Nathan Worden's avatar
$332.7m follower assets
Topicus stock pitch by Bastiaan
@picolinie gave a great pitch of Topicus which you can watch HERE
Or read the pitch below ⤵

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Topicus is a vertical market software solution provider.

And this basically means they make very specific and niche software solutions.

• Platforms for primary schools and
• Tax calculation for local German municipalities

It's really about very specific software solutions.

How they provide it: they own 200 small businesses that they operate through decentralized business model where the small businesses get to keep a lot of autonomy.

But there's some centralized parts such as finance and HR, so that the entrepreneurs of these companies can just focus on what they need to focus on, which is their customers and their products.

So the business model is a combination of entrepreneurial organic growth, but a large part is also focused on their Merger and Acquisitions playbook.

With the cash flows from the business that they own, they buy new businesses and they become perpetual owners, which is a very important aspect here. That means that when they acquire companies, they do not want to sell them. They want to keep them forever. And then basically building one big family.

I think a common mistake is: Topicus is not Canadian. It's trading in Toronto, Canada, but it's a Dutch company with operations that are focused on Europe.

So why do I think this is a good investment?

First of all, as a software company, it's very profitable.

We're talking 30% plus EBITA margins and they have a very strong return on invested capital. So the cash flows that they redeploy and they get very good returns on that.

Secondly, very favorable working capital structure with low CapEx needs, meaning that they have very high, free cash flow conversion. So the numbers that you see going on the Profit & Loss statement— they quickly transform into free cashflow.

They have a very large, fragmented market. There are many of these vertical market software businesses in Europe

and Europe is fragmented. You have a lot of different countries with a lot of different cultures and different preferences. So the runway for Topicus is huge. They're still so early, it's still early days. So a long trajectory left to go.

These solutions are very niche and specific, so high switching costs to a competitor.

And this also then leads to the company has very low churn rates and the pricing power is also huge.

And then lastly, Topicus has a very strong management team that has basically been there from the beginning.

They have many decades of experience within this industry and doing the Merger and Acquisitions playbook, and they also have very high insider ownership. So as a shareholder, your interests are aligned. Only 30% of the company is tradable for the public. Very high insider ownership.

Joey Hirendernath's avatar
This was a great pitch by @picolinie

My question for @picolinie would you say that $TOITF's niche solutions are the primary moat? Keen to know if there are multiple wide moats around the company