Constellation Software, Inc. (TSX:CSU, Financial) grew its revenue by 29% in 2021 while maintaining strong margins. The company’s organic growth has rebounded from the minor decline experienced during the pandemic, and the team continues to make acquisitions apace, investing essentially all the company’s cash flow back into expansion.
Mark Leonard’s head office efforts to deploy additional capital on a large, PE-style software acquisition or on a company operating outside of the vertical market software space have yet to bear fruit, but patience is often the cost of discipline. And we highly value the discipline of the team at CSI.
On the topic of discipline, Sequoia sold its shares of Constellation’s Topicus spin-off earlier in the year when the multiple seemed heady to us. As with our previous trims of Constellation itself, we were soon chagrined to see the stock price continue to climb after our sale, but we are content to trade the possibility of short-term levitation for investment soundness.
From Ruane Cunniff (Trades, Portfolio)'s Sequoia Fund 2021 annual report.
