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

Hello, and welcome to the Annual Meeting of Shareholders of Constellation Software Inc. Please note that today's meeting is being recorded. If you participate in today's meeting and disclose personal information, you'll be deemed to consent to the recording, transfer and use of the same. If you disclose personal information of another person in today's meeting, you will be deemed to represent a warrant to Computershare and the corporation that you first obtained all required consents for the disclosure, recording, transfer and use of such personal information from all appropriate persons before your disclosure. [Operator Instructions]. It is now my pleasure to turn today's meeting over to Mark Dennison, Chairman of Constellation Inc. Mr. Dennison, the floor is yours.

Good morning. My name is Mark Dennison, I'm the General Counsel and the Corporate Secretary for Constellation Software. Mark Leonard, the Constellation's President; and John Billowits, Constellation's Chair of the Board, have asked me to act as Chairman of today's meeting. Jamal Baksh will act as the Secretary of the meeting; and I ask Shirley Tom of Computershare to act as scrutineer and compute the votes of any polls taken at the meeting. 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. As indicated in our press release dated April 9, 2024, shareholders of Topicus, shareholders of Lumine Group and shareholders of the company have had the opportunity to submit questions in advance of today's meeting. We have received a large number of questions. On behalf of the shareholders, our panel of questioners has collated the questions received and organized them by theme. And following the formal part of this meeting, our panel will post those questions to our senior managers during the Q&A session of our meeting. Additional questions can also be submitted by any meeting attendee using the instant messaging service of the virtual interface. Questions which are already addressed in the questions submitted in advance of the meeting or that are redundant or repetitive will not be answered. Any questions regarding procedural matters or directly related to the motions before the meeting may be addressed during the formal part of this meeting. 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. Read out loud the name of the person who asks the question, and if applicable, the entity such person represents. 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 about on each business item after the presentation of all of the business items. When you're asked to vote, you will receive a message on the virtual interface requesting you to register your votes. When the 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 of the motions. The secretary of the meeting has filed with me the proof of mailing of the meeting materials, including the notice of availability of proxy materials in 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, 2023, 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 part 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 this 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 are properly logged in with their control numbers or invite code after the presentation of all the business items. The first item of business today is the election of directors. There are 15 directors to be elected at this meeting. The management information circular made available to shareholders contains information about the 15 nominees. Those nominees are: Jeff Bender, John Billowits, Lawrence Cunningham, Susan Gayner, Claire Kennedy, Robert Kittel, Mark Leonard, Mark Miller, Lori O’'Neill, Donna Parr, Andrew Pastor, Dexter Salna, Laurie Schultz, Barry Symons and Robin Van Poelje. 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 nominate each of the persons 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 the nominations. There are no further nominations. I declare the nominations closed. I note that as described more fully in our 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 where 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 as may be fixed by the directors and that 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 a Human Resources Committee of the Board will take into account the results in 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 responsibilities of the Board of Directors of the company, 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 mentioned earlier, voting today will be conducted by electronic ballot. I will now take a moment to ask for 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 members or an invite code and wish to vote will be able to see on the screen the election of directors, the appointment of the auditors and the 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 be open for 3 minutes. Once the electronic balloting closes, the voting page will disappear, and your votes will automatically be submitted. The line will now be caused for a 3-minute period. The full voting results will be published on SEDAR+ following the meeting. But I can now report that based on the proxies 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 move that the meeting be terminated, and I second the motion. I declare the resolution carried and the meeting is terminated. The formal agenda for this meeting is now completed. We will now take a brief break until 9:15 a.m. when the question-and-answer session will begin.

Welcome to the Constellation Software question-and-answer session. I ask that all attendees who would like to ask a question to use the instant messaging feature of the virtual interface to do so. When asking your question, please include your name, the entity you represent, if any, and if applicable, confirm if you are a registered shareholder or a duly appointed proxy holder. I'll now turn the meeting over to Larry Cunningham, who will be leading the question-and-answer session this morning.

Thank you, Mark. Good morning, everyone. Welcome, Constellation shareholders. We once again have a sizable crowd in attendance, 630 so far. That's about online with the past several years, we go between 600 and 700 in these virtual meetings. Back in the old days when we did it in person, we got about 400. And within that shareholder group are all of Constellation's directors, officers and managers you'll be hearing from today during this Q&A. And before we dive into the Q&A, we'd like to introduce you to the panel who will be responding to the questions. And to make those introductions, I'd like to ask Mark Leonard, President of Constellation Software. Mark?

Thank you, Larry, for this unexpected pleasure. You didn't bother to mention that. We have on the panel, I think, all of our operating group managers with the exception of the Perseus Group. I will field any questions that are Perseus related. And we also have David Nyland from Lumine and Robin from Topicus. In addition, Will and Howard are back to pose questions. And Larry, you all know, our Vice Chairman and the master of ceremonies here for today.

Thank you, Mark. We love to spring surprises on you. So there's your first. Thank you for introducing everyone. It's a wonderful panel, and I'm delighted to be the [ MC ]. And indeed, Howard and Will and I have together moderated the Constellation Software Annual Meeting Q&A for 5 years. This is the fifth year in a row that the 3 of us have worked together to collate the questions and post them to the Group. So it's been a delight to work with these fellows. Just for background on them, Howard was an Equity Research Analyst at Veritas from 2016 to 2022, covering Constellation at full time when he then moved over to his current position at Fiera, and his team there has been a shareholder of Constellation for more than a decade. Will Pan has been with Ruane, Cunniff for 14 years and has been a shareholder of Constellation since 2014. I've been on the Board of Constellation and a shareholder since 2017, and became Vice Chairman of the Board in 2019. So welcome. And just a little housekeeping. Mark Dennison went over this a little bit, but let me just review what we've done. We received a very large number of questions from a diverse group of shareholders. We edited them and trimmed them and condensed to [ bucket ] of ones into single questions to avoid taking up too much time. And so if you hear a topic you submitted on and the wording is a little different from how you put it, please understand that, that was -- it is a product of that attempt to integrate so that we answer as many questions as we can. And because of the sheer number of questions we asked, we're going to try to ask all of them, but we may not be able to get through them all, and we apologize in advance if we don't. In the past, we've managed to get through them all but, we want to give you a heads up that we might not be able to. We are also prepared to ask substantially all the questions that were submitted, except for a handful that did touch on proprietary areas that would not be in the best interest of shareholders to disclose or discuss. And again, as in previous years, we have the chat function open. We've been receiving questions all morning already, and Will and Howard and I will monitor that chat as we go and incorporate questions that come up today into the deck. And I think that's it. One more note, I guess. If you don't get the question and answer today or if a question comes up during the year, feel free to submit it on the Constellation website where we periodically publish Qs and As. We have not shared the questions with the operating managers ahead of time, except for a couple that require computational matters or personal information. We collated the questions into clusters of topics and then divide them up between the 3 of us, and we'll take turns posing our sections through 6 rounds, probably be about a half an hour each, give or take. And those 6 rounds are: business operations, acquisition philosophy, large M&A investments, spin-offs and other capital deployment, corporate governance and learnings. We'll start round 1: Business Operations with Will Pan. Will, thank you.

Thanks, Larry. Thanks, everybody, for joining us, and thanks for the opportunity to ask questions again this year. First set of questions on operations have to do with organic growth. So just to kick things off to Mark Leonard first, and then anybody who wants to chime in. What lessons have you learned over the last few years that helped improve organic growth? And to the extent you want to comment on that, what level of organic growth should we expect over the long term?

So I don't think I'm the best person to answer organic growth question. I think the operating groups would be much better than I. One observation, I think there has been a bit of an uptick in organic growth over the course of the last little while. One thing to keep in mind is that inflation has been higher. And so that's a tailwind for organic growth and you've got to take that into account. Years ago, we did a study of initiatives that we invested inside of Constellation. And what we discovered was the rates of return on those initiatives for the most part were quite poor, in particular, on a portfolio basis. Obviously, the best of the initiatives were wonderful. The worst of the initiatives were horrible. But on average, they weren't great. What we were really good at was doing acquisitions. And so that is where we're focused, and that has been the making of Constellation. Now as the acquisition opportunity tails off, and it will inevitably tail off at some point. I think we will shift some of our efforts towards organic growth. And I think we will do more of it. And in particular, as the returns on acquisitive growth start to come down, organic starts to look a lot more interesting. Most of the markets we serve don't have huge tailwinds. They're not growing by leaps and bounds. Utilities aren't growing by leaps and bounds nor are -- hopefully, municipal government. And the same thing sort of applies to a number of the other sectors that we serve, for instance, private clubs. And so you're going to grow with your underlying clients, but sure you can deliver to them the tools that make them better and help them be more efficient and we inevitably do that. We work with our clients to develop products and to build out our suites. And so that's one of the sort of generic approaches we take to organic growth. Is there anyone from the operating groups who would like to chime in, maybe raise your hand? Mark, I think Miller first, got to it.

Yes, I think it's always been an interesting challenge at Constellation, organic growth combined with working on the M&A, I think, as Mark had suggested, the good news is we have very sticky customers in a lot of cases that stick around for a long, long time. So getting our leaders to think a little bit outside of the box and maybe try to step into some new areas of those customers is really the challenge and our better leaders who have managed to do that can be very successful. And one of the things that we've been trying a little bit more in the last year or 2 is looking at using experimentation and running sort of low-cost experiments to try to discover maybe new approaches or maybe test some of the assumptions that we've had over many years to see if there might be an opportunity outside of what our businesses would normally have done for a long time. And one of the challenges you have as a business who's been in -- many of our companies have been around for in the decades, in some cases, is you tend to have a bunch of assumptions that you've built up over that period of time, and you assume those to be true, and some of them aren't exactly true. So I think there's some opportunity as well looking at experimentation, and we've been sort of playing around a little bit with that inside of our business as well. So that's all for me, Mark.

Jeff, I think you had your hand up next?

I did not, but I'd be happy to chime in.

There was also a question directed at you that you may want to answer at the same time, which is during the 2018 AGM, you talked about the importance of organic growth, including how it's more fun to work at companies pursuing growth. Harris instituted a [ 20 by 2020 ] initiative, and also attempted to improve back to base revenues, has your thinking changed about the 6 years out?

I'll start with your second question first. I don't think it's changed. I still hold the firm belief that working with companies that have the opportunity to grow and growing is a lot more fun than those that are shrinking and you have to make more difficult decisions. So I do think it's a more fun, interesting environment to be in. So I think we're still focused driving growth. So I think one of the questions -- the second part of the question you had asked, I think was what should Constellation shareholders expect in terms of growth, but I think my perspective on that would be, you have to remember, we are just a combination of over 1,000 companies. So I think the way that I look at it is I don't actually look at Harris' organic growth anymore, but what I look at is what is the growth coming from our individual businesses. And for each business, it has a very unique set of opportunities and challenges, and we want the organic growth coming out of that business to be as high as possible. And as long as we're doing the right things for that business and trying to drive growth as much as we can, that to me is successful. What it actually all rolls up to when you combine, in my case, over 120 or 130 businesses is just an actual calculation of our growth number. It's not actually the most important number. But when we get into an actual business that we think can grow at 10% and it's only growing at 3%, that, I think, is something that we spend a lot of time talking about or if we can find a business that we think we can grow at 10% and we can get it to grow at 15%, this, I think, is where we're spending our time focusing. But I think my other answer would be in terms of learnings, I think just focus. I think we do a lot of things. We obviously spend a lot of our time thinking about capital deployments and adding new businesses into our own. But I think making sure that we have leaders who wake up every single morning, focused on doing what they can to drive our existing businesses forward is really important and something that we can never sort of lose track of.

I believe Robin maybe had his hand up originally or am I...

No, you're right, Mark I have my hand up. I think it has been partially answered by Jeff, but I just want to say we study growers as well within Constellation, outside Constellation. And I think what Jeff said, the people are really focused on it, they make a difference, but there's not a kind of silver bullet that you say, it's just this. It depends very much on the situation for each business unit, as has just been said. And even with the Topicus operating group, who traditionally has been showing double-digit organic growth, and they still do, but it goes up and down and it differs per year. So it's very hard to take one real PL and out. I think it's the people being focused on it, driving it each day like Jeff said.

Robin, there's a follow-up or a question that was directed to you, which was during the 2023 AGM, you mentioned that Topicus was experimenting with the new bonus scheme based on organic growth rather than total growth. At the time you held off on disclosing the outcome. Are there any updates on this front?

Yes. So we still run that. And so far, the units where we have that, so they are particularly incentivized, we tweak a little bit the classic bonus scheme on organic growth. They're still showing strong organic growth. It doesn't mean that they don't have any interest in doing M&A, they have as well. But so far, I think we should study over a longer period of time. But so far, the organic growth kept reasonably well going. So it might encourage us again that focus on organic growth will help and hopefully setting the right incentives as well. And we're still studying that, and we're trying to experiment, and that's what we continue to do and follow up, but it takes some time.

So Robin had mentioned that at the Board level, we profile each quarter one of our growing businesses and trying to understand why it's growing and whether that's a deliberate investment or a tailwind or superior management, superior strategy, whatever the causes are of that particular growing business unit. Each quarter, we generally also do a profile of a venture capital-backed disruptor in the vertical market software business. And these tend to be pretty fascinating. The Silicon Valley crowd got very excited about vertical market software 7 or 8 years ago, and billions went into creating a venture-backed disruptors in the vertical market software space. A lot of those billions have been frittered away. But some of them have gotten traction, and those that have gotten traction are the ones that we tend to study. Now where do we tend to get traction? It appears that if you can use a penetration pricing approach to entering the market, you can do pretty well with these businesses. And so what you need to compete on price is inherently low cost ideally. And a client base that is price sensitive, that cares about what they pay for IT systems that is willing to move based on price. And that generally means that they face fairly low switching costs. Now one of the challenges, of course, is if you build up a high market share and a low switching cost business, that someone else is going to come along at some stage after you start to increase your prices to make some money and just steal the clients back from you. And so the challenge is to create a moat as you capture those clients. And I talked -- I think it was a couple of years ago about Veeva, and they are a wonderful example of this, creating a moat after penetrating a market. They did a great job of capturing pharma, in particular, big pharma with a CRM system that was built on top of Salesforce, so relatively low cost to create. And then they have subsequently reduced their COGS on that by building out their own platform underneath the CRM system and adding to it a whole series of applications that sell into the same client base, building up the moat inside of their business. So that's a sort of prototypical approach to building a great disruptive vertical market software business. We see very few of these. But when we do, we revel in the learnings that we can garner from them.

On the topic of learnings, we had a lot of questions come in, which was, have the rest of the operating groups been able to draw any lessons from Topicus.com on organic growth strategies?

Well, Robin, you're closest to the Topicus operating group with TSS and so you have a couple of managers who've had the chance to sort of rub shoulders on a regular basis with the original Topicans, any observations?

Yes. So I think there was a huge interest to study them. And we did. And Daan , who is running the Topicus Operating Group, maybe to clarify that. Topicus Operating Group is the original Topicus company, which went together with TSS. So when I refer to the Topicus Operating Group, that's the former Topicus company. And so everybody has been studying. I've been studying it myself in detail as well. And like I said before, I think there are many ways to drive organic growth, but there's not 1 single thing standing out big. It might mean that I think typically, the Topicus Operating Group historically has been involved in building applications, being involved developing it and taking it over and driving it, but they clearly could see legislative changes in markets. They have the right networks there and they have the right people with their nose in front having the right contacts, and they also had the guts to do it. They call it stamina, but I think it's more than just stamina, they knew what was going to happen, and they had the right partners and they set up right. So we talk a lot about new initiatives. They handle it differently. But anyway, everybody is studying that. But I think it's a different approach than we traditionally did in TSS. I haven't studied in detail who picked something up and -- but I think there's a huge curiosity to find that, and Daan is also explaining what he's been doing and try to share that with the other TSS and hopefully also with other Constellation units.

Daan works with me on VMS Ventures as well. And so we get the opportunity to get firsthand feedback into VMS Ventures from the Topicus organic growth people. One observation I would make is that the compensation system at Topicus before we purchased it was such that the people involved in the initiatives, that were driving the individual initiatives got to benefit from those individual initiatives. And that compensation is such an important part of business life. I think that for sure, influenced the outcomes with a number of these organic growth investments.

Mark, you did get a question about VMS Ventures, which is, has Constellation VMS Ventures funded any recent interesting projects? Is this initiative still viewed as a worthwhile approach to increasing institutional focus on organic growth?

I think the lessons will be a long time coming as they inevitably are in the venture world. We obviously -- who approved the investments, I think they're interesting. But interesting is in the eye of the beholder. We're seeing a lot more opportunities from outside of Constellation than we are from inside of Constellation. So I think some of the institutional barriers are high. So for instance, if you were a business unit manager and some of your folks wanted to start an initiative that was going to burn a big hole in your pocket for the next 5 years or 3 years, and was going to depress bonuses for your whole team, yes, that's a pretty scary prospect, right? If you spin it off to VMS Ventures, you tend to lose some of your best and brightest. That's a pretty scary prospect, too. So I don't think it's easy to do these things, I think it takes a very special combination of general managers who are very supportive, of some people in their organization who want to pursue an initiative and are willing so to speak, lose those people to the initiative. And so I don't think it's ever going to be huge inside of Constellation, but I think it can be a wonderful lesson to the organization on what you need to do to make initiatives work and maybe we'll figure out some other workarounds. We are working on an idea right now that could affect compensation for organic growth-oriented business units inside of Constellation, but it's early days.

There is a question in operations and moving people around since you just mentioned something like that. It was asked to Mark Miller to start, but anybody can chime in. At some high-performing organizations, it's not only feasible, but encouraged to transfer between departments. And anybody eyeing leadership roles, they're asked to work at different areas before moving up. At Constellation, we've heard of both upward and horizontal mobility and no doubt that various operator group conferences like [ Quadrants ], promote cross-learning and cross transfer. What is the attitude towards transfers between operating groups? And do you feel that has helped at all with retention?

So yes, I guess I'll take that. That's -- it's an interesting question because just forgetting about between operating groups, like even with inside of our operating groups, moving people around is happening as well, which can be equally challenging because there's -- if you have someone who, as market suggested, is really, really great, you almost hate to lose them. So it's a bit of a balancing act between encouraging leaders to move between businesses or between operating groups or portfolios inside of businesses and essentially trying to continue to develop your team. We do our best to try to encourage it. It doesn't happen as much as I'd like, I would have to say. We tend to have because of the growth of the organization, we tend to have people moving up, I'd say, more than moving across. And if you look at sort of the tenure of our business unit leaders, it always surprises me how low it is because we've tended to promote people. I think [ 75% ] of the leaders of our businesses are from within right now and 25% come from people we've hired outside. So promoting is probably the biggest focus. But in certain roles, for example, in finance roles, there's definitely been a lot more movement between portfolios and also across Constellation in some places as well.

I can add a little bit, Will. It's Jeff. If you want. I think, like Mark said, I think the movement across businesses and portfolios within an operating group is fairly well established, whether it's horizontal or vertical in terms of promotions. And I think the reason you don't see it across the Constellation operating groups more, like it does happen occasionally. I just think when you look at the opportunities that exist within the operating groups and the pace of growth and change, it's just not necessary to go anywhere else. So if you want to go horizontally, try a different function, if you want to change a vertical market, if you want to change a geography. All of these opportunities exist in every single operating group. So I think I'm not sure that you're ever going to see a ton of movement across the operating groups, perhaps if it comes a time when the groups aren't growing. But I think with, again, the growth that's going on, there's just so much opportunity within each one that I think we typically -- we would like to have more people filling our existing opportunities. So I don't think really you're going to see a ton going on across the group.

Damian here. I'll add to that as well. I think the -- as Jeff has mentioned, there is a lot of opportunity for people to move across organically. We've had people move from portfolios. We've had people take an expertise where they've got an opportunity to a portfolio that's got a deeper expertise in that space. One thing I think that we do well that other companies maybe don't is moving. We don't move people around too much because when you have -- make an acquisition and you're involved in that thesis from the start, you really have to carry that all the way through and you're fully committed to it. What we have seen, if we do change business units under different operators who haven't got that long-term history, there isn't always the same amount of buying. So some other companies do have a high rotation where they're rotating leaders around to different portfolios all the time. I think that what we do well is we have long-term ownership, and we just create opportunities to move when there's -- if it's geography or specifically -- a specific individual opportunity as opposed to having a regimented regime where people are moving from one portfolio to the next or one business to next and not having that long-term sort of ownership view. So I think that the ability to see something through and grow it over the long term is one of the strong points of CSI.

Great. There's another set of questions that has something to do with moats maybe. And again, this is to Mark Miller to start. But others, please chime in, and there are some follow-ups to people specifically later, including Barry and Damian. So Mark, how do you -- this question reads,, how do you rate the competitiveness of your products versus others in the marketplace and ones which are being created? We understand it varies a lot by vertical. We were wondering if there's a broad assessment, which can be made at the portfolio level? Do you have anything like that?

Yes. I don't think you can really make a broad assessment of the portfolio. But it really depends on the actual business itself. You've got to look at each business individually. I mean, as Mr. Leonard mentioned, I mean, we do focus heavily on building moats in all of our businesses. Some naturally have strong moats because we acquire them -- they already have very low attrition, but their ability to expand into other areas of the customers and deepen that moat of their customers is probably the biggest -- sort of the biggest advantage they would have if they do that well. But I couldn't really say across our portfolio, just sort of general -- sort of a general conclusion for that. It really depends on each of the businesses and exactly what they're doing and how mission-critical they are, of course. The more mission-critical they are. You've got a moat right there and the more they can build off of that. So I think that's -- that would be my comment on that.

Do you have some sort of scale or assessment rubric or anything like that? I'm just wondering if anybody else does?

I mean, looking at how long the customers have been there is really a great way to look at that. Obviously, your -- have a pricing power, what you have, the stronger the moat, you have that. And that's a wonderful thing because you actually can reinvest inside of your customer base when you have that and continue to deepen the moat. So it's really looking at all of those attributes. Market share can obviously be something that can be helpful at times. It isn't always with really, really large customers if you're doing a lot for them, that can be as valuable as having large market share across a market where that are sort of midsized customers. So it sort of really varies by business, and you got to look at each situation individually, and there's not really one way to sort of conclude that.

Maybe I'll go to this question for Barry, and it looked like Barry was going to jump in anyway.

I was going to jump in, but go ahead, Will.

So while existing customer churn is low for your various VMS businesses, what is this offer choice for new businesses formed in your verticals?

What is the software choice for, sorry, for what?

For new businesses formed in your verticals. The phrasing may be a little awkward, but I think the idea is basically, you've got your customer base, but when new businesses and new clients, potential customers form in your verticals, what is the software choice that faces them? And I think the implication is, how competitive are your offerings to the new businesses?

Yes. It's an interesting question. We spend a lot of time thinking about the competitive landscape in our verticals, and it ties into the organic growth stuff we talked about earlier, which is if you have a fierce competitive rivalry, organic growth is very, very difficult. And if the competitive rivalry is less, then there's probably better opportunities for organic growth. But if there's a new business coming in to, say, the private club world, which there isn't a lot of new private clubs popping out. But if there is a new private club coming in, I think what you're getting at is what are the opportunities for that private club to pick between us and our competitors. I think that's where you're going with this, but I'm not 100% sure. It is more, what do our competitors use to build out their software landscape. But if it's what new entrants from a customer perspective base, it's just really understanding the competitive landscape and where we play versus our competition. And some of our businesses, we're extremely competitive on the new name side of things. We have -- win rates north of 50%, and those are wonderful businesses that tend to have our better organic growth. And in some of our businesses, we don't have the best win rates because potentially, they've been around longer and maybe missed a technological shift like going from on-prem to the cloud. And so our software, well very valuable to our existing customers and well used by our existing customers. When a new customer comes in, they kind of say, I'm all in on cloud. I don't want anything that's on-prem. And if you're on-prem, we're not going to invite you to the RFP or into the bidding process. And so it's a business-by-business situation that we deal with, and we try and be logical with our investments. And when we have a business that's doing well and is winning significant market share, we like to think we invest more in that business. And when we have a business that is ceding market share and not winning new name deals, then you really ask yourself the question, can you logically and rationally reinvent yourself? Or are you better off taking those profits and investing them in one of the other businesses that tends to do well. And it's that capital allocation decision that we all have to face that we try and do the best of our abilities.

Great. Thanks. Then on the topic of cloud, there's a question that was asked of Damian to start, which is, have your thoughts evolved on switching costs in cloud-based vertical market software that is not customized? And I think the question here is getting at some old comments that cloud-based uncustomized software may be less sticky than on-prem or more customizable cloud software.

We don't see a specific difference in whether it's cloud than traditional, I would say.

Okay. Great. There have been a lot of questions submitted earlier and then live about generative AI, as you can imagine. So to kick off a couple of questions about this, starting with Mark Leonard, but open to anybody who wants to chime in. One of the most notable recent developments in the software field has been the rapid evolution of Gen AI LLM technologies. It's easy to see that if these technologies continue improving, they pose more than one risk to VMS businesses moats. For example, so planning VMS workflows via natural voice interfaces or significantly lowering the cost of developing competing offerings. What are you seeing from your business units in terms of plans to protect and enhance the moats vertical market software businesses from or with generative AI and LLM technologies?

So I think we're following what's happening in this space at many levels inside of Constellation. Obviously, I'm interested. The Royal Bank of Canada is our bank, a lead bank on our lending facilities. And the CEO popped up and talked about the magnificent effects that AI was having on their proprietary software development. So I reached out to them to say, hey, would you be willing to share how that's affected your development? And every time I see something of note from a major corporation that's using AI, I tend to try and look for examples of how it's influencing their strategy. Now that sort of curiosity and desire to know extends all the way down to individual programmers who personally are buying $10 a month subscriptions to Microsoft's GitHub and copilot combination. And so at all levels, everyone's hyperaware of this stuff. You can't go to a cocktail party without hearing how AI is going to change your life. And so if it starts to be important in our world, we're going to be very aware of it and we're going to respond very quickly. And we're already clearly dabbling all over the place and have a number of businesses that the bulk of their revenues comes from AI-driven products, not because we saw it coming, but because we happen to acquire businesses that we're already in that space. And so we follow those very closely as well. I think it's a question that others could chime in on usefully as well. Anyone else want to take a crack?

Yes. Well, I think -- it's Jeff. I mean, it's not much different than I think every other technology change that we've had to deal with over the course of the decades that we've been running or been in focus on vertical market software. I mean, certainly, from a new hype cycle, probably -- it's different from that perspective because to Marks' point, you can't really go anywhere without hearing about it. You can't really read any news clippings without coming across an article or commentary about it. But I think the approach that we take to it is not much different, right, which is this, how do we understand it, how do we focus on it? We just experiment with it and create initiatives just like we did when we were trying to move our products from on-prem to cloud. So I mean it's not much different. So in the Harris organization, I've asked each of our businesses to experiment with AI, right? So they have to -- they had to write up their experiments. They have to provide monthly updates on what we're doing at our conferences. We share these learnings with people. So we now have AI-specific sessions where we make sure everybody's understanding what each other is doing, so they can refine their experiments, learn from each other and continue to evolve. I think as we go forward, we'll probably have more and more people focused on it to again make sure that all of our businesses are paying as much attention as we feel they need to. But I think the way we go about this is not much different than the way we go about everything else that we have to deal with in running a business, which is we just try and pay attention, understand, experiment, learn and evolve. I think that's our approach, which is just kind of the Constellation way.

Okay. A touch to that too. Just -- I think Jeff's right on. And so it's Mark. I mean, we continue to learn is really key. And to elaborate a little bit on what Jeff was saying just about we've seen a lot of changes over the time. I mean, I've lived through some of our businesses, pre-Internet, post-Internet, pre-mobile phones, post-mobile phones. And each of those events, those 2 were pretty significant events in technology. And just talking about the mobile phone, just everybody using mobile for everything. We felt that would be a massive change. And I looked at a lot of initiatives, investments in organic growth are related to mobile phones, that didn't really pan out. So -- and then it did. So it -- sometimes, you really just got to just see how it will impact us and sort of learn and move with that. So -- but neither the Internet or mobile phones, I'd say, have fundamentally changed some of our businesses in the B2B space. People just expect you to do them and you expect to do more, and I expect we will use AI similarly. So...

We've got the AI businesses. Who wants to talk about those? Mark, were you talking? You're on mute.

I was. [ Perseus ] inside of dark matter acquired a very large AI business with hundreds of clients that have been doing AI for, I think it dates back to late, well, late 20s -- 2010. So let's call it a decade. Obviously, they weren't using large language models. At that point in time, it was more an expert system. But over time, they have clearly graduated to that. And they peaked at 1,600 employees in that AI business feeding the models. So these are nontrivial investments even in a tightly defined vertical. And you got to keep that in mind as you choose where you place your investments.

Okay. Any last takers on AI? All right. Well, that runs out the section on operations. Thanks very much, and I'll hand it over to Howard on M&A strategy.

Thanks a lot, Will. Similarly, I can't wait to learn from panel again. So this is on M&A strategy. Keeping in mind, I know there's been some concern about giving away too much proprietary info. Maybe the first question, I can turn to Bernie and then have maybe the other operating managers chime in, but this one is a bit broad. Without getting into any proprietary matters, how are you seeing the M&A competitive landscape evolving in your particular markets? What geographies seem favorable? What are some of the key trends you are seeing in general observations of the M&A environment?

Sure. Thanks, Howard. Competitive environment, I think we see quite a few copy cats that have formed over the years, and there's no shortage of it. And it comes from folks that have a few dollars to invest and a bunch of contacts and a phone that go out and start calling on vertical software businesses and look for very small acquisitions. And that goes all the way up to private equity firms and other strategic projects at the very high end, that multibillion-dollar vertical software acquisitions. It's across the gamut, the entire field. And we do see more and more popping up at the low end. Whether or not of those continue to operate over the long term, we've seen a couple just saying, well, let's do it for a little while and maybe they haven't received the returns that they were expecting and then they stop operating and sell off the pieces. Some of them do it for a short while and just do the same private equity strategy of holding on to them for 5 to 8 years and selling them off. So it's across the board. We see more and more of those businesses popping up and some shutting down, just feel that it's going to be more competitive over time. What are the other parts of your question, Howard?

Maybe some of the -- what geographies you've seen favorable or you've seen are variable? And what are the key trends? There's been some questions submitted as well asking about higher funding costs and whether that's helped Constellation or maybe raises the bar when you're looking at hurdles. So maybe just comment a bit on that as well.

As far as geographies are concerned, very hard to tell, there's competition everywhere. There's these copy cats or private equity firms in North America and Europe and the Far East and Australia, it's everywhere. So it's not like we have a major advantage in any particular geography. Funding trends, because of the higher cost of capital these days, may be at the very high end, prices have moderated a little bit, even dropped back a little bit, but still very highly competitive, still lots of money out there from private equity firms. The number of people that are interested in vertical software probably has increased. But there are more and more companies that are formed on a regular basis. And so I think there's going to be enough to go around. We're continuing to hold our share in terms of acquisitions. It's still a very competitive market.

Yes, it makes sense. And then there's still a lot of -- keep hearing about all this dry powder. And maybe that kind of does nicely with the next question where a person is asking about Constellation's M&A, of course, has increased, especially if you look at last year. In terms of the volume, how much of that is -- would you attribute that due to internal efforts versus the next favorable external backdrop? So mentioning the private equity may be pulling back due to higher rates. And if so, extrapolating that, how sustainable is that deployment at these higher rates?

Higher rates in terms of the amount, the absolute amount?

Yes, the absolute amount deployed.

It's a combination. I mean we've been increasing the number of folks that are going out there looking for acquisitions, both on the business development side and the M&A side as well. And of course, the executives that you see around the table today are very much all very much involved in M&A. So I mean a lot of it has come from the internal push. And of course, we have reached out to the investment bankers across the world, looking for more prospects to look at. And those relationships have given us more access. And so we see a lot more. Whether or not we get them, this is a big question, and it's very hard to predict.

Clearly, we've had more success with larger transactions. Lower hurdle rates for those larger transactions help. We've also seen a number of overlevered private equity bank companies come to market and where the debtors are basically own the business and the PE firms aren't getting any of the proceeds. And the lenders are going to take a bit of a haircut and we picked up a couple of those and we see a few more in the funnel. And so there are some troubled companies because of the higher interest rates and the very lax lending that went on, I think, in the latter part of the cycle.

And maybe that there was an interesting observation maybe that from -- there's some VC firms that may have also -- we're hearing that they're struggling as well. Obviously, they tend to invest in higher growth, maybe lower profitability acquisitions, but maybe from a revenue multiple, they've looking more favorable now. Have you looked at any of those opportunities? See, Bernie, maybe you're muted?

Sure, I unmuted now. Yes, we do see some opportunities. We're actually just starting out the initiative of going out and looking for VC-backed firms. But yes, it sounds like there are some that might potentially be available, as VCs have invested in fact, in my growth businesses, but haven't really been making -- businesses that haven't really been making much money. So we hope that we can go out there and find a few at reasonable prices. And it's just a matter of going out and trying to find them. And it's going to take some effort. It will take a while. But we hope to land a few.

Makes sense. The next question is about shifting away -- or the balance between larger, lower return acquisitions, mainly as the hurdle rate lowers for that size. And then the smaller acquisitions, which have higher hurdle rates. Have you made any progress between -- in shifting your focus towards more of the smaller acquisitions with higher hurdle rates versus the larger lower return acquisitions? Or maybe the question's trying to get at the shift between the 2 and the tension between the 2. How do you how do you try to scale those large -- those small ones while still [ can't ] large ones?

Yes. Bernie, maybe I'll take a crack at that. We respond to markets, Howard. And so -- and we do it at the most granular level. And so if there's a nice small business that we can get for an attractive price, we do it. And if there's a nice big business that we can get or less nice big business that we can get for an attractive price, we'll do it. And so what you see is not a strategic shift, it's responding to markets.

Yes, you can see what's out there and available. Maybe if any of the operating group managers maybe want to talk about that too in terms of building up their teams, the teams that look at the larger acquisitions versus maybe the portfolio managers and stuff that might look at more of the smaller acquisitions. Do you want to chime in?

We try to not talk about that stuff too much. We sort of feel that M&A is the place where we can differentiate. And so it's not something we enjoy sharing on.

That's fair. So I take that as a signal as maybe to move on to the next question then. Maybe this one will be more -- we'll get more there because it's about copy cats. There seem to be an ever-growing number of software consolidators and copy cats. You talked about this in prior AGMs, but are any of these copy cats on your radar? Have any of them done well that you're studying them now? And there's a few follow-ups. Maybe I'll start there. Anybody wants to chime in?

We profile 1 or 2 every quarter in our board deck and I don't know that we've had to do a repeat. So that means there's a couple of new ones every quarter we can look at and profile. Obviously, we follow them and when we lose to them, we're well aware of it. And so yes, we studied them intently. Hard to judge how they're doing because they don't share that information other than every one of them is doing spectacularly well. So it's difficult to learn from that, but we obviously do learn from losing when we lose and winning when we win against them when we're bidding. But yes, there's a lot of them out there.

And there's a specific copycat that's mentioned that's submitted through the live panel, the co-founder of Danaher is backing a CSI copycat, which pays a little more, but buys growth for EMS businesses that are mission-critical. Any thoughts on this? I know Danaher was one of the HPCs that was studied. And should -- does that mean should we be worried or hopeful maybe that people are going into this space if they're seeing things on sale? Mark, I think you're on mute.

I can't ever see being hopeful when a deep-pocketed competitor who has run a great high-performance conglomerate enters your space. So don't take it as a good sign. And they are trying to differentiate the strategy and I think that's a terrific way to approach the market and execution, of course, is everything.

We'll see how that experiment goes, I guess. So the next maybe few questions is about compensation and retaining M&A talent. So this question asks, how do you incentivize M&A professionals, obviously, ROIC of acquisitions they made. But over what time period would you measure it over because unlike private equity, CSUs M&A, there's no exit, so to speak. So how do you make sure the compensation is competitive to retain your M&A talent? Or do you believe that there's -- you're competing for different types of talent compared to what you see in private equity? Mean I'll start there and then jump to the follow-ups after.

Well, maybe I'll talk about how private equity compensates based on my experience. And then if some of the guys want to talk about how we compensate, and it's up to them and contrast if they can. But my sense of private equity is that you're an associate, you work like a dog, you eventually get to be some sort of junior partner. You get a few points in a fund, which means you get a share of the carried interest. Usually, you don't get much out of the current cash flows from the private equity firm. And your points get diluted by anyone else who gets points. And so it's as there is some game inside the private equity game as they add other aspiring junior partners. And then eventually, you become a senior partner and you get to share more in the carried interest. And there's an awful temptation in that point to either take a thing public or to exit the fund in some way, shape or form to someone who buys fund profit participations. Because if you just hand it on to the next generation of manager, it's a gift of an enormous cash flow, assuming you're doing well. But private equity guys are not well equipped for, given they spend all their life negotiating purchases and sales. So that's what you face as someone going to work in a private equity firm that plays in our particular space. I think our system, which doesn't require that sort of 7- to 10-year feedback cycle, tends to get you more of the reward sooner, but it's nowhere near the bolus of profitability that you can get from flipping businesses. And so for instance, the business from whom we bought Dark Matter and Optimal Blue, there was a very large acquisition done by them of Ellie Mae. And Thoma Bravo had literally bought that business 1.5 years before they flipped it. And I believe they made a $4 billion profit on that flip in 1.5 years. I mean, some of these private equity deals are just spectacular. Obviously, not all of them and the private equity returns have been coming down over time and reportedly have been quite modest of late, but historically, PE guys have done incredibly well, and it's hard to compete with that sort of quick flip that occasionally used to happen, and they're the ones that you hear about, right? And that's why it's so attractive for M&A people to go, is they keep hearing about the winners as opposed to the average performance inside of private equity, and the way that those performance bonuses get shared amongst the partners, the new partners versus the old partners. So it's not all wonderful and the private equity side of the slate, I guess, is the message I'm trying to deliver. Now if any of you feel the need to comment on how you're paying your M&A people and if it's enough, jump right in, but I don't see a whole lot of upside in this conversation.

Maybe I'll just -- there's been a question on that as well. People have been asking about -- this question asks about mid-level M&A people leaving Constellation. And in some recent years, they've even some former employees have even found companies that may compete with Constellation for acquisitions. Is this concerning to management? And is there anything that can be done to prevent some more of them with leaving? So that's a good segue into this. And if anybody wants to comment or maybe if there's any kind of structure that you found that tends to retain M&A talent better.

Yes. I think, Howard, this is Jeff. I don't see M&A talent as being any different than any of our other talent, whether it's technical talent or services talent or support talent or sales talent or even, let's say, administrative talent. So I think we're always focused on attracting, hiring and retaining the best talent across every part of our business. So I think when we see people leave for whatever reason, we really want to always understand why they're leaving and you know what they're going to. And I think all we do with that is we're try and learn and we take it back to understanding the environment that we're creating for those professionals to become masters of their craft, again, depending on what their craft happens to be. And I think we just take that learning and we try and incorporate it into our system. It's up to us to create the environments that keep the best and the brightest here. And I think on balance, we do a pretty good job. But clearly, we don't always, and I think there's lots of, I think, examples where we've seen someone leave that we would have much rather than stay. And I think you're just not always going to be able to retain them. But I mean we take that part of our business extremely seriously. And again, we're always trying to learn and understand what we can be doing better, again, to create that environment, which is a combination of compensation and right, the working environment, which is the experiences, the opportunities, the people they get to work with, all of those things when you roll them overall month ago.

It's Barry. I'm going to chime in a little bit more. The only other thing I would add to that is it comes down sometimes in the recruiting process and who you recruit. And if you can do a good enough job of understanding why they want to join us. And if you're getting someone who's younger, just trying to get something on the [ resumes of the ] springboard to go somewhere else, then that's one thing. And if you've got someone who's had some experiences elsewhere and found they didn't like those experiences and are looking for a different type of experience that we offer, that can sometimes help as well. So understanding their motivation for why they want to join us is often helpful in that process, if you can dig that out in the interview process.

Yes, Robin here. So I think also, yes, we occasionally lose people, but like Jeff said, I think, on average, we do a good job. And I also think if you see the growth of our companies and people who are there and are still sticking around also in M&A, and you might have been working with me in the beginning and now you run as an M&A lead a portfolio where you drive transactions yourself, you do more complex transactions, I think it's also a great place to work and all the learnings you took over all those years, you can implement them. And I think, of course, money is one, but I think also that the satisfaction of the job, the learnings and really being able to implement it on a daily basis, I think that's what motivates a lot of people as well.

Maybe, Damian, you -- I saw you unmute.

Yes. Look, I think I agree with everything that's being said. We don't lose a lot of our high talent as Robin just illustrated. These jobs grow as the portfolios grow and it's a great environment for people to grow their careers. But I think from an investor's perspective, I wouldn't be concerned about it. We -- the people, when they go to these, going to a copycat, for example, the feedback we get, it's a lot harder there. Even if you offer to pay more for a business, people want to sell their businesses to Constellation because they can see the environment and the track record and what businesses have been able to do. From a founder's selling perspective, that's definitely a strong point. It can be more than money. And if you're just throwing money and a copycat with a handful or 10 or 20 acquisitions over a period of time, there's not -- the vendors don't really see the learning opportunities there. So I think the -- we don't lose the key talent in M&A and one, probably the reason is the feedback from people who do go is that it could be harder outside than what it is within inside of Constellation.

Thanks for that. I get the sense from all the responses that working M&A and private equity or copy cats very different from potentially working at the old operating groups. There's a few M&A-related questions here for Robin. So this person asks, I've seen Topicus post job openings for M&A professionals that source targets in the U.S. and even parts of Asia and South America. Can you discuss maybe some of your plans to move outside Europe in your search for acquisitions? And maybe talk about are there certain countries or verticals where you're seeing more attractive opportunities?

Yes. So I think we always positioned ourselves as a European VMS, and I think that hasn't changed. But of course, we're exploring. We bought a few businesses who also have subsidiaries and businesses outside of Europe. So that's how most of the time goes. Then you have people there. And if they run their business well, they love to do acquisition as well, and we try to stimulate people there. And we're constantly looking into markets, in vertical market software or adjacencies. And you need people for that. But I think if those postings, I think that's not the big strategic change or whatever. It's just we're exploring, but our main focus is still what we did. But we're exploring those countries for sure.

Yes. It seems a little more maybe organic unintended in terms of how these M&A opportunities are growing as opposed to a strategic shift. This -- maybe as a follow-up here, someone is asking about the Topicus spend of acquisition as a percentage of used revenues. And they've noticed that it dropped a bit, I guess maybe they're counting the Topicus.com acquisition. But they're asking fundamentally if Topicus' fewer investment ideas or more difficulty executing the deals? Is this current level something that they should expect going forward? And maybe just talk a little bit about the pipeline.

Yes. I think nothing really changed. So we always try to do things rationally. And like I just said, I don't think there are big changes and sometimes we move a little bit faster, sometimes we move a little bit slower. If you look through our historical performance, it goes up and down, and it depends sometimes if you acquire a larger one or not. So I don't think there is a real big change.

Okay. This next one is for Bernie and also all the -- maybe all the operating group heads. Growing this quickly, it requires both acquisition opportunities and talented employees who can integrate acquisitions or lead them, if they so choose. But which is growing more quickly, internal talent or the acquisition pipeline?

I don't think we look at it that way. We grow our M&A people where there are requirements within our portfolios. And the opportunities come in as they come in. I don't think there's a race against time or whether we measure the M&A folks with the number of opportunities that come our way. As we've mentioned several times, we're very opportunistic when it comes to the number of acquisitions that are out there. And when we find them, right, when we don't, we move on. And the M&A talent that we bring in is a function of where we can place them within our portfolios.

I think the point that Mark Miller made earlier that 3/4 of our leaders come from the acquired businesses is very relevant, right? If you do a whole pile of acquisitions, you're going to get a whole pile of leaders. When we do use internally grown leaders and move them across into newly acquired businesses, I think it's a great opportunity for those who do make the move. Occasionally, we push someone to the breaking point, and we lose a few managers who go too far too fast. And that's our mistake when that happens. And generally, they'll want to do it. They'll be ambitious. They want the opportunity. They just may not be always ready for it. And up to us to make sure that they are when we give them that next opportunity.

And maybe as a -- this is a related question that's a little interesting. And this questioner asks about that they've seen numerous negative reviews on Glassdoor, which is a social workplace site people can review workplaces. They cite that there's been substantial post-acquisition layoffs of CSI investments, which some may say into growth and customer service and these reviews may harm CSI's reputation in the acquisitions market. Are you seeing this at all? Do you see that as an issue? And what steps are being taken or would you suggest to be taken to remedy this issue? And this questioner says that they've seen these reviews over 10 years. So they're building a case that this is happening fairly often, but are you seeing that?

I can start, Mark, if you want. So I think -- in our case, I get an e-mail every Monday morning with the latest Glassdoor reviews. Usually, I find it a very sobering way to start my work week. So I think we take the feedback seriously. Obviously, it's a microcosm of feedback that fits into our overall feedback system, where we're measuring employee Net Promoter Scores and all kinds of other metrics that we use to judge the work environment that we're creating for our employees. So again, we see the feedback. We -- again, we process the feedback. We try and understand the feedback. We try and learn from that feedback. I think clearly, we buy a lot of business, as Mark has commented before, sometimes we buy great businesses, sometimes we buy businesses that aren't so great and need to be made great. And I think sometimes the process or the investment -- undrawn investment thesis of taking a not-so-great business and making it great, does require us to do some things that the current owner was unwilling or did not want to do. And I think not everybody always agrees with those choices. But I think we are disciplined deployers of our capital, and we want to own these businesses forever. So we are more than willing to do the things that we believe are the right things to do for these businesses and for the employees who stay and the customers for these businesses for the long term. And again, we accept that, that's not actually going to be -- again, we don't do it to be popular. We don't do it because we're trying to win favor with anyone. We do it because we think it's the right thing to do. And we just again try and make sure we understand that we're doing the right things and again, put that into our overall feedback system. But we're not deaf to what goes on in these platforms. We see it all the time. Again, it's part of how we look and try and continue to get better.

I guess it's about communicating the value prop that's maybe unique at a lot of these Constellation business units and open groups compared to outside. And have any other operating group managers encountered this or study this or looked at how to communicate this?

It's Barry here. I can talk a little bit about it. So we've had, over the years, some negative Glassdoor ratings. And it's funny when you dig into them, sometimes they are talking about the wrong business. And so they come on to the site and make a comment about a business that isn't even our business. And the actual raw numbers of Glassdoor reviews that we get relative to number of employees is clearly the loud minority. It's not the majority. So we spend more of our time focusing on our employee satisfaction surveys that we do each and every year and focusing on that feedback because those are the vast, vast, vast majority of our employees. And every once in a while, you're going to get a disgruntled employee, maybe we did something wrong. And in which case, we do need to learn and get better. But a lot of times when you actually dig into it, it feels like we're going on a ratable that maybe isn't the best use of our time because we want to focus on the vast, vast, vast majority versus the odd and loud minority. But if there's something really bad in there, we absolutely will dig in and try and figure out did we do something egregious or was it not as bad as maybe it sounds on the Glassdoor reviews. But that's how we think about it within the [ Johns ] Group.

Maybe the Glassdoor will use AI and make it -- make this verification better or it might even be worse. But moving on to an interesting question to Mark, Mark Leonard. David Cicurel, CEO of Judges Scientific PLC has said, of the buy-and-build model that it is an arbitrage between the multiple of your own shares and when you pay for acquisitions. Do you agree with that? If so, why has substantially more capital in the VMS space [ now yet ] degraded this arbitrage opportunity?

So I think if you do nothing to the businesses you buy, he's absolutely correct. If, however, you add some value, bring some best practices, then clearly, he's wrong.

And there's different types of acquirers out there in the space. So it makes a lot of sense. And then maybe one last question on -- in this section. So has your success rate been lower or higher on acquisitions with higher proportions of revenue derived from services slash cut some development or one-to-one products, so maybe those that involve a lot of professional services versus traditional one to many or off-the-shelf products?

This isn't an area that particularly one is to talk about, we obviously study it, and we have different views on different markets as to where services are critically important and where services are not at all important et cetera, et cetera. But yes, it varies.

And maybe just one more from the panel because it was submitted live. With Constellation Japan's recent divestment of its only acquisition in the country, has Mark given up on expanding to Japan?

Well, that's probably best answered by Mark. So we didn't divest it, we ended the partnership that we had in Japan. And as part of that, the partner handled the divestment. We are looking around for another partner. We really believe that Japan is a very special place where a strong partner is required to do well. And so we're in that process now.

So it's still a geography that's being pursued. With that, maybe I'll hand it off to Larry to talk about large M&A.

Thank you very much, Howard. Just as an update on attendance. When we started at 9:15, I said it were 627. At this moment, they are 923. The number has been steadily increasing. That's a record. The section is called large M&A. And since Will -- Howard has just taken you through a number of questions and answers on M&A strategy, there's going to be a tiny bit of overlap and I apologize for that, but I think I'll ask the question anyway, even if they've been answered in some way because the questioner may be seeking a slightly different angle. The first is to Mark Leonard, Constellation seems to have increased the amount of capital deployed greatly over the past 2 to 3 years compared to, say, 2016 to '19. What factors have driven this other than opportunistic approaches and in particular, capital deployed into larger investments has seen a significant step change. Can you please provide some color?

In that particular period, I think we have just undergone evolution as opposed to major strategic change. Well, why don't we take a very specific example. And we've got David Nyland on the panel, and he is notoriously quiet about such things. But why don't we ask him about large acquisitions and the role that they've played in the growth of this business?

Thank you, Mark. And just back to the comments earlier, we don't necessarily seek large acquisitions is very opportunistic that we get presented with them. So it's been quite a bit of focus of my portfolio for last year or so. We've done quite a few corporate carve-outs in particular, have been a big thing. And obviously, they're very complex, but a stand-alone large acquisition is equally complex. So yes, I think we can get to the hurdle rates and potentially above and they move the needle. But there won't always be how we grow the portfolio, it's going to have to be a balance of larger deals and smaller deals, medium-sized deals. Moving forward, but I can ask more specific questions, but that's my general feeling about last year's.

I guess, the observation I make is that we did drop the hurdle rates for a while to encourage larger acquisitions. We've since moved the hurdle rates to real hurdle rates. So we're no longer leaving inflation within the hurdle rates, and that has moved up the overall hurdle slightly since we embarked on seeking and building relationships with the people who can bring us large transactions.

A couple of follow-ups on carve-outs. This questioner observes that we've seen more of them recently. And do you have any sense of -- and this might be for Jamal, but what portion of investments take the form of carve-outs these days compared to other forms of acquisition and do you see a trend towards more of that type. And then related, isn't that a much more complicated acquisition because of the need to pull the whole system out of another entity integrated into yours. So Jamal, if you have data and then, I guess, David can talk a little bit about what he's seeing.

I think we're seeing a nodding of head from Jamal suggesting he doesn't have the data in front of him right now. Obviously, we could get it. So with carve-outs, they tend to be -- well, actually, there are some small ones as well as some big ones. So they're all over the map. They tend to be more complex, as you pointed out, because often, you've got support services that are provided by the corporate pack and you've got to either duplicate or replace those support services when you get them. The parent may be getting rid of something that they're not happy with that hasn't performed well. And so often, you've got to make significant change when you get the carve-outs and so they can be enormously difficult relatively speaking. And so that's going to make you tend to focus on the larger ones. Anyone want to talk to this at all? Don't feel compelled.

Mark, it's Jeff. I do think like we do have a bit of an advantage there so I think our existing structure and our ownership forever, I do think relative to some other buyers allows us to be willing to take on that big lift and actually do the work or bring it into an existing structure that we already have. So again, I think on the ones that we've competed on and done, I know the sellers are -- they've been very pleased to work with us and what we're able to do and bring to these transactions. I think it gives them an added level of comfort in doing business with us and disposing out something that they probably to market where they don't want, but they still want to see in good hands going forward.

And I think David would say something similar. The good hands thing is particularly important when you've got a vendor who is going to continue to do business with the clients that we're going to get in the new acquisition, so where there are both customer and employees that the vendor wants to take care of with the subsequent integration of the business with Constellation.

Yes, just to add to that. So yes, safe hands means understanding the domain very well. So that we're not learning on the job and creating business continuity risk. And two is knowing those customers very well because they're very important customers typically to the strategic in some cases, $1 billion accounts. So what is to them a relatively small asset in the hands of a wrong company could create a lot of damage, reputational damage or maybe actually revenue damage. I think the fact that we are a perpetual owners is a huge advantage because they know this is the final destination for the asset, and they don't run the risk. It's going to [indiscernible] somewhere else in 3 to 5 years' time.

Mark Leonard, in your 2021 shareholder letter, you described efforts to establish relationships with "major M&A brokers to help identify larger investment opportunities." Can you update us on that and other ways the groups are identifying investment opportunities?

Yes, I think [ Farley Noble ] who was a previous Constellation employee and came back to join us again to handle this particular challenge has done a wonderful job of establishing those relationships and maintaining them and building trust with the brokers. So yes, it's been a terrific journey. And I think we now see much more market than we ever did before. So it doesn't mean that we're ever going to be a huge player in that market, but in very special circumstances, I think we can be useful for the brokers and can win some highly contested transactions. The one thing to keep in mind is that it's a brutally hard market in which to operate. And we measured this recently, between 70% and 80% of the auctions run by investment brokers end up not resulting in a transaction. And I'm sharing that because I want everyone to know who competes against us that this is a horrible game. You don't want to compete here. You should stop trying to buy these big broker deals you should leave them to us.

An analogous question is an observer notes that Constellation seems to have been buying larger declining businesses, your scratched and [ dented ] fixer uppers. Are you deploying more capital in that space? And what are the challenges or special risks to the overall mix of Constellation businesses from that approach?

The big ones we buy are not going to be, for the most part, big and beautiful because those will be attractive to the private equity firms that can use extreme levels of leverage and dress them up for sale and then flip them on to people who are willing to pay even higher prices. So as a rule, they are going to have challenges. They are either going to be a lot of work to spin out or they're going to have issues that we will need to fix when we get them. It doesn't mean that in that lump of rock, there isn't a diamond. And that's the objective clearly, is to find the diamond and cut it appropriately and polish it.

Here's a somewhat lengthy question, and it's been posed to all the operating group managers because partly the question wants to see if there's a consensus or disagreement on this topic. And the framework is whether you demand more certainty from larger investments compared to smaller ones. The question compares 2 alternative large, say, $100 million equity check opportunities and asks which is more attractive; one that just meets the hurdle rate and will meet it with near certainty or that exceeds the hurdle rate by 10% but has a wider range of outcomes, including not meeting the hurdle rate, which is more attractive? And is there a consensus among the managers? Or do you have different points of view on that.

Let's pick on...

Go ahead, Mark, do you want to call on people?

Yes, yes, yes. Jeff?

I'm not sure how you picked on me first, but we can take that up after the fact.

I was looking for someone highly numerate.

Okay, all right. The -- so I guess, I suppose I'm capital constrained, I guess, in this -- Larry, in this situation. So if I have to pick one or the other, yes, right. I don't think there's a simple answer. I think because we own these businesses forever, and we're going to -- we want to keep doing what we're doing, I think I personally would lean to the second one, which is the wider range of outcomes that would have a higher level of return. Although I would caveat it by just saying, again, in our case, we use four scenario modeling. So I would really need to understand what that wipe out scenario or that worst-case scenario might look like. So I can understand, again, much higher. But again, is there a chance that I'm actually going to lose money on my $100 million equity check or not. So that might sway me slightly differently. But I think I might -- I personally probably would be okay to consider the second. It also depends on the team, who is the team leading this deployment? Certainly, if it's at that level, I myself would be personally involved because that's just sort of the way we currently work things at the Harris Group and probably also would depend is it in an existing vertical or is it a new vertical. So I think there's other, I think, layers that you want to get into before you could just sort of pick one or the other. But I think in a simple answer, I would go with the both the lines.

Who else would like to finish.

Yes. So I think, Larry, the obvious answer is if both fit our criteria, we would try to do them both, but that's not your question. And then I think it's hard to answer because I think at the end of the day, it's the expected value of the case. So am I sufficiently compensated for the wider distribution and the risks. So if that second one you were referring to with a wide outcome has really a much higher expected return it might be attractive, the other one. So it's difficult to say, I need to dive into that specific thing, and I would try to get my head around it and to see if it makes sense. And it's like just what Jeff said, what happens if it goes wrong, what happens if it goes right. And that's try to do each day, bang my head again on door and I think and doing -- and really trying to understand it, and then it's hard to say which one I would prefer, it depends on what the markup is like I just said. So I think it...

Do you agree with Jeff, that it would vary with the team and the vertical and your experience in the vertical as well?

Of course, if somebody proposes something who has an excellent track record and you know that, that person always is right. And if it's a large one you were referring to, I will be involved myself as well. And if we both are getting to a certain outcome, that's what I said. And with all the risks and everything around it, that's what we try to put in our models, try to get our head around. So if I don't have more information, I can't exactly answer now which one I would prefer.

We have some data on this, which suggests that the dispersion on the larger transactions is smaller than on smaller transactions. And so if your dispersion is less and you're a reasonably good forecaster of results and we are, then it suggests that we have been probably looking at ones where we expect the outcomes to be tighter. Now would we swing for the fences on a transaction with the expected value, IRR that is very high. Absolutely. I would encourage that of all of the groups.

Anyone else want to comment on this. Mark Miller?

I mean again, I think I take that at Jeff, so I'd definitely be looking at that wipe out scenario for sure with the large distribution scenario and the team would have a big impact on -- and our knowledge of the vertical would have a big impact of what I'm thinking any type of looking at investment. We look back at how the team has done. As Mark suggested on average we've usually been right, but individual circumstances, it's good to understand how that team has done. So I really need to take that into account.

The Board actually posed this question sort of indirectly at 3 or 4 board meetings ago. And they're asking about bet sizing. And I was talking about how large a transaction we would consider with enormous amounts of leverage. And basically, the bet sizing challenge, when you pile on financial risk and I think that really is your question. At [ $100 million ] bet sizing doesn't come into it for us. It probably doesn't come into it for any of the people on this panel, but if you've got a portfolio manager who's got, I don't know, $200 million in capital under administration and is about to add $100 million, I think they start thinking about those wipe out scenarios a lot more than perhaps they should, right? From a strictly statistical perspective because the bet sizing becomes pretty scary.

Yes, that's a good description, Mark, because I remember using David as an example, the first transaction we looked at when he joined us was like that. And data walk -- it was just -- is this what you want to be doing for one of your first transaction, might have been the second transaction, but -- and he was wise and what. So it was -- it's very true.

So we did a pretty big one at the beginning, too, though.

Yes, exactly. That one, yes that one worked out. Yes.

Pretty good. But I think you also use some structural protection there, David, which was smart so that the upside was shared and the downside was somewhat protected. No more secrets got to keep quiet.

David, you're welcome to take a minute, if you want, or we can move on.

No, I'm good. I'm just playing with my mute.

All right. This is for Jeff. I think it's a natural segue in a way concerning Altera and Acceo. The question is with Altera your experience in health care presumably lowered the dispersion of predicted returns ex anti, but where the range of outcomes relatively wide and compare Acceo the largest investment you've made to that point. How would you contrast the M&A valuation processes between those 2 investments?

Yes. There are different investments. So I think Acceo was definitely our largest investment at that time, it was multivertical, right? So it was not a single vertical. So I think that by itself changed the way that I would say I/e considered it. It had some verticals that we were already in, but it also had a few that we weren't. But that portfolio effect was -- I found quite helpful, actually in terms of getting my head around making that investment. And we've had a couple of the businesses or even I think when you look back, one of the businesses specifically, I think that we probably modeled tighter returns or less dispersion has produced at the very high end of returns, and it's been just an absolute beautiful, beautiful business. And I think -- love to talk to that leader and spend time with that business because it's just -- it really is a -- probably one of the best CSI businesses that we have inside the entire CSI company. Altera, clearly, from a health care perspective, we had great comfort in terms of understanding, I guess, understanding the space in which we were deploying the capital, obviously, in the hospital market, a bit more international. So again, Altera has a bit more international operations, I think, in health care than Harris had at that me. I think -- some silver second thought, I think we probably still underestimated the cultural challenges of dealing with such a large entrenched culture of over 5,000 employees. And I think -- so the path to what we need to do with the business, I don't see as being super complicated getting on the path and making progress at the pace at which I would like to see us make progress, I think, is definitely a challenge, and I think Marcus and team, I think, are doing great work, but it is a daily grind to bring in our best practices and try and get a very large group of people to look at businesses differently to reengage with customers that were disenfranchised by, I think, decision-making and the experience they had pre our ownership. So I think definitely some learnings there. But 3 -- the very different acquisitions, I think, in terms -- I'd say we probably did more of a bet on it. So I think the we probably took more of a gamble in terms of what we were doing in terms of being confident in our ability, but whereas I think the returns modeled for Altera, I think we're tighter back to Mark's point on, I think we were pretty comfortable that irrespective of whether we were sort of really -- doing really well or not as well. Those returns were in a tighter range, but we put a lot of capital there. So I think that probably just reflects our mind -- conservatism in deploying capital.

Excellent. Thank you, Jeff. Here's one that came in this morning. and it is a little lengthy, but bear with me. And I guess it's direct to Mark Leonard, but I think others might be interested in opining too. It's about spin-offs. And the question is the proponent spin-offs, but he's not sure he agrees with the stated rationales entirely. And he says, one of the stated rationales you can use the stock of the spin-off to make an attractive offer to the [ cell ]. This question is I don't see any economic difference between using the stock of a spin-off and Constellation itself, both involve effectively selling some portion of Constellation to the [ cell ]. But I wonder if you're too anchored on keeping the share count of Constellation constant. And instead, this mode of things, I think the advantage to the spend is that they amplify the power of decentralization. They give managers and their teams more of an identity, it's motivating. They have their own stock to buy into and they use for acquisition, and they can compete publicly with other Constellation entities. Thus, he says -- he or she says, "I think CSI should consider doing more spin-offs without waiting for those large acquisitions. So I think CSI itself should be comfortable using stock to do -- to make the acquisitions should it need to and when it's value-enhancing. Am I wrong?

I would say that the question here is right with many of the statements she makes. The -- so we would use Constellation stock tomorrow to buy a wonderful vertical market software business for an attractive price. So there's nothing stopping us. And when the Board posed the bet sizing question to me it implicitly was asking if we would use stock or we would just leverage up to the gills to buy big stuff. And so I'm not averse to using stock. What I am averse to is some of the games people play with stock-based compensation. And I think the manipulation of stock price that goes on with stock buybacks and the timing of stock buys themselves is bizarre. I have a hard time understanding it. But for the right company, we will definitely use Constellation shares. And I think the same thing applies to the spinouts. So one of the challenges is that we operate with very strict rules around hurdle rates at Constellation. And that investing discipline that usually fails to incorporate platform synergies and cross-selling, and many of the things that acquirers seek out as synergies and acquisitions, we don't incorporate into our acquisition thinking. Sometimes we do, but it's very rare. So let's say, we have a telecom spinout and another telecom company is available. And we believe that -- we can operate better than it is currently being operated, so there is some reason about it. And we can buy it for a similar multiple to what we're trading at. Well, then there's a onetime bump in getting that business to operate a little better. And there may be another bump if the synergies that can be had by buying that business. And maybe another bump in using leverage because that generally is lower cost capital than equity. But once you've used up your leverage, that's when you start thinking about using shares. And so for sure, we would use shares of our spinouts to buy things. And in essence, that's what we did with Topicus. We bought a wonderful business at a reasonable price. And shared some of the upside with the vendors in the form of letting them participate in the subsequent listing of the combined entity. And so that's an appealing case that we can make to some special group of vendors that most other people cannot make is this, we've had successful spinouts and we do successful spinout. Now I agree that there is power and decentralization. I don't think you have to be public to get it, but I think it helps. I think it does create identity and it does create a loyalty at a level that's much closer to the individual, and that's always a good thing. I mean your best loyalty is usually to your direct boss. If you have a loyal and trusting relationship with the people with whom you work directly, that's the most powerful thing in your working life. That soon gets watered down as you move up 1, 2, 3, 5, 10 levels. And so I don't think people in subsidiary in Petoskey, Michigan of Constellation naturally have a whole lot of loyalty to Constellation. I think they think about their business in Petoskey, Michigan, and that's fine. And if we were to spinout a focused business in a particular industrial sector or a particular geography so that we ended up with a Brazilian equivalent of Constellation, I think that would be brilliant. I would think that we would end up with more acquisitions in Brazil if we did that, particularly if we branded it locally and then we would if we were 6 operating groups chasing acquisitions in Brazil. So I think there is advantage to doing both industrial and industry sector and geographic spinouts from a branding and employee perspective. I'd love to see it happen. It is a tool you can't use over and over and over again. It's a tool that you need to use selectively and you want to make sure that you and don't end up with a bunch of $50 million public companies that have $1 million or $2 million of overhead a year. This is something where you want the product of your activity to be a $1 billion software business, not a $50 million software business. So that brings another criteria to the table as you select and seek to do these things, and that's people. If you don't have some people, a team that you can see either building or have built a $1 billion business, then it's a challenge. The multiple spins by corporations through history, those that have been serial spinouts have often spun out things too early that didn't have great teams that were burning cash, it was a way of financing growth. And so we're not going to do that. We're looking to spend things that are good businesses with good people that you can feel happy holding. And that would be our preferences that our shareholders end up being shareholders of the spinouts for long periods of time.

Excellent. Thank you very much.

I just underline one thing, Larry, on that. Just one thing Mark sorry, it's really all important. It's also that the team itself wants to do it because it's an absolute -- you could have a great team who's doing -- they might not desire to spin it out, which is interesting. You looked at some of our leaders, some of them are David was very keen on doing that. Others would say they prefer not. So it's also important that the team as well as being capable is also -- has the desire to take on all the work involved in doing that.

I Definitely support that. I hate being public.

That's a lot of work, right? It's a different, very different interaction even with us. It's a different -- after you've spun a business out, right? So it changes a bunch of the dynamics. So some people are very comfortable with inside of some of our leaders are very comfortable within the inside of the Constellation organization and not having to have that visibility outside of it. So should -- that should not be not taken into account when thinking about this as well.

Yes. Thank you both of you very much. And I think to be a public company requires a minimum size, it's costly. You need to attract investors, some regulations require a minimum market cap, minimum shareholders equity or something. So excellent. Another question that came in this morning, I don't know where to locate it. So I don't know if this is the perfect place, but it's an interesting one and maybe it's quick. But do you foresee any major impact on your capital allocation decisions due to the pending Canadian federal government's proposed increases to the corporate capital gain inclusion rates. Any likely effects of that if it gets passed? Anyone?

I can jump in. Obviously, it's a very short-term thing if it is going to happen, which is June 25. So it's only a few weeks away. We have a couple of acquisitions that we're working on within Jonas that are -- that is a major factor in their decision to sell, and they really want to push to get it done in time for that change, if it happens. And so -- it's going to be a short-term bump, and it's only going to impact Canadian acquisitions, and we'll know in the next couple of weeks, whether it really had an impact or not. But definitely, if you were thinking of selling and you're Canadian based and you're going to have a large enough capital gain, there's a benefit to getting it done by June 25.

Thank you. Final question in this segment. We'll move on back to Howard. The question is for Robin. That's about Cigniti and the question is, are you happy you didn't buy 100% of Cigniti, have your reasons for not doing so played out? Or would you do it differently if you could go back and talk?

Yes, that's a good question. I think we took a deliberate choice to set it up like we did. And it's also the opportunity, again, we're just referring to the topic is ultimate decentralization. So in theory, the employees of Cigniti can buy the shares of Cigniti, they identify with the company. It was a geography where we had less experience. We consider this as a platform, looking for partners. So I think -- so far, we're happy we did it in the way. I think it leads -- you never know if we would have done it differently having a delisted or whatever, but that was a deliberate choice. And so far, I think the company is moving in the right direction. And I think that's ultimately what we want. And we want our shareholder partners to be true partners for long term and making the right and the plans we have as a long-term partner.

Excellent. Thank you, Robin. Well, that concludes this segment. We dipped into spin-off a little bit, but that's going to be a topic of the next segment that Will is going to lead in a broad framework of other capital deployments. Will?

Thank you. Yes, we've got some questions about spin-offs and then more ways that the company could deploy capital or allocate capital. We thought that there were the questions to some of the spin-off leaders were best posed here. So the next few questions are for the CEO of Lumine, David Nyland. So the first one to you is as Lumine employees are getting their bonus shares purchased at a question says 8 to 9x next 12 months revenue valuation versus 5x for CSI and Topicus. We didn't update any numbers. What employee retention strategies has the company kept in place to ensure low churn in M&A full-time employees, but you could talk broadly about it, please.

Honestly, we have the same bonus plan structure as CSI. And this is really the first year where we've been purchasing shares for the bonus program. Some very senior members of my team are financially aware we can articulate the question you just asked me by comparison to the other public companies, but most of the employees of Lumine, 3,500-plus, are really not that aware of those things. And obviously, the further down you go, the less meaningful it is in terms of their compensation anywhere. So I'd like to think that the stock price was a quarter where it is today, so we could grow, improve ourselves over time and get to a point with respect and trust to command this type of multiple, but we've got to take a long-term view. You've got to take a 10-, 15-year view, when people ask me about it, that's the view that I take. Whilst it might be -- seem high right now, if you're committed in the long term. In terms of retention, it's not a retention issue for me.

Great. Another question to you, which is acquisitions from carve-outs and companies running into bankruptcy tend to be more demanding with more legal work, more integration, employee transition agreements, more management bandwidth -- it is also our understanding that Lumine runs a more centralized M&A organization than the rest of Constellation. Given these 2 factors, can you elaborate on the initiatives you're taking in order to ensure that you have sufficient management bandwidth to be able to close many different opportunistic acquisitions should they arise over a short time frame. Can you also speak to how long it typically takes to fully onboard a carve-out and what your internal capacity might be for onboarding multiple carve-out simultaneously.

Yes, obviously it's heavy lifting during a carve-out and distressed public company carve-outs, distressed financial -- or sorry, strategic owned carve-outs are difficult, but just any carve-out is difficult even if they're not distressed. It's just highly typical situations and just very heavy lifting of infrastructure and people and data centers, et cetera. So it's -- yes, the playbook. In terms of having scalability to deal with it, just like take a mindset of being one year ahead on capacity, and that's 1 year ahead of capacity in M&A to concurrently handle these types of transactions and having 1 year at advanced capacity in the operating groups. So the slack and management capabilities available to take multiple concurrent large projects at the same time. So you can see we've been growing quite fast in the last couple of years, and we're not yet hit in terms of being ready to do larger transaction concurrently. And that could be evidenced by how we just done recently, just in the last 2 quarters. They were all done in parallel. So investing for the future being 1 year ahead has been our strategy.

Great. And then last one for you specifically here is, how should we think about the 5- to 10-year reinvestment capacity of Lumine relative to peers in the Constellation family. Theoretically, the specialized focus means a greater grip on the particular vertical, but you lose the breadth that vertical-agnostic players like Topicus or Constellation have. In other words, how many more $150 million plus [ Nokia ] carve-outs are there?

It's a very difficult question to answer. But I see this vertical is very deep and very wide because I live in it. And we're just at the very beginning, still of really penetrating this market with the size of the opportunity and the number of acquisitions we've done so far. So yes, it doesn't -- I'm not -- doesn't keep me up at night thinking we're going to have 10, 15-year runway minimum. And then there's obviously the adjacencies that will come after that.

We had a live question come in that seems to be posed to both you and to Robin. Do Lumine and Topicus management teams have different philosophies to Mark Leonard around use of debt. Does the spin enable them to become more levered?

Maybe I get first for Lumine. I think we have the same view as Mark and CSI. We want to be low leverage and be very specific and targeted when we do bring in leverage for very, very good reasons. Yes. So it's very selective, very cautious and our goal to remain fairly low levered. Robin?

Yes. So in the early days of TSS, I work with a lot of leverage. So I felt very comfortable doing that. I think we run -- as topic is now on a very low level of net debt to EBITDA. Q1, it was 0.3%. We have facilities in place. So it's not just a question of leverage. I think we should execute our strategy, which is growing our business organically and deploying capital, that's our main objective. But I think I also have another objective in the interest of our shareholders. is to put in place capital structures, which makes sense. And you could even debate if using leverage could be a value driver, and that's something we're discussing. That's something we're studying. And for sure, I also discussed with Mark Leonard. He sits on my Board. So it's not black and white, I would say. And it's the amount of that, it's the covenants you have. It's how strong your business is. I mean we have a very strong business with recurring revenues, long-term client relationships. So the covenants you build in. I think there is way more to say to it than just do you want to use leverage or not. It's about strategy. It's about capital structure and putting it in place very wisely. But then I would feel comfortable with having some leverage. We don't have it, but I would feel comfortable.

And I'm sort of on the record on this. If we were approached by a management buyout group that was buying their business and they were putting their houses on the line and leveraging up and wanted to do a highly levered transaction, and they were looking for an equity partner I would happily go into a transaction with 10x EBITDA debt or 20. I literally wouldn't care because we don't have a bet-sizing problem. The management team does but we don't. And so if the management team are willing to take that kind of risk with their own equity and presumably, they'll run the business differently because of that, I'm happy to encourage them to use gobs of leverage. To us, it's not a risk. At Constellation level, would they use gobs of leverage? Well, that was the question that was posed by the Board when they asked us to talk about bet sizing in large transactions. And for sure, we'd use lots of leverage for the right transaction at Constellation level. But we have an obligation to all of our subsidiaries as well. And so that obligation is to provide them with capital when they have opportunities or troubles. And so we have to factor that into our thinking whenever we look at a large transaction from the head office level.

Robin, you also got a few questions along these lines, which is the topic has paid a large dividend in 2024. Was the payment of that large dividend at all motivated by the large topic of shareholders' desire to have cash flow for their own investment purposes such as paying down debt or to invest in businesses outside of Topicus, TSS? And any general question sort of comments you have around that would be helpful.

Yes. So it's a onetime special dividend. So let's make that clear. after being 10 years part of Constellation, some people have been investing for a while and get out a certain age and might invest a little bit next to their shareholdings within Topicus as well and getting closer to retirement. So it's not something to call out unique. And I think, like I just mentioned, we lever down over the period of time. So maybe you might recall, in 2014, we put leverage on the company. That was part of the transaction when we joined Constellation. Over time, we did pretty fast amount of acquisitions, and we managed to lever down. So we thought after a certain period of time that given all the facilities, so our cash flows, facilities I have in place, we thought it was a reasonable suggestion after a decade.

Okay. Great. And then rounding out on spin-offs, sort of zooming out a little bit to Mark Miller and your capacity as Chair of Lumine, it looks like, David, was the highest paid employee in all of the Constellation families this year largely because of his 100% enhanced bonus. What was the rationale for this? And can we expect future spinout CEOs to be rewarded similarly upon successful completion of a spin out.

Okay. First of all, David's performance was -- it's been -- it's measurably outstanding, and I thought the Board have limit and felt it was an appropriate approach to it. And I wouldn't necessarily say that I would use it again, but it was the right decision for the situation at hand.

Great. And then this one's first to Jamal and then anybody else who wants to comment. Although the company hasn't done more than 1 spin-off per year, could you do so if the right opportunities came along?

Sorry, I'm not sure why that's a question for myself. But yes, I mean we will use spin-offs.

Jamal, I figured it out. The reason they're asking is because you're the CFO of all the spin outs. Not quite.

Right, right. I mean I can give an answer, Mark, do you want to respond to this, like not sure I'm the right person to answer how many spinoffs are going to do?

I think it really depends on the individual teams and whether they're ready to handle a spin out or not. The degree of sophistication you need for financial reporting and for compliance with stock markets and things of that nature is obviously something that Jamal has experience with and these people generally would not have experience with. We can get a lot of that expertise outside from lawyers and accountants who can help us on the professional level, but it is an additional task for sure. And it's also a cost, right? It's $1 million to $2 million a year. So nontrivial and you would hope that we wouldn't be doing 10.

Okay. Great. And then this one is to you, Mark Leonard. In the spirit of Teledyne, what Constellation makes our sales be less important than the style of the people who run it, are you still considering allocating capital outside of vertical market software. If yes, what's the rationale for pursuing these opportunities through Constellation rather than directly?

Yes, I'm not sure I buy that characterization of Teledyne. I think they very carefully created their portfolio, and I think they had a huge number of wonderful businesses that were relatively capital-light compared to a lot of the other conglomerates that were out there at the time. And did a spectacular job on capital allocation. So Teledyne, I think, is a once-in-a-lifetime kind of business to see. In terms of other things, it doesn't seem to be a problem right now. We've had to go out and raise $1 billion worth of debt to finance acquisitions prudently, and so the vertical market software space appears to have been able to allow us to invest our capital. And we can always spend time on leveraging if we have excess cash flows without having to go out and find other sectors. The nontrivial nature of finding other great sectors to go into is something that I've tried to emphasize over and over again. There's lots of smart people looking for places to make 20% returns on capital employed or 25% or 30%. And it's brutally hard, particularly if you want to make those returns forever as opposed to for 2 years and flip. And so yes, I don't want to suggest that we can find an alternative, but we will certainly, as we run out of opportunity in the vertical market software space start to look for opportunity elsewhere. But it's -- I can't guarantee that we will be anywhere close to being successful.

You had one live follow-up or a couple about this, which is back in 2021, you mentioned that you were close to deploying $1 billion in the energy space, but the opportunity slipped away. Have there been any other attempts to deploy capital into acquisitions outside of vertical market software.

I mean not of significance if that's the underlying question, but there have certainly been little dabbles that are going on.

Great. And then one other live question that came in was sort of the counterpart to the issuing shares. -- you commented that you'd be willing to use Constellation shares to make acquisitions. Are there ever circumstances where you'd consider repurchasing Constellation shares, for example, if shares were undervalued?

Absolutely.

Okay. Great. Well, that's the end of my section. Over to you, Howard.

Great. Thanks, Will. So the next section here is about governance. So a number of these questions are for Mark Leonard and John Billowits as Chair, but also to many others here given that many in the panel also are directors. So maybe if I start with a broad question, maybe to Mark or John, what issues have caused your Board the most angst in the past 12 months and have you solved them? I know there was some discussion about some of the issues or discussed in terms of using debt, but are there any other issues?

Mark, do you want me to start?

Yes. Yes. I think angst -- I mean, first of all, I can't remember an issue causing pervasive angst amongst the Board, but you have many directors here who could suggest otherwise, if they recall something different. But it would come up when very rarely the company does something outside of the norm. So I could think of the first spin-off was one that probably did cause some angst and that was met with a lot of Q&A and a lot of research by the company and other spin-offs and the possible benefits. And as Mark would say many times, the first 1 was an experiment, it proved well. And hence, there was another 1 after that. And then other than that, there's the occasional acquisition that is outside of the norm. Very few acquisitions come to the Board. But when they do, they're large and they usually have hair on them, as you're aware of. So there'll be a lot of Q&A. And fortunately, the Board is composed of a significant number of insiders we've got vast knowledge and experience. So the combination of the outside directors and the inside directors is a good balance to address those very few situations where there is some angst.

And I think there was some discussion around capital raising last year as we got further and further into the revolver, how are we going to raise capital, what sources were we going to use and obviously, we tried to get some debentures raised and got a little bit of money, but nowhere near enough and then went to the U.S. bond market and Jamal did a great job of raising capital for us as a debut issuer. And that provided us with capital that matched our investment tenure. But that took a fair amount of discussion, and the Board was very interested in our thinking.

Maybe this is -- Jamal, do you want to talk a bit about capital raising since we're added? And how is that experience? Is that are U.S. investors and their understanding of Constellation, you feel like that's improved? And would you also look globally for capital maybe to match some of the global acquisitions that you do?

I mean the majority of our customer base is U.S. based, not Canadian. The majority of the calls I have on a daily basis or a weekly basis are usually European now, some new U.S. investors. So that wasn't new, like the investor base for the bonds was different than some of the -- our common share investors, but it's the same story. So I think it went over well. I believe the marketing was very successful. The issuance was oversubscribed, the shares were -- the bonds are trading actively in the post market. Yes, so I think it was all well, I mean, it did take a lot of time and effort for a few months. We started the process in December and were done by Feb or end of Jan. So it was -- not sure.

Seems to have gone smoothly there. This next question is maybe to all the operating group managers, maybe starting with Mark Miller. Whatever you've been your experiences of fraud, I guess, in the group, the questioner didn't specify whether it's financial, internal fraud or external fraud from suppliers or customers or cybersecurity, but just maybe asking for general experiences. And as the impacts increased as you scaled and what have you've learned from them trying to solve fraud?

Yes. We've definitely had a few issues over the years. Nothing really material in nature. Just -- sometimes it comes from places you least expect and geographies you least expect, which makes it interesting. And being so decentralized, we sort of work on a sort of trust and sort of verify thing we were able to keep an eye on what we can. What we've learned is essentially when it's happened, we're pretty quick to share what has happened with the other leaders inside of the organization so we can learn from that particular situation and just do our best when we're looking at acquiring companies or investing in companies that we look at the situations they have with obviously using suppliers and what sort of the whole -- sort of supply chain for their industry is and if there's anything that we should keep an eye on there. But it's -- it's not been a growing problem, but I guess I should knock on wood on that. But when it's happened, it just surprises me sometimes where it's happened and how it's happened. And you just do your best to make sure that next time the situation comes up, you may have improved your best practices around dealing with that.

Any other operating managers want to comment on this or share their experiences. Seeing some head shakes. So maybe we'll go to the next question for Jamal in terms of scale due to the challenges of -- and you're wearing multiple CFO hats. And so this question are asked for the challenges of decentralization on group financial reporting continue to rise as the company scales? And are you investing more into head office reporting? Or what do you see about that?

Yes, not from a head count perspective, but definitely from a technology perspective, we've evolved over time. I think back 20-some-odd years ago is probably mostly Excel-based doing organic growth calls like in Excel. Now everything is put into the system that allows me to analyze organic growth down to a business unit level. But there's going to be more that we need to evolve, right? Like we are -- because we're so thin, I want to make sure were also somewhat redundant. So I am looking at systems again now to maybe automate some of the things we do from a financial reporting statement perspective. Also, I'm trying to understand the organization like we are, again, very decentralized, but the approach we've taken, like our VP of Finance, Scott Denneny, the way he is able to push down new accounting policies and ensure people are compliant like that's evolved over time, where he now has like quarterly and monthly meetings with certain groups, and then they push it down, et cetera. We've had to invest more into our internal audit group so that we're keeping on top of everything to make sure that people are following processes. Yes, without a doubt, it's evolved over time and it will continue to evolve.

Yes. And I'm sure the -- there'll be more exciting things like spin-offs and who knows what else down the pipe. Maybe the next question -- the next set of questions is on insider share sales. So someone just asked Mark Leonard directly, could you please comment under recent share sales? I guess, they pulled up the study reports and want to know the context around them?

Yes. Last quarter, I sold about 1.3% of my family's Constellation chairs. I anticipate that I will make shares sales over the course of the next decade or so. But at the end of that period, I still believe I'll have the vast majority of my net worth invested in Constellation. I'm diversifying and raising some capital to invest with my friends and family.

That's good to know. And then maybe a more broad question to John. Regarding the timing of stock sales by wealthy insiders is complete lazy fair, except for regulatory restrictions, truly best practice. And what is -- why does the Board not have a pledging or a hedging -- anti-hedging policy for insiders?

Yes. I'll start here, Howard, then I'm happy to open it up to other directors in the phone. But I mean -- we'll start with the compensation structure from the OGMs and the other staff. I mean, the structure basically is, is cash comp is pretty low and a huge portion of annual compensation is used to buy shares and they hold those shares at a minimum for 4 years. So -- as a result, we've got a lot of long tenured managers with a significant amount of wealth created by CSI shares, and it's by far the largest asset that they own. So I find it difficult to restrict them from selling shares when they need some liquidity. That would be my personal view. And I think that's shared with a number of our -- of our long tenured managers. And as Mark alluded to, you do see shares occasionally -- so our shares being sold. But again, it's a small portion of everyone's holdings, and they still have the vast bulk of their holdings within CSI.

And on a related note here, this question asks about professional investors with no links to CSI, sometimes seeming to profit from investing in the EMS companies, which CSI is buying in the public markets. So this questioner sites happening at Cigniti in Poland and Adapt IT in South Africa. And this person asked to an outsider, this seems odd with scope of reputational damage at least. And a questioner asked, what does Mark Leonard think about this?

It seems a silly question to me if they're public companies, anyone can invest. And would you want unprofessional managers doing it as compared to professional ones? I don't really understand. In terms of reputational risk, if what the implication is there is that there's tipping going on or insider trading, then that would be not good, and I think there would be criminal charges lead.

And yes, that's -- that would be pretty serious. On the next few questions, talk about the succession planning. So the first question is what happens if Mark Leonard gets hit by a bus, Bernie, Mark Miller, how deep is the CSI bench, are the principal systems, earnings embedded institutionally so that they can endure with different persons at the helm and maybe Mark Leonard, John or Larry, I know did a culture thing you guys can comment on this?

I mean, John, you're probably the best one to answer this.

Yes. I mean I'll start with the operating group managers. There's been some turnover in that group. I was the first 1 to kind of move on and fortunately, Damian has done a much better job than I did. So that was the first real proof that our systems run deep, and we do have deep benches and I think you've seen as well some changes in the roles of Mark Miller and Dexter. And so there's different models being used to -- as these managers move on and many of them are on the Board. So they'll be around for many years post leaving their operating roles. Bernie, I'll leave it to Mark to talk a little bit, but Bernie has been around for -- since the beginning. So he's got a wealth of institutional knowledge, not only institutional knowledge about the acquisitions, but also the people within CSI. He does have a small, but extremely seasoned team working with him and then there are a bunch of Bernies within the organization as we'll call them mini Bernies within Constellation that had been with the company for decades as well. And then, Mark, I mean, this question gets asked every year about his succession. I mean obviously, the long-running jokes, it have to be a really large bus to take Mark out. But that aside, they're on this phone here. There's many managers that are extremely capable. The Board does have a very short-term plan for if a bus were to hit mark what they would do, and they take comfort in that. But that's something that -- and I believe will happen 1 day.

Mark, do you want to comment on the mini Bernies?

Yes. So obviously, Bernie has seen all of our acquisitions since the year. And that experience with capital allocation is extremely valuable. The general managers since sort of the 2005 kind of range over the last 20-odd years have deployed the vast majority of our capital with a couple of exceptions. And so they have tremendous capital allocation expertise. And the natural evolution of our operating group general managers is to be primarily capital allocated, they have that responsibility and obligation. So you've got a lot of that expertise deployed in the senior management ranks. Below that level, there often is someone whose skill set looks a lot like Bernie's, someone who is, in essence, an M&A lead for the operating group general managers and spends 100% of their time thinking about worrying about, learning about VMS acquisitions and all of the techniques and experience that we have. And those people -- many of them are truly remarkable and could do Bernie's job, but we're fortunate that we have Bernie doing Bernie's job. So yes, there's definitely depth in the M&A function.

Yes, I can see that. I met a few mini Bernies myself, and they've been impressive. On a more broad succession question, I imagine there are different succession processes for selecting OGMs, portfolio managers and even business unit leaders across the groups, maybe to all the OGMs, how do you think about this at all levels? And do you see some commonalities between how you decide on the succession for these kind of folks down the organization?

So we delegate responsibility for that sort of thing to the people who are closest to it. And so one would hope that whatever level you're talking about succession on, it's the manager who sits above that person and for their own spot who does the succession planning. I gather we're not exactly long on time. So maybe rather than laying this one off to the panel, we'll move on to the next question.

Sure. So this question is about why did the Board decide against having an in-person or a hybrid AGM? Are the benefits of having shareholder employees gathered, who may have a lot of holdings in the stock outweighed by the cost or risks of the gathering this year?

Yes. When we switched to virtual, it was for an obvious reason. And having switched, we found it was comfortable and highly democratic. Obviously, more people can attend. And you're much less likely to have a gathering of private equity guys who are trying to learn from any manager they can corner any of the secrets that Constellation has. And so I do enjoy the virtual approach. I think it's both, on the one hand, democratic. And on the other hand, easier to control either information leakage or just having a bunch of protests turn up for whatever reason, appeals to them. So yes, I'm a fan of the virtual. But if our shareholders really want to have physical meetings. And I'm for sure, we would consider it. And if someone wants to put it on the agenda for the next AGM as something to vote on, I'd welcome such a motion.

There's been a number of them. Canadian companies look like shareholder resolution. So someone might take you up on that challenge, Mark. But in the next set of questions, maybe I'll kind of lump it together given the time we're at. A lot of questions from investors around Robin's new role in your world. So how many hours do you plan to spend as is part-time position? Is it temporary? When do you think about your capacity for future part-time leadership positions and given that your world might be in adjacent areas to Topicus. How do you kind of think about conflicts from that perspective?

There are many questions in one. So from -- the time I spend on Topicus is nothing will change. I was already Chairman of both companies, which are the constituents of your world, and nothing will change there. The model is pretty similar to Topicus. So I'm mainly involved in capital allocation. I'm not involved in operations. So nothing changes there. I'm not going to spend more time. So nothing really changes compared to the last 7 years. So that's one. And then the other question is, yes, I will limit myself to absorbing new responsibilities. So that's it, what I do now.

And just maybe the last part about -- are there any kind of overlaps you see between the M&A white space between those 2 companies?

There are not any overlaps. But if all kind of companies start moving into adjacencies, you don't know where it will end up. But I don't know where Constellation will be moving and -- but currently, it's not the case.

And maybe a more broad 1 to John. Is there any kind of -- has the board thought about any kind of policy with respect to C-suite level executives serving as CEOs at other companies owned by those -- owned by those directors?

Howard, I think you asked about assuming CEO, other CEO roles as opposed to directorships. I think they're all one-off. I mean it's going to be infrequent and they discuss it with Mark and Mark discusses with the Board and we move on, but there is no set policy.

It sounds like it's a case-by-case basis. And then maybe 1 last 1 in the section. I'll -- and this is to Jeff. Just a follow-up about the CSI ESG website initiative. Last year, you talked about tracking the data as an evolution, given how many business units they were in terms of cavern data. You mentioned you're hiring a team and maybe we're trying to move away from Excel. What is that process been so far? Any learnings and have you found a better tool than Excel?

So we do have a better tool than Excel. We did implement some software to do it. So we -- I think it remains to be seen whether that software will continue to evolve with us as we continue to evolve. So I think like anything else, we'll continue to evaluate whether it meets our needs. So I think, yes, we're pleased with our continued programs. Like I said, it's a journey. And again, our philosophy is we're not forcing our business units to do things that aren't sort of what they want -- or where they want to be investing their time and energy and attention. So I think we're doing more collaborating, more sharing, it's more inclusive in terms of people understanding what's going on. And I think we just continue to evolve the frameworks that we're looking to comply with to make sure that we're staying on par or sort of understanding what's coming so that we can obviously meet the requirements as they come. But I think lots of learnings, lots of, I think, experiments and trying to figure out different things. Obviously, just as we put in software, we have figuring out what internal systems we can use then to get the data sort of anticipating that at some point in time, this data may need to be verified by third-party organization, so making sure that we're sort of thinking ahead to do that, figuring out what metrics we should be tracking because there's definitely an endless supplier list of things that you could track. So trying to figure out the things that are the most meaningful to us and to our employees, to our customers and to our stakeholders, our shareholders, so making sure we can balance that out. But again, we do have individuals who spend more of their team on it. We do have software. And I think we have a road map that takes us through the next year for sure.

Yes. It seems like it's a dedicated plan for it. That's it for me. Thanks for navigating sometimes so many questions. And I'll turn it to Larry.

Thanks, Howard. It's about quarter to 12, so we're running short on time, but we still have quite a few questions, and we'll try to get through them in a kind of a lightning round. And incidentally, the population of the meeting reached 1000 and every time I checked, it was a higher number, the whole time. So good attendance. First question in this round to Mark Leonard. And you mentioned Veevo a few minutes ago. But at last year's annual meeting, you mentioned being interested in your study of Veevo as well as AppFolio, and you said you were interested in receiving assessments from others. What have been your main learnings from studying those 2 companies? And did you receive any valuable input from your ask?

For sure, we got some great input from both the fans and critics of those companies, and incorporated that into what we were learning. We did write-ups for the Board on both companies and shared our learnings. And both exemplary firms in vertical market software from which there are lessons to take away. I had the chance to spend time with the management and shareholders of our portfolio. And here, the views of the single -- singularly SaaS-focused group that has done incredibly well and provided my input on how I would address the high end of their market, which I think they found very difficult to comprehend and empathize with, but that shows where we're each coming from. And those kind of interactions are always a bless for me. Because of the profile, Constellation has got the opportunity to visit with and learn from many wildly successful companies. It's one of the joys of the job. And it's the best part of our public information being out there is that people are usually willing to take my call.

Thanks. Another 1 for you, Mark. How does Constellation with its track record of success, manage the balance between risk taking and loss aversion. Questioner puts this as the context. Most of the company's senior employees are large shareholders in Constellation and it would appear that they -- their investment in Constellation comprises most of their network. Is there any concern about reluctance of the next generation of managers to embrace risks that could yield greater long-term rewards?

Risk is a funny thing, and I hate the saying that risk is the chance to lose money. It feels like the wrong characterization of risk to me. I fundamentally believe in probability-weighted scenario modeling for thinking about investments and the risk around those investments. And I am happy with wide dispersion in outcomes, as long as expected IRR is very attractive. And I hope that by teaching this methodology to people and them understanding it, they would come to embrace it. So yes, to me, it's just probability, statistics, outcomes and bet sizing. Those are your inputs into assessing risk. And I think all of the people on this panel and most of the people working for them have the capacity to understand that if they apply themselves.

Mark, you mentioned doing the study once a quarter on venture-backed VMS businesses that are successful.

Well, no. I said disruptors. There's a difference. Many of them are not successful, but they are disruptive. But anyway, yes, go on, what was the rest of the question?

Well, you've opened the answer. What are the learnings from this investigation?

Yes. I mean when they're successful, you then ask yourself if they're just lucky or if they're good, and you try and learn from that. And when they're not successful, you're trying to understand how not to go there.

People seem to be very interested in the studies that you undertake periodically. This one references the 2017 shareholder letters description of the study you did a high-performing conglomerates. Have you conducted any other studies of that sort in the past several years?

I mean I get to visit some very successful companies, and I try to share those sort of trip reports with the Board and the managers whenever I do. And if there's lessons there, hopefully, that can happen. I requested that we do 1 on Motorola for next quarter because it's had -- after a period of disarray it's had a spectacular 10 or 15 years, and I'd like to understand it. And it's adjacent to what we do. It's obviously a bunch of hardware, but I think software has played a big part in their success over the last 10 or 15 years. So if there's any shareholder analysts out there who are also follow Motorola as well as Constellation, I'd love to hear from you.

Thank you, Mark, once again for you. In 1 of your shareholder letters, you talked about screening out sycophants and other types of nonproductive employees as Constellation now employs more than 56,000 people, is it more likely there will be sycophants and other nonproductive people? How do you screen them out?

Well, I don't but hopefully, their bosses do. And so the challenge, of course, is that people who are nice to you are hard to get rid of. But you can judge by performance, how people have done. And so we don't tend to turn over people quickly, but there is a slow turnover of people who have been with us for multiple years who just haven't performed. And I think it's that performance orientation that allows you to get rid of people who are pleasant but nonperforming.

Mark Miller or any of the other managers want to take a swing at that. Your groups are growing quite large now.

I think it's exactly what Mark said, it's performance, right? Leaderboards and just basically rank all the businesses as to what they do well, and it's obvious who the underperformers are, especially when you look at it over a longer period of time. That's exactly what Mark said.

Thanks. Coming to the final question or 2 here. We'll go to the submissions today. Again to Mark Leonard. At the 2016 and 2017 AGM, you said you believe that Constellation shares were overvalued. What did you perhaps underappreciate given the subsequent performance of the shares?

The growth since then has been significantly more than I expected.

It's simple enough. Here's another 1 that came in this morning, and I don't know who wants to take this, if anyone, what, but the question is about the Late Charlie Munger, who passed away in November. And the specific question for anybody who's a student of Charlie Munger. What was your favorite less learned from him?

I think some of the managers were at the Berkshire AGM this year. Any reflections on presumably your reading before you went?

I would just say, Mark, I had the opportunity to go in and thoroughly enjoy the experience. I just think, Charlie had just a way of just making everything that seems so complicated simple. And I think this just sort of avoiding -- or understanding some of the things that we do to get in our own way and prevent us from being successful. I just think is a -- is a great overall lesson that I think a lot of us could benefit from because I think when you look around, we just -- we overcomplicate a lot of things. And I just think we don't necessarily have to do that. And I think he was just -- he just always stuck to it. I always thought that was a great attribute of his.

Yes. I also attended and thoroughly enjoyed it. And I guess the one thing I would add is you probably need a sounding board and somebody can bounce those ideas off if that's a trusted partner, and that's clearly what we're in had with Charlie. And so the role he played as that sounding board was probably tremendous, and having those type of people you can talk to is in value. So that would be the other thing I would draw in there.

What I loved is that in the last 6 to 12 months only life. He gave a tremendous amount of advice. He basically was on podcast [indiscernible] place and attended dinners and things of that nature. I think the -- one of the relatively throwaway lines that I heard during that period was that he felt Berkshire had missed an opportunity in that they didn't use enough financial leverage. And if you look at the last 20 years of Berkshire's performance, it's easy to imagine them significantly outperforming the S&P over that period compared to how they did do if they had used more financial leverage. And so I think his point was, it's a collection, a diversified collection of great businesses and it could bear a lot more financial leverage, but Warren didn't want to take on financial leverage because he liked the idea of being the backstop for the American economy, having the ability to write the big check when times got tough. Now that backstop hasn't paid off for a long time. And even when it did pay off the last time around in '08, '09, it was a relatively small payoff. He didn't get '20's rates of return on most of the capital that he deployed at that point in time. And so I think the intelligent use of leverage, particularly when it's tax deductible, makes tremendous sense. Obviously, when it ceases to be tax deductible, and you're taking portfolio level risks that could wipe you out, then it becomes silly. But I think Berkshire had that ability to use debt that they didn't use, and I think I would love to see our spinouts factor that into their thinking if they get to the stage where cost of capital becomes important and becomes a way that they need to improve their rates of return to shareholders.

Larry, I didn't go this year, but my son was hiking in India, and he could buy all kind of books for $1 apiece, and he had a few on Munger as well. So I read them again. And what struck me is a simple approach that investing is not about being brilliant and something unique, but be consistently not stupider he calls it. And I think that's what we try to do each day.

It sounds like a perfect note to end it on. It's just exactly 12 noon. Thanks to everybody, especially to all the shareholders who put in these wonderful questions into the panelist for answering them. I will now turn the meeting back over to the host, either Computershare or Mark Dennison. Thank you all.

This concludes the meeting. You may now disconnect.