A Hidden Gem Deep Dive Brief: Topicus
The CSU Spin-Off Set to Dominate Europe’s Vertical Software Landscape and Beyond
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Welcome back Explorer!
This eighth edition of my Deep Dive Briefs series is a special one—not just because of the company we’re diving into, but because of the format itself, blending the best elements of my 📎 Deep Dive Briefs and 📎 Hidden Gems: Special Editions.
This time, we’re zooming in on a company I’ve been hinting at for months:
If you’ve followed Expanse Stocks for a while, you likely saw this one coming. I’ve teased this gem a few times—most recently in the 📎 Monthly Specials (March 2025)—but until now, I hadn’t put together a full research report.
Just a few weeks ago, I published a free-to-read Hidden Gems edition featuring a primer on Constellation Software, Topicus’ parent company. If you haven’t read it yet, I highly recommend checking it out first! Here 📎 Hidden Gems: Fourth Edition. It sets the stage perfectly for what’s ahead and to better understand Constellation’s family. 😉
With the timing just right, this felt like the perfect opportunity to highlight this surprising CSU-backed Dutch serial acquirer.
So, let’s rewind to Topicus’ origin story—its complex spin-off process—and dive into its business model, key growth drivers, competitive advantages and a fundamental breakdown to get a clearer picture of its valuation and potential.
Topics I’ll Cover
🔹 Company Overview
🔹 History & Evolution
🔹 Ownership & Non-Controlling Interests
🔹 Core Offerings & Business Model
🔹 Technical Analysis
🔐 For Paid Subscribers:
🔹 (Hidden) Economic Moat
🔹 Growth Drivers
🔹 Capital Allocation
🔹 Leadership & Structure
🔹 Financials & Valuation Model - Quick mental framework and DCF model to estimate intrinsic value and shareholders returns
🔹 Final Thoughts – My stance on Topicus as a long-term investment and why it’s still a hidden gem
Let’s dive in!
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Company Overview
Topicus may not be a household name (yet), but as disciplined capital allocator, it’s definitely top tier.
Spun off in 2021 from Canadian juggernaut Constellation Software, Topicus follows a similar formula: acquire, operate, and grow niche Vertical Market Software (VMS) companies. Unlike flashier tech startups burning capital in search of scale, Topicus compounds cash flows through acquisitions, guided by a disciplined playbook that also emphasizes organic growth.
Headquartered in the Netherlands and listed on the Canadian TSX Venture Exchange (TSXV: TOI), Topicus focuses on acquiring mission-critical vertical market software firms across Europe. These aren’t flashy consumer apps—they’re essential tools that power everything from school scheduling to municipal administration, healthcare systems, and tax filing. They may run in the background, but they’re absolutely vital.
That’s what makes Topicus such a compelling hidden gem: it merges the capital discipline of a value investor with the recurring revenue streams of a SaaS provider.
If you want to better understand Topicus and its real-world impact, I highly recommend visiting their official website (link’s on the image 👇). It includes an insightful video that tells the company’s story and showcases its behind-the-scenes role across the Netherlands and broader Europe. It’s a great way to explore their software suite, the industries and sectors they serve, and the mission-critical nature of the products they build
History & Evolution: Built to Compound
Topicus began its journey under the wing of Total Specific Solutions (TSS), a key European subsidiary of Constellation Software. As Constellation’s European presence expanded, so did the opportunity to create a spin-off focused exclusively on that market. The result was Topicus—named after one of the early businesses that helped anchor Constellation’s early growth.
Unlike many serial acquirers that centralize branding and operations, Topicus carries forward the decentralized DNA of its parent. Each acquired business maintains its autonomy, local identity, and direct customer relationships. It’s a federated model that scales, not by force, but by structure.
Since its spin-off, Topicus has evolved from a pure-play acquirer of (mostly) private software firms into a more sophisticated capital allocator. Recent moves, such as minority investments in publicly listed companies like Asseco Poland, reflect a growing ambition and a shift toward a maturing holding company structure.
If Constellation Software was a novel idea for acquisition-driven compounding in the early 2000s, Topicus might represent its next-generation evolution optimized for the 2020s and 2030s decades.
Ownership & Non-Controlling Interests
One of Topicus’s most complex and misunderstood features is its layered non-controlling interest (NCI) structure. Understanding this is essential for investors trying to analyze earnings or intrinsic value.
Layer One: At the Holding Level
Public shareholders only own ~64% of Topicus. The remaining ~36% belongs to:
Constellation Software (~31.3% via a special voting share)
Joday Group & Ijssel Group (~4.7%), founders and early stakeholders. These partners hold exchangeable units, which don’t appear in the basic share count but are fully dilutive.
💡 What does it mean?
Even if Topicus earns €1 in consolidated earnings, only €0.64 of that belongs to public shareholders. Everything else is allocated to founding groups and Constellation.
Layer Two: At the Subsidiary Level
Some of Topicus’ acquired operating companies also have their own minority shareholders. Examples:
Sygnity – ~73% owned by Topicus
GeoSoftware / GeoActive – ~60%
Others may have NCI depending on deal terms
Per 📎 IFRS rules, Topicus consolidates 100% of revenues and earnings from these businesses, even if it owns only a controlling stake. The non-owned portion appears below the income statement line as “Non-Controlling Interest.”
💡 What does it mean?
Even though Sygnity’s revenue growth benefits Topicus’s top-line optics, only 73% of its bottom line is actually attributable to Topicus shareholders.
This double layer of NCI creates a need for earnings "clean-up" if you want to understand true free cash flow to equity holders. Fortunately, Topicus provides a breakdown of “Free Cash Flow Available to Shareholders (FCFA2S)”—the most useful figure to use when calculating Topicus or Constellation Software’s valuation and metrics like FCF yield or DCF models as advised by Mark Leonard.
Core Offerings & Business Model: Mastering the VMS Game
Topicus operates in the world of Vertical Market Software (VMS)—specialized tools built for specific industries or niches. These software products are mission-critical and deeply embedded in customers’ daily operations. They’re rarely replaced, not because they’re flashy, but because they work. Switching is risky, integration is costly, and the ROI remains high—even if some interfaces still resemble old Windows 95.
Key Traits of VMS Businesses
Mission-critical to daily operations
High switching costs, low churn
Stable, recurring revenue
Modest R&D requirements
Often run on negative working capital (customers pay upfront)
Their business model follows the ‘Topicus Playbook’:
Acquire cash-generating VMS businesses at attractive valuations
Decentralize operations, but retain tight capital allocation oversight
Reinvest free cash flow into more acquisitions or, occasionally, minority equity stakes
Rinse, repeat, compound
It’s a capital-light, high-ROIC model built for long-term compounding. As of 2024, Topicus generates €1.2B+ in annual revenue, with free cash flow margins consistently above 20%.
Technical Analysis: 🦎 Topicus (TOI)
Breaking Out Beyond ATH
Topicus’ 2021 spin-off from Constellation Software (CSU) initially led to a Covid-driven buying spree, pushing the stock up too quickly. But instead of sustaining unsustainable highs, it built a multi-year base, bottoming at CAD $60 back in 2022 and gradually setting up for a true breakout—which we’re witnessing now, in real-time.
What could be more bullish than a stock discovering new (price) frontiers, aka All-Time-High (ATH)? Well, very few things indeed 👇
✅ First breakout attempt at CAD $140 was rejected amid a broad market sell-off in February-March, but the stock recovered after retesting its w/ 50MA, and now, it’s not looking back as it discovers new price frontiers week after week.
✅ Earnings two weeks ago were good 📎 TOI earnings, but what looked even better is their prospects for next Q. With recent aggressive acquisitions ramping up recently, 2025 is shaping up to be even stronger.
Key Indicators
🔹 MACD: Bullish setup above the zero line, riding new wave of positive momentum.
🔹 Volume: Clear signs of accumulation (better seen on the daily chart)—buyers are stepping in with every occasional dip.
🔹 Support Levels:
📌 Key levels to watch: CAD $140—previous ATH, and CAD $150, both acting as support now.
Commentary:
Probably, one of the most convincing setups in the software sector amid recent market volatility outside the US.
🔒 The following sections are reserved for paid subscribers
🔹 (Hidden) Economic Moat
🔹 Growth Drivers
🔹 Capital Allocation
🔹 Leadership & Structure
🔹 Financials & Valuation Model - Quick mental framework and DCF model to estimate intrinsic value and shareholders returns
🔹 Final Thoughts – My stance on Topicus as a long-term investment and why it’s still a hidden gem