May 8, 2021
Robin van Poelje
So, good morning, everybody. This is Robin van Poelje speaking.
Maybe good afternoon or good evening for some people outside of North America. We’re today having our call related to our Q1 financial results.
We thought it would be a good idea to present today and talk to you our figures. It’s the first time we present our figures in the way Topicus.com is currently as it is.
Q4 was still TSS. So, we thought it would be appropriate to do that.
We won’t make it quarterly habit. When we talk about Topicus.com, we talk about the whole group.
And when we talk about Topicus.com B.V., we talk about the Topicus operating entity. So, thank you all for attending.
We don’t have any presentations. We have Jamal Baksh, our CFO on the line, and we have Daan Dijkhuizen, our CEO on the line.
And yes, we would go right away into Q&A.
Operator
[Operator Instructions] Your first question comes from Thanos Moschopoulos of BMO Capital Markets. Your line is now open.
Thanos Moschopoulos
Hi. Good morning.
Congratulations on the spin-off and congratulations on what seems to be a strong first quarter. My first question is, can you update us on the current thinking and potential timing of the VX [ph] listing?
Jamal Baksh
Yes. I think, we kept that open as an option.
We’re still considering it. We’re not in a hurry.
So, I think, we will pick that topic [Technical Difficulty] might be of interest to European shareholders. But again, we keep that open and have no concrete timeline yet.
Thanos Moschopoulos
Okay. And a question for Daan.
I presume you’ll continue implementing many of the core aspects of the Constellation and TSS strategy. But, given that you’re coming to the organization as an outsider, I’d also imagine that there are going to be some nuances in terms of how you implement the strategy versus what Robin might have been doing previously.
And so, can you clarify whether that’s the case, and what some of those nuances might be in your thoughts?
Daan Dijkhuizen
Actually, when we merged on January 5th, Paul Noordeman, the operating group CFO of Topicus B.V. and I were the -- truly discussed that went into the ecosystem of CSI and TSS.
And we actually took the role as a real newbie, new kid on the block. So, we went through the best practice days.
And all of the knowledge sharing activities that CSI and TSS have built up in the past 26 years. And actually, we are making a selection of practices that we are going to implement at the top of this operating route with, yes, maybe some flavors with respect to organic growth.
Thanos Moschopoulos
Okay. But, it sounds like flavors are still to be determined as you’re working through the process.
Daan Dijkhuizen
Yes, it is.
Thanos Moschopoulos
And then, can you comment on how the pandemic has been affecting your ability to deploy capital, and how that -- the dynamic is perhaps evolving in recent weeks?
Robin van Poelje
Yes. I don’t know to who you pointed question.
But, here is Robin. So, this is then I think, Topicus.com as a whole.
Yes. I think, nothing changed compared to last year.
So, the pandemic is now, one year going on. I think, I would signal the same situation as is.
We continue to try to nurture our leads, visit the companies, but we do it now digitally. And yes, we still continue as we did in 2020.
Operator
Your next question comes from Paul Steep. Your line is now open.
Paul Steep
Daan, maybe for you first. For Topicus B.V., could you give us a quick history lesson?
I know, different people are in different places in terms of their understanding. And I think what people are most interested in is talking about the growth that you achieved with the organization clearly, organically.
Can you may be just walk us through some of the progression at Topicus in the last maybe 5 or 10 years, maybe not all the way back? But that would be a great starting point.
Daan Dijkhuizen
Okay. Well, thank you.
Topicus, as it is today, was found as Topicus B.V. as it is today, was founded in 2001.
And it kicked off with a sale philosophy, putting technological talent at the core of those sales, put some entrepreneurism into that sale and create actually new product in little market niches, and by means of sale division, Topicus has had double-digit growth in the first 10 years of its existence. And it went into markets with high administrative burdens like education, healthcare and financial services.
And the approach of Topicus as this nice player actually took off and became successful by means of a strategy of adjacencies. So, getting into other stuff, verticals attached to the one that Topicus served.
They well managed to enlarge market share, actually, in those markets and managed to onboard new clients or new client groups within those sectors or domains. And as of 2015, we still have those different sales with their own captains, but sometimes in the same industry, and we decided to make the next step and create actually vertical market platforms based on the vertical market software sales, and to interconnect those different solutions with each other, which actually results with additional efficiency gains for our clientele, and also improve the efficacy of the different processes that we support with our software.
And that’s why we created those four what we call these visions of Topicus B.V. being healthcare, financial services, education and social services.
Paul Steep
And I guess, maybe one other follow-up for you is, how should we think about growth within core Topicus B.V. in terms of -- obviously you’ve got leading share in the Netherlands from what we can tell in those four verticals that you’ve identified?
What’s the potential to organically go beyond the Netherlands or should we think that the Topicus portion -- Topicus B.V. portion, sorry, of the entity will pivot and use even more M&A going forward?
Daan Dijkhuizen
Well, from an organic point of view, there are actually strategies threefold. Be aware that Topicus BV kicked off in some way boring back office situations with high administrative burdens and it’s actually climbing the value ladder.
So from back office software, we moved to value adding primary process features, and sometimes even content solution. So, if you take education, for example, we started in the back office, the financial back office of primary education with our solution.
And we’re now moving on to student tracking, and actually learning -- adaptive learning systems as well. So, there’s potential from an organic point of view.
And the same comes for healthcare and our financial services solutions. That’s strategy part number one.
Part number two is moving into adjacent verticals. So, we have a track record, for example, the mortgages, we moved into the wealth management markets through a takeover in 2017.
And now, we’re moving from wealth towards the pension market, which is heavily related, of course, to the wealth management market. So, that’s our second strategy.
And the third one is a strategy of selected internationalization. As you know, I’m Dutch.
So, sometimes we jump on the back of the bike of our clientele. And we follow our clientele to another country.
For example, in financial services, a large financial institution is using our product in the Netherlands, and is deploying our product now in Belgium, for example, and we’ll do the same most probably in Spain or Germany, in the near future.
Paul Steep
And then, I guess, my final one to maybe both you and Robin. What do you -- from both of your perspectives coming from separate companies.
What do you think the greatest opportunities in bringing the companies together is that maybe people haven’t appreciated or that you’re seeing from the inside that those of us out here can’t fully appreciate in terms of the opportunity long-term for the new Topicus? Thanks, guys.
Robin van Poelje
So, I think at the outset, our idea was that we have three operating units, Topicus B.V., one of them and the two existing TSS operating groups as well. I think, there is a different history, a different culture.
And so, at the outset, we said, we want to continue what we’re both doing well, TSS part and the Topicus B.V. part.
So, that’s the main strategy. And we think there can be cross fertilization by exchanging best practices.
And I think there are many best practices, but to put it simple, I think, the organic growth Topicus B.V. is demonstrating that has our interest at the side of TSS.
And I think what TSS has been doing historically, there are different elements which might have the interest of Topicus B.V. And I think in the classical style, as we did already, within Constellation, we continue now as well as a decentralized model.
And we think that curious managers, curious employees, they will look for those best practices, they will exchange them. And that’s how we hope to pick it up.
So, I don’t think it’s something which is not appreciated by the outside world. It’s only something which will need to become more critical over time, I would say.
I don’t know guys, do you have to add something to that -- do you like to add something to it?
Daan Dijkhuizen
Yes. I would like to add that although TSS is more an acquisitive company Topicus B.V.
is coming from an organic perspective, from a cultural point of view, we’re quite alike. So, the tremendous amount of autonomy on the business unit level is something we find very important in both companies.
The high degree of solidarity is important and the element of sharing knowledge. We will not enforce synergies.
We won’t to enforce come together. We will facilitate it, encourage it.
And actually since January 5th, you see groups working in the same domain, working in the same vertical coming together, looking at each other’s products. Some people at Topicus have the back office product, they have front office product, and they see what they can do together.
And that improved product and customer intimacy with our clientele in different segments that we serve.
Operator
Your next question comes from Paul Treiber of RBC Capital Markets. Your line is now open.
Paul Treiber
First one for Robin, I think most of us -- most investors are familiar -- quite familiar with Constellation and its practices and projects for acquisitions. Just want to hear in your words, for Topicus going forward, when you think about the strategy for acquisition, the hurdle rates, how Constellation may allocate acquisitions between the operating groups, should we take that as been similar or identical to what constellation does, or do you think you’re going to -- Topicus will alter that strategy or put its own sort of twist on that strategy over time?
Robin van Poelje
I think this -- I’d give you the short answer. I think it’s similar.
So, we have been part of Constellation, we’re still part of the Constellation ecosystem. And we continue as we did.
And Topicus B.V. will align to those processes and approaches as well.
And that’s it. We simply continue as we did.
Paul Treiber
And could you elaborate a little bit more on -- in your prospectus, there’s a conflict of interest section that did indicate that Constellation is able to allocate acquisitions between the operating groups? Specifically, are there any -- I know you can’t get into the details of that.
Are there any regions or verticals that would be off limits to Topicus or explicitly off limits or that would restrain Topicus in your view for your growth objectives?
Robin van Poelje
No, I don’t think there are any restrictions. It’s only Topicus.com itself decided to focus on Europe, because we think Europe has its challenges, but also its advantages.
And we’re the operating group based in Europe. So, that’s why we decided to focus on Europe.
And other Constellation operating groups are active there as well. So, we think we have to do a good job.
And that’s where we’re hired for and that’s what we have to do, so. And I know where you’re referring to, in respect of conflicts.
I think that’s more in case of, but so far, we haven’t encountered it. But, that might be one day a situation.
I can’t give you a concrete example yet. But one day, it might be, but currently it hasn’t been on the table.
Paul Treiber
And just the last one for me, the stock, since the spin-off, has done very well. Finance theory would say that your cost of capital is now very low for the Company.
Are there any considerations to issuing equity from treasury to take advantage of the environment and maybe your new lower cost of capital?
Robin van Poelje
Well, Jamal, is that one for you to answer?
Jamal Baksh
I’d just say, it would be no at this time. Similar to Constellation, the way we think about it is what our cost of capital is.
Everything we do from an investment perspective is return on invested capital, and it’s cash on cash. At this point, there is no thoughts about issuing equity.
Operator
Your next question comes from Robert Panes of Richardson Wealth. Your line is now open.
Robert Panes
Do you anticipate moving the North American listings to more senior exchanges in the near future?
Robin van Poelje
Yes. There’s no plan to move to the TSX board.
From our perspective, things are working fine. And I understand that there’s some funds that aren’t able to invest in the company as a result of it being on the Venture Exchange.
It’s not top of mind for us -- to move it to the TSX if that’s what you’re asking.
Robert Panes
Yes, or NASDAQ proper?
Robin van Poelje
Definitely not NASDAQ.
Operator
[Operator Instructions] Your next question comes from Richard Tse of National Bank.
Mihir Raul
This is Mihir calling in for Richard. So, I just have two some questions.
So, I know Paul kind of touched on this. So, just regarding, like you guys have the regions that you’re operating in, and then Constellation’s also operating in similar region.
Is there any guidelines of how you guys would deal with potential conflicts in regards to the acquisitions if they were to come up?
Daan Dijkhuizen
Well, I think we try to avoid conflicts by having clear rules, so how we play our M&A games out. And I think that’s pretty clear to all our M&A folks.
And if there are some -- something contentious there, then I think head office will decide where it goes. But, most of the times that -- I would say, those kinds of issues are very limited.
So, I think it’s mainly by having clear rules, how it works. And we all know that we’re all working on different geographies, and Europe is clearly being one of them.
Robin van Poelje
These roles have existed for years. I mean, we’ve had six operating groups each with their own M&A teams, and this isn’t something new that we’re having to deal with.
We’ve dealt with this before. But I know, some investments are brought up well now because we only -- Constellation only owns a portion of the Topicus.
Does that create a conflict? But, you could say, Constellation only -- there is a minority interest in TSS as an operating group for years, and we dealt with the same situation.
So, this is not something new that we have to come up with, with this continuing on with processes and rules that were exited and have been in place.
Mihir Raul
Okay. Thanks for that color.
And then, just a last one for me here is that, given that you guys have a smaller footprint, do you think you should be able to grow faster that Constellation over the next three years?
Robin van Poelje
We hope so. But, you can do I think the math in different ways.
I read that story before. We’re a little bit smaller and where we are where constellation was, let’s say 10 years ago.
That’s one theory. And other theory is, conservation is composed of six tdotcoms.
[Ph] So, what’s the difference? And they even have a head officer attached to it which deploys capital as well.
So, hard for me to judge. I think, we as tdotcoms [ph] simply have to do what we have to do.
And hopefully we do it better. But our six operating groups are doing job as well.
So, let’s see.
Operator
[Operator Instructions] There are no questions over the phone. Presenters, please go ahead.
Robin van Poelje
Yes. Everybody thanks for attending and thanks for taking the time and for asking your questions.
And I hope we could provide you with helpful answers. And I wish everybody has a nice day.
Operator
This concludes today’s conference. Thank you all for joining.
You may now disconnect.