The Canadian Investor - Braden Returns to Talk CSU and Whether the Market Is Wrong on Software Stocks

Episode Date: February 16, 2026

Simon and Braden reunite for a throwback 1-on-1 to break down what’s behind the recent “SaaS apocalypse.” They discuss why AI uncertainty is crushing software multiples, how coding agents could reduce seat counts, and where value capture might shift next (subscriptions vs. usage-based and hybrid pricing). They also separate the real risks (in-house tools at large enterprises, margin pressure from AI features) from the overhyped ones (easy competition without distribution). The episode wraps with a candid check-in on Constellation Software’s selloff and what they’re watching going forward. Tickers of stocks discussed: CSU.TO, ADSK, MSFT, CRM, ACN, DSG, LSPD.TO, SHOP.TO, MNDY   Subscribe to our Our New Youtube Channel! Check out our portfolio by going to Jointci.com Our Website Our New Youtube Channel! Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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there's going to be some great opportunities for investors this has to be one of the biggest quarters i've seen from this company in quite some time Canadian Investor podcast Wow throwback for old times just me and Simone on the mic today

it's good timing man we got absolutely SaaS apocalypse in the last few months and you know I am a shareholder of many software companies so it's a good time to catch up and just chat and see you know what we're thinking

as we endure this together yeah I know it's been it's been a while since we did just you and I because the last few times Dan was there too and he had something he had to deal with this week. So he asked if you and I could just go back to old time stakes. I should, of course. I mean, kind of nostalgic a little bit. But SaaS has been just something else. And I'm pretty excited to have you on the podcast because Dan and I have talked about SaaS and what's going on.

Dan has a unique perspective. You know, you and I and him have been chatting and how he's been revamping the stock trades website with. Claude Co-work, I think it's called. That's her new tool, right? I think he's using Claude code. Yeah, Claude, yeah. And I think they, anyways, it's, I know it's Claude. So he's done quite a lot of stuff with like basically no coding knowledge.

And he brought in a really interesting perspective. But I think sometimes we see that and we kind of forget that there's a lot more complexity that goes into building software. And I think you bring a really good perspective because you're at the intersection of, I guess SaaS, some crossroads with AI and a couple other things. So I'll be interested in what you have to say. And I'll also talk about some of the research and reflection I've done when it came to SaaS talks. And I think, you know, the way I'm looking at it now with a week of thinking about what happened last week with everything crashing, it seemed like. Yeah, I mean, it's been

it's been a crazy, what I'll say, December through the beginning of February year has really changed how agents are just doing jobs via writing code and can stay on task for a really long time. The tooling's gotten better. Of course, Anthropic has like taken over the world as kind of the clear leader in most things, especially when it comes to coding agents. And it's really just spooked software soup to nuts. And I have a lot of thoughts on that. and so to you. And there's good and bad and there's uncertainty. And I think that that's kind of a really important place to start, really,

which is when you and I both know the predictability of a growth story is well intact, so is the rest of the market. What happens to the valuation, right? It's the same in reverse. It's the exact same thing in reverse. You know, I think it's Dev Contisaria says like, quality investing. So investing in quality stocks is the perfect intersection of growth and predictability of the growth. That's what makes a really great business. And when the predictability

is unknown or, you know, there's there's some debate to be had, that's when you get big compression and multiples. That's what we're seeing. Yeah. Yeah, exactly. I mean, I think it's a bit overdone in some areas. I think some companies, the ones that are probably the most beaten up by far, I think those are the ones where there's some pretty obvious risks, but there are some companies. And one that I've been thinking about quite a bit is Autodesk. I know I didn't put that in the notes, but that is one I thought a little bit. I did some research. I'm like, you know what? It could really start reducing the number of seats that are required if you're thinking about an archival. firm, the number of junior architects that may have been required to draft a plan, and now you could use AI agents to do it. You still won't remove the need of a head architect or a couple of them that will still need that. But one thing, one way that they, I think are pivoting is a little bit more to a usage base, right?

So it doesn't matter who or what uses the platform. the usage-based billing is definitely a pivot that I think you'll see some of those more sticky platforms that are trying to avoid the seat removal with AI agent doing a big chunk of the work. So I think you're going to see more and more platforms. At least the ones that have some stickiness. I think you'll probably see some or do like almost a dual pricing where you pay a base fee. have certain amount of usage included and then any additional usage kind of comes at a greater cost. One platform that, you know, I use is the script. So they actually have switched to that.

They did that about four or five months ago. And they switched to a monthly membership to a certain amount of hours. So it was already kind of usage base, but now they switched it even for the AI functions that you use. So the more you use them, so you have these AI credits that you can use, but you have to purchase additional ones or get a more premium subscription to get more. So I think you might see a bit more of those hybrid and Autodesk is really interesting because when you think about Autodesk

and I'm thinking about Autocad, but there's other software they have just because I'm more familiar with that one with my dad being in architecture when I was younger. And you also have like these building codes that you have to follow a lot of regulation. And when you're thinking about replacing AutoCAD, it would be not an easy feat to do to replace the software and kind of the ecosystem they built around it.

There's so many conflicting thoughts and there are some risks that are overblown. There's some that are real. And there's really just this transitionary period that you're talking about right now, which is where the value capture is. And maybe that's under attack. And that's a real risk, if not managed correctly. You know, software had to go from a licensing-based model to SaaS. SAS inherently is defined by, like, cloud software.

Now it's just kind of a word for all software, even though a lot of stuff, like, a lot of stuff, the Constellation Software, maybe we can just quickly talk about Constellation software before we get to the docket. A lot of stuff they own is on-prem, license-based. software that runs locally, you know, inside of a veterinary clinic. And that's, that's common. And sometimes they didn't need to pivot because a lot of customers just don't care. So, so that's, that's, that's one thing about all technology, especially software, is that it is providing a service in, in what's called a jobs to be done framework. And the jobs to be done framework is a very valuable framework for software entrepreneurs to think about to get customers to care about what you're doing, which is focus on a job to be done. There is a job or area of expertise to be handled

with the service that you are subscribing and licensing. And that framework doesn't start with your customers care how the cookie was baked. No, they care. They care. how the cookie tastes good, right? That is job number one to be done is that the cookie tastes good and it does what it's supposed to do. And it's there when you need it. I think that's one of the most important things because if it starts not working and let's say they replicate that software with a clawed, but then it breaks and they don't know how to fix it and they don't know what to prompt and the eye to actually fix it. Not great for business. So here's my take. The death of software in quote unquote's happening right now is the birth of the most software you will

ever see ever more software is going to be created in the next 12 months than the previous 10 years combined that it's just exponential the amount of software we're about to create and so it's kind of a it's kind of a really weird dynamic to pivot it as to position it as a you know software somehow going away because it's just not true. There's kind of this golden age of software that's about to be created as a result of AI encoding agents. So it's an interesting kind of dynamic to put around. What I will say, Simone, and then we'll get into what you're talking about here, is we're not going back to the way that we previously used to run software companies or create software. We're not going back. This is out there. This is out there. This is out.

there, we're not, we're not going back to the ways of writing every single line hand by hand with proper syntax. The job of a software engineer just changed dramatically from, of course, since the creation of LLMs, but really since December of 2025, just like, you know, two and half months ago. Fundamentally, even like the people who are like their most purists of writing code are now saying like, okay, 80% of my code. I'm doing only about 20% of the work now. Which makes software engineer so much more damn valuable in this next era. Like, they're such valuable people. The job has changed, but they're just so valuable for companies because now everyone can be an 100x engineer. So let's get into it. You're going to talk about some of

the main risks. And I'm sure we can work through this. But it's, it's been interesting. over the last three months for sure for me as someone who is a AI bull but also realistic around yeah is this going to just somehow kill these businesses overnight and i don't think that that's so true yeah and it's really i think it's something you need to as business by business right before i guess we get started on that i think the one that comes to mind that and feel free to disagree if you don't agree with that but like a doc you sign that to me is something that would be highly susceptible to being disrupted. I mean, it was already getting disrupted before this.

Let's be honest. It's already a business that I would never own. No, but that's a perfect example where, like, I'm not an expert in code or anything, but just I don't think it's super complex, right, to begin with. And then you add something that you can probably replicate that kind of software, probably within like a few weeks or a month if you're like a startup that. that has like minimal amount of funding and maybe one engineer that had to experience. Like it does feel like you can replicate that software pretty quickly.

I already use a DocuSign competitor who I know from a mutual friend who started it. And I think I pay like a few bucks per seat. So like I don't care to vibe code or a placement of that. But like that's an example of like my doxySine's like kind of a crummy business. And I, well, then my example was just to give one where I think that's an example of one that I think can easily be disrupted. I think we'll probably talk about example where it's on the opposite end of the spectrum. Having cash on hand is essential for any business. Traditional business accounts hit you with high fees while paying little to no interest on the

cash you need for day-to-day operations. That was our experience too, until we switched to the new EQ Bank business account. Now, every dollar earns high interest with no monthly fees and and no minimum balance. You also get free everyday transactions like EFTs, bill payments, mobile check deposits, and 50 outgoing and 100 incoming free interackey transfers. And to sign up, quick and fully online, no branch visits because, let's be honest,

no business owner has time for that. We use it for our own business, and it's the first account that actually helps our money work harder while keeping operations simple. Check it out today at eQbank.ca slash business. My wife and I are currently planning a big summer trip to the Maritimes, and our daughter will be visiting Halifax for the very first time.

We're looking for a place on Airbnb right near the water so she can wake up and see the ocean every morning. We can already picture ourselves exploring the waterfront and coming back to a cozy house to cook a family dinner or for a quick change of clothes and head to a local family. friendly seafood restaurant. Finding the perfect home base is making the whole trip feel real. It also got us thinking about our own place while we're away. If another family's home can be the backdrop for our first maritime adventure, maybe ours could be that for someone else. Hosting our home on Airbnb would let travelers make their own memories in our beautiful neighborhood, while giving us extra money

to put towards all those lobster rolls in Halifax. And the nice thing is the flexibility. We can decide to host our home only when it works for our schedule. Your home might be worth more than you think. Find out how much at Airbnb.ca slash host. Calling all DIY, do-it-yourself investors, Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept

of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends. And there's other stuff like learning duolingo style education lessons that are completely free. You can search up Blossom social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up, some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas,

and using the analytics tools. So go ahead, blossom social in the app store, and I'll see you there. I think the first thing that's really interesting is just the LLM themselves, right? So you talked about Anthropic and Claude and how, like, they've really come to the forefront. Are they going to be the top model in, like, like three, four months? Probably not. We've like literally seen one after the other, like almost a switch of models every two to three months or maybe four months, you know? For a while it was

Gemini that kind of leaped in front that was Anthropic before that was Chad GPT with its various models. You name it. But it's, it's, I mean, I think it talked about that, but really feels like it's getting commoditized. Like it's, these models are really impressive. Don't get me wrong. They really, really, they're getting more and more impressive. They're still making mistakes. Don't be fooled. They are making mistakes. I see it every day.

They are making mistakes still. Even when you use the thinking if for doing research and stuff like that. But one thing that kind of comes to mind is, how are they going to be profitable? Like that is the one thing. The more I see it, the more I'm like, man, like there's so much competition. I just have a hard time thinking they'll be able to make money off of that. Like, they'll make money. They just won't be profitable.

Yeah. I think it's really too early to tell on that model because right now it's just, it's just an irrelevant number. And, you know, if anything Uber taught me that a business that I thought could never be profitable is extremely profitable. So I am hesitant to say that they won't find good unit economics. They very well might. And I think the amount of value that they create, they can have tremendous pricing power

with the LLMs, just inherently because of the amount of value that the product can create for customers. So TBD, but valid point on the change of the guard in terms of what the best model is at the time, it's always a very, very hot competitive market right now. And it's changing rapidly. Anthropic has been wise to be very focused on coding. They've been focused on coding assistance from the very start. And now that's playing huge dividends. And so they've always been the leader there, to be honest, just because of their focus. And, you know, people are like, ah, chat GPT's dead.

I'm like, no, like, have you met any, like, anyone off the street? That is like, by far the most popular AI application. Like, not even a question. So we're in the very exaggerated. stage of this market. That is one thing I've really noticed is a very exaggerative blanket statement market. And I think any serious user, though, is very agnostic.

I've noticed that about myself. I am not shy of switching model. If I find one's better than the other, I will dump that model like there's no tomorrow. Like, I don't care that it knows more about me than the other one. I just care that I want the most accurate one and the most powerful one. That's the way I participate.

I love man. I love manis as a like normie. Don't get me wrong. Clod is clode is fantastic, but manis is a really powerful tool for a normie like me who doesn't want to have to pick which model for which task and it just does it for you. I didn't. I haven't tried that yet. Facebook, Facebook bought, or meta bought them for, what was it? Manis acquisition. Meta bought them for it's listed two and a half billion in December. It's a fantastic tool, Singapore based. I'll give it a try, but I guess the other thing too and thinking about SaaS a little more is, I think one question to ask whenever you're looking at a SaaS company is like,

are they like, what layer are they doing? Can the work be done by an AI agent, for example, by bypassing the software? Or oftentimes it will have to use the software. We talked a little bit about that. about usage base. But, you know, how the work actually gets done. Can you use an agent or AI to create like templates, integration, edge cases, reliability, drafting designs. I did talk about that a little bit with AutoCAD, kind of reducing the more junior work. So how does the actual software interact with that? Can you bypass the full software, that full layer and then making that software less and less

relevant or does the software just starts being used by just an AI agent and then how does the company actually capture that? Because there are companies that will be bypassed by AI completely where there are others. And I think I come back to AutoCAD, but I think AutoCat's one that they probably won't able to bypass that. This is the biggest unknown or risk or where is this to go right now. and I think a valid multiple compression factor, which is where is the value capture going to happen? Unknowable today.

And, you know, hence the compression. This is a real risk. And so I'm going to keep an eye on is where is the value capture for these tech? Like, in 10 years from now, are people going to have these 50 different inter, like, so if I look at my browser today right now, I have, I have 12 tabs that are pinned. to my browser all the time across my like just typical Google drive, my calendar email like Google suite thing. And then there's like my AI tool or two. There's the fiscal AI platform. There's my CRM. There's my calendar schedule thing. There's my hiring CRM platform. There's a bunch of different like what I'll call CRMs for my business across different categories. Does that exist in 10 years?

Is that how I run my day to day? Do I have individual capture flow with all of those platforms? I don't know. It's not like those businesses are useless in this next age. It's just where do they make money? Is it going to be some other way? I don't know. Or will it be like integrated all in one?

I don't know. Yeah. Yeah. And I don't know. No one knows. Like it's just really impossible to predict. Yeah. And I think the third question then here would be the stick.

thickness factor, right? And I think that's really important. And can come in like so many different forms too. You can think of historical projects within an enterprise. It's just part of an ecosystem with partners. You deal with that with partners. You just can't switch to something else all of a sudden because then it means that the partners have to switch to. There's company standards, additional training for employees. Yes. You know, we, we were seeing AI take jobs, but at the same time, I think it's hard to think that they'll take all the job, so there's still going to be some humans require the switching cause regulatory stickiness. I think that's a big one to look for. I kind of alluded to it for AutoCAD, some failure risk.

I think we talked about it a little bit for small medium businesses. They don't have the resources, even if they try to do some coding on their own, they might be able to do that. But what happens if it fails and they don't know how to fix it? Like these are all things that you need to ask. And I think even with the previous question, I think a lot of it is this could be rapidly changing for any software, any given software. I think you can't really go and invest in a SaaS company right now and think it'll thrive in this environment and just not look at it for two years. Because it could be, your premise could be wrong and you could literally have missed a boat and you really have to stay on top of it. I think that's the other thing I wanted to add.

Yeah, it's true. And I think management teams managing this next phase is so important. The stickiness factor. Now, I like the story of when Warren Buffett went to go work for Ben Graham, Columbia, who was his value investing professor. And I think it was Buffett that said, I'll work for free for you. And Graham said, your price is too high. And so it's a really funny kind of good stuff.

but important story that Buffett's explaining here, which is like someone's time in this situation is not free, like to train you on this kind of thing. And I like this adage for software because I feel this all the time as a software AI entrepreneur trying to get people to care about what we're doing and switch from their existing incumbent is if I come to them and say, the software is free, the price is too high. Like the price of, free is too high in this scenario. And the reason for that is because of this switching cost. It's not free.

Their time is not free. Ben Graham in the story's time is not free to teach Warren Buffett about investing. Training employees is not free. Like it takes its time and resource. Correct. Correct. And the existing thing if it does the job that it's supposed to do and switching the airplane engine while flying the business,

is not always so fun to do. And so, you know, this is one risk that I wanted to spell about people being able to just spin up competitors is also some big risk to software. It's not. It's not. There has already been a huge commoditization of the cost of creating and speed of creating software since the computer was invented, right? And so I want to dispel that risk because it's completely. baseless. If I come to you with a free offering for a vertical market software replacement, your price is too high, right? And so that's something really people need to consider that I don't

think all of a sudden upstarts because they can vibe code an application is all the sudden a huge risk to incumbents because there's more competition. There's a lot of software entrepreneurs that would love to just be able to displace the incumbent software. They're, problem is not product. Their product, their problem is distribution. Yeah. And showing oftentimes it's, you have to show that it will be worth their while and they will, even if you make it free, for example, like it will save them a lot of money in a relatively short amount of time, right? Like they will probably see the upfront cost, but if you get the right clients and you explain it properly, if you can just explain that, you know what? I agree. It's going to be more upfront cost for

you now, but this will be a game changer for your company medium to long term, and you will regret not doing this if you do it. Like that's kind of the angle you have to go. Maybe not said exactly like that, but that's what you have to show, right? And the next one, the rebuild cost test, you kind of alluded to that a little bit. I think could a strong team rebuild a credible version of this product way faster than they could two years ago? And I think that is where some of the SaaS companies people will have to ask this question. questions very thoroughly. Can not Joe Schmoe in their, like in their garage, can they replicate a software, but a team with proper funding of experienced developers along with AI tools, can they

actually replicate that and make a dent into a specific software, especially a software that may not have that stickiness factor than, you know, some other softwares will have. I think that is a very, in my view, and tell me if whether you agree or not, but I think that is, this is where I disagree with the market. Okay. Yeah, go ahead. And why? This is where I disagree with the market. Based on what I just, what I had just explained around switching to a new upstart, if it was only that easier, I would have a, you know, much, much bigger business than I do today with, with, with replacing incumbents with the AI alternative. No, this is one that is overstated in the market today about people's willingness to switch quickly to a replacement. Now, we're getting

huge traction in the business is now like, by way of update on fiscal for the people like, you know, since I kind of been focusing on it full time from the podcast, we've grown like, you know, a bazillion X's at this point. We're now 50, 50 full time people. I think actually 54 full time people. So the business is chugging along. But we still face the same. switching costs. Like the rules of the game have not changed for people to come switch to us over the alternative. And so ambitious, smart entrepreneurs and founders will always find a way to come take market share. But I don't think that just because the software is easier to build now, that the rules of this game have changed whatsoever. I think it's the exact same.

getting customers, building product, sorry, building product is not what slows us down. It is really around distribution and switching costs and building a real company. Product is not the limiting factor. I guess where I would push back a little bit is I think you tend to be focused a bit more on large customers, right? So I'm thinking this is probably more true

if you're thinking about very small micro businesses or even businesses that offer SaaS for kind of, you know, individuals, not even the business market. I feel like when you get to that more granular level, you're facing businesses that will be more nimble because they have what, two, three, four, five, ten employees, maybe less, right, or like slightly more. So I think the rebuild cost test might be more true when it comes to that where you can have a business or just a single individual not has a subscription for whatever software

and say, okay, yeah, this one is offered for half the cost. Am I willing to take some of my time? I'm the only one making that decision. I'm the one who actually manages my time. I think that's where that question comes a bit more relevant. I have a section on this. Okay, sorry. And for the people listening, we'll talk about constellation at the end

specifically as well too. Okay, sounds good. But those were kind of the big things. Obviously, we talked about the seat issue. I think that's, that one will be. very interesting to watch. I think that one has been plaguing, especially the companies you mentioned a little bit, like CRMs. Those have been really, really been hit hard by the market predicting that they'll just be able to sell less seats. And then I guess, are they able to switch

to a usage base? I really don't know. That was one answer. I'm not quite sure. I haven't used those software all that much in my life either. So I'm probably not the best person to know that. But that is a, that's a question to ask as well if that company is really built for just seats and how much it'll be disrupted. The idea is, which is possible today, which is I could give an AI agent, autonomous AI agent. They know the clawed bot moment, which is now called OpenClawe, kind of went viral and there's people kind of replicating this now, which for an easier and more secure approach. but basically the idea is that instead of having one seat for my CRM all of or for some tool doesn't need to be a CRM where my 10 people do tasks in there. My one AI agent does all of them for us.

That's one seat instead of 10. Exactly. And so that's kind of the risk there. And it's real. And the thing I love about markets is how forward looking all of this is already. Because this is not happening at scale right now. This is a few indie hackers like showing that it's possible on online. Like it's being shown in almost like pet project form right now.

This is not happening broad scale across the Fortune 500s today. But I love how quick, you know, the market is to figure these things out. It's fun. I mean, a fun is a weird word for losing a lot of money at once. Yeah. It's an interesting time. I mean, like, Salesforce has just been completely hit hard.

Monday.com has been hit pretty hard. I think because of those fears, right? It's one of them, for sure. Yeah. Having cash on hand is essential for any business. Traditional business accounts hit you with high fees while paying little to no interest on the cash you need for day-to-day operations. That was our experience, too,

until we switch to the new EQ bank business account. Now, every dollar earns high interest with no monthly fees and no minimum balance. You also get free everyday transactions like EFTs, bill payments, mobile check deposits, and 50 outgoing and 100 incoming free interackey transfers. And to sign up quick and fully online, no branch visits because, let's be honest, no business owner has time for that. We use it for our own business and it's the first account that actually helps our money work harder while keeping operations simple. Check it out today at eCubank.ca slash business.

My wife and I are currently planning a big summer trip to the Maritimes and our daughter will be visiting Halifax for the very first time. We're looking for a place on Airbnb right near the water so she can wake up and see the ocean every morning. We can already picture ourselves exploring the waterfront and coming back to a cozy house to cook a family dinner or for a quick change of clothes and head to a local family-friendly seafood restaurant. Finding the perfect home base is making the whole trip feel real. It also got us thinking about our own place while we're away. If another family's home can be the backdrop for our first maritime adventure, maybe ours could be that for someone else. hosting our home on Airbnb would let travelers make their own memories in our beautiful neighborhood while giving us extra money to put towards all those lobster rolls in Alifax.

And the nice thing is the flexibility. We can decide to host our home only when it works for our schedule. Your home might be worth more than you think. Find out how much at Airbnb.ca. Host. Calling all DIY, do-it-yourself investors. Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency. because brokerage accounts are linked. And then once you link your brokerage account,

you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning, duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there.

I encourage you go on there and follow me, search me up, some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there.

Yeah, and so that's kind of the main thoughts I had. I know you have some more, so I'll let you kind of run with it. I might chime in a little bit and then we can finish off talking about CSU, like you said. So I have some kind of notes jotted down here, which is there are a lot of things to think about how AI disrupts every aspect of the knowledge workers. typical day, right? This is the reason for a massive sell-off. The future is less predictable. Valuations come down. It's very simple. When it comes to AI fears, I want to dispel as a founder working at, like, it's weird. I don't even know what to call my business. It's like one-third AI,

one-third software, one-third data as a service. SaaS, Das, and AI. So the two different categories that I see people bucketing together are very different. The two categories that I see bucketing into one risk that I think are very different are one, because there's an ability to now spin up a competition faster, this creates pressure on the existing solutions. More competition, pricing pressure, okay, sure. So that's that's one. I guess mode erosion, I guess would be, yeah. Sure, yes. Yeah. I'll just say increased competition, maybe, as broadly as, as simple as I can put it. Number two, because of that, because of that technology,

internal teams can create spin-up in-house solutions to replace existing tools. These are not the same thing. They're not the same risk and I don't think that they're created equal. I am not worried about the first one. That's why I said I disagree about the because there's now competition easier to be created that it's all of a sudden really bad for existing software companies. The cost and speed of creating software has been deflationary since the creation of software itself, right?

And so to provide a high quality software service, you don't just need a good product. You need a good product, but you need support. You need integrations. You need customer relationships. You need a sales team. You need marketing. You need distributions. You need all the switching costs that come in associated with customer data, proprietary data, integrations.

You know, the list goes those on and on. And so you need to compete the same ways here as if you, no matter how you created the code, if that makes sense. And so the speed of developing products is not a leading blocker for software entrepreneurs. If you were to ask them all, like, what's your biggest problem today? Five years ago, if you were to ask them that question, it wouldn't have been, I can't make the product fast enough. I don't think you'd hear that from any of them. So I would literally, if you were to categorize all of the risks from AI, which some of them are very real for almost anything that a knowledge worker does, things are going to change over time.

I put this as a one out of 10 risk, honestly, in my framework. The second one, which is now being bucketed in there, which is internal teams whipping up in-house solutions, this actually has way more merit to it. And I see a lot of people dismissing this. I'll tell you why there's way more merit to this. I hear a lot of software investors like, ah, there's no way people are going to build internal tools. Yes, there will be. There are already people doing it.

And have you tried a coding agent today, like for what it will create you? Will every customer do this? Will there be a business case for everyone to do this? Absolutely not. Hell no. But I think it's dismissive to say that it's not going to happen because it already is happening. And a big layer of uncertainty for me is where this value capture is going to happen. Instead of 50 tools, will it just be one central intelligence layer to connect all of them?

And can you still charge as much there? And will it be usage? So all the things that you've mentioned, I think, are much more serious risks. It makes me wonder due on that vein, you know, like back over the last 10, 15 years, you saw like larger organization just like outsource a lot of their IT stuff. It was just, yeah, like I saw it in my previous employer. Like a lot of it was outsourced. I do wonder if they'll start insourcing it more, revert a bit more to the way it was before

where if you have the right people and you think you're. better serve your own needs by building, you know, maybe not all your software, but specific software that you use with that are very kind of specific to your business. I can see some companies having enough resource and say, you know what, it's better to do that in house than trying to get another niche option somewhere else. Yeah, I'm so conflicted on this idea because, you know, we're a tech company and it's like obviously we have the ability to create internal tools fast, but it's like there's no way in hell I'm telling my engineers to focus on that because they're valuable out creating things for our customers, right? So it's kind of this

prioritization layer that I think is a bit tricky to wrap your head around. But at really big companies, if you're talking about really big items, this is important. I think vertical market software, small niche vertical market software is much more insulated from this risk. Because the veterinarian or the dentist has much Yes, CSU, it has much less of an incentive of doing such a thing, especially when the costs of it and the grand scale is much lower. At this point, you know, it's very TBD. I think people will have to fall in line with the best models.

I think the models are going to eat workflows. I think every tool has to kind of get in there and, and play by this new paradigm is kind of my general reading on it, but that doesn't destroy the business. Yeah, exactly. Because I think the reality is you'll see some businesses do it on their own, and you'll see some that will stick with it. I think that's the reality is just understanding what portion of each will go in each bucket.

I think that's the more difficult thing. But one company that comes to mind that I'm interested in hearing what you have to say, because we didn't put this on the note, but I was thinking about it, especially when I talked about large enterprises, Accenture. That is one I've thought about quite a bit and how they could potentially be disrupted with that. I mean, the market certainly things they'll be disrupted. It's down 40% over the last year, I think, roughly.

So it's just, that is one I've thought about how, like, how exactly they'll be affected with all of this. Well, there's there are massive risks to this type of business that they do in two areas that come to mind. Ascenture does a lot of things and they're very embedded into a lot of businesses and they have like, fuck, I don't know, like 400,000 employees or something crazy. Maybe even more actually. Maybe just explain to people who are not familiar with Accenture because it's been a while since we talked about them. Yeah, Accenture is a technology consulting firm. They're global.

They do a lot of acquisitions. They're consulting firm. So people will take them just like you would hire a consultant for something else, but specifically for strategy consulting around technology, implementations, outsourcing of IT. Yeah, that's how I saw. Yeah. They'll also do things like spin up like, oh, you need 300 people to do this kind of manual work. Like, oh, we have massive teams in India, Philippines, low labor areas where they can be,

you don't have to spin them up as employees and pay us big money to outsource all that work to them. So they do a lot of that. It's actually an Irish founded company. Anyways, all of those categories are at risk. I know. The outsourcing of people could be outsourced to robots, right? Yeah.

That's clear and obvious, especially data collection, manual stuff like that. And then number two, they provide an inherently useless, I'm kind of roasting in essentially. here, but they provide an inherently useless AI consulting practice when the technology changes every two months. Why the hell would you hire some people who have MBAs to teach you about, like to get you up to speed on AI when, and by the way, what they give you is outdated in a month and a half. Like inherently the business model is just broken right now in my opinion. So they're not going right. They're not going away anytime soon, but it's just, Is it a AI winner? No, I don't think it is.

Yeah. And when I was talking about companies outsourcing or, you know, reducing their IT teams, like in the last 15, 20 years, with the exception maybe of the last few years, Accenture was a big beneficiary of that. Like I saw it my old work. Like they reduced the IT team and guess who came in and did some IT work outsource? It was Accenture. So that's the one that came to mind. But sorry, I know I went a little bit on, from the left. That outsourcing model was brilliant and money and it worked. And like, yeah, I mean, if I look at what we're doing compared to our competitors, we're doing it with like 25 manual data collection analysts compared to like 9,000 that our competitor uses.

9,000 people compared to 25, right? Like, it's very, very different. And that's just specifically on the data collection process. So it's, of course, they do other things inside their business, but I'm talking about the data collection. Something quickly I wanted to talk about, before we talk about CSU. I wanted to also bring up something I don't see talked about is what about gross margins for technology companies in the AI age? Did we take traditional gross margins from software as a service companies in the kind of like 90% frame for granted, right? Yeah.

Like is this also something that the market's selling off that people are not regularly talking about, right? because this affects profitability. Quote from Figma, which has just been a train wreck since IPO. Oh my God. We added 140 net customers in Q3, up 88 and Q2, blah, blah, blah, blah. Okay.

Turning to blah blah, blah, blah, blah. Okay. Our Q3 gross profit was 237 million representing a gross margin of 86%. That's adjusted gaps a lot lower. As we brought Figma, make and other AI features into our customer base, the cost to serve these products and features greatly impact gross

margin. We believe this is an investment in driving both the ubiquity of our products is critical to the workflows of the future. Currently, we are not enforcing credit limits on our full seats for charging for consumption. When we do, we anticipate the offset of the incremental inference spend. Very insightful quote from the Figma CFO, right? I mean, to me, there's no doubt just based on you're giving companies just for the, like, just think about it right. Like, let's say the company has no intention of switching because the software is very sticky, like you mentioned, right?

That's probably the most ingrained thing. They can still use it as leverage to reduce their cost. Like if you have a large client, like they can definitely use it as leverage to try and reduce their cost, which at some point, this. software company will probably have to give in if they're a large enough customer, if they're threatened to leave for competitor, right? They don't, they don't even, it could be a bluff just enough to reduce the price and then you reduce the margins. Like, why would you not? I got asked about this on a podcast. Yeah. The other day.

There's always some bluff that procurement teams are using. Yeah, that's fair. Yeah. You know what I mean? So is this another one in the toolkit? Maybe, but I think they're always kind of playing chicken with their vendors on. renewals no matter what. But I feel like they have a little more ammunition now. That's just, yeah. It's another, it's another bullet in the chamber for sure. Another quote, Amy Hood on their Microsoft call a couple weeks ago, gross margin percentage was 68% down slightly year over year, primarily driven by continued investments in AI infrastructure and growing AI product usage. Quote, Amy Hood of Microsoft. Is this something we'll seem more of? I'm

I did a fiscal chart on the charting feature where I grabbed just like all the typical SaaS basket names plotted, adjusted and gap gross margins. And it wasn't statistical enough, I don't know, statistically significant. Is that the word? Yeah, that's it. To draw some conclusion here. So I thought maybe just the earnings transcripts here might be more indicative of what people are thinking. So I don't know if we're going to see more of this. Or it could be also,

like maybe if you give it a year or two, right, you'll start seeing that a bit more. It might be a bit too early too. That could be the other thing. But no, I think that's really interesting. Honestly, I think that is part of it. I think the market is just pricing in slightly, even if it's just slightly lower, just slightly lower margins going forward. I think that's definitely part of it. And it does make these traditional businesses that have like actual. tangible equipment and stuff like that, it does make them look a little more attractive, especially if they're less likely to be significantly disrupted by AI. Because in the last 10 years, 15 years, they weren't very attractive for a lot of investors

because you just couldn't get the same kind of margins. But now it might almost be like, you know, that extra safety that you need into those businesses. Sure, the margins won't be as high, but at least you know what kind of margins you're looking at. Yeah. Yep. Yep. Should we talk about CSU?

Yeah, people are probably obviously wanting me to talk about it. Yeah, let's do a little maybe five, ten minutes on CSU because we've been getting a lot of questions. It's been an epic drawdown from CSU for both shareholders. I'm epically broke. Yeah. For me, it's smaller portion of my portfolio. And to be honest, I bought it when it started, had the big drawdown already like 20, 25%.

but I think I'm another 20, 25% down since I got, I became a shareholder. So as of today, it is, this is just equities of the portfolio we track where I have, you know, my individual positions. So, you know, if you include all the other stuff, it's, it's always been less than this, but it's gone, it's gone from a 50, sorry, a 40% constellation specific, more if you include Topicus from 40 to 20, right? 21.3%. So there's the drawdown. It's down another 6.8% today. Ben had the best like gift. It's like, it's like this for people listening. It's just it was this huge, huge drawdown. Then it tiny up when it had like three, four percent up one day. And it's like screaming that it's up. Yeah. Yeah. Yeah. You're like celebrating with the champagne bottle while you finish like in ninth place at the race, right?

Like, you know, like people are up on the podium and you're just wearing it right now. And so let's talk specifically about Constellation. There's a, oh, Matt, he just joined the body. He joined early. That's okay, dad. You could have joined. He joined on time. I think it's us taking a little along, but that's okay.

We're finished. Yeah, that's all right. When it comes to CSU, right, CSU is fundamentally a serial acquirer of low growth software companies. This has been the case for a long time. They tracked the organic growth rate. It's not the same organic growth rates you're going to see from a service now, a Palantir, you know, kind of these businesses.

They are buying small, usually very small. You don't have to go to corporate for, I think, anything less than 50 million. And so most of them are under that and they're all being done by the operating groups specifically. You know, they'll bring the big dogs when you're going to do a bigger acquisition, which I'm hoping they do more of, by the way. So it's very decentralized, autonomous way to run the business. The risks for constellation have always been greater than this new ones coming out about AI, in my opinion. The risks for constellation have always been greater.

are copycats competing for deals. There's a lot of copycats. Mark stopped doing his shareholder letters because of the copycats. They're popping up all the time. I've sent you guys some. Some of them have become very good and very sophisticated. They're all around the world now competing for deals. Capital allocation was pretty soft in 2025.

Mark Leonard stepped down. I don't know what's happening with his health. It's very opaque. There hasn't been much. this kind of AI risks call and then Mark steps down like, I don't know, two, three business days later. So there is a long list of reasons that the stock compressed on the multiple. This AI one is now just gas on the fire of what was starting of a drawdown because of these concerns because all of software is getting wrecked. Like look at the IGV index. So,

buying Constellation is a bet on niche small vertical market software companies and not just those companies, it's a bet on them to be able to acquire more of them. That is the investment. It always has been the investment and it is buying things with high returns on capital. Are they buying the best businesses on earth? Hell no. Hell no, dude. These things, are pretty clunky a lot of times. You can see some screenshots of some of the soft ones. They're old. Yeah, they're old.

They're usually a founder who's willing to exit, but it's a home, it's a permanent home for the business. It is a permanent owner, a perpetual owner of the businesses, as Mark would say, not like private equity, which spins them out and sells them out.

So that's attractive for a lot of founders. Where should I go with this? What am I doing personally? absolutely nothing. I have not sold a share. I haven't thought about selling a share. I have certainly thought about buying more shares many, many times. Have I bought more shares? No, it has nothing to do with the valuation today. It has to do with, I don't add things, add to positions that are that larger positions. They get there from me not trimming them. Is it the most rational way to run a portfolio? No, but is it the way that I run my portfolio? Yes, because when you find a big,

monster winner, don't freaking sell them. Right? And so that's where we are today, man. I think some of the risks they are very insulated from. I think some of them are somewhat real. I think what matters more for this business is how capital allocation trends over the next six months. That's what I'm going to be really, really focusing on. And let's see a couple quarterly results come out.

Yeah, I think that's going to see some. I think that's going to provide more clarity. I mean, I don't have too much to add. I know the business decently well, not as well as you and it's a small position for me. And I, again, I took it on the way down, but clearly my timing was too early on that. So that was back in the fall. So I should wait it a little, I guess in hindsight. But yeah, I think we'll have to see.

I think you're right. It'll probably be some disruption. But, you know, if 2% of what they have is disrupted versus 25%, that's a very different outcome, right? And it's, I think, hard to know right now. So I think I'll just, yeah, we'll see, probably give it a year how things go. We'll probably get a whole lot more clarity in the past year, not only on AI disruption, but also Mark Leonard, like, we'll probably get more clarity in the next year. I think that's going to be something big in play right there. As for some quick numbers, I'm just going to pull up some quick numbers, the maintenance and other recurring FX adjusted. Okay,

So the maintenance and other occurrings, by far the largest segment of the business, kind of an opaque side, but it's all of the recurring software revenue, right, other than the on-prem licenses stuff. So it's by far the biggest, the most important segment of the business. It does today on a trailing 12 months, about $8.3 billion in sales. And it's grown anywhere from, on average, it grows 25%. the last five years are 24, 28, 30, 28, 17, 16, 1726. So you get an idea. This is not a slow growth name. It's definitely buying a lot of companies. And organically, it grows around 6% a year.

So organically, that means that it's not growing that much. That's a lot of pricing power or just inflationary CPI increases. It's not significant. But it's not shrinking, right? They do about call from rounding up a bit here two billion in free cash flow available to shareholders it's actually but 1.8 and now it trades at is that that's in US dollars right yeah so it's trading trading like 20 times right forward forward just gap earnings is 15 times now is it the is it the best ratio to use? Absolutely not, but it gives you an idea, right? This is one last thing.

I'm just going to check out operating. Forward, EV to EBIT is 18 times. So you're now in a ballpark where you're not paying crazy prices. It's on a huge drawdown. It's trading at historical lows. Do you think they can keep doing what they've been doing, which is rolling these things up? Yes, then it's probably good value today.

But just remember, anytime you buy a stock just because it's gone down a lot doesn't mean you can't go down more. No, exactly. That's it, right? I think you know me. I think in probabilities and I think for me, it just I'll keep a close eye in the next year. I think we'll just get a whole lot more clarity and then I'll decide what I do with my position. It's not a big position. But I have no reason to believe still with the information yet that it shouldn't perform well.

So that's kind of, that's where I stand. But anything else when before we wrap this up? No, no, good to be back and, you know, people who are facing this drawdown, it's weird, right? It's like things look as bullish as ever in some categories and your stocks are going down. It's the game we sign up for. Exactly. That's it. Yeah. And I think maybe the best way to ram this up is just I posted that on Twitter, but just note how you react. When you're facing a big drawdown in your portfolio, just take note how you react.

Do you panic? Do you sell? Do you take a moment? Do you say, you know what, I'll wait a few more quarters, kind of get some more data there. I think that's really important because if you, no matter how you react, just make sure you get some learnings from that. Maybe you react the perfect way, or maybe you didn't react as you should. And that means that next time maybe you need to have a bit more balance or a little bit smaller of a position to avoid that kind of reaction. But I think that's probably the best tip I can give people right now. Yep, yeah, well said. It's a tough game, but at the end of the day, if you're listening to this podcast, chances are you manage a portfolio, chances are you're saving some money, chances are you do this for yourself or professionally putting money away into owning assets. That is so key. I've seen a, I don't want to get too sentimental here, but I've seen a gigantic shift. and people's belief in the system that we've built is just off if they don't own assets.

And how could it be on? You have benefited zero from the system. Assets prices are volatile, but the fact that you own assets is really, really important. That's how you get the benefits from capitalism. And if you don't own assets, that the amount we're printing, you're going to get smoked, right? You better have a high demand skill set if you don't own assets. That's all I can say, yeah.

Exactly. So own assets, especially if we're unsure about what's going to happen in the labor market over the next 15 years with AI, own assets. I really, I don't know how you think about this. I think there needs to be seriously done something done about how, regular people cannot invest in the AI companies of tomorrow right now because they're all being pumped by late stage private valuations by late stage venture capital and the dot com era companies we could all invest in in the public market why can't I easily buy shares of anthropic today right

you know I think it's fundamentally bad for people if I can't participate in the growth of those assets in this next era I think it's really really bad I don't know what can be done about this, but... I think the market will fix itself. I think there's been a lot of froth there, and I think, I personally think that there's going to be opportunities to invest in those companies when they need capital and there's been a bit of a shakeout. That's just my personal belief, I could be wrong, but I understand where you're coming

from. I understand that, yes, there is a lot of opportunities. If they keep getting marked up, if they keep getting marked up, they keep... You're saying, I guess, the market takes care of itself if they don't keep getting Markup. However, now they've gone public at $2 trillion, right? Patience. That's...

But you know what I mean? I know what you mean. Amazon didn't go public at $2 trillion, right? I know where you're coming from. I think it will resolve itself, though. I feel like this... I hope so. I hope so.

I hope so. Thanks a good point to end it, because I have to get ready for recording with Dan. Braden was great to have you back on the podcast. Yes, sir. provide your perspective. I think it was definitely good, a fresh one and kind of insider knowledge. I think that really help. Hope you. Everyone liked the podcast. If you want to see what Braden does or doesn't do with his portfolio, you can go to join tcii.com. Dan and I also share our monthly updates. So that'll be coming up in a few weeks now. So you'll be able to see that. We appreciate the support. Make sure you

follow us on YouTube. Dan and I are looking to do in the next week or two, a YouTube live. So we're looking to do that. We're wanting to do it a bit earlier, but with my dog passing, just the timing wasn't great. But make sure you join that. We're going to be hitting 2K subscribers soon, so kind of getting that going, posting more and more content. So I appreciate all the support. Thanks for coming on again, Braden, and I'm sure we'll do that soon. Yes, sir. Thank care. Bye-bye. The Canadian Investor Podcast should not be construed as investment or financial advice. The host and guests featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.