Constellation Software Inc. (CSU) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Stockholders of Constellation Software Inc. Annual General Meeting 2021. Please note that today's meeting is being recorded. During the meeting, we will have a question-and-answer session. You can submit a written question at any time by clicking on the message icon at the top of your screen. Please note that your registered name will be announced along with your question during the Q&A session. Following the formal portion of the meeting, guests will not be able to submit questions. [Operator Instructions] It is now my pleasure to turn today's meeting over to Mark Dennison. The floor is yours.

Thank you, and good morning. I'm Mark Dennison. I'm the General Counsel and the Corporate Secretary for Constellation Software. Mark Leonard, Constellation's President, has asked me to act as the Chairman of this Annual Meeting. Jamal Baksh will act as secretary of the meeting. I ask Shirley Tom and Amanda Castellano of Computershare to act as scrutineers and to compute the votes of any polls taken at the meeting. Due to the COVID-19 pandemic, we are conducting today's meeting virtually via live webcast. Since the meeting is being held virtually, we want to outline a few logistical items regarding the conduct of the meeting. Questions can be submitted by any meaning attendee using the instant messaging service of the virtual interface. When asking a question, please indicate your name, which entity you represent, if any, and if applicable, confirm if you are a registered shareholder or a duly appointed proxy holder. For each question we answer, we will summarize the question and read out loud the name of the person who asked such question, and if applicable, the entity such person represents. Questions will be addressed during the question period at the end of this meeting, provided that some questions may be addressed during the formal part of the meeting, including questions regarding procedural matters or directly related to the motions before the meeting. As indicated in our press release dated March 29, 2021, shareholders also had the opportunity to submit questions to the company in advance of today's meeting. We will pose those questions to certain members of senior management following the formal part of the meeting, and we'll also take questions from the audience. Questions which are already addressed in the questions submitted in advance of the meeting or that are redundant or repetitive may not be answered. For the purposes of the meeting today, voting on all matters will be conducted by electronic ballot. Registered shareholders and duly appointed proxy holders will be asked to vote on each business item after the presentation of all business items. When you're asked to vote, you will receive a message on your virtual interface requesting you to register your votes. When voting commences, the polls will be open for 3 minutes. We will now proceed with the formal portion of today's meeting. To expedite the formal part of the meeting, I will move and second all motions. The secretary of the meeting has filed with me proof of mailing of the meeting materials, including the notice of availability of proxy materials and form of proxy, and where applicable, the Notice of Meeting and management information circular. The consolidated financial statements of the company for the year ended December 31, 2020, and the auditors' report thereon have also been mailed to all shareholders of the company who have requested them. Copies of these materials are also available on the company's SEDAR profile and on the company's website. We would be pleased to deal with any questions concerning the financial statements subsequent to the completion of the formal business of this meeting. The scrutineers have reported to me that we have at least 2 shareholders present by electronic means and holding or representing by proxy at least 15% of the votes entitled to be cast at the meeting. As such, I declare that a quorum is present for the conduct of business, and this meeting is properly constituted for the transaction of business. Voting today will be conducted by electronic ballot. The balloting will be open to registered holders and appointed proxy holders who have properly logged in with their control numbers and username after the presentation of all business items. The first item of business is the election of directors. There are 15 directors to be elected at this meeting. The management information circular mailed to shareholders contains information about the 15 nominees. Those nominees are Jeff Bender, John Billowits, Lawrence Cunningham, Susan Gayner, Robert Kittel, Mark Leonard, Paul McFeeters, Mark Miller, Lori O'Neill, Donna Parr, Andrew Pastor, Dexter Salna, Steve Scotchmer, Barry Symons, Robin van Poelje. The meeting is open for nominations for the election of directors for the ensuing year or until their successors are elected or appointed. I will now nominate the directors and second the nominations. I hereby nominate each of the person whose name appears in the management information circular under the heading Election of Directors to be a director of the company until the close of the next Annual Meeting of Shareholders or until their successors are appointed, and I also second those nominations. If there are no further nominations, I declare the nominations closed. I note that as described more fully in the management information circular, the company adopted a majority director election policy in May 2009. This policy enables shareholders to vote separately for each director nominee at meetings of shareholders or directors are to be elected. If a director nominee does not receive the support of a majority of the votes cast at a meeting of shareholders, that director will be expected to tender his or her resignation from the Board following such meeting. The resignation will be effective upon acceptance by the Board and will be disclosed via press release. For more information about our majority director election policy, please see Page 20 of the management information circular. I will now move and second a resolution appointing the auditors for the current year and authorizing the directors to fix their remuneration. I move that KPMG LLP Chartered Accountants are appointed auditors of the company to hold office until the close of the next Annual Meeting of Shareholders or until their successors are appointed as such remuneration is may be fixed by the directors and as the directors are authorized to fix such remuneration, and I also second the motion. Unless there are any questions, I will move to the next item of business. The next item of business is an advisory resolution to endorse the company's approach to executive compensation as further set out in the management information circular. As the vote is advisory only, it will not be binding on the company. However, the Compensation, Nominating and Human Resources Committee of the Board will take into account the results when considering future executive compensation arrangements. I will now move and second the approval of the advisory resolution. I move that it be resolved on an advisory basis and not to diminish the role and responsibility of the Board of Directors of the company, but the approach to executive compensation disclosed in the management information circular is accepted, and I also second the motion. Unless there are any questions, I will move on to the voting process. As I mentioned earlier, voting today will be conducted by electronic ballot. I will now take a moment to ask that the balloting be opened to registered holders and appointed proxy holders. The polls are now open. And at this point, all registered holders and appointed proxy holders who have properly logged in with their control numbers and username and wish to vote will be able to see on the screen the election of directors, the appointment of the auditors and advisory resolution on executive compensation motions brought forth at this meeting. Please register your votes by accessing the voting page and selecting the for or withhold buttons next to the name of each proposed director and next to the resolution with respect to the appointment of KPMG as the company's auditors. Please select the for or against button next to the advisory resolution on executive compensation. The voting will remain open for 3 minutes. And while you are submitting your votes, we will begin introducing the speakers for the question-and-answer period. Once the electronic balloting closes, the voting page will disappear, and your votes will automatically be submitted. [Voting]

The full voting results will be published on SEDAR following the meeting, but I can report that based on the proxies which we've received in advance of the meeting, all matters that were put to a vote today have passed. The formal items of business as set out in the Notice of Meeting have now been dealt with. I hereby move that the meeting be terminated, and I second that motion. I declare the resolution carried, and the meeting is now terminated. The formal agenda for this meeting is now completed. I will now be turning the meeting over to Mark Leonard for introductions, after which we will proceed with the question-and-answer period. I ask that all attendees who would like to ask a question to use the instant messaging interface feature of the virtual interface to do so. When asking a question, please include your name, the entity you represent, and if any, and if applicable, confirm if you are a registered shareholder or a duly appointed proxy holder. There is a link to a Google Form in the information panel on the left side of the virtual meeting platform. Please follow the link and complete the 2-question survey to indicate which type of shareholder you are. Mark, over to you.

Thank you, Mr. Dennison. We thank you all for joining us. We won't go through our normal introductions at length, but there are a couple of new faces at the table this year for those shareholders who've joined us for the first time. If you want to pose questions to the directors who don't introduce themselves, feel free to send a message to the panel and to Larry and they will try and get it in, and we can get some background on those people if you would like some further background. But by way of introduction, why don't we have Damian and Daan, the 2 new faces at the table, take a minute and introduce themselves. Damian, do you want to start?

Yes. Thanks, Mark. My name is Damian McKay. I lead the Vela Operating Group, which I inherited from John Billowits. I joined Constellation and Vela through an acquisition of the data mine business in 2015. It's been a great result for that business and for that team as we've been able to grow, and it's a real honor to take over from John in this portfolio. Vela, for those who aren't familiar with it, it's a global -- very global set of businesses diversified across 7 portfolio groups. We cover areas like mining, oil and gas, manufacturing, retail and travel. Over to Daan.

Thank you, Damian. Good morning, everybody. This is Daan Dijkhuizen. I'm manager of the Topicus.com Operating Group. I have been the CEO of Topicus B.V., the acquired Topicus, since 2017. 4 years earlier, I joined Topicus, and it was after a decade of serving as a technology executive at ING Group. So I joined the CSI ecosystem on January 5 of this year, while CSI acquired Topicus B.V. and executed the spinout of the merged PSS and Topicus B.V. combination under the new name of Topicus.com, working very closely with the Chairman of the Board, Robin van Poelje, and very glad to have become part of this family. Thank you.

Thanks, Daan. Thanks, Damian. So rather than asking others to do introductions, what I'm going to do is, in the following order, ask them to identify themselves and then talk about a professional frustration that they've experienced over the course of last year that was not COVID-related. I think we've all heard enough about pandemic-related items. And the order in which I'll ask the people to introduce themselves is Barry, Bernie, Dexter, Jamal, Jeff, Mark Miller and then Robin. And try and spot those accents and those voices because you'll probably be hearing them throughout the course of the day, and we often forget to say who's talking. So off you go, Barry.

Sure. Thanks, Mark. It's Barry Symons here. I'm the CEO of the Jonas Operating Group. And I guess my frustration would be, I've always said the toughest part of management is having to part ways with an employee when they're a great employee and have done nothing wrong, but we just don't have enough work for that employee. And we've had to do that a decent amount in the last year. Quasi pandemic-related, but it's just my biggest frustration always in management. So I'll go with that one.

Bernie?

Yes. It's Bernie Anzarouth. I'm the Chief Investment Officer for the business. And my biggest frustration, I guess, in the past year would be seeing interest rates remain incredibly low and asset prices going up incredibly high. Multiples are just at stratospheric levels.

Good one, Bernie. Dexter?

Hello. I'm Dexter. I run the Perseus Operating Group. And my biggest frustration, aside from COVID, I don't know if it's professional, but there's no more pools to go to. I've been to the north and south. And there's no middle pool that I can go to. But otherwise, it's just keeping the team in touch and -- keeping in touch with your team and communicating best practices, goals and, in general, just keeping in touch with your team. Thank you.

Thanks, Dexter. Jamal?

Yes. Jamal Baksh. Yes, luckily, I'm blessed to have an amazing team and able to work anywhere from head office [ to college ], et cetera. So really, I had no frustrations.

You've got to say Investor Relations, Jamal. Come on.

I love talking to them. So no issue [indiscernible].

Jeff?

Good morning. Jeff Bender, responsible for the Harris Operating Group. I wish I was Jamal apparently because he has no frustrations. So reflecting on Mark's question, I think we had one of our senior and very tenured leaders decide to leave us [ far away ] through the year. I think reflecting back on it, we didn't really see it coming. I really wish we would have had the opportunity to have a meaningful conversation with the individual. I'm not sure it would have changed the outcome, but I think it would have been -- I just think it would have been a better part of the process. And then I think as that was unfolding, I think it also highlighted to us that we still need to continue to evolve our succession planning. So that's still a work in progress for us. That's it, Mark.

No, that's a really good one. And thought-provoking, it's -- it triggered in me the realization that people who have built fairly significant network may [indiscernible] a lottery ticket. And I think there is a lottery ticket-type opportunity in some private equity plays, and people see that chance to make absurd amounts of money even after they built real serious wealth with Constellation sometimes as attractive. And that's something we have to think through in our own compensation policies. So yes, I definitely empathize with you on that one. Mark Miller?

Hello. Yes. I'm Mark Miller, and oversee the Volaris Operating Group. And one of the big parts of our job is sort of communicating the CSI ways across our businesses, which are all over the world at Constellation. And one of the harder things I found is -- I try to involve myself as much as I can personally in that, is sometimes communicating with people who don't speak English, obviously, as a first language and sometimes aren't really getting the message and continuing to develop our leaders who are from those areas of the world to do that better. And I think the whole situation with doing everything by video conferencing these days to sort of underline that issue for me in the last year more than ever and trying to respond to that as best possible.

And Robin?

Yes, English is also not my first language. But my biggest frustration last year was we worked terribly hard on our spinout, and I've been working for -- to realize it already for a couple of years. We signed it in May. And then we want to do our listing, and we had a 6 months window. We hope to get the release in October. And then we had to have some delays, and then we crossed the deadline in November. In theory, sellers could walk away, but we managed it all, and we were celebrating then in December. But sometimes it was frustrating as well. So we pulled it through, but it was once in a while frustrating.

[indiscernible]. So my own personal frustration is, and it's last year, but it's also for a few years, is much along the same lines as Mark Miller talked about. Because we are operating globally, our ability, and particularly those of us who are unilingual or maybe 1.5 lingual, whatever that is, almost bilingual, find it tough going into third or fourth or fifth culture and language and trying to have an impact and realize how difficult it is to communicate across cultures and languages, our beliefs and our approaches and things of that nature. And it's been particularly tough as I've been working on Japan as a sort of personal pet project. And I've got some great people over there who are capable in English, and they're studying what we do. But the cultural gulf is so large that I'm having real struggles crossing it and being effective. So I share your concerns, Mark, as we go worldwide. Okay. We're going to move on to the Q&A session now. Larry is going to lead that process. He has a panel of people who have helped him. So Larry, would you like to introduce yourself and those helping you?

Yes. Thank you very much. Larry Cunningham here. I've been a member of the Constellation Board of Directors for 6 years almost. I've been Vice Chairman for a few of those. And when Mark issued the press release announcing that I was going to be Vice Chairman, he said the job description was to help the Chairman. And so one of the things I get to do is host the Q&A portion of the meeting. Just a little bit about who's in the audience. We have 400 people on the line. That's a pretty good group, pretty large, considering the size of our shareholder base. Thank you so much for most of you filled out the poll -- a little bit of the results of the poll in terms of who is among that 400. 3/4 of those 400 people are individuals. Nearly half are individuals who are also employees of Constellation. Only 2% of the -- those taking the poll are index investors. But most people in this meeting have picked Constellation as an investment. And also very long term. The second question shows that 70% of the people at least have held Constellation shares 3 years or more. About half of the total filling out the poll have held Constellation for at least 5 years. And 1/5 have held it for 10 or more. I appreciate the introductions from all the managers to whom the questions will be directed, but I also just want to recognize the other independent directors. Usually in the in-person meeting, at this point, Mark would ask them all to stand. Obviously, they can stand if they want, but it wouldn't do any good. But I still -- at least I want to mention their names. Andrew Pastor, Susan Gayner, Rob Kittel, Lori O'Neill, Paul McFeeters, Donna Parr, Steve Scotchmer and John Billowits, portfolio manager, now an independent director. It's a real treat to serve with this group, and it's an outstanding Board, both the independents and the management group. It's a real treat. It's also a real treat to have worked with the 2 analysts who will help me pose these questions, Howard Leung and Will Pan. These are both -- 2 of the most experienced analysts in the field and focused on Constellation for a long time. Howard is a equity research analyst at Veritas. He's been covering Constellation since 2016, and he's been with that firm for 6 years. Will is at Ruane, Cunniff where he's been for 11 years, and he's been -- he's also a shareholder of Constellation. He's been a shareholder since 2014. We received a very large number of questions. By our count, we received 134 questions. We received them from a diverse group of shareholders numbering about 25. And it will be impossible, obviously, to ask every single one of those questions. We're going to be here together 3.5 hours. That's about, what, 210 minutes or less. If we asked every question, we'd have about a minute and a bit for each one. Obviously, that would be silly. So we've had to make some choices and to condense some of the questions as posed. The good news is that there were many that duplicated each other. There are some hot topics this year. And so the 134 may be a little bit misleading. So we don't think we're going to be able to answer all the questions, but we've tried to condense and select so that you receive the greatest amount of valuable information. So if you hear a topic being asked, being discussed, and it isn't exactly the way you worded your question, please understand we're probably going to generate the same information even if we didn't ask the questions as they were submitted verbatim. Last year, we did the same format with the same group. Will and Howard and I, there was a smaller number of questions, but we did -- we were able to get through almost all of them. So we'll do our best to cover the waterfront. And as with last year, as Mark Dennison has said, if you have a question [indiscernible] during the meeting, you'd like to submit it in the AGM Lumi function, we'll receive that. And at periodic intervals, we'll pause and pose questions submitted today through that function. We have not shared the questions ahead of time with anybody on the panel with 1 -- with the exception of 1 question which could have required some computational steps. So I asked that question to Jamal. But otherwise, questions will be a surprise. Well, a surprise in some sense. The good news is this is such an informed shareholder group. The questions are all good questions, solid questions, straight down the middle types of questions. And so in some sense, I don't expect any big surprises. We divided the questions into 6 categories, and each of us will take a turn as moderators for 1 of those categories. The 6 -- and we'll run them roughly at about the same length, somewhere around 20, 26 minutes, something like that, so you can keep track of the topics as we unfold. Those 6 categories, the first category will be on M&A and investments. That's a very familiar one. I think we have that category just about every year. And most of those questions will be posed, brought to the panel as a whole. So operating group managers and others will simply volunteer to speak to the various questions. The second category is going to be a little bit of a world tour with questions about different geographies and a couple of questions on particular verticals. The third category is larger investments and investments beyond vertical market software. This has its own category this year mainly because the President's letter issued on February 15 explained a somewhat broader ambition or investment in competencies. And so that letter elicited quite a few questions enough that will devote a whole segment. That will be the third segment this morning. The fourth one on Topicus, TSS, also a new event, the merger of Topicus and TSS and then the subsequent spin and the ensuing -- we've got a whole quarter of performance now. I know you had a conference call on the quarter yesterday and got some questions answered, but it's a topic of some significant interest to stockholders. So that will be our fourth segment. And then the fifth one, a return to some more familiar terrain around corporate culture, operations and management. And the final segment, the last segment, turns a little bit toward you, about our shareholder base, what we like about shareholders, public perceptions of Constellation and then the topic of ESG, environmental, social and governance. So that's the order of the day. Thanks again, everyone, for coming. So we'll turn -- kick things off with our first segment, the familiar M&A and investment topics, and this segment will be led by Will. Will, thank you very much.

It's Will Pan here. Thanks, Larry. Thanks for the privilege to be here interacting with the team. I appreciate it. And it's also a privilege to be asking some questions on behalf of fellow shareholders. So another year, another virtual AGM. No surprise, there's some questions about how M&A went during the pandemic and that cohort. So a broad question for the group. During the pandemic, did you find that you adjusted your approach with respect to the types of assets that you were willing to acquire? For instance, were you more reluctant to buy troubled companies since the troubled company might be harder to fix with travel restrictions in play?

Anyone have any particularly relevant cases come to mind?

Mark, I'll take it. It's Jeff from Harris. Yes, I don't think, Will -- when I reflect back, I think, obviously, the first quarter, I think when the pandemic sort of was upon us, I think that was a very slow period of fun. So I think other than that, a period of adjustment to really just sort of understand and -- what we were doing and what potential salaries we're doing. But I think once we sort of got back into the groove of what we do -- I think because we look at owning our businesses forever, I don't recall any conversations internally where we were concerned about what we were buying. I think we went back to looking at the types of businesses that we always look at. We were spending, I think, a little bit more time on integration. So again, thinking through what our integration strategies would be to make sure we're setting these businesses up for success at the beginning, given we were not going to be able to physically be with them, which would obviously be a standard part of how we did things. But I don't think other than that, it really changed how we look at what we look at. And I think if you look at the market in general, I think, again, other than maybe a quarter of a hiccup, people kind of went right back to what they were doing before, and things continued to move forward. I think with technology, I think a lot of our meetings were virtual anyway. So again, other than there were definitely in-person meetings, a lot of what we were doing was actually in the format we were doing it. And I think, again, a lot of the transactions that we were working on, we had already met a lot of these owners in person, again, because these processes don't sort of start and stop within a 1-week period, they can last over a period of years. So again, I don't think that had a major impact. I think now as we're continuing to deploy, you're seeing more, I think, opportunities where we perhaps have not actually met face to face with certain individuals. But I think there, we're now more comfortable with our [indiscernible] integration because we've had more practice and more experience. So that would be the Harris [indiscernible].

Mark, you did one that was [ levered ] to the gills before we bought it. And so it must -- you must have felt a certain trepidation going into that one. Do you want to talk about it without necessarily identifying it?

Yes. I mean -- well, I think just expanding generally on what Jeff is saying, I mean, there's sort of the side of it where the early days when we -- during when the pandemic broke out are -- we were unsure what was even going to happen with some of our own businesses, right? And there was a high level of paranoia on what we're doing with our own businesses. So the lens you'd look through at a business that you're considering acquiring was obviously with that in mind, right? So -- and as time passed and as we sort of got a bit of better feel for how our businesses were performing, I think it helped us continue to look at the businesses we are trying to acquire more rationally through those lens and a little less paranoid with how bad could it get kind of thing. And it was -- it's kind of easy to forget that because we -- it seems it's so long ago, but it really wasn't that. And I think the business you're mentioning, Mark, I mean, I think, again, I think we looked at it -- just looked at that sector in general and looked at how we currently were doing in that sector and what was happening in it and took that into account in deciding whether or not we thought this is a -- this was an investment we should proceed with. So...

And did you find you did a different level of diligence on any of the issues with that particular one? Or because...

I think the good news is we had good knowledge in the sector and a good group of people who had a lot of confidence -- a balance of confidence around what they thought was possible and what we thought would happen. So I have to say all investments, I'd say, in the first postpandemic, for the first 6 months, I did spend a lot of time thinking about the worst case more than I would have before that. In fact, I usually would start by thinking through that before I move to what could happen if things were stayed -- got back to the prepandemic levels and tried to get more comfortable with that. I'd say I'm less in that mode now. I don't know if that's helpful, but I'm saying we're looking at it like we did prepandemic now as I think through deals. And it is interesting because when you do go look and consider what's the worst case, you actually -- it's healthy in 1 way, but it also influences somehow how you're thinking about the whole investment considerably, right? So...

But really, you had asked if it made us look at different types of assets. So one of the first things I did on the heels of early lockdown was reach out to some of our best competitors and offer them investment, minority investments in great companies because I thought it was a unique opportunity to help and participate in sectors that we knew, with people that we knew and admired. As it turns out, things weren't as bad as we thought they were at the time, and no one took me up on it, but it's something I would have thoroughly enjoyed, and -- but it didn't last.

Yes. I think like I was thinking, is this going to be a 2008 with a different flavor to it being that it's pandemic again, right? And what's going to happen? I was sort of -- that was going through my mind as we were talking to people. But the businesses themselves, like us, I think, felt -- the businesses that we were talking to felt more comfortable as time passed. So yes, it was -- yes, it was, again, surprising for me how this has panned out over the past several months. I would have assumed things maybe took a different path, but they slowly improved. So I didn't -- we didn't really change our tactics, but of course, we're always having a lot of conversations with a lot of people. And many of those conversations happened over multiple years, and that just continued anyway, right? There's a lot to do anyway. So I don't think we changed our focus at all, to be honest. We just kept on going and just had a bit more of a skeptical eye on what the future might look like because of the pandemic.

One thing that did happen, Will -- sorry, Will, turn to you.

Go ahead, Mark.

Yes. One thing that did happen was that our directors got very uncomfortable about our white box scenarios when we were looking at investments and started asking us to think through extreme outcomes. And that sent us back to look at the weightings that we had on the white box scenarios in our models. And we found that they were fairly robust because we already used multiple scenario models. Even when we threw in extreme scenarios with low probabilities, it didn't change the expected outcomes a lot. So I was really pleased by that sort of stress test of our M&A process, if you will.

Yes. I agree. I'd agree. And one thing we were looking at internally during it was attrition, right? We're heavily looking at attrition internally in our own businesses. I think we're checking it weekly, monthly, like at a much more high cadence than we normally would. And that's how we grew comfortable to -- with how we thought about that particular scenario, Mark, that wipe-out scenario as well. So that provided us some comfort as we remain more paranoid about what might happen, what could happen.

Great. Thanks, everybody. Next question. At this point, what do you think is your biggest bottleneck for making even more small VMS investments, the sort of bread and butter ones that you scaled up significantly already? Would you characterize it as more external, such as what's available at attractive returns? Or internal, such as M&A staffing or integration needs? And could we maybe get a comment on the coverage that you see of the transactions that happen in this space?

Yes. So we're always nervous about sharing trade secrets, but with that preamble, I'll pass it on to -- who's our most close-lipped? Barry.

Yes. I would definitely say it's more on the external side of things. We've been -- all of us have been ramping our M&A coverage. Do we think we have perfect coverage? Absolutely not. But has it been getting better? Absolutely. And I would say we're talking to lots of companies. We're still getting lots of transactions done. So it's not like we're not getting things done. But I would say our bottleneck probably would be more finding companies that sort of fit our sweet spot and being able to get them executed. Obviously, if we ramp it up too quick, we'll start to have the challenge -- of the internal challenges not having enough staff to integrate these. And so as we continue to buy more companies, we start to stretch our teams more and more. And I can speak within the Jonas Group, we're fairly stretched right now, but I think we can definitely keep doing what we're doing. But if we double what we're doing without sort of investing a lot more internally in our people, things would start to break. And so we've got to manage that balance pretty closely. But I think there's enough talent we can find in our organization and even outside organization that we could scale if we found enough opportunities. So I'd say it's more external, but the internal will hurt if we double where we are today.

Robin, how about you?

Yes. I think it's both a little bit external and internal, but I think the big challenge at our side was internal. So we're trying to cover more geographies within Europe. You have the cultural difference, you have language difference, and we have a lot of new people within our team. So they have to learn the ropes, steepening the learning curve. And we did something like 17 transactions last year. So that means we do more than 1 per month. So getting that all done with a new team and having that all properly managed, on top of the merger we did with Topicus, I think it was a big challenge, but we managed it. But -- so I would say, and on top -- like Mark and Jeff said, the pandemic, it pans up well, but you spent more time on each acquisition, where can't it hurt us, what will happen? So it was a very intense period. So I would say the internal side, I think we did a great job, but it was a lot of work.

And Will, the mental model of bottlenecks is a useful one in a lot of systems. But when you're on a steady ramp the way we are, it isn't so much bottlenecks as ramping everything at every stage simultaneously the challenge.

Great. Sort of piggybacking on this, people can expand on the same thought, what are your views or what are the team's views on the remaining opportunity set to acquire small VMS companies? By redoubling the effort to make large VMS acquisitions and consider investments outside of VMS, which is another topic, it seems like the implication is that small VMS investments will no longer absorb the growing cash flow. So what are your thoughts on the opportunity in small VMS acquisitions going forward? Does it plateau? Does it tail off?

It's so hard to understand the size of market. It's the thing that fuels most venture capitalists. When you look at truly wonderful businesses, to my mind, they are those that define new markets very tightly and then do a spectacular job for that tightly defined market. Those are the ones that end up with moats that are the kind that we like. We're not the low-cost provider in an economy of scales-driven business model. And so I'm sure we could define our available market of potential acquisitions to include little e-commerce companies and Internet companies with various kinds of media companies and God knows what all else and make it absolutely enormous. It doesn't mean, however, that our best practices and our M&A processes will be useful as we extend it into that larger market. So I really think it's a process of evolutionary exploration that we're embarked on as opposed to running hard into a big market kind of thing. We'll figure out where the economics of buying little businesses break and where they're good. And hopefully, we're way up that curve and learning every day, things that people who are following won't even have the chance to discover because they'll never get to our experience level.

Does anybody else have any thoughts on sort of the remaining opportunities that they're seeing in small investments? Barry was already saying that maybe it's more of an external constraint. There's not that much to find. Robin seemed to be a little bit more equal. But tilting towards the internal side, anybody else want to opine on whether they -- what sort of supply they see or market they see for the same kind of bread-and-butter VMS acquisitions that they've been embarked on?

Yes. Robin here. Yes. I think even during the pandemic and opening up new countries, but even in existing countries, I'm still surprised that we still are able to find new companies. So I think we do a good job on trying to find new companies and introduce ourselves. Of course, there is competition, and the competition is emerging. I think you see it everywhere. But we're still able to find our deals even in one-on-one processes. So I don't think it's a limit. I still think the availability is there. We just have to be smarter and more creative and work harder, but then we still do our deals.

And Damian from Vela. I would say that as we make the network effect of continuing to make these acquisitions the positive references we get from our existing businesses and the employees in those, we're not seeing a diminishing market for those smaller acquisitions in our world.

Great. I haven't mentioned competitors. We do have a question about competitors [ recorded ] more high-profile CSI copycats launching, sometimes with former CSI employees and then more PE firms entering the space. And folks talk about whether they've seen an impact from these competitors, particularly in respect of attracting and retaining talented employees. How do you stay ahead of that?

I'll take that one, Will. It's Jeff from Harris. I don't think it's really any different than it's always been. We have to create the right environment for all of our employees, including our capital deployers, which is a combination of the short-term compensation, the long-term equity appreciation and really the collegiality and the challenge and the learning experience that they're looking for. So I don't think anything's really changed from that perspective. I think there's no question when Bernie gave his frustration about low interest rates and crazy amounts of capital and valuations, I think there are a lot more people, I think, willing to pay amounts that we typically have not paid in the past. But I still think when you really sit down and talk with the people who are investing in what we do, it's not just about the money, right? Like the experience that we offer here is very different from most. And I think for those that are looking for that experience, it's still quite rewarding. And I think we're always challenging ourselves to, I think, stay on top of that and to make sure that we are competitive and that we understand what the options are. So a number of us make sure we spend time making sure we understand what private equity is doing and what -- how they're paying and how they're compensating their people. And so I think we're always incorporating that back into our system. Is it perfect? Absolutely not. But I think we're -- it is definitely top of mind, and we're always, I think, sort of focused on paying attention to that.

So Will, the -- I saw a headline the other day that said IPOs have raised $0.25 trillion so far this year, $0.25 trillion. That's about 3x more than it was at the peak back in 2000 when everyone was Internet.com this and that. So the amount of money, a flood of cash, that's out there is astonishing. And you're going to stay away from that wave. You've got to find places that are protected and that you're not going to be overwhelmed. And attracting people who don't want to go ride the wave and do want to have a career and do want to develop mastery as opposed to being part of the most recent pump and dump, whatever it is, you're looking for a certain character within the people that you hire and a willingness to go on a journey of mastery. And it's hard to know when you hire those people whether they're the right folks. But you figure it out pretty quickly. And so we do have a certain amount of churn in the people that join us who decide it's not the right place for them and that there are faster ways to get to nirvana. But it's all a question of what your objectives are. And so we've, of course, lots of long-term employees, too, that have become wealthy and I think fulfilled in the jobs that they have. Mark, do you want to just...

Yes. Just to add to that, I think there's a bunch of our employee shareholders on the phone. And many of our leaders, in fact, I think 3/4 of our leaders, have come up from among -- within the companies that we've acquired and brought on to the team. So that's pretty special. And those are -- those people, as well as having an affinity to the business that they came with, some of them like to move on and do more things with their careers. And that's a unique opportunity that I think people forget about. So there clearly are the people that you bring in and you hire and we have fabulous leaders that we brought in that way, too, but the bulk of our leaders come from within. And that's pretty special. They're in the regions of the businesses that we've acquired in -- in the language of the businesses we acquired, which is even better. And I think that provides a slight moat around that, Will, if you want to call it, not a perfect one, but I do that. And because we're decentralized, it reduces the number of single points of failure as well. And so it's what the whole team does versus a handful of individuals in the long run. And if they have to fund the business, I think there's more of an affinity with us and provides us an opportunity to continue to grow through acquisition that way.

Great. Thank you all. So [indiscernible] and Bernie mentioned valuations, and Mark, the wall of cash. So there's a question that is addressed to Mark and I think to the team. It starts by buttering you up. Great job creating shareholder value over the years through disciplined benchmarking and best practices, but many software companies [ create ] higher prices than CSI would generally stomach given its hurdle rates. Do you worry that by not focusing on or owning these companies, you may be missing an opportunity to observe different but still sustainable value-creating practices being realized there? Any efforts to try to learn systematically from best-in-class VMS more broadly, even outside of the walls of CSI?

I think we definitely study best-in-class vertical market software businesses. Sometimes we study them because they're public. And sometimes we study them because they are for sale. And that's one of the joys of being a participant in these marketplaces. Certainly, we get to see some of them directly, but we also get to see some through brokers. And we don't always come up with a price that is the winning price. In fact, that would be single-digit percentage of the time. But what we're particularly good at is looking at things that are either slightly troubled or slightly tougher to understand than a simple LBO-type model, assuming that you can sell it to someone else for a higher price than you've bought it for. And so it's those situations where I think we can add value. And with the brokers themselves, we tried to respond very promptly, deal with them and their clients with respect. And if we're not going to be a contender, let them know fairly early in the process. But we get to learn a lot in that process as well because we get to see these best practices.

I think, Will -- it's Jeff from Harris. I think from my perspective, maybe about 5 years ago, we were talking a lot about private equity and trying to understand maybe more closely how the strategies that they were deploying, what it was doing to the business, so how the levers they were pulling were adding value to the businesses they were buying. So Mark agreed that I could spend some of my -- at Harris, we call key time, energy and attention, spending more time hands on with some private equity firms. So again, I devote a portion of my time to working with 1 private equity firm specifically, but sitting as an independent Board member on other vertical market software companies. And this, again, I really enjoy for a number of reasons, but not only do I get to better understand some of the tools the private equity uses, I also get to see how some other great operators run vertical market software companies in terms of when they're acquiring, how are they integrating, how do they think about organic growth, how do they think about pricing, how do they think about, again, the other business strategies that they have. And then I bring that knowledge back into Harris and share it with our leaders and obviously share it with my peers across Constellation. But I think we're always paying attention. Mark says, we do study a lot of public companies. We obviously see tremendous numbers of companies. But we also, I think, are very interested in always understanding what we could be doing better and what other things are out there that we should be thinking about. It's just part of our DNA.

Great. That's the end of that section. Thanks all for your responses.

Thanks, Will. We'll move into Segment 2 here momentarily, but why not first take a question we received in the chat this morning. This is from Louis Hernandez. How do you make sure your leaders stay humble, considering that CSI is probably the best in the world at its craft. Mark, how do you do that?

Yes. I certainly don't do it. But what I find is, we discuss things intensely as a group, whether it's verbally or through e-mail. And we question without taking personally what we see and what we hear. And so I think it's constructive criticism, I guess, is part of the culture, our willingness to ask dumb questions or smart ones. We don't tend to accept fast-forward, fast, move on type answers. And then we go back afterwards and do postmortems both quick ones, which we do after every investment, roughly a year after. And increasingly, with the Board, we've been doing what we call mature post-acquisition reviews where things that are more than 5 years old, we're going back and studying. But the first group that we studied, we randomly picked. And I did that deliberately rather than focusing on large ones and good ones and bad ones because I felt a random pick of a bunch of mature investments would make the Board realize what we do. It isn't just the successes and it isn't just the failures, it's an awful lot of the in-between stuff, too, some of which is small, some is product buys, some of which is shrinking businesses, some of which are businesses that turn into massive compounders that generate high rates of return for decades. And understanding that, that dynamic happens, that it's a portfolio effect. And although our returns from a portfolio point of view are more or less what we expect, there is wide variance around outcomes. That was, I think, at least from my perspective, a desired learning that we managed to drive into the Board through that process of reflection on prior performance. And hopefully, a very candid reflection as opposed to defensive.

Well, thanks, Mark. My own observation Louis is, I think humility, among this group at least, is one of the reasons for their success. So it's almost self-sustaining. Let's slip into Segment 2. This is a brief tour around the world. Constellation has a unique or distinctive approach. And yet, it operates in more than 100 countries, and that has led to a lot of people to wonder about what are the similarities and differences around the world. So we've got a half dozen questions on that subject. The first is not for anybody who wants to speak to this, but some people who have operated in Europe more than others. The question is, what are the most noteworthy differences between applying the CSI playbook in the U.S. compared to Europe? And they suggest examples that they'd be interested in hearing about in terms of investment strategy, valuations, capital allocation, decentralized philosophy. So Damian, Daan, Robin, any of you would like to take it?

Well, just I have a preamble before that question gets answered. I'm still sensitive around sort of the trade secrets thing here. So try and keep it general, gentlemen, maybe Robin first?

Yes. For me, I think it's hard to judge the difference between North America and Europe because I'm predominantly active in Europe. Robin speaking here, yes. But of course, I've followed the North American market as well through the group here. I think you hear a lot of stories about difference in valuation, that kind of stuff. And then the wave from North America comes to Europe. There might be a difference, but I think competition has been heated in Europe as well. So I don't think it's a huge difference. And I think the big thing I mentioned before is Europe has a lot of different countries with different culture, with different languages. So yes, we do see differences between the northern part of Europe and the southern part of Europe, definitely. We see also a difference in the way these companies are run. Sometimes family enterprises having lots of things intermingled between how they run their business and how they have their own expenses. And they're different per country. So we try to get our head around it. I think what just has been said, we try to learn. So like studying a competitor doing our part. We do it per country as well. And so yes, I don't know the huge difference between North America and Europe, but I can see it within Europe. And yes, those countries are really different. And in certain countries, as mentioned before, just language, trying to have a conversation in Spanish with a Spanish entrepreneur might make a difference than just trying to approach it in a Dutch way or just by speaking English that are very simple steps, but it's really the difference being part of networks. And so yes, that's the reason why Topicus.com focuses on Europe. It's complex enough.

Well, one follow-up question for Robin or the others is, do you see differences in the software markets in the regions in terms of fragmentation or pace of disruption, that sort of thing?

Well, let me just talk to my experience in Japan. I found it to be a much smaller market than I would have expected from the point of view of the number of vertical market software businesses that we've been able to unearth given the size of the local economy. And that was a real surprise to me. And I think we've found the same thing in a few other countries as well. North America is a particularly verdant place, a single homogeneous market with very similar culture and regulations and taxes and all those other good things. Whereas the smaller the market you're dealing in, it will be a very different sort of structure.

So this feeds into the next question really about the relative attractiveness of capital allocation opportunities in those regions, North America, Europe or in emerging markets to throw that in.

I think it's a red herring because you start thinking about individual verticals and the competitive intensity within each vertical, and that frequently determines whether there's any money to be made selling to new name clients. So if you end up with a market with 3 players and they're rational and they're not totally driven by market share, you can make really good money. But if you end up in a market with relatively low barriers to entry and venture financing and they can exit at 10x revenue as well. You can actually pay people $9 to give you $1 worth of revenue, right? So the economics of some of these markets just become so irrational so fast. And the trick is to get out of the way of the wave, focus on your clients, do a great job for them, drive down attrition and service for every need, but make sure it's economic for you within that small base. So I don't think there's a geographic answer. I think it's very much a market-specific answer and depends upon competitive rivalry within these tiny little subsegments.

That's fascinating. So you think that the kind of the rationality of rivals doesn't really correlate with geography, so that there's no reason to expect more rational rivals in North America, say, than Europe or Japan?

Well, I think you can be perfectly rational in paying a client to give you $1 worth of orders, a massive amount of services and help and assistance if the public markets then value that company at an astonishing multiple on the exit. And so it isn't that the players are being irrational, it's the public markets are probably not valuing the businesses that they're getting correctly. And whether that will correct or not will depend upon what economics these businesses deliver as they mature and how people are valuing them at that point in time. And we just haven't seen many of these businesses show what their final economics are going to look like. Everyone's thinking all of these businesses make 50% free cash flow on revenues and continue to grow. And obviously, the economy of the world will soon be consumed by one of these businesses if that keeps up. So it can't. Life has to change, and it's just a question of when the penny drops.

Excellent. A related variation on this question is, in your models, how do you quantify or incorporate country or political risk and currency risk, especially in emerging markets?

That's a good one. So Damian, you have some far-flung assets in some places that occasionally have all kinds of things going on that we don't frequently encounter in North America. Do you want to reflect on the question?

Thanks, Mark. I think there's definitely differences. And we do model differences for those markets based on our experience in those markets. So you can't do a model for a similar business in Canada as you could in maybe in Latin America or Africa, et cetera. So there are some certain things we do that we have learned from experience of having businesses on the ground, a range of inputs where we do modify the model for those given markets. Probably wouldn't go into details here, but you definitely need to adjust some of the assumptions and also some of the hurdles to make sure you capture these sort of inherent differences in, be it regulation, market or just the local economic dynamics.

And one of the big things that's going to change, I think, over the next little while is, governments have provided fabulous amounts of liquidity and stimulus to economies. And at some stage, they may decide that they have to pay that bill. And they're probably going to come looking and that's going to turn up in the form of tax rates. And so how do you model tax rates? We've seen tax rates well above 50% in historical times. I could definitely see them going back there. And the real issue becomes what returns on capital will be acceptable? Will you be able to pass those through to clients? How do you model all of that given an onslaught of taxes? It's got to be something that all corporations are thinking about.

Well, thanks, Damian. Thanks, Mark. Political risk can also be political opportunity, right? I might take us to Africa. And a question for Mark Miller. Assuming it's not too soon to talk too much about Adapt IT, people wonder if you'd be willing to share a brief profile of its business, markets, successes and challenges.

Yes. I'd prefer really not to chat about Adapt IT, unfortunately, Larry. So yes, we'll have to save that for later time. So thank you for the question, though.

Okay. We understand it's a work in progress, let's say. Let's go closer to home. Jeff Bender, a question on Quebec, in particular. The questioner says, Harris may be unusual within CSI in making investments in Quebec. Is there a certain expertise that's necessary to win in that province?

I'm not sure I've ever thought about it that way. Yes. We don't really do anything, I think, in Quebec that we don't do in other geographies or areas, which is, I think, make sure that we understand the culture and we speak the language of the sellers. So I think, well, certainly, Quebec within Canada, again, has some cultural differences and certainly prefers, in most cases, to speak in the language of, in the French language. So obviously, all of our businesses that are there meet those 2 criteria. I think there's no question if we're at a prospect that is not from Quebec and is not choosing to speak to the sellers in French, not willing to, again, maybe even business transact like the legal agreements in French. And I think there's no question, I think, that we would be at an advantage. But it's no different than, I think, Robin in the Netherlands or Damian and his group in Spain. I think it's really no, we're not doing anything different in Quebec that we wouldn't do in those other geographies. I think when you're in the vertical, when you're in the geography, that is a strength, and we have that strength in Quebec. And we try and use it as sort of as much as possible.

Jeff, comes naturally into a related question on Acceo. The question wants to know if you can provide an update on Acceo and particularly how during your ownership you have integrated and grown that business.

Yes. So I think we're extremely pleased with the Acceo business. I think we inherited, as Mark Miller was speaking before, like a lot of our leaders come from the businesses that we acquire, Acceo was another great example of, for us, a reasonably large business that brought just a superb amount of talent that, again, continues to work within the Acceo business and even sort of broader, I think, within our Quebec and overall Harris businesses. Again, it's growing. It's profitable. I'd say it's outperforming our expectations. So I think that's always, it's always good when we're outperforming, especially on something of that size. So again, I think if we had the opportunity to invest in another Acceo type company, I think we would cherish the opportunity to do that. But again, I think, back to your, maybe your Quebec question, I think our Acceo business, I think, really probably moved us forward very quickly in being a dominant player in the province of Quebec. So I think from that perspective, just our overall presence in the province was significantly enhanced with Acceo. We are everywhere in that province. And most people know who we are and what we do, which I think is definitely beneficial.

Is that something you consciously tried to cultivate, Jeff, that provincial recognition, that sort of brand strength or it just happened as a matter of running your business?

Yes. I think my background is not in marketing, much to the frustration of many Harris marketing people and leaders. I think as I've aged and I would like to think matured, I do gain more of an appreciation for it. So I think, I don't know that we have sort of consciously driven the creation of a brand, but I think by default we have created one. And I think now we understand that it is of a benefit. And I think we are trying to use it to our advantage to continue the success that we have seen in Quebec. And when I talk to, Sylvain Gauthier is the senior Harris leader responsible for our businesses in Quebec. And when we talk about what is our Quebec M&A strategy, we want to own and identify every single vertical market software company in Quebec. And from our perspective, there's no excuse that we don't know every single company, and they don't know us. So I think brand definitely helps us there. Obviously, we're very connected into the financial community in Quebec. Again, all of our business leaders are in Quebec, and they interact in the business community. So I think, I'm not sure, again, it's conscious, but I think by default it's there, and I do believe we are starting to leverage it or benefit from it more as we continue to grow and expand.

We'll have a question later on Constellation's brand in the world or in its relevant markets. So we'll cross-reference that particular point on Harris in Quebec. The final question in this segment, though, I'm going to go back to Mark Miller. We let you off easy on Adapt in Africa. But here's a question on SSP, a recent investment. Can you tell us a little bit about that, the markets it serves and how it fits into the insurance ecosystem?

Yes. Again, I think I prefer not to get into the details of SSP, Larry, at this point so.

I'm not going to press you, Mark. And just so the audience knows, I mean, we do have to be careful in 2 parameters. One is securities laws, which restrict what we can say without having released it in appropriate forms, and proprietary matters. So I appreciate your care around those 2 points. That will wrap up that segment. And so we'll move into Segment 3. This segment is on large investments and investments beyond vertical market software. I'm sure you all know, but just to catch you up. On February 15, the President issued a letter starting out extolling the virtues of the traditional approach at Constellation toward small and midsized acquisitions with high hurdle rates, low overhead, and he bragged about the culture of autonomy and collegiality where people are thriving. And then said, but we're working on 2 other initiatives. One is to increase the number of very large vertical market software businesses in the multi-hundred million dollar equity range and expanding the circle of competence outside the vertical market software space. So that letter, obviously, an important statement and has produced a lot of interest among the shareholders and so many questions this year that we've allocated a full segment to it. And to lead the questions in this segment, we'll turn to Howard. Howard Leung, thank you very much.

Thanks, Larry, and thanks again for having me here. It's definitely a pleasure to ask you all questions. So as Larry said, lots of interest in large investments and looking beyond VMS. A lot of these seem to be directed at Mark Leonard and maybe Bernie as well. I guess we'll start with a question about the team, assembling the team for larger investments. How large of an M&A team are you building at headquarters? What's the G&A associated with this? And how are you thinking about compensation of this team compared to the operating groups?

I'll say, they thought a lot about compensation, but how large of a team is a good question. Basically, from head office, all we're going to try and do is coordinate broker relations. Our expertise, our people, our human resources are down at the operating groups. Frequently, they will have these companies already identified and have started developing relationships with them. But then these large prospects will go into a process and will disappear from sight of our operating groups. And our objective from head office is just to have the pulse of the investment bankers and brokers who are handling these transactions and to be able to call them up in a friendly fashion and say, hey, I understand there's a process. What are you looking to do? What are you hoping to achieve, et cetera, et cetera. And so we're going to try and constantly stay in touch with those brokers. We're going to leverage the operating group skills and resources to the extent possible. Where it isn't possible or we want to do some work before we engage one of the operating groups, we will have a small team at head office that can do some of that work. And certainly, I and to some extent, Robin, who has wanted to take some of his time and allocate it to large prospects. And obviously, Bernie and a couple of the folks that we've hired will be working on this as well.

Right. So it sounds like it's really to get the banking community or the broker community involved at the head office level?

And for them to feel that they're getting prompt and high-level attention to the prospects that they bring in, that they're getting a fair hearing and that we are getting back to them so that they can decide whether to include us in the shortlist and things of that nature.

Right. Right. And in terms of the team that you're looking for, these people at head office, what capabilities are you the most confident in? And where might you want to supplement to make it a successful part of the strategy so that you're able to bring in all the people you need?

I'm not worried about attracting people. That isn't really the issue. What we're looking for is character and the willingness to work hard. So when I talk about character, that willingness to tell the truth, to speak frankly with the brokers about what we see and what we're concerned about and what we like and what we think we can do takes a maturity because you always want to sort of hang around the process. And you're wasting your time and other people's time often when you do that. And there's lots of prospects. As we said, there's 40 to maybe 100 big prospects a year that we'd love to see. And obviously, we don't want to chew up the time of people who are working on other transactions that have a higher probability of closing if we don't think we can be competitive. So it's spotting amongst those few transactions those where we have competitive advantage. That's what we're looking at the outset.

Right. And I guess since you've released the letter, how have those conversations with brokers been happening? Have some come flocking back? Have you seen a big surge in the last few months?

No. I think we need to build relationships with them and at very senior levels and convince them that we can be a helpful part of their process. So we're certainly working on more than we have at head office for a long, long time. But that's because we haven't been doing much at head office. But you know the way we focus at head office.

Right. And once you do actually buy a large investment, how do you decide which operating group might absorb it? I guess from your earlier response, it sounds like the operating groups actually lead the process and the head office just supports them. Is that right?

I think it will. So what happened with -- let's take TSS as an example, as this became a new operating group in and of itself. But I had assistance from the other operating groups [indiscernible] solely a head office processing. Nearly all of the group were in closing to advise and help and time with Robin and his team. So it was a group effort.

Right. And I don't know if you can -- you can say this, but the FICO acquisition yesterday, that Jonas closed -- is that -- was that Jonas led and head office supported? Or...

Yes. If you ask Larry, he'll say that Jonas led it and head office didn't support it, but he managed to get it over the fish line anyway, yes.

Fair enough. And then for Mark specifically, I know you mentioned that you're looking at Japan, but this person wants to know what are you spending a lot of your time lately? What results or discoveries have you found so far? And they're assuming you've spent a lot of time on this large M&A and non-VMS stuff, so they want to know more.

Sorry, Howard, I didn't really get the question. Were they're asking me how I spent my time on the Japanese opportunity in particular or things in general?

Just what are you spending a lot of your time on?

Interesting. Well, the large stuff has obviously been time consuming over the last little while. I also looked at a couple of opportunities outside of vertical market software, one of which has gone away but was a big dollar potential deployment outside of vertical market software and the other one of which is a sort of nascent industry opportunity that I think we have a unique skill set to bring to the party and some good unfavorable economics, favorable to us and favorable to much of the rest of the world. And I'm excited about it, but it's a very long-term prospect. And will not be an early obvious win, would impact -- look very contrarian. And -- but it has this -- it has a huge embedded option. So that's what I've been spending time on.

All right. I can't wait to hear more about it when it's official. On still on the large investment train, what -- have you tied any of those lessons you've studied from high-performance conglomerates into how you approach large investments? This person brought up an example of TransDigm's recent acquisition of Esterline which required putting in an entire management team to share best practices. So what do you think that you have to pay higher purchase multiples as well as...

I'm sorry, Howard. I didn't quite get the question there. You were saying we studied high-performance conglomerates. And then I lost the thread. Howard?

It appears Howard has disconnected. Let me see if I can dial back out to him.

Okay. I'll pick up where he left off. He was just asking, Mark, for large investments, what lessons are you applying from your study of high-performance conglomerates as the author gives the example of TransDigm. Apparently, in a recent acquisition, it ended up putting a whole management team down there in order to proliferate their best practices.

I mean most lessons I got from the high-performance conglomerates were depressing that over time, they generated ever lower rates of return on incremental capital deployments. And although they continue to be operationally efficient, the way they continue to generate acceptable and reasonable returns was through the use of gobs of financial leverage and TransDigm was probably the most extreme example in terms of financial leverage. And it's just a personal comfort thing that we haven't gone that route. So what we're trying to do, what we -- where we think we have the greatest chance of successes is not large investments or investments outside of vertical market software. But it is in continuing to do lots of small and medium-sized vertical market software investments using the processes and approach that we've historically used. So obviously, we're trying to scale that. And that's absolutely our focus. Everything else is a side activity and probably doesn't generate anywhere near as good rates of return as that core activity. And I don't particularly want to distract people from the core. So lessons from the high-performance conglomerates. I'll tell you 1 lesson I've learned, and that's Roy Thompson wrote a book which I love called, After I Was Sixty. I'm turning 65 today. So maybe I write a book after I was 65. And if I can have the success that Roy had after he was 60, he basically left North America and moved to the U.K., took a small amount of money and started up again and did a phenomenal job. He obviously knew the newspaper business very, very well and did quite well in the newspaper business. But where he scored and did dramatically well was the early days of television and then the early days in North Sea Oil. So he did 2 things that were totally outside of his core competence and did so remarkably well. And so if there's an example out there that I'd love to follow, it would be them. And so as I look at things that are outside of vertical market software, hopefully, I can be as Roy was in looking for things that are unusual and unexpected. ITV was the first time, I think, licenses have been handed out for television in the U.K. that weren't government licenses. And North Sea Oil, obviously was a bonanza, but they're very early days of the bonanza. It was an opportunity spotter. And we probably need to do that if we can't get our core business to consume our capital employed. But I'm still very hopeful that we will do a better job on the core.

So that's a really good lesson shared, and we will turn to that in a few questions about investments beyond VMS.

You can see how I'm trying to shut down this particular line of questioning, Howard?

Yes, it's too bad. There's a lot of shareholders who'd be really interested in this opportunity, I guess, large M&A is...

Yes. I'm not sure it's an opportunity. It's an opportunity to fail here. We got good at something, and we should probably keep doing a lot of it.

That actually relates to my next question. But before that, happy birthday. I'm sure most people would be getting their CPP by now. But I don't see that for you in the next -- at least in the next few years. Will large VMS businesses be operating differently say, with the goal to extract cost synergies to compensate for presumably higher acquisition multiple? Would you pay a higher -- now this is interesting, would you pay a higher multiple for faster-growing software businesses, whether VMS or not and historically?

Well, obviously, if you think growth is going to continue, you will pay a higher multiple. So let's chop that question because it's sort of obvious and not particularly useful and relevant. What you're asking about with the synergies question is whether, given the circumstances of the particular situation, would we behave intelligently. And I got to answer you, I hope so. I mean, we run our businesses differently if they're in different circumstances. Mark Miller probably has the widest range of size of businesses from incredibly dynamic to quite large global businesses. So Mark, why don't you just sort of try and contrast how those businesses might be run differently?

It's a really interesting question. And what's interesting about it is we spend our -- we spend a lot of time trying to learn from each other at Constellation, and we try to get our business leaders together to learn from each other as much as possible. But one of the challenges is if you're running -- let's just -- we'll pick a number, let's say you're running a $100 million business and you're sitting that person down with the person running, let's say, a $5 million or $6 million business. Can they really learn from each other, right? They're very different businesses. If you're the head of sales from, let's say, $100 million business and you have marketing under, you might have 50, 60, 70 people in your department. And you've got to be a coach of a coach of a coach, plus you've got a -- yes, you've got to think cross borders. There's a whole bunch of things you might want to think about versus a small business where you might only have 2 people or 3 people in sales and marketing, right? So it's different. And the things they worry about, things they think about, the type of people you need as those businesses continue to grow, sometimes change. So the person who was the head of sales when it was a 2, 3 person sales department, can they run that 50, 60 person one? And they might not want to. And it might not be the best place for them to go with their [ careers ]. So it's a really, really interesting problem. And we -- it's one of the things that I struggle with, so I really like to -- I got to be careful on the intellectual property stuff. So I'll dodge the last part of what I was going to say, but it's really -- I think as we continue to grow, I see them as very different businesses with different -- a lot of different things to think about. And with larger addressable market and processes that are smaller businesses instead of Constellation, don't really need to have make decisions to change products and what have you. I don't know if Mark that was where you wanted me to dive into on. But that's sort of the things that I think about when I think about the differences in size.

Okay. That makes a lot of sense and different sites have different needs. I guess one about hurdle rates here. Since you've lowered the hurdle rates, are you seeing more potential investment opportunities? Are you seeing many CSI like TSS, Acceo, Topicus, what does the funnel now look like for a typical -- for a more typical VMS business? And maybe if, Bernie, I'm sure you've looked at the universe as well. If you could chime in, that would be interesting.

Bernie, do you want to talk to funnels?

Sure. We -- since we started up contacting investment bankers, we've started seeing a little more volume in terms of what's available out in the market. And for the longest time, we've kind of been on the outside looking in. And I think we've been able to generate enough interest amongst the bankers to bring us into the processes that are ongoing now. Whether or not we'll be successful is to be determined. But yes, we started to see a lot more, definitely.

Okay. So that's good. And aside from lowering the hurdle rates and building out the team at the head office, what are the changes do you think Constellation has to do to become more competitive and to hit more elephants per se?

[Indiscernible], Howard.

Just trying to think of a good answer for you, but I can't give you one.

Fair enough. I mean it's -- those are pretty big changes those 2. So Looks like we're seeing some results already. So fingers crossed. The one last -- one of a large investment. I know Mark doesn't want to talk about them anymore, but here's -- the question is about the correlation between investment size and implied IRR. Is it linear, the relationship between the 2? Or are there certain size categories where you see IRRs being more attractive?

So there are single venture -- sorry, single private equity funds that write single checks that exceed all of the capital that Constellation is invested in 26 years. Now if they're getting higher rates of return on that than we are, then I would be very surprised. But obviously they are attracting capital, so they must be generating rates of return that investors find attractive. We've had a tremendous track record in the early days when we were capital constrained of generating very high rates of return. And as we've had more and more and more capital, we've definitely seen our rates of return come down. And I think it's going to continue. Once you're deploying billions per annum, the likelihood of generating outsized returns, returns that are 15 points above what you can generate in the markets, are very low. Competition is going to come. So yes, I think definitely size drives down IRR and it's at work at Constellation, and we spend all of our time trying to hold back the tide of decreasing IRR.

Yes. That makes sense. Our relationships and those PEs just want an exit, so that's why they're doing this. Investments beyond VMS. So without disclosing specifics, but I'm sure there's a lot there. What are the general characteristics and requirements of non-VMS markets or businesses you were looking for? What are you actually turned down? And in terms of what you turned down, what you regret turning down? And what do you wish you didn't turn down? Or you're happy to turn down, sorry.

So it's not like people bring us opportunities. We go looking for opportunities. And where do we go look, we go look where other people aren't looking. And so bring me your sick, your tired, your ill and we'll have a look. You've got to be [ concerning ] to get superior results. And then you've got to have a process of protecting whatever advantage you have once you've discovered, unearthed and shown the world that there are superior results to be had. So what we're looking for is a needle in a haystack. It's -- the likelihood of success is near 0.

Yes. It's definitely a tough one. In terms of the talent in this end, what people or companies are you seeing that would best help your circle of competence in this area? And have you have had any progress in building out the team, I guess, or your contact?

So I mean, the criticism I get from the Board and from Robin in particular, is that I should have people helping me with this, but what strikes you as opportunity is very idiosyncratic, I mean it varies an awful lot because I really believe that successful investors who have long track records are rare animals that generally work alone and have lots of authority and the ability to mobilize resources themselves. And hence, the comment I made in the letter about hopefully the Board and the shareholders having the confidence to let us try stuff. And maybe we'll find something, but I'm not betting the farm on it. I'm betting the farm that the general managers will do a great job of investing capital in vertical market software companies that are small and medium sized. That is going to drive the bulk of Constellation's economics for many years to come.

Great. And then you touched on this earlier, Mark, a bit. But when you talked about TAM and kind of narrow TAM working better well defined TAM. But there's a question about expanding outside VMS and going into adjacent software businesses such as payment, ACM, HCM, human capital or payroll which are more horizontal-related businesses. Would you -- have you been looking there at all? And in relation to that, would you consider earlier-stage investments, center investments. And the person asking is wondering because your knowledge of software would make you better investors than the average VC.

So we definitely look at adjacencies and we do payroll. I think it's a fabulous business. And payments, this is my own personal belief is a race to the bottom, and it's a scale play, and it's going to be ugly. And it isn't something that -- I mean, obviously, to the extent that we can deliver payment streams to various of the players and they're willing to pay us for it, we're delighted to participate in payments in that regard. And then figuring out how much of the payments plumbing to incorporate into our products is the decision that our various managers have to make. And it requires an underlying knowledge about how the payments value chain is carved up because there are valuable pieces in it. But I fundamentally believe long term, it's going to be a low-cost operator. It's margin kind of fair. So it's not like we're going to invest billions in payments. But we'll certainly participate in that particular space. I was a failed venture capitalist, and that means I have a very dangerous desire to go back and do it well. But I'm not about to go do it with the shareholders' money. I might try it with some of my own. And the thing that would appeal to me most about venture capital was something that appeals to me most about Constellation, which is small teams working really hard trying to do a great job for their clients and that camaraderie and sense of purpose and mastery that comes from those small focused teams. And I love the start-up world for that intensity and energy, frequently coupled with intelligence. And we create that, again, inside of Constellation would be something I thoroughly enjoy. And toy with it from time to time, and I talk to the various operating group managers about it. But it's a really hard thing to do. It tends to be naturally small and focused. And so doing it at scale is very difficult. So I don't think we'll be doing venture capital in any big way that would move the needle and consume significant amounts of cash.

Fair enough. And it's -- unicorn hunting is a whole different sport. So I get that. That's it for me on these large investments and investments beyond VMS. The next section is on Topicus and TSS, which I'll turn to Will.

Thanks, Howard. So based on question volume, there's a lot of fascination, this Topicus B.V., in particular and its superior organic growth as highlighted by Mark Leonard. Happy birthday, Mark, in the announcement and press release. Also, Topicus has proven interesting as a case study for spin-offs. So starting with the first topic, maybe most appropriate for Daan and then maybe Robin as well. We know that U.S. Topicus B.V. will take on some of CSI's best practices, but each group retains its own strategic nuances even today. Are there any in particular Topicus B.V. you would highlight, such as the types of markets that you're in, the culture approach to these organic initiatives or how you optimize businesses that you will want to retain?

Robin, why don't you provide the context of TSS and Topicus?

Yes. Thanks, Mark. Yes, I will do. Robin here. Yes, I think let's start and go back in time. I think Topicus B.V., the Topicus operating company and TSS, I think are 2 different animals, 2 different horses. I think Topicus really started from scratch and started off building software, and they also, in the early days, that they want to enter into software products and recurring revenues, and they did that particularly to organic growth, but they also did their types of acquisitions. But different acquisitions than we do or mainly acquisitions they bought products, they bought markets, but then they put their development and commercial power behind it, and they really develop those markets. I think TSS is way more like CSI. I started it in what is [ 15 years ago ], and we mainly acquired companies, and we try to make them grow organically, and we hope that they -- when they acquired other companies. So I think the -- and I told you this story. Because the origins of these 2 companies are completely different. And I think that's what we want to keep as well, the original founders of Topicus sold their previous company to a large system integrator. They didn't like that. So for them, it was very important when we had our discussion, negotiations that they want to keep their firm as it is, and they wanted to continue. But of course, they had a curiosity to find out what they could learn from us, but I think that's them -- for them to answer. And the other way around, TSS wanted to continue as well on the path we were, but also like to learn from Topicus. And what we like to learn in particular from them is how did they do their organic growth? How did they do it? Did it create value? And we're -- have been studying that over the last few weeks, and we're still studying that. And we take a slow approach there in the sense that we keep it as stand-alone companies. I think that fits this design model. Our decentralized model where we simply run the companies as they were. But over time, we share best practices. We have learned. That's how we try to improve our gain. I think that's a little bit of context. Is that what you were looking for, Park?

Yes, I think so. Because it points out that you can't look at topicus.com as a single entity, it's really 3 operating groups, and the Topicus operating group, I think, is what the BV question was about. So that's really a question for Daan. So Daan, you're the alien in the room. You're the one who didn't acquire your way to glory. Why don't you talk about your early sense of what it's like to be part of the mother ship?

Well, actually, directly after the merger or the closing of the transaction on January 5, Paul Noordeman, the operational CFO of Topicus B.V. and myself, went directly into the best practices days of Total Specific Solutions. So yes, we were actually received very warmly and started to work on those best practices and getting to know them right from the start. At the same time, in parallel, we used the first quarter to do the necessary plumbing in integrating Topicus B.V. into the financial ecosystem of TSS and CSI as well. And yes, there's a lot to learn for Topicus B.V. on the operational side of running a software business. And the other way around, we think we can contribute to TSS and to CSI in a broader perspective on how to spot, for example, regulatory change in a market or how to spot market infrastructure changes because those changes mostly trigger organic growth at Topicus B.V. or in software, in general. And then you put some tech talent on it, together with a master in the domain or the vertical market at hand. And then you start to develop a market or enter an adjacent niche to an existing vertical, for example. So that's -- we expect that it will work both ways. And actually, we don't enforce the best practice sharing, but we encourage it, and we see it actually happening in several verticals in the Netherlands, currently.

We were fortunate at both the Topicus Board meeting and the Constellation Board meeting to have a presentation from one of the Topicus founders about what he saw as the fundamental principles that built the company. So sort of a codex that will be a living document and provide us with their understanding of where they have been and how they got to where they are. And we're going to try and make that as a rich a document as we can. And we'll see -- we'll, hopefully, add to the learnings that we can pass back and forth over time. I just was summing by Daan, who's been kicked out of the call -- so he's -- we'll try and dial them back in, but we lost him, Larry, if you were looking for further questions on Topicus, at least for the time being.

Okay. We can come back to that, Will, if that's okay with you, we could pause on Topicus, and move -- we'll come back to that later. There are a few more questions there. But why don't we segue into Section 5, which is called roughly, it's a pretty broad category. Management, Operations and Rivals. And is Howard still in the call?

Yes.

Howard, you want to kick that one off?

Sure. Yes. So Management, Operations, Rivals, a pretty general category for all the operating managers. So the first set of questions relate to the pandemic and the lessons from the pandemic. So generally speaking, what business trends have you seen emerge or end since March 2020? Are you also currently seeing any inflationary pressure in any of the operating units?

Who wants to take a crack?

Barry?

Yes, I'll start. I think one of the things that we learned within the Jonas Operating Group is the nature of recurring revenue, not that we didn't understand it, but we have a little bit more transactional revenue.

That's me.

That was Mark, I think. Yes. So we have a little bit more transactional recurring revenue in some of the other operating groups, like I'm thinking of our fitness business, our hotel business. Where in the Fitness business, we get a clip of the payments running through the system. In the hotel business, we get a clip of the bookings running through our system when someone books a hotel room. So obviously, those businesses were hit extremely hard through the pandemic. And so that's been a challenge for us. And it's made us think more -- not that we didn't think about it, think even more about sort of the types of recurring, whether they're true 100% recurring or a little bit more transactional recurring. And we actually looked at a business in the tourism space during the pandemic and ended up not completing the transaction because of that fear. So it's just something that we've sort of digested in the last 12, 13 months, whatever it's been. On the inflation side, I assume you're talking potentially about wage inflation within the business. But maybe it's inflation outside of the business, but I was thinking of it in terms of wage inflation inside the business. And I think we're seeing a little bit of that now. Obviously, tech has remained relatively hot in some cases, gotten hotter throughout the pandemic. And so there's definitely some inflation from a salary perspective going through our organization right now. External inflation in terms of, I think, the prices we charge to our competitors are what -- are not -- I mean, our customers or to what our customers are passing on to their customers. I think that's vertical dependent. So it's really hard to comment on that. And obviously, in some cases, it's definitely there. In other cases, it's definitely going the other way where there's deflation going on.

Right. That's good. And if there is inflation, that will lead to higher interest rates, which I'm sure Bernie will be happy about. And I guess, I'll turn it to you, Dexter, maybe because you have a homebuilding segment. And as we've all heard, building materials are under -- have gone through a lot of inflation. Are you seeing that at all on the software end or any other inflationary pressures in general?

Well, it's fortunate that the cost of our software is kind of a fraction of the cost of building homes. And in fact, most of our customers are paying even more for the guy who caulks the windows than they do for our software on a per home basis. So given that, we haven't been impacted by inflation that our customers have seen. Does that answer the question? If you want to me elaborate...

It does. And maybe if you have any general news, things about any trends you've seen since last year or anything your group has learned since the pandemic?

Well, we are fortunate to have a meltdown and be the main recipient of the meltdown back in 2007, 2008 to 2010. So immediately, we took the steps to get our business and make quick changes at the start of pandemic. And we ended up not seeing the same impact that we did in 2008, but we were ready and prepared. And so what we did immediately was we said, "Okay, here are our potential first cuts. And in 3 months, this is our next set of cuts." And so from our experience in the homebuilding crash in 2008, where we kind of had to reduce our staff by 40% because our business crashed by at least that, if not more. And so we were prepared for the pandemic, and it didn't have the same negative impact that we experienced in 2008 and 2009. We've added a lot of staff for our homebuilding group, and it's been one of our strongest organic growth. And following kind of the buys in homebuilding as well in the U.S. and kind of the move from cities to home, private homes where you could actually work from home.

Yes. So that's been a trend that actually could benefit. Good point. Does any, maybe...

Right now when homebuilding -- is that they're starting to get a shortage of land -- developed land. And so we're seeing some sort of a reduction in homebuilding because they don't have the land to build new homes on.

Right. And actually, thinking about Barry's response to transactional revenues. I know, Dexter, you guys also have a real estate business. And you probably -- did you see a lot of -- did you see significant volatility maybe in the first few months in the pandemic, where the volumes dropped off, but then now they've come back, they surged back, probably? And how does that change how you manage the business?

Staying on homebuilding, what's happening to the homebuilders also is their margins being squeezed because they sell these homes, a lot of them on spec. And so they're actually -- their margins are kind of going down. Sorry, could you repeat the end of the last question?

It was on the realtor business, real estate business and how -- if there were transactional revenues, if there are transactional revenues there, how that led to...

We don't have transactional revenues. We haven't really seen a lot of difference or growth in our Real Estate business. It's been -- a lot of the growth has largely come from acquisitions. But we haven't seen a big change in the real estate agent market.

Okay. That's good to know. Opening it up kind of to all the groups here on organic growth. The question is, in this person's view, organic growth has been a challenge across Constellation ex-Topicus. Do you share that view or not? And how might you increase your organic growth?

Is that same question to myself as well?

Sure. Anybody who wants to take it.

Well, organic growth, it's, I would say, 1 in 6 companies that we invest in becomes a strong organic growth company. But you don't know which 1 of those 6 that you invest in that will become that organic growth leader. But what's behind the organic growth is the mentality of the management and their conversations with the customers and also having -- and this is my opinion, a more SME base. Another thing that generates organic growth is also if you get on to the right horse. And so some of our organic growth is driven by consolidation in certain industries where you have, for instance, a homebuilder buying other homebuilders as they grow. And so that generates organic growth because your customers are growing as well. And so it's -- we have a number of investments that have strong organic growth, and other ones that are challenged with organic growth.

Right, right. And did the other -- any other operating managers want to chime in on this? Do they -- are you finding the same -- I don't know, Dexter?

Yes, Mark Miller has a comment.

Yes, like it's a great question, Howard. And I think just so the basics are -- is pretty much all of our businesses are a low percentage of our customers' sort of operating expenses, right? So I think there's opportunity to grow organically across the board. Sometimes, when we acquire businesses and even some of the businesses we've owned for a while, they need to sometimes stop doing some of the things they're doing rather than trying to do more, which might involve getting a little smaller before they start thinking about growing. Because you need sort of a good foundation to build off of. And that's easy for me to say, and it's hard for people to do because you have to sort of make some tough choices around maybe who should your customers be and what segments of the market they should be in? Should you go international? Should you not go international? So those are some of the things that our leaders kind of have to wrap their heads around. But I think the real challenge for our leaders is just customer observation -- is seeking those opportunities and trying to find them inside of our customer bases. And I think Dexter said, 1 in 6 of our businesses, I'm not sure if that's the right number. Heads our businesses on a percentage basis are good at it. And now I think it's because the leaders are able to spot -- do customer observation, what they might do to grow their businesses. And yes, you'd love to see more of that. And I think the opportunity is there. But I don't think you can expect it across the board. And remember, what we're trying to do here is make sure that we're buying and holding forever. So we're trying to make sure that we -- our businesses are -- have built good moats around them to stay in those markets forever. And growing and getting either diminishing returns or moving into new areas that maybe in the long term, won't have those kind of moats is maybe not the right thing to do. So it isn't a simple solution of saying, "Hey, should everybody be organically growing." You still got to think through it case by case and you have to have the right leaders in place to do it. And then you also have this tension between acquiring a lot of businesses as well. And some of your great organic growth leaders who are able to spot opportunities and look at moving into new areas of their customers or maybe into new geographies. Some of them have some great skills for helping us acquire businesses as well. So it's also a question of where do you put their time? Where is it best to be putting -- and where are you going to get the most capital out? Investing more in organic growth to expand an existing business? Or using some of that really great mindshare to think about how to kind of do more acquisitions in different situations and maybe coach some other leaders on what they might do better. So there's a lot of things there. It's a really interesting problem and it's an intellectually stimulating one to chat about. So I think that's about as much as I can say about it.

Yes. There's no right answer, I guess, to this question really. It's just a lot of trade-offs. Does anybody else want to comment? I know that there is a -- there was the keep your capital program that Mark is alluding to. How -- and how do you trade that off with your organic growth initiatives?

Well, if you just ask me about the mathematics of keep your capital. Obviously, as you're generating rates of return in the 20s, every, I don't know, 3 years, you've doubled your capital base. So you've halved your return on invested capital. There is a tremendous sense of energy to deploy that capital. And obviously, we have hurdle rates. And so they're under this tremendous pressure to deploy capital, but then we were keeping it a little bit high. So we're putting them under unbelievable stress, then saying, "And, by the way, grow the business organically and develop new people, too, and think long term. But other than that, enjoy."

No, yes, there's a lot of tension there with that. And I guess tying into this question about customer attrition for all the group managers. Have you noticed customer attrition increasing over the last 5 years? And -- or changing, I guess? And what do you think explains this is there anything from the head office side that you're encouraging the outgoing, incoming should do differently on customer attrition?

No. Now, of this, let's talk to some of the groups. Damian, have you seen any particular areas of painful attrition?

No, I think it's reasonably stable. There is some industry-specific drivers, but I think across...

That's what I was hinting at.

Yes. So, yes, I think overall, it would be stable, unless there's a market shock in a certain segment, be it leisure travel or some -- maybe oil and gas, for example.

So Damian had in his portfolio, an access your own business for, I think it was 2 or 3 years in a row, organic growth business and it was in the travel space. And so not surprisingly, they have probably suffered a fair amount of attrition over the course of the last little while. A lot of that's been concealed by transaction-related recurring revenues because the transactions have gone down. You don't know if those customers have gone away or if they -- nascent and will come back. But I'm judging those customers went bankrupt along the way.

That's good color on that. And one on -- maybe to Perseus, but maybe some of the other groups, too, on outsourcing, we are offshoring. We know Perseus uses that. And did the other groups increase their use of R&D offshoring during the pandemic? And in general, for all the groups, what lessons have you learned there, if you did?

I think Robin is probably, after Perseus, the next best to talk to about that.

Robert, do you want Perseus to talk a little bit?

No. I think Perseus' story is pretty well known in terms of the outsourcing, Dexter. So I was thinking Robin has probably been -- got those next largest near-shoring operation.

Yes. No, yes, like what Dexter is doing, we're doing it. We have an in-house nearshoring. We do a lot to Eastern Europe, and particularly, Romania. We do that already for nearly 15 years. And we leave that up to our business units if they want to do that or not. And the -- I think the lesson's learned and also how often is it really depends on the business units. Some are big fans. Others are not big fans, has nothing to do with nearshoring, might also be due to our own business units. So it takes 2 to tango and to make it work. Let's be pretty clear about that. And over time, I think we saw a gradual increase, but again, driven from the business units itself. And I think the pandemic has no influence on it. I never heard anybody talking about due to the pandemic, we're going to use more outsourcing or whatever. And I also know that the Topicus B.V. is also running some experiments or that's running certain activities as well. And they sometimes even go further than we do. So yes, we have a lot of experience, and I think good and bad. But overall, I think it increases over time, step by step. And we do also, by the way, next to our own business units, our in-house company, it's called Yonder. They don't just do it for the TSS units. do also from some CSI units, and they also do it for a lot of external clients, which help them to remain competitive, which helps them to be really ahead in their game. So I think if you look back when this company joined us in what is 2006, 2007, you see now where this is now, I think they made tremendous growth.

Right. This is Damian from Vela again, if I could just add to that. So we've -- within a Topicus group, Yonder, the businesses that Robin referred to. We've used them to help solve problems. But when we think about R&D, outsourcing or offshoring, it's not about costs. It's much more about quality and access to certain talent. So from our perspective, we're not trying to just offshore jobs to achieve a location. It's all about the talent of the people that we have internally and then getting specific input and skills from specialists like the team that Yonder have. So we do engage in it, but it isn't a -- without most of our products, specialists, very special skills are required, and it's not something we look to do to necessarily move those offshore.

And Robin again. And just came to my mind, I was working this week on a project and we had to do technical due diligence. And also the people of Yonder's business there and very knowledgeable and very detailed knowledge and experience because they happen to see so many different projects. So they're also useful in those kind of areas. So yes, so far.

That's great. Looks like provides benefits outside of R&D, too, which is great. One for Jamal here. Person here wants to try to figure out what the margins would be like if you did no acquisitions to get a sort of clinical maintenance margin, what would you estimate these margins to be at your maintenance margin versus the annual investment into your M&A activity? So I guess your acquisition, your acquired margins over your maintenance one?

Yes. I mean, I really can't answer a question because I mean, for me to answer that question, I'd have to tell you what we're investing in M&A, which we don't disclose that information. I mean it's pretty obvious if we were doing M&A, it's a lot of headcount reductions, bonuses will be lower. All of those individuals that were focused on M&A, would that be focusing organic growth? Do you expect that to go up? And to give you specific numbers, I think I just can't disclose that.

That's fair. And then moving on to culture here. So a bigger picture on the organization. This question -- the person wants to know how far are we from the point when operating groups -- existing operating groups get too large to handle for 1 OGM, requiring group split. So even beyond -- splitting up an operating group? Also Mark Leonard has said he does not want to want another OGM reporting to him, except maybe Japan, resuming through the bandwidth constraints. So how will the next level of scaling occur from a structure level?

Any of you contemplating splitting up your groups?

Well, Robin here. I did it a few years ago. So we got inspired by the presentation of Mark Miller about splitting business units. And we took their best practices over. And at a certain time, we also decided to split TSS, and that's why Mark was referring to, you have Topicus B.V. and TSS, but we have 3 operating groups. The background to that is because we did split TSS in 2 separate operating groups in 2017. And I think it has been a great experience that are run by 2 very motivated and very skillful general managers. And they take care of their business and they drive it forward. And yes, they're on KYC. And yes, I think it was fun to do. It was a great learning, and I think it really helped us focus on Europe. So 1 part of TSS focused itself on Northern Europe. The other part focused itself on Southern Europe. So it has been, I think, a good -- yes, has been a good experience for us.

And I can add to that. We have a lot of -- yes, we have broken up Volaris into really many different operating groups, some operating groups, below operating groups in a way effectively. And it seems to be working pretty well and measure them all against each other. It's -- it was one of the stories of the early pandemic. I was -- I mean, the first 10 days of that, I was really just thinking what to do, what to do, what to do. How can -- how should we manage through the situation? And It's pretty obvious. It's basically just let our leaders in this decentralized environment sort of tell us what they need to do. And we've got, I think, like Robin said, it's we got a lot of talent there. And we give them the accountability and the autonomy to make those decisions. And one of the ways of doing it is to create sort of sub-operating groups, if you like, you call it, we have sub, sub, sub operating groups as well. And I'm a big fan of that because that gives some people something they can call theirs, and they get to wear the measurement and how they're doing that, which includes owning your capital and being judged on your returns and your growth. And yes, all of those things. So I definitely think it's a great way to go.

Right. And just digging into that a bit more, Mark, maybe on the Lumine and Modaxo groups and the creation of it. Question here on is this an attempt to get synergies between similar businesses? What -- can you just take us through the rationale maybe of that?

Yes. I mean, I think it gets synergies where it makes sense because I had -- I was always in the early days of what Trapeze was, which I was one 1 of the founders of Trapeze. We traditionally run Trapeze as sort of a global business, and then I'd move to separating Trapeze out more geographically over time. And then bits and pieces of Trapeze ended up being owned by sort of different sub-operating [indiscernible] sense to create Modaxo and bring it together and get a group of people with sort of a global perspective on what's happening, but time will tell that's a long experiment. There's nothing you're going to see in the short term, I think, with that. And Lumine has done a nice job of acquiring businesses in telecom and media. So I think they probably already thought through some of those things and used it when it makes sense. So I just -- interested to see how it works out. I still believe, as Mark Leonard suggested that small accountable teams are wonderful things because they can get focused on a group of customers and make a big difference for them. And I don't like a Swiss Army knife approach to the world to say we can solve it all with this 1 wonderful solution. So -- but there may be some opportunities in some cases to do that, but I really leave that to the Modaxo team and all of the leaders throughout the world to sort of think about that, and the same with the Lumine team. So it's going to be fun to watch. It's going to be something that we see over the years, not over the months. Maybe over the decade.

Yes. Fingers crossed. And I guess, Mark can take a crack at this, too, but I'll open it to everybody else to answer. In terms of running a decentralized business, is that kind of a learned skill or in innate behavior that's hard to teach based on maybe your attempts to try to groom other people to run decentralized businesses?

I think to learn how to run a portfolio, It takes -- I don't want to say decades to do that, a large portfolio. So it isn't something that you learn and a handful of years. It takes time because you've got to see some of the things you've done and what the consequences of those decisions over a longer period of time. So -- but yes, I think it's something that people are -- it's just -- it's into our philosophy of utilization. Initially, it was inside of the businesses. And then -- and now we have sort of those groups or sub operating groups were and we're just continuing to learn how to do that better over time. And clearly, just people who run portfolios and can understand how to think about overseeing managers and when to step in and when not to step in are special people. They're coaches as much as they are leaders. And I think that's key and not everybody can do that, but we're lucky at Constellation everybody on this phone call, for example, really understands how to do that, and it's a special skill, and we can't take it for granted. It's really hard to decide when to let someone fail and learn from that versus tell them what to do and tell them it's not going to work. And probably not to do it versus letting them do it and then saying, "Ha, maybe what can we learn from this? And let's -- maybe we learn not to do that again," and it's really -- it's a difficult thing to do so let's put it that way. Not -- and I think we've got some special people across the group here who could do that. So -- and it helped us work through COVID, I think, quite well.

Okay. The next question is about kind of the culture, and it's asking Mark Leonard on and it states the podcast with Harris. On that podcast, you'd expressed some disappointment in the culture of the organization, noting that it is different from what it was in the early days. Scaling culture is not easy. But your specific concerns might concern any senior leader in any large organization. So how is the CSU or CSI working to maintain its high-performance culture as the business grows larger? We know, Mark, you're a student of other -- of high-performing businesses. And have you studied Amazon in this regard, the questioner seems to suggest they solve this riddle with their focus on the small two-pizza teams.

Yes. I'm not sure how many two-pizza teams you find working in the Amazon fulfillment centers. So I think the two-pizza of teams that are writing millions of dollars worth of Amazon stock are probably quite different. So culture. I don't believe we have a culture, and I know that, that all is with Larry and Steve Scotchmer. I believe that the general managers and I, and Jamal and Bernie and Mark, we all know each other when we will interact and we interact with candor, and we tell each other what we think and we know what our values are and you learn that, right, over time, as you work together for a serious amount of time. And if you want real input on a phone-in issue, and you phone up any one of those people, you will get real input, you won't get politicized stuff back. And that's what you want. I mean, it won't always be comfortable. It will sometimes be download painful, but you will get that feedback. That's the culture amongst us. Now I'm warned about that if you go down to 1 of our divisions, you're going to -- and you go far down in the ranks to, I don't know, a call center where we're handling support calls. You're not going to get the same thing. And I've sat in those centers early in the morning where people are coming in and they spend time chatting about the night before and what they did on the weekend and the girlfriend and whatever it is, the intensity that I saw in the early days of some of the companies that were part of Constellation and that were probably my insured portfolio, I don't see replicate. I see something that you talked about, Howard, in the very early days of Constellation, which is a reversion to me. And large groups of people when you get 27,000 people, I'm willing to bet that there's an awful lot of those folks who are just working for a living. They're not on a mission. They're not looking to change the way Constellation operates. They're just looking to make a paycheck. And there's nothing wrong with that. You can't expect exceptional performance from everyone. And then we do try to put together those high-performance teams, you take a toll. People pay a price in their personal lives, in the family's lives, and they're going to be willing to make that trade-off. You can't force them to make that trade-off. So you volunteer into that intensity. Now we have it amongst the group that I talked about at the beginning of this particular diatribe. And we try and make sure that the people who work directly with us have it. But the more levels you go down, the weaker that intensity transmits. And it transmits differently because we don't share 100% of the same values, we share 90%. So you multiply 90% times 90% times a bunch of times. And you get this sort of dilution and reversion to the mean. It's a mathematical certainty that you will. So the culture of our business that does para-transit in the Nordics is going to be different than the culture of our payroll business in Brazil. I have no doubt that if you went and surveyed it and looked at it, you'd find that. They speak some of the same language because we share some ratios and some approaches by doing acquisitions. For sure. And so that's the best that we can hope for. There's a shared language and that we can share experience And the level of empathy and collegiality between them so that we can pass stuff back and forth.

Yes. It's a tough task, and thanks for dissecting the culture for us. I'm going to actually -- I'm going to pass it back to Larry now to do the general shareholder Q&A that we've received.

Thanks very much, Howard. You may have just answered this, Mark, but I'm going to ask the specific question this fellow asked anyway, just a sharp -- because it's a sharp question. Christopher [ Freed ] What are the 3 most important elements of Constellation culture shareholders should know about and keep track of?

Yes. I just said that it doesn't exist so to then name the top 2, we could kind of ironic, at best. I'm sure that others feel differently about their cultures than I feel about Constellation's cultures. And so does anyone want to talk about their top 3 most important cultural elements? And feel free to tell me that my views on culture are wrong as well. Clearly, I scared them, Howard.

Howard, it's Jeff from Harris. I'll take a quick crack since I'm not usually scared by what Mark says. Although thank you for bringing up the fact that the podcast I did with him got out into the public sphere because that is a sort of point of contention with Leonard and myself. Yes. I think when I look at culture, I think discipline comes to mind, accountability. And then maybe to use Mark's word, collegiality, which I think really the way that I look at that is this willingness to share and to be open and honest with each other. So I think you -- like Mark says, you see that at our group. Again, Mark Miller is more than happy to share with me what's working for him, what he's thinking, what's not working, and I would try and do the same with he or any of my peers. And I think we try and take that into the organization. To Mark's point, I think it's probably strong at the top, and it's probably different at different levels that you go. And the fourth one I would add maybe is just this sense of humble curiosity, I think. So again, trying to make sure that we're just always willing to challenge each other and think of new ways of doing things. And I think the -- if you call, Adam Grant, the new thing is this concept of unlearning. So again, you would learn lots of great things, have lots of great experiences, but there can be a benefit in unlearning some things, too, if they don't -- if they're not suiting your current purpose or continuing to move you forward. So that's how I think we described some of the major components of the culture. But again, my peers might disagree with me in terms of their specific organizations. I think there's no question that each operating group has, again, a somewhat similar culture, but also a different culture, right? But if you went to Jonas, there are some similarities to Harris, but it is not the same organization as the Harris organization.

I think Damian wants in.

And just to add, I agree with both what Jeff and Mark have said, an observation for someone who's only been in the company 6 or so years, very -- there is a culture here that with a sort of an owner-operator type mindset, but very careful about how money is spent in terms of operating the businesses as you would have with a small business as opposed to what can happen in other large companies the size of Constellation. So I think the decentralized nature and the culture there is to be careful with what you spend and then really careful about how you invest to make sure it's like you do feel like you're investing your own money or you're very careful to that extent that we're not playing with other people's money. And I think that is a culture that runs deep in the company from what I've seen. And I think that, that's something that shareholders who aren't employees can probably take comfort in that.

Excellent. Well, thank you all very much. Culture is a fascinating topic. I think the culture is rich at each of the units and at the company as a whole. It may be hard to answer Chris' question with a list of 3, but you've done a remarkably good job. Well, listen, that wraps up that segment. That was segment, the fourth and sixth. Let's return to the segment we had to drop due to tech difficulties. That is the topic of Topicus. Daan is back on the phone. We did have a brief introduction to the topic, but we have quite a few more questions to pose. And so we'll return to that segment with Will leading the questioners.

Thanks, Larry. So this question is curious about the -- now that Topicus is an independent public company, what, if anything, is the new entity doing differently than what TSS did while it was part of Constellation and not spun out? And I would guess that the question is not asking so much about conference calls like the one that you just did, but maybe more operational and plus the fact that you have your own currency.

Shall I take it? Robin. Yes. Well, to be honest, I don't think a lot of things did change. TSS Public and TSS Blue, as we call them, and we have done Topicus operating group, the 3 operating groups, but let's talk about TSS because that's what you're referring to. I think in the operations, nothing has changed. The groups are headed by the same people. They run their business skillfully. They have people reporting up to them. They still do what they do. They still are part of the CSI ecosystem. So nothing really changed there. And I hope it's not going to change. And if it's going to change, it's due to an influx of nice best practices we can take over from a Topicus B.V. And for the rest, we continue as is. We're still also part of the whole CSI ecosystems related to M&A and all that kind of stuff. So for me, it's -- we were the sixth operating group, we still are, and we only have our separate listing now, which brings some other stuff with it, what you just referred to. But that's it for me, mainly.

Great. What about employee compensation? So how does that compare now to Topicus to Constellation? Will Topicus has followed the CSI policies to pay a significant portion of bonuses and shares escrowed for 3 to 5 years and also not issue shares from treasury for employee compensation?

Yes. Robin here, yes. So also there are nothing changed, except 1 point. So we still follow that CSI policy. We have -- there's still the same bonus formula. The only difference is that our employees will invest not in CSI, but they will invest their bonus in topicus.com. And that was also one of the reasons to do a separate listing, not the only, but 1 to have identity, to be close to the business we're involved in. And now that's what we have been doing already over the last year. So the bonus 2020 has been invested in topicus.com.

Great. Next question is a little bit broader -- Mark Leonard gets a special call-out. Mark, how do you feel about the valuation of Topicus? And does this influence at all the decision making process and considering further spin-outs?

Yes. I always feel that valuations are too high for tech companies, given their underlying cash flows and economics. But that also relates to the fact that I'm expecting, I'm hoping that eventually, yields on borders and equities will move to more normal social levels. So obviously, I think that the stock price is higher than I expected it to be. I hope that it would gradually sort of increase in price as opposed to increasing in the way that it has. And I think it has lots of expectations built into it, and it puts tremendous pressure on the management team to stretch and, try and generate results that justify the levels at which the stock is trading. Now I think that same concern applies to the markets in general. The -- I wrote about this Jack Henry and its period from 2000 to 2010, where the stock basically didn't appreciate. But the underlying economics of the business got better year after year after year. And I think that was a very bad end result for investors and for the shareholders who are employee shareholders, where they're wealth basically stagnated for a decade. And so I hope that doesn't happen for Constellation, for Topicus or for the market in general. And my big fear is that we're going to see an extremely long period of market price stagnation in stocks and that people will cease to be believers in the equity markets. And they will not be the way that people save for retirement and have better lives because of it. So that's a very dim view of our economic future, driven by what I expect to be inflation and increasing interest rates. Doesn't relate much to Topicus per se.

Great. This one is maybe a little bit more, starting with Mark Miller, and then it'd be interesting if any of the other operating group manager has any thoughts about it. It may just be coincidental, but at the same time that Mark Miller, you started talking more about spin-offs, especially ones that were dedicated to specific verticals, the creations of Modaxo and Lumine happened at Volaris. Now obviously, I wouldn't comment on whether those are potential spin-offs, and it's also the fact that in the past, Volaris has created these sort of dedicated units like TripSpark. But maybe talk a little bit about whether these sorts of organizational changes already generate many of the benefits that a spin-off would and how you think about whether to ultimately consummate a spin-off.

Well, I mean, I definitely didn't do it to set them up for being spin-offs. That wasn't the thinking there. I mean, Lumine had it in itself, it was basically was -- it was good for people focused on the telecom area, and they've done a nice job acquiring businesses in that sector. So I have to say that just sort of evolved naturally. And yes, quite enjoyed watching that. And as well as the Modaxo, which is essentially -- I was one of the founders of the Trapeze business, which was the first business acquired by Constellation back in 1995. I toyed within that for many years, whether I should sort of bring those businesses together, kind of under an umbrella again. So I think it was just -- sensibly to do it strategic. And I think I answered that question early, in the sense that, yes, I'm -- well, I'm anxious to see over time how that works out. It does create some of -- I guess, if you looked at it relative to what's happened with Topicus, it does create some of the advantages of getting a group of people who are all kind of have -- are wearing, let's say, the Volaris brand or the Constellation brand name as much as sort of that they have this overarching brand called Modaxo as well as Lumine. So there's some advantages of that. So if you're going to work inside of Modaxo, one of the companies inside of Modaxo, so you can at least say, "We all share a passion for people transportation and moving people, getting them from home to work and from work to going out for the night, what have you. So it helps move people." So there's some advantages to that, I think, from just attracting great people who really care about, for example, people transportation. So you -- I think you get some of the advantages of that by doing it. You don't get as far as -- we do pay a lot of our senior employees in Constellation shares. We buy Constellation shares for them. And you're not getting that particular aspect of it for your senior employees where they would be getting, let's say, a Modaxo share of some sort, like that. So there might be some additional advantage to that. And time will tell with the Topicus, how important that is for us in the long run. So that was just my comments on it generally.

Great. Do any of the other operating group managers maybe have some thoughts on what they've observed with Topicus in the spinoff and whether they have candidate businesses or no candidate businesses in their own groups? Maybe not. Returning to Topicus, in -- the question I'm asking, which countries do you feel that Topicus currently has the necessary management and infrastructure to execute on M&A? You've already talked a little bit about being in Northern and Southern Europe. Maybe it's better to talk about areas of Europe you don't yet cover and then whether you would venture out of Europe and at what point.

Yes. Robin here. I think we're, let's say, from -- that I'm [ leaving ] from the Netherlands. So from Amsterdam to Lisbon, it's a 3-hour flight. From Amsterdam to Helsinki, it's a 3-hour flight. That's what we cover. We have feet on the ground in all the countries, maybe some smaller countries now. But I think over time, we like to cover all the countries. So I think we have currently, I don't know even by heart, but let's say, we have 8 people sitting in Paris and maybe we have 2 people in Stockholm. So it differs on the size of the geography, and it also differs -- France is our second largest country next to the Netherlands. So that's what we try to do, to cover it all. And then I think your next question is when do we go outside of Europe? Is that what -- did I understand it correctly? Well, I think that it's something we have to think about, but it's not on our list yet. But Daan is our new CEO, maybe he wants to change things, and it's up to him. [ And I'm one of the guys ] who are running the TSS units, but we always used to focus on Europe.

Daan, do you have any thoughts, interest in exploring outside of Europe or just starting in Europe outside of the Netherlands for now?

Well, actually, Topicus.com or TSS actually just kicked off their internationalization strategy within Europe a couple of years ago, and they make tremendous progress over there. I'd like to refer to the offshoring activities that are taking place within Topicus.com. And that brings us to Southeastern Asia, to a country over there. And what we do notice is that there is some appetite for our solutions in the financial services area. And well, maybe that could bring us over there from an M&A perspective as well, but we really have to sharpen our minds on that one. And I think we will have our hands full on Europe in the next years.

Well, one of the things we've seen is that you follow big clients around the world. And so if Daan had a client, one of the Dutch banks who wanted then to open up in Indonesia or somewhere of that nature, then he would probably end up establishing a presence there, et cetera, et cetera. So that big client service is a great way to sort of expand your business and teach you new geographies. And then the other thing is you get good in a particular region doing a particular thing. One of the things that TSS did well was notaries in the Netherlands, and that's a peculiarity of Napoleonic law and it isn't hard to then go -- where else do they have Napoleonic law? Boy, this is a good business here. Let's go see if it's a good business elsewhere, that kind of thing. So you get ideas, right? And you potentially move out and you make little experiments. And geography is an initiative just like R&D is an initiative. It's something where you invest a few years' worth of efforts and you hopefully get some traction.

Right. That's it for Topicus. Back to you, Larry.

Thanks very much, Will. We're running the trains exactly on time this morning. We're going to move into the final segment momentarily, but let's turn to a couple of questions from the chat that are still focused on sort of business operations. [ Douglas Ott ] asked the question about pricing power. "Knowing that this varies across the business units, can you nevertheless identify any sources that tend to be significant across Constellation and the factors that tend to weaken pricing power?"

I hate talking about pricing power because it has the implication that you sell the same thing for a higher price next year than you sold last year. Nearly always, and this is almost without exception, the product we sell next year will not be the product we sold last year. We will improve that product. We will add features and function. It will be bigger and better and more tailored and have more refined support systems, have more knowledge and experience built into the product than ever existed previously. So I think what we're really talking about here is can you sell more stuff to the same clients year after year? And I think the answer is absolutely. That is the core fundamental of what we do. Now sometimes it doesn't show up because we start with rough diamonds. And like rough diamonds, you have to throw away sometimes half of what you've got before you get down to the polished stone. And that's what we often do when we buy these businesses. So once you've got your polished stone, you then start putting it in a setting and adding complementary jewels around it. And that's what we do with clients. Now if that price increases, you may look at it that way, but it's certainly not what we're doing.

That is satisfactory to me. Does anyone else want to chime in? It's an interesting reinterpretation, I guess, in a way, sort of focusing on switching costs and product and enhancements rather than specifically at pricing power. With no further thoughts, let's take the second question in the chat. It's more -- essentially about operations. It's a general question about organic growth. This [ Himanshu Bindal ] wants to know, "Can you provide a sense of the distribution of organic growth across the Constellation of -- across the portfolio," the groups, I guess, "such as a fraction of the businesses where that's declining, expanding or staying more or less the same?"

Yes. I don't have that number by fingertips. Could I get it? Probably yes. Would it be different last year than it was 2 years ago? Absolutely. And is it different for acquired businesses, recently acquired businesses versus long-term businesses? And again, it would be very different. So I think it's meaningless to people unless they're focusing on an individual business in an individual market, and we have too many to enter into those discussions. We don't even present it to our Board in that way.

Yes. We don't really think about it in that way. It is interesting that -- you could probably get the data if you needed it, but we don't really need it, so...

And we definitely have the data because we do it on a business-unit-by-business-unit basis, but we just don't use it in the sort of analytical way to predict any about the portfolio, per se. We -- when we look at the businesses, we look at the business unit level to make forecasts and -- et cetera. We might roll them up to create a sort of overall forecast. But even then, we don't pay a lot of attention to the roll-up. What's important is the business-unit-by-business-unit level stuff that you do and the person running that business unit gets asked tough questions all the time on whether they're running their business well. And they get compared to what their peers are doing, and you try and benchmark whether they're a good person in a tough situation or a lucky person in a great situation and the sum of both. And that's where the judgment comes in.

Excellent. Well, just one more before -- it's a nice question to segue into the final segment. It's another one of those questions that asked for 3 things. And it's also -- it's by the same author, [ Chris, Christopher Freed ]. Thanks again for the 3-part answer. It's, "What are the 3 things that shareholders should most worry about in relation to Constellation's operations in the foreseeable future?"

Obviously, to my mind, the redeployment of capital and [ done ] stuff would be right up there. And I guess #2 would be returning capital because a huge chunk of Constellation's value is premised on the redeployment of our capital intelligently. So -- I mean those would both be bad things from the point of view of our shareholders. And then I think if we lost our senior managers. If they all said, "We made a bunch of money, we're out of here because it's no longer fun being here." That would be pretty scary, too.

Well, just one digression off that third worry, what should shareholders expect from senior managers?

Yes. I'm not sure I understand the question, Larry. I guess you'd hope that they would expect what they've seen in the past.

Yes. That's all the scope of the question I have, too, but I guess it's just -- it's leadership, building an enterprise, shaping the next generation, obviously deploying capital in an effective way. Is there anything distinctive about a Constellation manager that warrants special expectations compared to managers at run-of-the-mill companies?

Could I throw something in, Mark? I'll throw something in. So just to make it -- I'd say, I think our leaders need to make sure that they've built enough slack in the system to continue to acquire businesses and deploy capital. And that is one of the things I spend a lot of time preaching to the leaders across our businesses. And if the slack isn't there, it will impact our ability to deploy capital, in my mind. And it's a big challenge doing that and being ahead of the curve. Now not everybody might agree with me on that one, but it is something I worry about greatly and think about. And when you're talking about slack, you need to be not thinking about what we need for the next 6 months to next quarter, the next year, you got to be thinking multiple years. So I think our best leaders are able to think and make sure that we have, as best as they can, the people ahead of the curve rather than finding out that you've basically run out of capacity.

Well, employee ownership is an interesting distinguishing feature of Constellation, too. I think we've got a pretty high level of employee ownership out there in general and certainly in this call. And one of them is asking -- I think it's an employee. It sounds like it from the tone of the question, from the tenor of the question. Kevin Greig, G-R-E-I-G, says -- he's talking about trying to promote the sense of employees having a long-term ownership stake and a sense of identity so they don't feel like a small cog in a big machine. He's asking, "Besides spinouts, what other ongoing experiments or working hypothesis does Constellation fiddle with to address that kind of employee identity and long-term outlook?"

I get my sense of identity from the people I work directly with, the managers and the Board, to some extent. And I have a suspicion that no matter where you are in the organization, it's pretty much the same thing. You don't feel any enormous fealty to Constellation, per se, if you're in a branch in Spain. You feel a sense of team with your manager and with your colleagues and with your customers. And it's very much dependent upon that manager to create that atmosphere that motivates and provides a career path for the people who they manage. So I'm not a huge fan of Constellation. I wanted to call Constellation "Software Co." I wanted it to be as generic as possible, and my partners wouldn't let me. Because I felt that the team you worked with and the organization that you directly work in was the important thing and the customers you work with and that you form relationships with.

Anybody else want to chime in, some of the managers that are, I guess, quite close to some of the employees?

Let me take another crack, since I obviously didn't convince you. So going out to the employees and going, "You know, our return on invested capital went up 0.2% this quarter." The average employee is going to be, "Great. Fine." But going out to the employees at the original Topicus business and talking about new product developments in, let's say, power transit that have enabled their customers to service their underlying clients, who move around on paratransit and who are serviced by paratransit authorities better, it's likely to make them feel pretty proud. And so I'm not looking for anyone to be other than casually proud of being associated with Constellation and the environment it's created, who are actual employees working in the businesses. I certainly hope that the general managers here who created the individual operating groups are more proud of Constellation as an overall entity that has enabled them to work the magic of the -- don't have to create the works of art that they have brought into this world, but it's not -- I don't want Constellation on coffee cups and T-shirts.

Excellent. Well, let's move -- that's a perfect segue into segment 6, the last segment. And I'm going to move the questions around a little bit in light of the -- but I'll quote this, and the category is basically about the shareholders, the public perception of the company and then the category of ESG. The first question I'm taking out of order, I'm going to just quote, "Will Constellation's parent website ever get a modern paint job?"

I take a perverse joy in keeping it retro and thinking of reducing it to maybe monochrome.

At least it's not the simplest in the -- the simplest corp website in the world. That distinction belongs to Berkshire Hathaway. Well, slightly more seriously, here's a question. I promised earlier that we'd have a question about Constellation's name recognition and so on in our conversation with Jeff Bender about the recognition of Harris across Québec. This question is about recognition of Constellation in the United States. The question starts with gratitude. It says, "CSI is a well-run company, providing excellent services and products, yet it is not well known in the United States. Does Constellation wish to change the lack of name recognition south of the border? And if so, how?"

We were thinking of issuing coffee cups and T-shirts. Now, well, as I just finished explaining, branding Constellation isn't important, except to a constituency who cares, and that possible constituency is people looking to sell their businesses. And if they think that selling to Constellation is selling to a company that will look after their businesses, that will cherish them and will provide a place for their employees and customers that will give them a good home, then that's great. And so we have lots of people out delivering that message to that constituency that we care about. It's not one you can reach intelligently through advertisements, but it is one that on a direct reach basis, we try to do all the time.

Thanks. And just to follow-up, anticipating what that holder might say, well, that's good. That's great. Do you think that Constellation has that reputation among potential sellers of business in the United States as a dozen in Canada or other locations?

Yes, I think so. And I would argue that probably in the U.S., we have done as good a job as we have in Canada at reaching out and touching the potential candidates, acquisition candidates. And I'm pretty sure we have gone into those levels recently in the Netherlands and some European countries.

Well, thanks again. Here's the constituents that might matter. It's not the customers or other cohorts. It's not the sellers of business, but the shareholders apparently in the United States. I own the stock through the Toronto Stock Exchange but some people own it through a U.S. traded security apparently called CNSWF, which apparently trades over the counter. This person is asking -- I just don't know about this, but this person is asking, "Is there anything Constellation can do to facilitate smoother trading and more liquidity of the U.S. traded security, CNSWF?"

So Jamal, I thought that was just the Nasdaq symbol for our shares that were traded between Nasdaq participants.

Yes. My understanding is like -- so the over-the-counter market, we have no involvement in it at all, how it was established and how they trade [ and if ] it mimics what the TSX does, but I don't believe it has anything to do within Nasdaq. But yes, in terms of -- yes, we -- like I [ get reached out to them in ] terms of trying to move it up to another level, et cetera, but -- and it was never our intention for the stock to trade in the U.S. on that exchange. It was done without any involvement from CSI.

Okay. Yes. So we're not actually listed in the U.S., Larry, and it's both expensive and it tends to -- I don't know if you've ever seen -- every time there's a press release regarding a U.S. security that isn't particularly laudatory, there are subsequently a half dozen press releases from law firms who claim that they're about to launch class action suits. And so that litigious environment isn't one that we particularly would like to expose ourselves to, and so staying out of the U.S. listings is pretty appealing.

Yes. Thank you very much. Speaking of shareholders, do you have a definition or a conception of an ideal Constellation shareholder?

I -- clearly someone who has done their homework and chosen to be a shareholder after having done extensive homework would be an ideal shareholder because then I feel less concerned about them being a shareholder. For friends and family and friends and family of employees who become shareholders, who do it for the reasons of being friends and family as opposed to because they've chosen this as the best possible security for them given their circumstances, those people, you're always going to feel wildly responsible for. And then for the indexes, I feel virtually no sense of affiliation for them. They are just playing a numbers game, buying stocks based on the weighting in the index and selling them for the same reasons, so they would not be on my Christmas card list.

Got you. In terms of those who have done their homework and invested on its basis, what -- the next question is in effect about how the company evolves over time, the world does, too, and you really -- if you're going to be an intelligent investor, you need to do your homework regularly and stay up to date. The question is, "Can you think of an investor that has adapted in their understanding of your business well over the past 5 years? And if so, who -- what sort of investor, what sort of learnings would that represent?"

So the most impressive investors are those with a nuanced understanding of our business. They get that through, obviously, consuming all of the stuff that's publicly available, but they often get it through nonpublic sources as well. They build relationships with employees. They talk to customers. They go to trade shows. They follow all of the unconventional so-called scuttlebutt-type sources, and you've got to be impressed that they do what they do, and I know of several who fall into that camp.

And the question -- the author is also curious about the opposite. "Are there any shareholders who simply don't get it and frustrate you with not doing their homework or not understanding and nevertheless, owning?"

Yes. I mean many of the index investors, I have no problems at all with what index investors do. I think it's a service to the world. However, when they start voting their shares without diligence, I get offended. And so I regularly get lectured by index funds that hold -- are the major shareholders in cold mining operations, tobacco, things that are clearly not social goods, and they're the largest shareholders in the world in these companies and they lecture us on our ESG practices, and that hypocrisy is sickening. And they don't take the time to understand what we do. So when we get criticized about the diversity of our Board, we go into great lengths to explain how our Board was built and what we're looking for in our Board, I've got no useful feedback from these large index investors. I ask them for suggestions, people who would meet the criteria that we were looking for in Board members. When they did make suggestions, they were absurd in that they didn't map onto our requirements or desires in the least. Anyway, so those are the ones who I'm not big fans of.

Understood. And that's not a unique view, and I'm very sensitive to it myself. Segue into ESG, which is a category of ideas promulgated by the United Nations in 2005, that wants to encourage long-term sustainable thinking around these categories of environmental, social and governance. It has, since the UN promoted it, taken on a life of its own to many and is certainly one of the hotter topics in the world of shareholder management conversations. And so a few questions in that category. First, a very general one, "Could you comment on the recent demand for disclosures in this area? Such as," this person says, "those related to 'human capital, environmental footprint, employee development and even the role that your software can have in society,' such as," they give a good example, "building sustainable transport systems?" So yes, views on the current appetite for disclosure around these ESG ideas.

You want me to say something here, Larry, yes? I mean we -- I get a request for this information all the time. It's extremely difficult to try to respond. Like we are a conglomerate of thousands of business units, all doing different things, all might be doing certain activities from an ESG perspective. And for me to try to compile it and record it at a Constellation level is almost impossible. And that being said, we're getting more and more requests, and we know we need to deal with it. And people are voting certain ways, et cetera. And so -- well, Larry, I'll put it back to you as well. You -- we sort of decided, it's okay. Well, look, there are things being done throughout the organization. And we are now going to try to make an effort to try to compile that information and put together some sort of a document that we can publish on our website that says, look, we're not ignoring this. It's just that we can't respond to some of these questionnaires that come from CPD or MCSI (sic) [ MSCI ], whatever it's called, I can't remember it now, but that -- but things are being done. And so rather than just saying no or not responding, at least then we can point to the stock and to say, "Look, the Constellation and the businesses within Constellation do -- definitely, from a diversity and inclusion perspective, things are being done at the operating groups. Maybe not so much from a carbon emission perspective, but definitely on the social side. And then from a governance -- I think we can -- we're comfortable in the governance of our Board, et cetera. But Larry, I don't know if you want to -- because I know you sort of were spearheading this from a Board perspective.

Yes. Sure. Thanks, Jamal. And so Jamal is exactly right. Constellation is unique among corporations in the degree of its decentralization and autonomy so that many of the functions happened deep down below in the organization. And you might be able to generate some of that information and aggregate it. And we're going to -- we take all these matters seriously. I mean I mentioned the UN promulgation of these standards in 2005. Well, Constellation has believed in most of them since the beginning. And some of them are very basic, fundamental ethical principles about how to manage the business, how to treat employees and customers and how to behave in society. So I think Jamal is right that what we've not done is collate the philosophy or the views in a single spot, and that's what we're going -- we're -- Jamal and I are leading a group that will try to look into that and generate something useful for the shareholder community around this. And then some of it will be explaining what some of the distinctive features, including decentralization, for instance, and the composition of the Board and why we think these are the best components of the governance structure for Constellation. And so it's reflecting, to Mark's point a moment ago, that we're going to try to speak intelligently and substantively to the interested shareholders who want to know, want to understand. And so we think we've done these things. Mark's letter have done a good job at communicating a lot of the values and principles, but we think it's it may be useful to try to collate them in a single place. So Jamal and I are at work on that, and we look forward to sharing it when it's ready. Just going back to the questions. There's a couple here still on this idea around targets. Jeff Bender, apparently, your podcast is eagerly -- easily viewed. One person says he really enjoys the podcast and including a recent one on diversity and inclusion. And the question you're asked, if you'd be willing to share some of your observations and reflections that -- on that topic within Harris?

Yes. I think we're trying to create an environment where all of our employees can bring their best selves to work every day so they can interact with their coworkers and our customers. And I think -- like any organization, I think we can do better, and we need to do better. So I think we continue to explore it further. And we have all kinds of programs and initiatives where we're trying to sort of make it part of our conversation, that was the point in the podcast. I think it was this sort of -- be willing to talk about things that are uncomfortable and I think things that are just not talked about enough to sort of shine a spotlight on. So that was the -- again, that was the attempt of the podcast. But again, I was -- I'll be honest, I was quite nervous, actually, for a handful of them. And I was more nervous for that one, I think, because, again, I was uncomfortable. And I think we -- the 4 people that we had on there, I think, did a phenomenal job of just being honest and open and opening the eyes, I think, of others as to how people who have differences can be perceived. And I think, more importantly, how we can sort of help them, I think, create an environment that is more accommodating and more accepting. So again, I actually give credit because of -- the podcast to the 4 speakers more so than myself.

Thanks, Jeff. Here's another one. I guess it's in the category of ESG. I'm not -- that category can be quite elastic, but it's an -- I think it's an interesting question. A moment ago, a question referred to how some of our software can help society in terms of building sustainable transport systems, for instance. This other question notices that some software can do the opposite, some software can promote risk profiling that may be biased in some way or another. Do we use any techniques to police against the misuse of software or those kind of problems? Are there algorithms available to control for these side effects? How do we think about that in -- around product development, I guess?

I think the underlying assumption is that there is some kind of central control that sits somewhere inside of our organization that can control for these things. What there is, is a host, let's say, 500 and something business units of companies that have management teams who are using good judgment to run their businesses. And they have customers and clients, who presumably think that they are the best providers of those solutions. Otherwise, they wouldn't be doing business with them. And I certainly hope they don't have bias in their systems built in. But it's always going to happen. You're dealing with humans here, and some people are going to get it wrong. And so I don't doubt that if you scour our software and you go down into one of the individual groups, and whether it be for our housing software and it's a questionnaire that goes out to people who are applying for housing, that some people might perceive there to be bias in those questionnaires that are generally developed with our housing clients. It's just in the nature of the beast. So there's no easy solution to it other than you hope that people are decent human beings with good values and are trying to do a good job for their clients and their clients' clients. Guys, any views on applying AI to look for inherent bias in our systems?

Well, hearing none, I'll intervene again. And I thought that was a very thoughtful and helpful answer, both in terms of the company and its business. All products can pose adverse effects. But let's -- we're nearing the end of the gathering, but with there are 2 mini segments left. We left out a couple of questions on the topic of competition. We talk a lot about having rational rivals. We also talked about having copycats. But Howard has a couple more -- at least one question more on competition before he'll turn it back to me for some final broad questions. Howard, do you want to take up a couple of competition questions?

Sure. Yes. I'll just bundle them kind of into one, and all the group managers can comment as they see fit. This question really asked about, is there one thing competitors have that you wish your groups had or each business unit had? And there's been obviously a lot of VC money flowing into certain verticals. Are you seeing more entrants in your markets than usual? And how do you fight back with what you have?

When you're talking about competitors, you're talking about competitors to buy companies not to compete to sell software?

I -- actually, I think the question -- I'm not entirely sure because it was just asked like that. But I think it's about the -- to sell software. I think it's the operating competitors as opposed to the M&A competitors.

Okay. Yes. So do you find there's more new entrants into your businesses, I think, is perhaps a good way to look at it, guys. Anyone have a view? Barry?

Yes, I can start there. I would say in some of our verticals where the TAM, the total addressable market, is a little bit bigger, there's definitely been some new entrants over the last couple of years who have come into it. And I'm thinking in the salon and spa space, for example, also in the fitness space because they tend to be larger markets. And I guess I don't think there's anything they have that we don't have. I would wish they were maybe a little bit more rational in the way they compete and how they model similar to ours in terms of what they're trying to accomplish for their overall corporation and building an enduring business versus getting it as big as possible and then selling it to someone else in a very short period of time, but it is what it is. And yes, that would be my -- I guess, my comment on that.

Anyone else?

I'd be curious to hear, I guess -- I know Topicus, Daan has -- there's -- he has quite a few cloud-based businesses. And what I want to know is if it's more competitive in that space in some of the verticals that you're in.

Okay, Howard. Yes. Well, we do encounter -- because there is so much money in the market, also in the space of the early-stage companies, you see in 3 verticals in which Topicus B.V. is operating, you see a lot of newcomers in the market in the fintech space, in the health tech, in the ad tech. But the nice thing about it is that a lot of those start-ups, actually, if they start making money and they want to move to the next step, they need distribution. And for that, they tend sometimes to come to us because then we can tuck them in on our platforms and give them the opportunity to have this distribution, for example. But we see some new competitors, some new players with very niche-specific solutions coming into the market, yes.

Thanks, Daan. Yes. If no one else wants to comment on that, I'll pass it back to Larry.

All right. Thank you. Well, coming towards the end, a few more open, textured sorts of questions, maybe call them fun. Does anyone care to share the best book you've read over the past year? This person writes in saying, "Mark Leonard has done this in the past. We'd love to have a recommendation either from Mark or anybody else."

Guys, anyone read anything they really liked? I think maybe they've all been working too hard to be reading. I am reading the Amazon book. One of the questions earlier was about studying Amazon. I've never really spent any time doing so. It just sort of felt a long way from our world, but I think it's called Working Backwards. And I'm sort of halfway through it. Anyone else got a book that they liked over the last little while?

Yes. I read a book, but it's about -- it was about family businesses. It was one of the Harvard professors who did the family business practice. But I don't know, if you're in the family business, I can highly recommend it. And it was about Enduring Advantage, that's the title or family business. And his name is Professor Davis. If you're interested in family businesses, it might be of interest.

I have the ones that Mark recommended -- one of the ones that Mark recommended, and I forget when he recommended it, just to the Board or to everybody, but it was a biography of Roy Thomson. You referred to him earlier, Mark. I think that was the biography recommended and I read. I thought it was very interesting, very good, very fascinating character, interesting life, built up a huge -- one of the Canadian -- one of Canada's most important companies, I guess.

Yes. Well, there are a host of biographies on Roy, but the one I mentioned earlier was the After I Was Sixty, which was an autobiography for a certain period of this life. Next question, Larry.

Okay, Mark, here's a tough one. Speaking of authors, this person cites Daniel Kahneman, a famous behavioral psychologist who's influenced a lot of us, I think. And this person attributes to him a technique that she calls a premortem that is sitting here now, anticipating problems. And here's her question for you, Mark. "Assume that it's 5 years from now, it's 2026, and your estimate of Constellation" -- I'm quoting, "your estimate of Constellation's intrinsic value per share has halved relative to what it is today. What most likely has happened?"

We have not been able to deploy the capital and half our value is associated with deploying capital at high rates of return. I can say that with a high degree of certainty.

Right. You said that was -- the #1 thing you need to do is -- or the #1 risk is done deployment of capital.

Or it's not deploying it, one or the other. You can do both.

Right. You don't want to take out a crystal ball and identify the sorts of macro or micro forces that might lead to that scenario?

No, I don't think so.

All right. Then we'll flip it around. The final question asked by another shareholder more affirmatively is, "What is the" -- and this person says, "Hey" -- I like the phrase the person used. It says, "I've only been -- I've been a shareholder only since 2013." I like that phrase. And then says, "What is your intended destination for Constellation, 10 or 20 years from now?"

It's going to be a sum of parts, Larry. It's got to be whatever the individual businesses achieve in terms of deploying their own capital and shaping their own futures. And so it comes down to 500 questions, right?

Yes. I guess, it does. I mean it reminds me a few moments ago, you said that you had -- you wanted to name this company not Constellation, but just Software Co. And I remember reading your business plan, that's the title that you gave it. And I read that within the past few years. And when I did -- it was written 20-plus years ago. When I did, it was amazing how similar the vision is to the result, and yet you've done a lot of experimentation and a lot of evolution throughout that process. So in some ways, there was a master plan or a grand vision, at least. Do you have a grand -- but it sounds like you're saying now, you don't have a master plan or a grand vision. It's more of an evolutionary opportunistic kind of growth.

Yes. Absolutely. I mean when I sent you that plan, when we talked about it, I think I told you that we got about 60% of it right. And so I don't want to give people the sense that vision is ever crystal clear. It was very, very right. And some of the policies and philosophies were very, very right. But the refinement has been the master stroke. It's how it's gotten better and evolved that's made it great.

Well, that's a -- at least from my point of view, a great note to end on. We want to emphasize before we go that if shareholders have further questions, we have a nifty function on the Constellation website where you can submit your questions. Jamal and Mark and others who regularly examine that box and give answers, and they're published on the website. It's a wonderful mechanism for engagement with shareholders. So feel free to do that if we haven't answered your question today. I think we've covered a lot of ground. And I want to thank all the shareholders for being here and for providing those questions. And I thank the panel. And especially my 2 co-questioners. So with that, Mark, I'd like to turn things back over to you.

Okay. Thanks, Larry. I really appreciate it. Larry also polls the Board every quarter and gathers up the Board's feedbacks for me and for the managers. And I've told him that's probably the most thankless task inside of all of Constellation because I, on the one hand, make fun of the requests and abuse him for delivering the message and they on the other hand, say that he's not getting me to do what I'm supposed to do. So thank you, Larry, for doing this and for doing that [ Vice Chair and all ]. Thank you, panel, Will and Howard, for helping with the questions and obviously, a huge thanks to the employees and managers of the company who built something that I'm incredibly proud of. And I hope that all the shareholders share that sentiment. So until next year. Buh-bye now.

This concludes today's meeting. You may now disconnect your lines.