Constellation Software (CSU)

Business Overview

Constellation Software is a serial acquirer of vertical-market software. FY2025 revenue under IFRS (reported in US dollars) was $11.6B, up 15.5% from $10.1B; organic growth was 4% (3% after currency). Maintenance and other recurring revenue was 74.9% of the total ($8.7B). The company reports expenses by nature, so it does not publish a gross or operating margin in the peer-table sense.

Operating cash flow was $2.7B. Free cash flow available to shareholders (FCFA2S), the company's own measure, was $1.7B, defined as operating cash flow less interest, lease payments, the IRGA/TSS liability revaluation and capex. Capex was $68M, or 0.6% of revenue. Acquisitions totalled $1.6B of consideration ($258M + $1,321M). There is no share-based payment line in the statements and none for key management; executives must invest 75% of the after-tax bonus in shares held in escrow for an average of at least four years, with no stock options. The FY2025 MD&A does not publish ROIC, deal count or a retention rate.

How the Numbers Read

Most of the 15.5% revenue growth was bought. Organic growth of 4% is the run-rate of the existing portfolio; the gap to 15.5% is acquisition contribution. FCFA2S at $1.7B is tighter than operating cash flow of $2.7B because interest, leases and the IRGA/TSS revaluation sit between them. Capex is trivial (0.6%); the real reinvestment is the $1.6B of acquisition consideration.

Nil stock pay stands at the opposite end of the software set from Snowflake's 34.1%. Cash after stock pay and cash before it are the same here. Maintenance and other recurring at 74.9% is the installed-base cash that funds deals. The vertical acquirers guide covers why value turns on deployment rate times return on acquired capital.

How the Model Values This Kind of Company

For a serial vertical-software acquirer, organic growth is low by design. Value turns on how much free cash flow available to shareholders is deployed into acquisitions, and on the return earned on that acquired capital relative to the cost of capital.

Maintenance and other recurring revenue fund the deal pipeline; capex is trivial beside acquisition consideration. Stock pay is nil, so cash before and after equity compensation is the same. The DCF cash flow is after acquisition spend.

What to Watch in the Financials

Organic growth. 4% in FY2025 (3% after currency). This is the portfolio's underlying rate once acquisitions are stripped out.

Free cash flow available to shareholders versus operating cash flow. $1.7B against $2.7B. Interest, leases and the IRGA/TSS revaluation explain the gap; definition is in the MD&A.

Acquisition consideration. $1.6B in FY2025. The reinvestment rate is this spend relative to free cash flow available to shareholders, not capex.

Maintenance and other recurring share. 74.9%. A falling recurring share would weaken the cash that funds deals.

Key Risks

Acquisition dependence. With organic growth at 4%, sustaining mid-teens revenue growth requires a steady deal pipeline at acceptable prices.

Return on acquired capital not disclosed. Without a published ROIC or deal-level return, the hurdle has to be inferred from cash generation and management commentary rather than a filed ratio.

No retention metric. Durability of the maintenance base is not summarised in a single renewal or net-retention figure in the FY2025 MD&A.

IRGA/TSS liability revaluation. This item sits inside the free-cash-flow-to-shareholders bridge and can move the company's own free-cash measure without changing operating cash flow the same way.