Greystone Capital Q2, 2024
Top Five Positions
As of the end of Q2, our top five holdings consisted of Sylogist, Bel Fuse, APi Group, Medical
Facilities Corp, and Limbach Holdings. Currency Exchange International sits right outside of__________________________________________________________________________________
Greystone Capital Management | adam@greystonevalue.com | www.greystonevalue.com
the top five, with our top seven positions representing nearly 80% of client assets. I will make
adjustments as necessary, but regardless of where the economy and public equity markets go
from here, I remain optimistic about business results through the remainder of the year and
moving forward.
Sylogist (SYZLF)
It’s been years since our first purchase of Sylogist shares, and I continue to admire the intrinsic
qualities of the business. Sylogist possesses many of the investment attributes I crave which
include a leading position in their industry, durable and counter-cyclical characteristics, strong
growth prospects, and an impressive managerial record of operating and capital allocation. I
remain confident that Sylogist’s attractive economics and long runway for growth will produce
improved earnings power and shareholder value over time.
The core business for Sylogist, which consists of selling non-profit, government and education
related software, continues to fire on all cylinders. Customer relationships are strengthening,
SaaS revenue is growing, and Bill Wood and team are focused on strengthening the company’s
competitive advantage within their end markets.
Sylogist began to earn our trust years ago, taking short-term actions (viewed as negatives) to
make the business more durable and strengthen customer relationships over the long term. A
hefty dividend was cut, and margins were temporarily lowered to make value-accretive growth
investments, which are paying off today. Even amid aggressive investment spending, Sylogist’s
business remains highly cash generative.
As SaaS revenues continue to grow, especially with the help of channel partners, the
Professional Services segment of the business will naturally atrophy, while margins and cash
flow will increase over time. I estimate that within 12-18 months, we should see a significant
inflection in SaaS revenue growth along with the potential margin benefits stemming from the
positive mix shift, at which point we will be the owners of a recurring revenue, high margin,
cash generative SaaS business with a durable competitive position, counter cyclical aspects,
and a cheap relative and absolute valuation.
With further contributions yet to materialize via the Gov and Ed segments (which are wide open
for the taking), revenues could accelerate even further than what I anticipate. It won’t happen
overnight, but Sylogist is on its way to CAD $100mm in revenues and likely 30% EBITDA
margins, measured against an EV of less than CAD $250mm. We will continue to benefit from
increases in intrinsic value over time, assuming the business isn’t acquired beforehand.