Hi Multis
Before we dive into the Topicus earnings and look if the stock is an outstanding opportunity now or doomed, first, I will let Julien introduce himself.
Hi everyone
My name is Julien. Like Kris, I also live in Belgium (that tiny country between France and the Netherlands).
I joined Potential Multibaggers a few months ago, but my real journey into investing began about 2 years ago.
My background is in business development, where I spent most of my time researching markets, first in pharmaceuticals and later in food & beverage and chemicals. To do business well, you need to truly understand the companies you’re dealing with, their incentives, their margins, their strategy, and above all, their long-term vision.
That curiosity slowly evolved into something more profound: an obsession with understanding businesses not just as partners, but as investments. Somewhere along that path, I stumbled upon Warren Buffett’s words that still resonate with me today:
I am a better investor because I am a businessman, and a better businessman because I am an investor.
That quote captures my mindset perfectly. The more I learned about business, the more I appreciated investing as a way to find excellence.
It’s hardly a surprise that Berkshire Hathaway resonates with me. A company that embodies this dual mindset of patience, discipline and the quiet power of compounding.
And as often happens in investing, one story leads you to another. In Europe, there’s a company walking a similar path. Smaller, more agile, but which, in my opinion, is guided by the same philosophy. That company is Topicus (TOI.V) (TOITF).
“The Padawan and the Jedi Master” - How Topicus Follows the Constellation Path of Perpetual Compounding
For those familiar with the saga of Constellation Software, Topicus is its European apprentice, a Padawan learning the ways of the Force of Compounding. It studies the same code, has the same discipline and walks the same path of decentralized growth.
In the next section, we will look into the details of this capital allocation with a focus on the company’s Q3 2025 results.
Financial Results
Kris here. Julien laid the basis for this article, but I edited it heavily. That’s not unusual for a first article. But, as Topicus is a tough company to understand, I had to add quite a bit of context as well. You can see this article as a joint effort between Julien and me.
Topicus reported Q3 revenue of €387.9 million, up 24% year-over-year. That came in slightly below the €391.1 million consensus. But that’s a small miss of just 0.8%.
Organic growth was around 3%. That’s not that high, but that will probably be temporary, as Topicus did a lot of M&A in the past year. Usually, the company buys companies that are not growing or even shrinking. That’s why they can buy them cheaply. Over time, they get the organic revenue up, but as Topicus used so much capital for acquisitions, the new companies drag down the organic revenue.
The headline earnings look ugly at first glance: diluted EPS came in at a loss of €0.94 versus a consensus loss of €0.61.
The net loss is almost entirely driven by the one-off accounting impact related to Asseco. That accounted for €221.7 million. It distorts the income statement, but it tells you very little about how the company actually performed during the quarter. This is accounting stuff, not any form of operational deterioration.
A second reason for the losses is the contingent payments. Those are milestone payments. If an acquired company does really well, it gets extra bonuses.
The cash flow looks better. Operating cash flow was €48.4 million, up approximately 53% year over year. More importantly, free cash flow available to shareholders (FCFA2S) jumped to €22.3 million from €10.4 million last year. That’s up 114%, and it shows the company does much better than the reported net loss suggests.
Because of the acquisitions, the debt is rising meaningfully. Net debt stood at €742.4 million as of September 30th, up sharply from €275 million at the end of 2024. We will look at this further in the Quality Score update.
Acquisitions remain the engine of growth for Topicus. The largest move this year was the acquisition of Cipal Schaubroeck NV, a Belgian public-sector software company, for €223.6 million.
Over the first nine months, it contributed €33.6 million in revenue and posted a €5 million loss during the integration phase. Early-stage losses are not something to be afraid of. The integration takes time, and you’d expect some drag before the synergies kick in. With the loss, you see where the organic growth was impacted by the big acquisitions I talked about.
Next to Cipal Schaubroeck, Topicus acquired a handful of smaller VMS businesses in the first nine months of this year, for a combined €96.9 million. These all fit into the typical strategy we know from the company: buy small, recurring-revenue software businesses, integrate them efficiently, and let the model compound over time.
In the end, the investment case for Topicus hasn’t fundamentally changed. Topicus is still in the early stages of its journey as a European software compounder. The structure is right, the culture appears intact, and the focus remains on durable, cash-generative businesses.
So, why is the stock down so much, then?
Another great Fiscal chart. Grab your 15% discount here!
Well, you know the stories: Mark Leonard leaving and AI. We have written about that extensively at Potential Multibaggers, but let’s just recap once more.
1. Mark Leonard stepping back as the CEO of Constellation Software.
I have emphasized multiple times already that if I’m confident in one successor, it’s that other Mark, Mark Miller. He was an executive of the very first company Mark Leonard bought, so he has been there from the start, literally. All that time, he was the COO standing next to Leonard. I’ve seen firsthand at Chapters Group’s Capital Market Day how incredibly important the COO is in a serial acquirer.
It’s simple, actually.
The CEO has the vision and contacts for acquisitions.
The CFO determines whether the price is reasonable.
The COO is responsible for the full execution: integrating everything, giving the acquired company advice (’You need 1.5 extra FTE in the marketing department’, for example), the pricing strategy, etc.
On top of that, Mark Leonard is so visionary because he decentralized the company from the start. Managers at underlying levels have the possibility to decide on acquisitions up to a certain size in their field. They are taught the method that Constellation uses. This is the most decentralized company I know, even more than Berkshire Hathaway.
In that sense, Topicus actually has nothing to do with Mark Leonard since it was split off.
And, on top of that, I’m a huge fan of Robin van Poelje, Topicus’ CEO. Mark Leonard only got a cult following in the last 5 years or so. Before that, he was mostly unknown to most investors. I could see the same future for van Poelje, who owns about 30% of Topicus with the Strikwerda family (he’s the son-in-law there).
He already was the leader of TSS, which merged with Topicus, before the acquisition by Constellation Software and he did a fantastic job in that function too. From the people who have talked with him, I hear one thing consistently: “He blew me away.” That’s a great sign.
2. AI Will Kill Topicus
Ok, picture this.
You are a clerk working at a small town in Belgium, let’s say Maldegem (where I live). There are about 24,000 inhabitants.
You have been using Cipal Schaubroeck for over twenty years, just like your colleagues. Most have never known anything else.
Here comes this 24-year-old kid into your office. He claims to have better software, coded with AI, that will replace your Cipal Schaubroeck bookkeeping and official notetaking software. It will be so much better, dude!
What you think as a clerk is simple:
* How about the security?
* How about compliance?
* Will this be up all the time?
* How long will it take to retrain the full team?
* How much will it cost to implement?
* How will we rip CP’s software out of the whole system?
* How will I sell this to my boss?
* Our software is less than 0.5% of our total cost, is it worth taking that risk?
I could go on, but I think you get the point.
Topicus bought Cipal Schaubroeck earlier this year. And no, it won’t grow that much organically. New towns just don’t get born every day. But with some pricing power, it will grow organically, probably 2% above the inflation or so.
That’s the kind of companies Topicus invests in. And that’s why AI is much less of a threat than most people think.
Now, on to the Quality Score and the Valuation.
This is where the free part ends.
Why don’t you upgrade?
One good investment and you could have it back multiple times. And Topicus could be that investment.