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 is. Q4 was still TSS, so we thought it would be appropriate to do that. We won't make it a 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.com operating entity. 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. Yeah, we would go right away into Q&A.
Your first question comes from Thanos Moschopoulos of BMO Capital Markets.
Hi, good morning. Congratulations on the spinoff and congratulations on what seems to be a strong first quarter. Maybe my first question is, can you update us on the current thinking and potential timing of the Dutch listing?
Yeah, I think we kept that open as an option. We're still considering it. We're not in a hurry. I think we will pick that topic up further on the road. Might be of interest to European shareholders. Again, we keep that open and have no concrete timeline yet.
Okay. A question for Daan. I presume you'll continue implementing many of the core aspects of the Constellation and TSS strategy. 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. Can you clarify whether that's the case and what some of those nuances might be in your approach?
Thank you. Daan here. Actually, when we merged on January 5th, Paul Noordeman, the operating group CFO of Topicus.com B.V. and I were actually the scouts that went into the ecosystem of CSI and TSS. We actually took the role as the real newbie, new kid on the block. We went through the best practice days and all the knowledge-sharing activities that CSI and TSS has built up in the past 26 years. Actually, we are making a selection of practices that we are going to implement at Topicus operating group with maybe some flavors with respect to organic growth.
Okay, it sounds like the flavors are still to be determined as you're working through the process.
Yeah. They did.
Okay. Can you comment on how the pandemic has been affecting your ability to deploy capital and how that dynamic is perhaps evolving in recent weeks?
Yeah, I don't know to who you point the question, but here's Robin. This is then, I think, for Topicus.com as a whole. Yeah, I think nothing changed compared to last year. 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. Yeah, we still continue as we did in 2020.
All right. Thanks. I'll pass the line.
Thank you. Your next question comes from Paul Steep . Your line is now open.
Good morning. Thanks for doing this, guys. Daan, maybe for you first, for Topicus.com B.V., could you give us a quick history lesson? I know, I think different people are at different places in terms of their understanding. I think what people are most interested in is talking about the growth that you achieved with the organization clearly organically. Can you maybe just walk us through some of the progression at Topicus in the last maybe five or 10 years? Maybe not all the way back, but that would be a great starting point.
Okay, Paul, thank you. Topicus.com B.V. as it is today, was founded in 2001. It kicked off with a cell philosophy, putting technological talent at the core of those cells, put some entrepreneurism into that cell and create actually new product in little market niches. By means of cell division, Topicus had a double-digit growth in the first 10 years of its existence. It went into markets with high administrative burdens like education, healthcare, and financial services. The approach of Topicus as this niche player actually took off and became successful by means of a strategy of adjacencies, getting into other sub-verticals attached to the one that Topicus served. They managed to enlarge market share actually in those markets and managed to onboard new clients or new client groups within those sectors or domains.
As of 2015, we still had those different cells with their own captains, but sometimes in the same industry. We decided to make the next step and create actually vertical market platforms based on those vertical market software cells and to interconnect those different solutions with each other, which actually resulted to additional efficiency gains for our clientele and also improved the efficacy of the different processes that we supported with our software. That's why we created those four, what we call divisions of Topicus.com B.V., being healthcare, financial services, education, and social services.
That's great.
Give you a very short narrative.
No, thank you. That helps. I guess maybe the one other follow-up for you is, how should we think about growth within core Topicus.com 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? Should we think that the Topicus.com B.V. portion of the entity will pivot and use even more M&A going forward?
Well, from an organic point of view, there are actually strategies threefold. Be aware that Topicus.com B.V. kicked off in some way boring back office situations with high administrative burdens and is actually climbing the value ladder. From back office software, we move to value-adding primary process features, and sometimes even content solutions. If you take education, for example, we started in the financial back office of primary education with our solution, and we're now moving up to student tracking, and actually adaptive learning systems as well. There's potential, from an organic point of view. The same counts for healthcare and our financial services solutions. That's strategy part number one. Part number two is moving into adjacent verticals. We have a track record, for example, in mortgages.
We moved into the wealth management market through a takeover in 2017. Now we're moving from wealth towards the pension market, which is heavily related, of course, to the wealth management market. That's our second strategy. The third one is a strategy of selected internationalization. I'm Dutch. 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 will do the same most probably in Spain or Germany in the near future.
That's great. I guess my final one to maybe both you and Robin, from both of your perspectives coming from separate companies, what do you think the greatest opportunity 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.
I think at the outset, our idea was that we have three operating units, Topicus.com B.V. one of them, and the two existing TSS operating groups as well. I think they have a different history, a different culture. At the outset, we said we want to continue what we're both doing well, TSS part and the Topicus.com B.V. part. That's the main strategy. We think there can be cross-fertilization by exchanging best practices. I think there are many best practices, but to put it simple, I think, you know, the organic growth Topicus.com B.V. is demonstrating that has our interest at the side of TSS. I think what TSS has been doing historically, there are different elements which might have the interest of Topicus.com B.V. I think in the classical style, as we did already within Constellation, we continue now as well.
It's a decentralized model. We think that curious managers, curious employees, they will look for those best practices, they will exchange them. That's how we hope to pick it up. 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 crisp over time, I would say. I don't know, guys, do you have to add something to that? Would you like to add something to it?
Yeah, I would like to add that although TSS is more an acquisitive company and Topicus B.V. is coming from an organic perspective, from a cultural point of view, we're quite alike. The tremendous amount of autonomy on the business unit level is something we find very important in both companies. The high degree of collegiality is important and the element of sharing knowledge. We will not enforce synergies. We won't enforce come togethers. We will facilitate it, encourage it. 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 a back-office product. At TSS, they have a front-office product, and they see what they can do together and improve product and customer intimacy with our clientele in the different segments that we serve.
Thank you.
Your next question comes from Paul Treiber of RBC Capital Markets. Your line is now open.
Good morning, thanks for taking my question. Just first one for Robin. I think most of us, most investors are quite familiar with Constellation and its practices and strategies for acquisitions. Just wanted to hear it in your words, for Topicus going forward, should we think about the strategy for acquisitions, their hurdle rates, even how Constellation may allocate acquisitions between the operating groups? Should we take that as being similar or identical to what Constellation does? Do you think Topicus will alter that strategy or put its own sort of twist on that strategy over time?
I give you the short answer. I think it's similar. We have been part of Constellation. We're still part of the Constellation ecosystems system, and we continue as we did, and Topicus.com B.V. will align to those processes and approaches as well. That's it. We simply continue as we did.
Could you elaborate a little bit more on, in the prospectus, there was 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, but 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?
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, that's why we decided to focus on Europe. Other Constellation operating groups are active there as well. We simply have to do a good job, and that's what we're hired for, and that's what we have to do. I know where you're referring to in respect of conflicts. I think that's more. So far we haven't encountered it, there might be one day a situation. I can't give you a concrete example yet. One day it might be, currently it hasn't been on the table.
Just the last one for me. The stock since the spin out has done very well. Finance theory would say that the 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?
Well, Jamal, is that one for you to answer?
I'd just say shorthand 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. Yeah, at this point, there's no thoughts about issuing equity.
All right. Thank you guys for taking my questions.
Your next question comes from Robert Rains of Richardson Wealth. Your line is now open.
Yes. Do you anticipate moving the North American listings to more senior exchanges in the near future?
Yeah. There's no plans 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.
Yeah. NASDAQ proper.
Definitely not NASDAQ.
Okay. Thank you.
As a reminder to ask a question, please press star one on your telephone. Your next question comes from Richard Tse of National Bank. Your line is now open.
Morning, everyone. This is Amir calling in for Richard. I just had two questions. I know Paul kind of touched on this. Just regarding, you guys have the regions that you're operating in, and then Constellation's also operating in similar regions. Is there any guidelines of how you guys would deal with potential conflicts in regard to the acquisitions if they were to come up?
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. If there are something contentious there, then I think head office will decide where it goes. Most of the times, I would say those kind of issues are very limited. 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.
Okay. Got it.
These rules have existed for years, right? We've had six operating groups, each with their own M&A teams. This isn't something new that we're having to deal with. We've dealt with this before. I know some investors have brought up, "Well, now because Constellation only owns a portion of Topicus, does that create a conflict?" You could also say Constellation only had, well, there was a minority interest in TSX as an operating group for years, and we dealt with the same situation. This is not something new that we had to come up with. We're just continuing on with processes and rules that were existing or that have been placed.
Okay, thanks for that color. Just a last one from me here is that, given that you guys have a smaller footprint, do you think you should be able to grow faster than Constellation over the next three years?
We hope so. You can do, I think, the math in different ways. I read that story before. We're a little bit smaller, and we are where Constellation was, let's say, 10 years ago. That's one theory. Another theory is Constellation is composed of six T.coms, so what's the difference? They even have a head office attached to it, which deploys capital as well. Hard for me to judge. I think we as Topicus.com simply have to do what we have to do, and hopefully, we do it better. Our sister's operating groups are doing a good job as well, so let's see.
Okay. Thank you guys so much for the color. I'll pass the line.
Again, to ask a question, please press star on your telephone keypad. There are no questions over the phone. Presenters, please go ahead.
I was about to say thanks. Yeah. Thanks, everybody. Yeah. Oh, go ahead, Robin.
Oh, yeah, sorry, I missed that. Yeah, 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 a nice day.
Thank you.
This concludes today's conference. Thank you all for joining. You may now disconnect.