Constellation Software Inc. Announces Results for the Second Quarter Ended June 30, 2026 and Declares Quarterly Dividend

Good company, strange its not being talked about more

Difficult to understand i guess

Good company? U dont listen to management flopping from the past few years right?

lots and lots pf shitty products over milked yoy

It’s traded on a fake exchange maybe?

Didn't know Canada was a fictional country. Must've missed the South Park episode.

They’re a real country, they just have floppy heads, square wheels, and a fake exchange

We've seen a decent run up recently. Im hoping for a leg down to buy in again.

It’s been down for months already, buy buy buy

It's up 25% in 3 weeks. Would not be surprised if a leg down drops it back to mid-high $2000s CAD.

My precise point. I already took profit and aiming to buy again lower. Around 3k

I agree, organic sounds not good. It is almost zero, but with inflation it is negative.

This is THE number people look at when they try to figure out whether CSU is impacted by AI. It's really not great. The CEO even mentioned during their AGM that their organic growth needs a bit of work. Hopefully they can do something and it doesn't get worse.

My undeserving it is because of Altera. Without it is 4%, which standard kind of normal for company. Probably it is fine for long term investors, but short term can be red flag.

Standard BUT trending downward. Some people will interpret that as AI replacing their software.

Yep. But hard to believe about replacing. I would say seat count maybe reducing.

What do you mean trending downward? CSU organic growth has been low single digits for decades. It's even been negative a few times.

Yep. The business is essentially dumpster diving, cigar butts, and extracting value using their businesses to benchmark what is the optimal margin structure to run the underlying acquired companies.

Their MD&A has a chart on organic growrh without Altera. The maintaince/recurring segment has been trending down. Q1 AND Q2 are tied for lowest growth (4%) from what I can see.

Capital deployment is THE number and its humming. I predict lines will go up and down on the charts but the business will keep compounding at astounding rates for at least a decent while yet.

Lmfao organic growth near 0. And some people thought AI doesn’t impact them LOLOL. AI turned generational buy the dip people into Generational bag holders

I think a SaaS monster like CSU would use AI to its benefit, reduce head count and integrate key features into existing tools with it.. it's hard for me to believe mission critical software will be replaced by ai. Personally I want support and confidence that I can pick up the phone and call someone if there is a problem, using AI really eliminates that. Finally I think AI will do wonders to create fear for current SaaS products ultimately driving down their value bringing more opportunity for CSU to generate better value by achieving lower purchase multiples. I'm not saying AI won't have negative impacts but I think people are so stuck on that narrative that they are missing the positives it brings to the table, maybe I'm crazy, i am long CSU.

You misread the results.

I think too many people are focused on organic growth and missing the bigger picture. CSU has never been valued like a traditional software company where the primary driver is organic revenue growth. The real value creation has always come from management's ability to allocate capital and compound through acquisitions. This quarter, the most important takeaway shouldn’t be the 1-3% organic growth. It should be the evidence that the acquisition engine is still operating at a very high level. The long-standing bear case has been that CSU became too large and would eventually run out of worthwhile acquisition targets. The recent deployment figures suggest the opposite. I'd actually be more concerned if CSU reported 8-10% organic growth but acquisition activity was drying up. Organic growth adds value, but the reason CSU became one of the best compounders in the market was its ability to continuously generate cash, redeploy that cash into acquisitions, and earn attractive returns on invested capital. The market seems to be treating CSU more like a mature software company when historically it has behaved more like a decentralized capital allocator that happens to own software businesses. If management can continue finding opportunities to reinvest billions annually at attractive returns, that matters far more to long-term intrinsic value than whether organic growth is 1%, 3%, or 5% in any given quarter. To me, the key question remains the same: has the acquisition runway disappeared? Based on recent results, the answer appears to be no. That's a much more important conclusion than debating a few percentage points of organic growth.

Any capital allocator rollup valuation starts with a fundamental value of the existing business based on its revenue and earnings growth and business risk, then adjusts upward that valuation based its ability to generate additional earnings growth using cheap debt to acquire businesses at low multiples at scale. What people have historically overlooked about constellation is that with Nominal GDP - 3% Growth, the fundamental value of the existing businesses is quite low. It should be more like 8x ebitda. Should it really be with an addition 10x ebitda because it can acquire more 1-3% growth businesses with 6-7% interest rates? That’s the question. I have no doubt they’ll have lots more to buy - most PE funds have zombie software companies growing 2-3% in them that they’ll eventually default on or give up for cheap (eg look at Medallia).

The reasoning he has is apt on organic growth. If Constellation is running at 5% organic growth with little capital deployment, it means they hiked up prices because the engine has stalled. My concern would be around hurdle rates.

All those PE firms buying up software at peak multiples in 2021 was a special kind of stupid, in retrospect. Thoma Bravo lost $5 billion with Medalia. Blue Owl will likely be forced to sell their own distressed assets for pennies on the dollar if investor redemption requests keep up like they are currently

I agree with everything you said. But you also need to be mindful of how the market thinks about CSU. If this was before AI then capital deployment is for sure the #1 issue (and analysts have talked about this for many years). The stock is now down big from one year ago. It's not because of capital deployment. It's the risk of AI. So if you expect the stock to re-rate and recover, the number one factor to look at is also AI. That's what management is discussing most during their AGM and last ernings call. Not capital deployment. Organic growth is the number investors look at when they try to figure out how impacted they are by AI. That being said, think they are still well positioned even if AI does prove to be somewhat disruptive since they are a roll up so future acquisitions will be cheaper too. But in terms of stock price for the foreeable future, that will be heavily connected to the AI risk.

CSU has never been an organic growth story, even before AI was a thing. It was always about the capital deployment engine. The type of software they buy primarily serves small, niche industries with little to no growth and possibly even declining growth. The only way they can generate organic growth is by raising prices. But that's the whole point of their strategy, they buy stuff too inconsequential to attract competition from bigger and better players.

Again, I think we all agree what kind of business CSU. That's not the point. The point is: 1. There is fear/skepticism around AI. 2. Investors want to figure out if CSU will be disrupted. 3. They look how organic growth is doing as a clue, since deceleration in this area may suggest their SaaS portfolio is being disrupted (seat, pricing). 4. They then model out the growth rates to figure out how much their current Saas business is worth (then add in the other component for the value of CSU as a capital deployment business). FYI if you listen to the AGM, the CEO himself said they need to work a bit more on improving organic growth. They recognize that the market is scrutinizing this figure. Honestly in a world without AI risk no one would be paying much attention to organic growth. But this is now becoming an important metric for analysts.

Organic growth is important to watch as a hygiene factor, given AI disruption is a major bear thesis.

Big words

I like the high amount of capital deployment, 2026 is likely going to be 90-100% more cash deployed vs 2025. \~3 billion vs 1.5 billion in 2025. That is the best sign. It would be better that organic growth is tracking like Topicus, and revenue growth slightly higher. But otherwise, this is a solid showing, again for 2026.

Where is the legend! u/theconstellationguy

Hello! I am here. Everything looks good at a glance, haven’t taken a very close look yet. Capital deployed on acquisitions is impressive to say the least, all else seems to be business as usual. I don’t really care much about organic growth, this has never been the priority.

Revenue grew 17% (3% organic growth, 1% after adjusting for changes in foreign exchange rates) to $3,335 million compared to $2,844 million in Q2 2025.   Net income attributable to common shareholders increased 386% to $274 million ($12.93 on a diluted per share basis) from $56 million ($2.66 on a diluted per share basis) in Q2 2025. Excluding the impacts of foreign exchange and the IRGA liability revaluation the increase was 8%. A number of acquisitions were completed for aggregate cash consideration of $732 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $160 million resulting in total consideration of $893 million. Cash flows from operations ("CFO") were $477 million, an increase of 10%, or $44 million, compared to $433 million for the comparable period in 2025. Free cash flow available to shareholders1 ("FCFA2S") increased $125 million to $345 million compared to $220 million for the same period in 2025 representing an increase of 57%. Subsequent to June 30, 2026, the Company completed or has open commitments to acquire a number of businesses for aggregate cash consideration of $669 million on closing plus total estimated deferred payments of $149 million for total consideration of $818 million.

Banging earning report. Great increase in free cash flow.

I found about Altera from past call Q: And then on the Altera acquisition, obviously, it's faced some expected customer attrition. It's good to see the positive recurring organic growth in the quarter. Just wondering, any update on how that business is going and whether organic as a whole can kind of either stop declining or turn positive at some point? A:(**CFO):** "Yes. The business is running pretty close to what the investment thesis was, from a returns perspective." Basically maybe it is expected and it was part of the price that we pay for Altera Ref: **CSU Q4-2025 Earnings Call Transcript (Alpha Spread):** https://www.alphaspread.com/security/tsx/csu/investor-relations/earnings-call/q4-2025

They should be a good benchmark for the broader SaaS market, but other SaaS names have increased profitability and revenue. Not sure if they are leading or lagging but if anyone wants to do a comparison of the past 3 years (post ai) I created a Base: https://createbases.com/s/xjoppc52j0prglaegrh8a4iqr3

Revenue grew 17% (3% organic growth, 1% after adjusting for changes in foreign exchange rates) to $3,335 million compared to $2,844 million in Q2 2025.   Net income attributable to common shareholders increased 386% to $274 million ($12.93 on a diluted per share basis) from $56 million ($2.66 on a diluted per share basis) in Q2 2025. Excluding the impacts of foreign exchange and the IRGA liability revaluation the increase was 8%. A number of acquisitions were completed for aggregate cash consideration of $732 million (which includes acquired cash). Deferred payments associated with these acquisitions have an estimated value of $160 million resulting in total consideration of $893 million. Cash flows from operations ("CFO") were $477 million, an increase of 10%, or $44 million, compared to $433 million for the comparable period in 2025. Free cash flow available to shareholders1 ("FCFA2S") increased $125 million to $345 million compared to $220 million for the same period in 2025 representing an increase of 57%. Subsequent to June 30, 2026, the Company completed or has open commitments to acquire a number of businesses for aggregate cash consideration of $669 million on closing plus total estimated deferred payments of $149 million for total consideration of $818 million.

The 1% headline is misleading — open the MD&A and find the Altera table before drawing conclusions. CSI publishes the decomposition themselves. Maintenance & recurring organic growth, FX-neutral, ex-Altera: **4%**, same as Q1. Altera alone printed **–19%**, and the MD&A says outright the deceleration from Q1 was "largely due to Altera." Even that –19% overstates it: Q2'25 contained \~$17M of one-time revenue ($9M upfront recognition on two contracts + $8M contract amendment) with no repeat this year — on a \~$153M quarterly base that's 10–11 points of "decline" from comp math alone. Altera is the old Allscripts hospital EHR business Harris bought in 2022 at a fixer-upper price, fully expected to shrink while getting milked for cash — it threw off $21M of FCFA2S this quarter doing exactly that. It was never the moat thesis. It's 4.6% of revenue and its weight halves every few years while the rest compounds 17%. Meanwhile Topicus did +6% FXN recurring, and they deployed $893M in Q2 plus another $818M committed since quarter-end. The honest bear point: the clean ex-Altera recurring series ran \~6% through 2025 and has now printed 4% twice in a row. That step-down has no excuse attached. If Q3 comes in below 4% ex-Altera, the deceleration is the core portfolio, not the excuses. That's the number to watch — not tonight's 1%.

Exactly. There's a chart right there in the MD&A showing ex-Altera the recurring is still trending down. Not a disaster per se but definitely not a good look when people are looking for clues round AI disruption.

Not down, flat. It's nowhere near caused by AI disruption, more from a softening economy.

| Maintenance and other recurring | Jun. 30 2024 | Sep. 30 2024 | Dec. 31 2024 | Mar. 31 2025 | Jun. 30 2025 | Sep. 30 2025 | Dec. 31 2025 | Mar. 31 2026 | Jun. 30 2026 | |---|---|---|---|---|---|---|---|---|---| | \*\*CSI excluding Altera\*\* | 6% | 6% | 6% | 5% | 6% | 5% | 6% | 4% | 4% | | \*\*Altera\*\* | 7% | 1% | -5% | -9% | 1% | -10% | 5% | -6% | -19% | | \*\*Consolidated\*\* | 6% | 6% | 5% | 4% | 6% | 4% | 6% | 4% | 2% |

In the 2 years before June 2024, organic growth was always 6-7%. Maybe it's just 2 softer quarters, or maybe it's genuinely showing signs of AI weakness. Hard to tell.

6% down to 4% doesnt show much signal of AI disruption at all. If so, its minimal and not worthy of the huge drawdown in the stock (close to 50%)

Good points here but I'd push back a bit on this: "That step-down has no excuse attached." Not attached but presumably a result of decreasing inflation flowing through the automatic price increase clauses. Which should mean stabilization if that's all it is. But that doesn't change the underlying point -- it's a flag if there's further deceleration.

EPS up 386% and FCF available 2 shareholders up 57% for the quarter To me they killed it

They did good but the question is always pricing for the future. Can they keep it going long term?

The devil is in the details. If you look at the line items you'll see these figures are after adjustments that don't reflect the core performance.

I need to dig in to the details but that goes both ways. Like the revaluation adjustment for Topicus’s Asseco equity investment 2 or 3 quarters ago. You pointed out the TSS revaluation charge - that goes both ways also from quarter to quarter. If you want to back that out in your analysis fine Headline revenue growth is very positive and they are putting capital to work, that will pay off down the road. I’m not that concerned about organic revenue growth to be honest

Tomorrow's conference call should be interesting.

Agree - my bet is there will be questions around the capital deployment details and organic growth.

I think people are so on edge about certain questions. That any type of awnsers wil result in heighten volatility.

I remember your post on topicus and you were largely downvoted because you don't seem to appreciate that topicus preferred to wait and pay off debt instead of paying higher multiples in private markets that haven't rerated to the public markets multiples - yet. As these things go, private equity funds raised in late 2010s / early 2020s are already refinancing their leveraged buyouts at higher interest rates, and they will need to return the capital to their LPs. If they can't dump their holdings on retail like they did during the SPAC era, they'll need to sell to disciplined capital allocators like Topicus and Constellation that are quietly accumulating cash so that they can act like a coiled spring around the end of the decade. The rates don't even need to go up for private equity funds to be in trouble, they just need to stay above zero. The market made the same mistake you did and confused the discipline behind a not-so-great number for an indication the VM software market is satured. These businesses can't be measured by any single quarter.

Topicus deployment wasn't great during H1 - they spent Q1 and some of Q2 paying off debt. I think once I saw the details, seeing their their deployment after the Q2 cutoff date gave me some more comfort. I don't think I've ever implied VMS is looking saturated. Everyone knows private assets are going through some issues right now and CSU family is primed to benefit. You can ask AI to go through my reddit comment history - I've mentioned this as a positive catalyst many times. Otherwise their organic growth and FCF growth weren't particularly inspiring. My verdict was that their quarter was just..okay/meh. Not much worth highlighting. Numbers weren't great but not alarming either. Hence against everyone else I predicted a red day which did happen (-4%). I'm actually a Topicus shareholder. It's close to 10% of my portfolio. I've also traded in and out of CSU. I've followed the CSU family stocks pretty closely for the past year and I'm generally bullish in the long run and them being a cash flowing rollup in this environment is a big part of that. That being said, just because you like a company doesn't mean they can't do wrong. When new information comes in, I'd rather reevaluate my thesis vs. explain away any negatives.

I think we are past the peak AI fear in SAAS; a lot of negativity is already priced in, so to me this report is a win. The biggest tailwind is that when all saas companies trade cheap, a serial acquirer wins. We should expect to see non-organic eps growth acceleration.

Bear case thesis 1. AI disruption. Organic growth (ex-Altera) going down from 6% in 2024 to 4% today doesn't smell like major AI disruption to me. Certainly not the kind of disruption that would cause the stock to decline so much from all time highs as it has done. Jury still out but the signs are positive to me. Bear case thesis 2. Too big to deploy capital. The scale of capital deployed well and truly confounds this one. In fact, we might be seeing software valuations fall (due to AI) which is enabling them to deploy MORE capital at the desired hurdle rate.

My thesis in a nutshell: With AI a lot of software companies are going to struggle the next 2-3 years while everyone thinks you can replicate software in 5 minutes. CSU numbers where good and it was cheap for a while this year. They are in a good position to go through those 2-3 years of pain. I am not planning on selling nor adding to my February 2026 position.

I believe you are stretching the narrative to fit a pre-existing bear case. Use a modest dip in organic growth to justify AI disruption fear is reaching. If it were trading at peak priced-for-perfection multiple, I would maybe flag this as a warning sign. But it is not. To me, looking at ex-Altera organic growth dipping from 6% to 4% is nitpicking and the fear is overblown. As many other comments suggested, and I am sure you understand this too, the most important thing for constellation is their acquisition engine. When they are deploying capital well, when they are growing their FCFA2S well, there is no need to think too much about it, especially at the current suppressed valuation level. I don't care about short term market movements, nor would I attempt to predict it. If Mr Market somehow decides to throw a tantrum a few hours later, I'd love to see it and will happily buy more.