However, an annualized share price ROI of nearly 40% over 13+ years is only half of the success story here, since any sky-high ROI must also be achieved at sufficiently low risk to be considered a “success” rather than sheer luck. On this note, Constellation has achieved incredible consistency in successfully investing in, and managing, well over 300 software company acquisitions. This success is even more noteworthy given that every Constellation acquisition has a timeline of forever, with no planned exit strategy.
In other words, Constellation’s success cannot be attributed to just rolling a lot of dice and landing a few unicorns to become the stock market star that it is now, with the bulk of the investments eventually discarded and swept under the statistical rug. Just the opposite. There has never been a unicorn investment, and nearly every acquisition that Constellation has ever done has been successful from an IRR and profitability point of view. No “dice” are ever rolled, since they never need to be. The risk is simply mitigated, and quite drastically so, with exceptional due diligence and post-acquisition best practices. This is again because of an obsessive focus on recurring revenue and the related balance sheet impacts – both during due diligence when all of these companies were acquired, and forever afterwards as they assimilate Constellation’s best practices in managing a recurring revenue business.
Constellation Enterprise Intelligence Services (“Constellation EIS”) is the CSI business unit that grew out of the internal BI and FP&A team that has developed, implemented – and often initiated – many of the CSI best practices. That is more specifically who we are. Daniel Schmidt leads this team and has worked at CSI in senior executive positions since 1998, over 20 years. He did this initially by leading the CSI BI and FP&A effort informally as a CFO of four of CSI’s operating groups (there are currently six in total). In between those CFO roles, Daniel took on the temporary role of CIO of all of CSI for the express purpose of automating the consolidation of financial data across CSI’s many business units (>100), in preparation for its IPO in 2006. The enterprise FP&A platform that he implemented almost single-handedly was extremely successful, and it is still in use today to drive the financial consolidation and FP&A processes across all of CSI.
From this CSI CIO role, Daniel moved back to a final CSI operating group CFO role for about seven years, with an intense analysis-centric focus on the recurring revenue business model. From there, he again moved into a dedicated CIO role focused entirely on BI and FP&A, this time for a single CSI operating group. It was done with the express understanding that it would eventually evolve into a revenue-generating GM role focused on the sharing of best practices with respect to BI and FP&A, especially as planned internal projects were implemented and brought to maturity. The pivot from an internal to external customer focus, along with the formal launch of the core MRR Churn product, was targeted to start during 2019, and we are right on track. That is basically where we are today. We have a dedicated BI/FP&A team serving a large group of very independent businesses within CSI, whom we treat just like our customers, and we are transitioning towards serving an entire market of customers with recurring revenue businesses.