TIVP064: Kelly Partners Group: The Constellation Software of Accounting? w/ Daniel Mahncke & Shawn O’Malley

17:35Shawn O’Malley:Most of the time, it's actually someone from the inside of the acquired business who takes over. So let's imagine there are junior employees who know the business well and also have a trusted relationship with the clients and are also willing to take over the practice, but they lack the capital to buy out the founder or the CEO. And then KPG kind of enters the picture, buys the controlling stake of the company, solves the payout for the existing partner, and then creates a structure where the next generation can basically buy into the operating business over time and become the leader of it. And that has been the process in some of the acquisitions over the last couple of years.

18:10Shawn O’Malley:And, you know, that's a great way to source new investment opportunities for KPG. And again, some founders or CEOs, they don't even want to leave immediately. They don't want to go into retirement as soon as they sell to Kelly Partners, because as you just said, part of the idea is also to become a partner. And, you know, if you sell into KPG with the idea of becoming a partner and you immediately retire, that's not really what KPG is looking for. So most of them, you know, they just want to continue working, but not for 60 hours a week, right? which is something that KPG can help them with too.

18:39Daniel Mahncke:You pointed this out before. Whenever I hear about tax or accounting firms, it just seems like they're always working at 100 % capacity and maybe more so and just still cannot meet demand. And it's actually an issue I've brushed up against a few times personally trying to get tax help. But that fact alone makes me quite bullish on KPG's overall growth outlook. And so my question for you is, where do you think are the biggest growth drivers going forward?

19:04Shawn O’Malley:Yeah, we actually talked a bit before this call about our own tech stories. So there's certainly a problem finding the right people for your taxes. And I actually spoke to one of our community members recently, whose good friend works as a forensic accountant in San Francisco. And he has a successful firm. He earns seven figures. And as you just said, doesn't even come close to meeting demand. And he doesn't want to retire yet, but he does want to reduce his workload. And this is one of the businesses that in theory would be perfect for KPG. It's highly profitable. The founder wants to slow down a bit.

19:35Shawn O’Malley:And there's so much amount left that you could technically expand the business with KPG's resources and make it bigger and more profitable almost overnight after joining the structure. So this example shows, I would say, two tailwinds. First, a founder who is slowly stepping down and is looking for a way out and a highly profitable business that can be expanded as soon as KPG joins as a partner. I would say it's not just, you know, cherry picking an example here. In KPG's home market, Australia, almost 60 % of accounting business owners who plan to retire are doing so in less than five years. So that's about 20 ,000 businesses left with a potential succession problem.

20:13Shawn O’Malley:And if you would add the US and the UK, the two markets that KPG is expanding into, that number actually goes up to almost 90 ,000 businesses. So point being, there seems to be no shortage of acquisition targets for KPG.

20:26Daniel Mahncke:Well, that makes sense. How do you see the industry evolving now? I mean, we have to talk about AI in every episode, it feels like, so you won't be surprised when I bring it up here. But of course, the question for me is whether this market is generally going to be growing or declining in the future because of the impact of AI. And right now, yes, demand is so high that practitioners can't meet it. But taxes and accounting seem to very much be areas where LLMs are already pretty good and getting better quickly. So is this something that you expect to change? I mean, will in five years time, a personalized AI agent on your computer file all your taxes for you and just have all your financial information and do it automatically?

21:06Shawn O’Malley:Yeah, I would say that's first answer where the market not accounting for the AI impact is generally growing or declining. So where it's going. You might have heard about the recent headlines in the Netherlands where the government has now implemented a 36 % tax on unrealized gains, which is a scandal if you ask me, but I wouldn't be surprised at the same time if we see more of this in other European countries. The point being, on average, I expect taxes to go up and to get more complex. And you know, it's what we've seen over the last few decades. And I've heard few people who believe this will change.

21:39Shawn O’Malley:Debt for countries is going up and you will need a way to finance that. And higher taxes are one of the first that come to mind. And if you add to that, that in all countries KPG operates in, there's actually a shrinking base of taxpayers simply due to demographics. That's just another reason to increase taxes over time for the people who are still working. So basically for the middle class of those countries. And Brett Kelly actually mentioned something that immediately reminded me of Mark Leonard. While Brett was an expert accountant before starting KPG and worked in the field for over 10 years, he's read thousands of books and studied hundreds of businesses, but also industries.

22:13Shawn O’Malley:So he could have settled for all kinds of industries to establish a serial acquiring business in, but he settled for taxes. And then you ask why? Well, in his words, there are two things that are certain, death and taxes. And it's kind of similar to the idea that Mark Leonard had, which is basically, and I'm convinced Mark Leonard is simply an exceptional investor, which means he would have been successful in all kinds of fields, but he chose VMS because he believes that's a highly predictable business that will exist for quote unquote forever. And in many ways, taxes are similar, but even more durable.

22:46Shawn O’Malley:And you know this, just an important distinction that I have to make. I think we'll come back to that later. And I think that's like probably the one thing that gives me pause about KPG's M &A pipeline and therefore also their way to grow. But staying with taxes just for a second here. Since the 1950s, the tax law volume has actually grown by 14 times. And while the UK still performs quite well in terms of how easy it is to file your taxes, which kind of came as a surprise to me after also talking to some UK members in our community who I think wouldn't agree with this statistic, Australia and the US are even further down the list.

23:19Shawn O’Malley:So holding the 25th and the 36th place respectively. And by the way, I just looked it up because I was interested in it. I'm not surprised to see Germany even further down the list in place 48. And when taxes go up and become more complex, that's obviously bullish for tax advisors and accountants. And it's probably the biggest tailwind in today's story. We just got to figure out, and that's kind of what you alluded to, whether firms like KPG will be the main beneficiaries of that or whether AI will take most of the workload. And some might remember my episode on S &P Global a while ago. And one of the reasons their businesses are relatively shielded from AI, at least, you know, in my perspective, besides the data mode, is the regulatory environment.

24:00Shawn O’Malley:In the age of AI, you want to own companies that operate in markets where regulation is complex. Personally, I ask ChatGPT or Gemini questions about my tech situation all the time. But in the end, I do have a tech advisor who handles everything. And my tech situation isn't complex, as we talked about before. Actually, ChatGPT could handle pretty much everything that I need. However, your tax advisor is the one actually talking to the tax authorities. And while he doesn't take on full responsibility for everything, there are still many things for which you just need an official tax advisor. And, you know, S &P Global, that's what I said in this episode, has kind of the stamp of approval on ratings.

24:37Shawn O’Malley:So ChatGPT just can't provide the same. And people like me have a tax advisor who more or less gives his stamp of approval for my taxes. As you know, my co-host Sean and I are obsessed with analyzing companies. But you probably have noticed from personal experience that talking stocks is not everyone's favorite hobby. And I'm reminded of that every time I bring up investing at dinner or when I'm out with friends. They tolerate it for about 10 minutes. But then I get this look. The one that says, we get it, you love stocks, but this is not the place. So Sean and I thought, why not build that place?

25:13Shawn O’Malley:And we did it. It's called the Intrinsic Value Community. Our members range from pilots and firefighters to lawyers and engineers, but also hedge fund managers, actual rocket scientists and CEOs. And despite those different backgrounds, what connects all of us is the passion for value investing and continuous learning. And each week we host live calls, covering everything from vetting the group's best stock pitches to analyzing portfolios, investing case studies and conversations with expert guest speakers who are either prominent portfolio managers, CEOs or authors. And the best thing is that if you ever miss a call, we have a library of recordings for watching back every single call we've ever hosted.

25:53Shawn O’Malley:And if you prefer reading over watching, well, then we have dedicated spaces in the community to share write-ups, discuss investing ideas or just your thoughts on the general market. And multiple times a year, we bring the community from the virtual world into the real one, including private dinners in Omaha for Berkshire weekend, and meetups in New York City to explore, hang out, and most importantly, talk stocks. Our last cohort of members brought together 20 incredibly thoughtful people, some of the sharpest investors that Sean and I have ever met. And if you want the chance to learn alongside people like that, you should join our waitlist at theinvestorspodcast.com slash intrinsic value community.

26:33Shawn O’Malley:That's theinvestorspodcast.com slash intrinsic value community.

26:40Daniel Mahncke:Oh, it makes sense. I'm still looking at that chart, actually. It says that Japan is the hardest country to pay taxes in. So I guess we should both be fortunate that we're not there. But yeah, you know, this past year, I went through the process of setting up an LLC, an S Corp, and those aren't like hugely complicated things to do by any means. But as I started working with ChatGBT to try and do it myself, I just realized that I'm not the type of person who wants to take on the risk and uncertainty that you might be doing things wrong or not fully optimally because you don't know what you don't know, honestly.

27:13Daniel Mahncke:And you're also creating a lot of extra work for yourself when there's the possibility to just pay an expert a fair price and they'll tell you, yeah, you should do this. Don't do this. Pretty straightforward. I'll handle it for you. That peace of mind is still valuable in the age of AI. I went into this year thinking that I could do it all on my own with AI. And honestly, I came out happier than ever to pay for professional help than I would have in the past. In the past, it used to kind of annoy me that I had to pay for tax prep help. And now I'm like, send me that invoice. I'm more than happy to pay, you know, as long as you have a good relationship with your accountant.

27:50Daniel Mahncke:And to me, it seems like a pretty worthwhile expense. And I think I probably, if I really wanted to, of course, anything's possible. I'm sure I could have figured it out with AI. And I know for a fact there are people who are more resourceful than me and who are more motivated than me to try and figure it out for themselves. But still, I want to talk about these risks that AI poses and how KPG might benefit from it. Because the number of people who are able to use AI to figure out their taxes, maybe not me, is definitely growing. And you have to see that as some sort of challenge to the business.

28:25Shawn O’Malley:I think you point out one of the most underappreciated facts about the entire AI discussion, which is it's possible to do things with AI yourself. But most of the time, it just ends up not being more efficient than just hiring an expert with enough experience and expertise to help you with that problem effectively and hopefully for the right price. And that has been true for almost all technical innovations in the last few decades. And it's why so often you say that certain industries will die, but in the end, they only become even more important. And it's something that we talked about, for example, in the Constellation episode.

28:58Shawn O’Malley:But anyway, I mean, the two main bear cases are the clients are handling more tasks by themselves using LLMs. And, you know, that a good chunk of the work that accountants are doing will be commoditized. You know, think of stuff like simple bookkeeping, standardized reports and all such things, basically what my tax accountant would be doing for me. And that's a good chunk of build hours by accounting firms. If this is commoditized, prices on those build hours would fall and margins would obviously compress. And I think that's a risk personally, you know, that Kelly partners can shield against relatively easily.

29:31Shawn O’Malley:I mean, the main question is, which customer are you serving? If I'm your customer, your job is certainly in danger. Again, my taxes are so easy to fire that, you know, with some more improvement on the AI side, I could fire them myself and feel comfortable doing so, especially when you think about AI agents that are even more hands-on than, you know, your usual LLMs. But if your client base consists of these small and medium-sized enterprises, so-called SMEs, well, then things just get much more difficult. I mean, there's a reason why 90 % of SMEs use professional help. And at that point, the true value add comes from the advisory service, not just filings and reports.

30:06Shawn O’Malley:And things like business structures, trust, anti-decisions, those kind of things are where the actual value is lying. And while, you know, this can be technically done by AI too, we're now entering the territory where the stamp of approval that I talked about earlier becomes way more important. When you set up a complex corporate structure to save on taxes, then suddenly the tax office calls to get a detailed explanation of what's going on. I know I would much rather call my tax advisor than ask JGPT to explain it to me so I can go back to the tax office. And this stuff is just highly personalized and sensitive too.

30:41Shawn O’Malley:So that doesn't necessarily matter for you and me if we file our own taxes. But if you hire a tax office, they can't just use ChatGPT, Gemini, or Claude and feed your data into those LLMs. It's kind of similar to what you talked about with Doximity and the HIPAA AI models, you know, that increases the chance for tax officers to apply their own AI tools, which gives them the option to work more efficiently and shield themselves from these horizontal AI competitors like the big techs that we always talk about. And you know, technically, techs advisories or accountants don't have a huge mode, but once you trust your techs accountant and you feel like you pay a good price and he's actually helping you, you tend to stay with him.

31:17Shawn O’Malley:And that's something that we've seen over decades now.

31:20Daniel Mahncke:So it sounds like you agree with KPG's opinion that AI will mostly handle these routine compliance tasks and calculations while the advisory part of the business becomes more important. And that's also where the margin is, right? I mean, even if build hours from routine tasks are getting squeezed or priced lower, the strategy and advisory part of the business is where the pricing power is. And, you know, we're talking a lot about how AI will take jobs and there's all these bear cases out there, but this is sort of the opposite of that. There's a really compelling argument to make that by leveraging AI, tax professionals will have significantly more time to actually advise their customers.

31:59Daniel Mahncke:And considering that demand does outpace supply so significantly in terms of the number of people who need help with better optimizing their taxes, this does seem like it could translate into a significant business expansion opportunity by onboarding more clients of people who know they need tax help, but never felt motivated to do it or couldn't find the right accountant or helping people realize that they need tax help who never understood. I mean, there's probably a lot of customer acquisition that they can do as they have more time to focus on advisory instead of the more routine stuff.

32:37Shawn O’Malley:I would say it definitely makes sense to me how KPG can balance some of those lost build hours with higher margin advisory services. And yes, it also makes sense to me why SMEs would not choose an AI agent over professional tech experts, at least not public ones. However, I'm also humble enough to admit, I don't know. I don't know how things will play out. I think the improvements in AI are still incredible. And just when you think it has stopped, Claude comes around the corner and just overshadows ChatGPT and Gemini completely. We just started using Claude here and TIP and we just got to say, well, we were blown away by how much better these models are compared to JetGPT or Gemini.

33:18Shawn O’Malley:So this is kind of making you think about how far this can still go. But there are also some potential positive impacts of AI for businesses like KPG. On the acquisition engine, for example, Brad Kelly expects M &A to be possible at even lower prices right now and probably also in the next, let's say, four to five years. as PE firms, so private equity firms, that bought many accounting and tax businesses over the last few years, and are selling them amid the overall market sell-off because they fear they can't hit their short-term targets anymore and basically want to get their money out to invest it elsewhere.

33:50Shawn O’Malley:So for example, what we also see in public markets, taking your money out of, let's say, software and putting it into semiconductors, memory chips, basically all of those sectors that benefit from the AI trade. And that offers Kelly Partners an opportunity to take over some of those businesses at even better prices than they have done so in the past. And the same goes for founders of such businesses. I would say in the grand scheme of things, we often forget that all of these are little businesses run by individuals. When you're in your 50s or 60s, you might no longer be on the leading edge of tech.

34:22Shawn O’Malley:I mean, some of those founders might rather sell their companies since they fear they can't compete in a world of AI. I mean, you'll laugh, but my grandfather owned a plumbing business many decades ago and it was performing really well. But then computers came. Yep, that's the time we're talking about here. And he just didn't want to use them. So he ended up retiring before he would kill the business by insisting on not using computers. And I tell that story just to let listeners know that these things exist. Small factors that, you know, no one talks about in finance class or in big corporations.

34:54Shawn O’Malley:And anyway, I think if you believe Brett Kelly, the acquisition engine will benefit a lot from the AI shift.

35:00Daniel Mahncke:well somebody who lives on a computer for their work i think he made the right decision i get tired of staring at the screen but yeah no it's funny i mean i think he's right but you know talking about brett kelly but for all the doom and gloom i haven't really seen any ceos who are publicly saying that they'll be negatively impacted by ai everybody at least has some kind of story of how they will benefit and we'll just have to wait and see how true that ends up being But obviously not everybody can be a winner. But the age point that you made is also interesting to me, since Brett actually makes the argument that KPG's age structure will help them adjust to new developments better.

35:42Daniel Mahncke:Apparently 75 % of the company is in the 25 to 49 range, and more than half the company is 34 or younger.

35:50Shawn O’Malley:Yeah, that will certainly help in integrating AI and adapting changes in how people work. Again, this might sound like a weak point to many, but changing how you work after decades in the business is just not an easy thing to do, right? And to compare KPG's average age to the industry, I mean, the average age of partnership firms in the accounting and tax industry is typically around 60. And to go full circle, since these are the companies, you know, eventually acquired by KPG, you can also imagine how the margin expansion potential and the efficiency gains from acquisitions in the next five to 10 years could be even better than in the past, considering that KPG will take advantage of all the automation and AI and a lot of firms that it will acquire will not have done the same.

36:33Shawn O’Malley:But as you said, and I think that's quite a good point, I haven't yet heard of a CEO who said AI will kill them. I guess Mark Leonard was probably the only CEO who I heard publicly saying that he doesn't know whether this will be something that can actually disrupt the business. All other CEOs are very confident in telling you that they will be the beneficiaries and that AI will increase their margins and no business will be touched by AI.

36:57Daniel Mahncke:So just talk about the companies that they like to acquire and besides the regions that they look in and the fact that KPG often acquires companies with succession problems, what are the more detailed acquisition criteria they look for? You know, what other things do they need to check the box on to make a deal?

37:17Shawn O’Malley:So KPG applies five filters when assessing potential partnerships. And the first one is about the mission, the values and the vision. And I think this always sounds a bit wonky and it's hard to pinpoint what exactly that means. But you know, Brett Kelly is a very smart man and highly motivated man. And I think that's also what he expects from his partner. So he wouldn't want to partner with someone who is in it only for the payout or to reduce the risk of his operation. He wants people who buy into the mission of KPG, which is basically growing accounting businesses, especially in Australia, but also just helping these small and medium companies by giving them the best service possible.

37:53Shawn O’Malley:And I think that also aligns with the second filter, which is the acquired partners should want to be part of the KPG team.

38:01Daniel Mahncke:Honestly, it reminds me a lot of TIP, which is the acronym for our company that we work for, the Investors Podcast. We're a small company of maybe 20 or so people, but it's a special place because I think we all take a lot of ownership and pride over our work. and as a company, we're also big fans of the author Jim Collins, who talks a lot about how the best businesses have the right people on the bus. So I know you know that, Daniel, but that means is basically it doesn't matter where the bus is going, but with the right people on the bus, things will work out. And I would probably augment that to say that you don't just need really high quality people who understand business to be on the bus, but you also need to incentivize them correctly.

38:45Daniel Mahncke:That's equally important. If your employees' KPIs to reduce R &D as a percentage of revenue, rather than pushing them to think about how technology can be used to grow the top line of the business, you might actually just be encouraging them to slash the company's R &D budget, damaging the business over time by underinvesting in technology. And so point being, you need great people and you need them thinking about what's best for the company long term in terms of shareholder value creation. So the CEO of our company, Sig Brodersen, he often talks about wanting to find people who are on the same journey too.

39:21Daniel Mahncke:And it's like, okay, what does that mean? Well, to me, that's not just about finding great talent and incentivizing them properly, but it also means getting the timing right. You know, if you had just had a baby and are starting a family, it's probably not the right time to take on a ton of financial risk and start a company. I mean, people do it, but it's, you know, for most people, it's probably not the thing they're most interested in doing at that time. with the idea being there are moments in time when the stars align and an opportunity is a win-win-win and there are times where with the same person maybe even going after the same opportunity things just don't work out and it sounds very vague um but i relate to it on a personal level like it makes a lot of sense to me of you know there's just these random moments in life where you could have gone either direction and you know it works out for better or worse and so there are moments when it just makes sense for people's journeys to sync up.

40:12Daniel Mahncke:But most of the time, the timing is probably not right. That's kind of the mindset you have to have. And at least that's the mindset we have here at TIP of we're very, very selective about bringing new people in. And then once you're in, you're really part of the family. And to some extent, it's because we're looking for high quality people. And to some extent, it's wanting to make sure we can bring them into a situation where the incentives are aligned. But also it's looking for, hey, are you the right person in the right place at the right time? Do all these things line up for this really to make sense for us to work together?

40:43Daniel Mahncke:And if it doesn't, we'll keep the door open to working together down the road. And that was like a super rambling way to say, we do try to live by these philosophies ourselves. And we are, in a sense, always hiring. Then we're always looking for people who can bring that special talent and trying to assess where they are in their journey to see if it syncs up with where we're at as a company.

41:07Shawn O’Malley:I certainly have found a new appreciation for the right cultural fit after joining TIP. Before that, I likely wouldn't have been very skeptical about culture and talking so much about the perfect fit and the right time because I felt like, you know, if there's a business that's perfectly run, you should buy that business if you're KPG. But especially considering how close you work together with this 51%, 49 % stake, You actually have to find the right people in place. And also, if you think about decentralizing the business later on, you want the right people at the right spot to make decisions for getting your business ahead.

41:41Shawn O’Malley:And something that I can't emphasize enough is the fact that clients in the tax and accounting industry are very loyal to their personal advisor. So technically, KPG could acquire a company, then the founder leaves, opens up another shop, and then reaches out to old clients again. I'm sure there are ways to prevent this through certain contracts. But as you know, I mean, bad actors don't really care about that. And in KPG's position, you want to prevent this stuff basically from the get go. So trust is just a very important factor for the business. So they want to be a permanent home for their partners and their businesses.

42:14Shawn O’Malley:And that includes acquiring the companies with as little disruption as possible. So the 5149 structure is also implemented here because the client relationships matter so much in the business. for Constellation software, I don't know, Transdime, for example, this structure wouldn't have made as much sense as it does for Kelly Partners. And the third layer, you know, in the process is that KPG only wants to buy companies where it can own all of the offices. In accounting, there are many of these so-called networks that basically look big on paper, but they are in reality just independent firms kind of sharing the same name or maybe a loose service agreement.

42:49Shawn O’Malley:It's sort of an affiliate model. And in that case, KPG just couldn't run their usual playbook. The whole model depends on plugging firms into these centralized systems. So we're talking about the tax act. We're talking about the reporting, the back office stuff, all the processes and the brand standards. And, you know, if half of the offices are independent affiliates, you can't force them to adopt the KPG standards. And if they go out on their own, but remain affiliated with KPG, to some extent, that also adds significant risk.

43:17Daniel Mahncke:And looking at the graphics on screen, it looks like the last two filters are what we already discussed. And the core business must be accounting and tax services for small to medium enterprises. And then the acquired company should have around$2 to$10 million in revenue.

43:33Shawn O’Malley:Yeah, I think the only thing I would emphasize again is how important it is that these are SMEs, so these small and medium-sized businesses. Because again, earlier I talked about how my personal taxes are relatively easy to handle with the AI and maybe an agent, but the advisory part is really where you have, you know, customer lock-in comments you play. And obviously, KAPG knows that, and that's why they focus so much on these small and medium enterprises. And this isn't new either. I mean, there have been hundreds of software solutions for taxes and accounting in the last 20 years that have tested tax advisory modes or at least competitive advantages before.

44:07Shawn O’Malley:And it's kind of similar to how Constellation software was tested by the SaaS model and also didn't get disrupted. But to emphasize again, We decided against owning Constellation because we don't underestimate the threat of AI. Programmatic acquirers do not have a natural mode like, I don't know, companies like Airbnb, Uber, or DoorDash. They succeed if they have the right structure, if they have the right incentive system, and if they are operationally better than the other companies trying to do the same. And AI is now testing at least this part of operational superiority. And it is incredibly difficult to figure out exactly how it will impact businesses.

44:42Shawn O’Malley:and the ones that survive are most likely those that are heavily regulated. Taxes and accounting are certainly sectors where that's the case. And I do think that gives me some peace of mind thinking about the future for the industry.

44:56Daniel Mahncke:Whenever we talk about acquirers, it's not as straightforward to talk about competitors. And when we talk about Airbnb, it's relatively obvious that booking.com is a direct competitor. And for Netflix, there's a bunch of companies you can mention, Disney +, Amazon Prime. You could also make the argument that really any medium, any screen that attracts people away from Netflix is a competitor. Any time not spent on Netflix, in theory, is a competitive challenge to Netflix. But in this case, I guess you could imagine maybe the big four, like Deloitte, PwC, EY, and KPMG. Even if they don't compete in the same sense of acquiring other companies, they do compete on attracting talent and clients.

45:38Daniel Mahncke:but are there any companies that actually follow the same playbook as kpg that are you know literally a direct competitor in the purest sense on the public side i would say the closest competitor

45:52Shawn O’Malley:is probably cbis i mean brad also talks about cbis as one of the closest comparisons for kpg as a company and it's u.s focused and also based on acquisitions in the financial services sector but I don't consider them to be, you know, as much of a competitor as for example, booking is to Airbnb because CBIS has so many other different units as well. So they are having, you know, this benefits and insurance business, which is a huge part of it. So it's such a large market too, that I would say there's space for KPGs or Kelly Partners, for CBIS and many other companies to exist and to compound. And actually when it's the case that they would actually hunt for the same companies, I think that's a good sign because it would be showing you that both companies compounded wonderfully.

46:34Shawn O’Malley:And that's something that I would take as a shareholder, especially looking out at all these potential targets that are in the market. I don't see how they will hunt for the same companies in, let's say, the next 5, 10, even 15 years. More serious competition for KPG, at least in my mind, are private equity companies or just private businesses doing M &A in the space. So in the past, PE drove up prices by entering the market and basically bidding up the price that they are willing to pay for companies. And I say in the past because the AI sell-off had one positive effect on companies like Constellation or also Kelly Partners, and that's less private equity competition.

47:10Shawn O’Malley:Private equity, you know, they look for companies that they don't hold forever, as KPG, for example, does. They buy them to sell them for more money. That's basically what they do. So when public comparables fall and strategic buyers get more cautious, the obvious exit at a higher multiple than what you paid becomes just harder to underwrite. And if the exit multiple is uncertain, private equity tends to get out of the space because suddenly you just can't justify paying the old entry prices. And then the second problem for BE companies is actually the leverage that they use to achieve the return hurdles.

47:43Shawn O’Malley:And this is a higher risk approach. So, you know, when the outcome is less certain, this approach is even more risky than usual. And most of the time they tend to get into different spaces. So, for example, as I mentioned before, they might look for opportunities in the AI space rather than KPGs, accounting businesses, or maybe software if you talk about VMS.

48:01Daniel Mahncke:There's also a second order effect where PE can end up creating sellers. If a PE-backed accounting firm was built on the assumption of an easy exit, a valuation reset can lead to stalled sales processes, recapitalization discussions, or pressure to de-risk portfolios. And that doesn't mean that private equity leaves the space, but it does mean the most aggressive bidding behavior kind of cools down. And some PE-owned assets may eventually look for a more long-term home. But how about we talk some more about Brett Kelly, primarily his stake in the company and his compensation, and also the key man risk that comes with all this and his clout over the business and importance to it.

48:47Daniel Mahncke:We talked about key man risk for companies like Berkshire and Constellation, but in this case, the company that's only worth a couple hundred million dollars, it's even more important, right? Because you don't have nearly as many second lieutenants lined up like you probably do at Berkshire. And so with the departure of Buffett or Mark Leonard at Constellation, the main question has been really whether the market is still willing to pay a Buffett or Leonard premium when valuing Berkshire and Constellation. But with KPG, it's about how the company is run and truly the operational side of the business.

49:23Daniel Mahncke:This business is far from having that same unshakable culture as Berkshire. And it's not yet close to having constellations decentralization. So what do you think of Brett Kelly and his role in the stock success and the key man risk here?

49:40Shawn O’Malley:Kelly Partners is certainly highly dependent on Brett Kelly right now. And he still makes all the capital allocation decisions, although they have about 12 so-called scouts who are working for them and basically figure out or looking for companies, digging into the market and kind of seeing where the good opportunities are that you could go after. He also has over 25 years of experience in commercial and professional accounting. So he's not just the type of CEO who is good at storytelling and motivating people, although he certainly is great at both. he also has a ton of knowledge on this sector and on the industry.

50:15Shawn O’Malley:And whenever you hear him talk, it's also very clear that KPG is somewhat of his baby and that he wants to lead it to become much bigger and much more successful of a company. And he's probably said that he wants to stay for at least another 25 years. Now, the future is unpredictable and we never know what will happen, but I think it certainly isn't planned for him to go anywhere. And again, he owns close to 50 % of the shares. So he's also highly aligned with shareholders. He did say though, and that's interesting, that he wants to bring his stake in Kelly Partners down to about 35 % over time.

50:47Shawn O’Malley:And he also tried to take the key man risk fear by saying that they have a detailed succession plan in place if anything should happen to him at any time and that there are highly capable partners in place who could take over. And I'm sure that's true. Yet, if there's a departure of Brett Kelly, that would certainly be a huge hit to the company.

51:08Daniel Mahncke:And what's the explanation for why he wants to reduce his stake in the company? I mean, I don't know if it's concerning, given that he still would own more than a third of the company, but it is a sizable reduction that deserves an explanation.

51:21Shawn O’Malley:I think it's mostly about gaining some more liquidity. We can't forget that while he's very wealthy on paper, he never got paid any additional stock options or grants that he could sell, and he didn't earn any outsized salaries either. So up until now, he basically has made most of his money from KPG's dividends. In fact, I'm actually quite sure that the main reason for the dividends has been to pay him. Most likely, that's also why the dividends were eventually paid out monthly instead of quarterly. And to be fair, those were not huge dividends. We are talking about reasonable dividend yields of about 3 % to 4 % on average, including special dividends.

51:57Shawn O’Malley:So it's not like the dividends have halted the business's operations because there wasn't enough capital or money to invest. But besides Brad Kelly's personal finances, I think another reason for reducing his stake is a potential listing in the US. Because if he owns 50 % of the company, that would also mean that there's limited float for the stock. And bringing his stake down means, again, there's more shares that can be traded publicly. and he actually even moved from Australia to the US to personally oversee the expansion in the US, which I think means that he really wants to double down on this market.

52:32Daniel Mahncke:How is the expansion going? I don't think there's a US listing yet. Is that right?

52:38Shawn O’Malley:By now, I mean, 15 % of revenue comes from the US. For comparison, that's five times the size of the UK business. KPG currently owns about six businesses in the US, so there's plenty of room to grow. One of the latest acquisitions has been Marky, an office in California that generates about$5 million in revenue. Another company KPG partnered with is actually a big partner of McDonald's. I think they serve about 700 McDonald's franchises, which is, as far as I know, about 5 % of the entire McDonald's footprint in the US. And while that's great, I think they do have to build a customer base that is not in connection with McDonald's and that entire bubble.

53:16Shawn O’Malley:I'm pretty sure they will be able to do that. In terms of a US listing, there's already an OTC ticker. So the stock is also quoted in US dollars, but there's no major exchange listing yet. And I wouldn't expect that to happen anytime soon, but that's just a gut feeling. And also, if you look at how much money that would cost KPG, also on an ongoing basis, I think it's not the best decision for them right now. There's not much information about whether there are any concrete plans right now for a listing in the future, but it's not necessarily something that I would be excited about seeing.

53:47Daniel Mahncke:Well, this is the fun part. And by fun part, the not so fun part of trying to look at these acquirer businesses because they're not straightforward to value, right? I mean, it's easy to look at one company and their financials and get an idea of what you might think of fair prices. We're talking about an acquirer. You're looking at all of these different businesses that they own and then trying to see how that's reflected in the parent company. And it gets messy quick, but let's get into the nitty gritty a little bit. I mean, what are the metrics that play a role for this company? And I got to admit, when I just quickly glance at their financial statements, it's confusing.

54:23Shawn O’Malley:It is like, it's messy. It is a bit tricky to fully understand what's going on. And unfortunately, that's often the case, as you just said, with these types of businesses. And whenever I do look at their financials, I think my main objective is to find the main metrics, you know, the most important ones that I have to monitor and kind of understand to then understand the entire company. Usually, that's cash flows. But depending on the reporting, it can make sense to make certain adjustments. So for Constellation, there was this number called free cash flow to shareholders. For Kelly Partners, that number is called NPATA, which stands for net profit after tax before amortization.

55:00Shawn O’Malley:And you need to add back amortization because KPG capitalizes the client relationships if it buys a company. And those are counted as intangible assets on the balance sheet. And then they are getting amortized over time. And that amortization is a real historical cost, but it's not a recurring cash track on the business. So adding it back kind of gives you a metric that's the closest proxy to what actually flows to shareholders. You might call it owner's earnings. If you were to use a normal PE on a serial acquirer like this, it would make it look just perpetually expensive because the amortization line only grows as you acquire more.

55:36Shawn O’Malley:And that basically says nothing about the quality of the underlying cash generation. On the other hand though, you can also not just look at their income statement and know what's going on because they have to report 100 % of the revenues and the profits made because of the gap measures, although they own only 51 % of those businesses. So that also means they own only 51 % of the revenues that you see and they own only 51 % of the profits you see. So in terms of revenue, you do have a similar picture to Constellation. Again, I mean, relatively low organic growth, about four to five percent per year.

56:10Shawn O’Malley:And the inorganic growth is the main driver of the business. So that's basically purely a function of capital deployment. So how many firms KPG buys at what size and at what multiple. And part of what you're betting on when you invest in KPG is basically that Brett Kelly can keep finding these fragmented accounting firms to buy at, you know, three, four, five times EBITDA and then fold them into a platform that trades at 20 or even 30 times earnings. And that spread between, you know, three and five times EBITDA or 20 or 30 times, that spread between is what, you know, the market values those earnings at.

56:45Shawn O’Malley:And it's a big part of where the return is coming from. An even bigger part though, is the margin story. So again, we talked about it before, buying businesses that earn an 18 % EBITDA margin and basically doubling that to far over 30%, that's another huge driver.

57:01Daniel Mahncke:KPG's margins, they look impressive overall, especially when you compare it to the competition. KPG's gross margin is consistently in the mid to high 50s, while CBiz's gross margin is what, like 15%. So just to quote Brett Kelly, I really like this. High gross margins are the most important single factor in long run performance. The resilience of gross margins pegs companies to a level of performance. And that really resonates with me. We see this in all kinds of businesses. Gross margins kind of set the ceiling for how well a business can do. And high quality companies tend to have high gross margins.

57:42Daniel Mahncke:If you can't price your products or services attractively in the beginning or have to overpay on the cost of delivering them, then it's very unlikely that you can make up for that later on by reducing some of your costs further down on the income statement. The gross margin is the most raw form of profit. We're just literally subtracting out the cost of goods sold. So if you're a coffee shop, it's just accounting for subtracting the cost of the coffee beans and maybe the water and whatever. But it's not like the full overhead is being accounted for. And so the only caveat I would say is I'm not sure I entirely agree with the point Because the idea does seem to overlook these businesses that lean into scaled economies shared, like Costco and Amazon.

58:27Daniel Mahncke:You know, Amazon has very low gross margins. But excluding those, I very much do see the point on how gross margins set the ceiling of profitability. And yeah, if you start out with a business or looking at a business that has poor gross margins, the room for error is a whole lot narrower. were. And it's also interesting to me that CBiz's margins, though, are so much lower than KPGs. I mean, is there any good explanation other than just KPG is fabulous and very well run? I mean, is there a good reason for why there's such a gap?

58:58Shawn O’Malley:I think the main reason is actually a structural one. So CBiz, again, is a large U.S. professional services conglomerate. And its revenue includes also advisory, consulting, but also insurance and benefits, administration work, all of that stuff. and many of those are services that require expensive specialist staff with high billing costs relative to the fees that they can charge so large enterprise clients also have more negotiating power which you know then compresses the fee to cost ratio so seabest is effectively operating like a staffing intensive business where most of the revenue that comes in immediately flows out as compensation to the professionals delivering it and then you have KPG, on the other hand, which is basically generating 95 % of its revenue from these tax and accounting services to, again, small and medium-sized private businesses.

59:47Shawn O’Malley:So KPG's clients are largely price-taking and relationship-driven. They have been with their accountant for years, again, often decades, and they're just unlikely to leave unless the relationship breaks. So they're not as price-sensitive as these larger corporations are. That's basically the dynamic that gives KPG pricing power that CBIS simply does not have. And also this partner owner driver model kind of reinforces this dynamic further because the equity partner running each office is not just a salaried employee, which would be the case for CBIS. They own a stake in the business, which means by nature they are incentivized to then manage costs and just protect margins.

1:00:25Shawn O’Malley:And as we mentioned before, KPG's partner firms, they don't simply join because of the money. So that's something that Brad Kelly talks about. KPG doesn't have to compete on offering the best salaries in the market. That's not what they do. One interesting thing that we also see in the chart is when we compare the margins, you will see a third company. And that third company is called Telenoam. And Telenoam is a Finnish accounting firm that uses software automation for bookkeeping and all these basic accounting services. And their gross margins are roughly 40%. So that's significantly above CBIS, but also well below Kelly Partners.

1:00:58Shawn O’Malley:And the most likely reason that I see is that Telenoam's automation models reduce, some of the direct labor costs that Cebus has, but they also compete on price in a relatively commoditized segment. And they carry more technology and infrastructure costs. In the end, it's just a different ban. These lower cost delivery through technology rather than these higher value relationships. And the gross margin is basically reflecting that. And if you ask me, that model is most likely to be disrupted by AI, even if they have a first move advantage in implementing it. And we only talk about these different models and kind of look at the gross margins, because it gives you an idea of how important this SME part of the business is.

1:01:38Shawn O’Malley:If you tackle these large corporations, you don't really have pricing power. But if you know, automate these very small bookkeeping tasks, then it's very likely that AI will actually come for your business. And you can kind of see that in the gross margins that the higher quality business you have, and KPG is the highest quality here, the least likely it also is that you get disrupted by things like AI in the future.

1:02:01Daniel Mahncke:I think we've probably used Constellation as a comparison today, maybe a dozen times, but to do it once more, one thing we've seen with Constellation is a lack of share issuances to fund acquisitions. And looking at KPG's share count, which is almost entirely flat, it suggests that they do the same. And given that, then how does the balance sheet look, right? Because they're not issuing equity and they probably can't entirely fund acquisitions with their own cash flow. Clearly they're taking on debt. So how much debt are we talking here?

1:02:36Shawn O’Malley:We touched on it briefly, but I think it's worth understanding exactly where the debt sits because the structure is also not trivial if you just look at the filings and the presentation. So KPG reports its debt in two buckets and that's for one, the parent entity. So the listed holding company, KPG, and then the operating businesses, which are the 51 % owned subsidiaries running the actual accounting practices. Historically, the vast majority of debt was in the operating businesses since again, each acquisition is funded at the subsidiary level with the acquired firm's own annuity cash flows. And those are then used to repay the term debt over four to five years.

1:03:15Shawn O’Malley:So basically, how do you fund the acquisitions? A mix of the cash flows of the company plus debt. In 2024, though, for example, the operating businesses carried about$36 million of the$45 million in net debt, while the parent company, so KPG, only held$9 million. That changed, though, with the U.S. expansion. I mean, the parent's debt basically surged from$9 million in 2024 to$29 million by December 2025. as again KPG began funding the US expansion or at least some larger acquisition activity directly at the holding company level rather than just pushing all the debt down into the subsidiaries.

1:03:52Shawn O’Malley:And generally KPG targets a net debt to EBITDA ratio of around one and a half and basically two would be what they would call their ceiling. In practice, the ratio has ranged from 0.8 to 1.9 since the IPO depending on just the number of deals completed in any given year. And right now, for example, it sits at 1.8, which is on the higher end, mainly because of an increase in acquisitions and also the aforementioned U.S. expansion. This is a lot of numbers. It seems kind of complex. Long story short, that seems to be quite well managed. And we also shouldn't forget that roughly 95 % of KPGs revenue is annuity based.

1:04:30Shawn O’Malley:So we're talking recurring fees for, you know, tax returns, compliance and accounting services that these SMEs are also legally required to obtain every single year. So they don't cancel, they don't delay, they're just not sensitive to economic cycles in a way that, say, a construction or retail business is. So, for example, during COVID, KPG's revenue barely moved. I mean, the annuity character of that cash flow means that lenders and investors can really treat the debt repayment as highly predictable, especially considering that also for the customers, the retention rate is about 93%. All right.

1:05:06Daniel Mahncke:How about valuation time? I think KPG has been a rather expensive stock for a long time. But after coming down 50 % in this broader market sell-off for all companies that might even remotely be touched by AI, I wonder if this has changed in your eyes. I mean, is this a company that is looking attractively valued or is it one that manages to still be expensively priced even after dropping 50 %?

1:05:32Shawn O’Malley:I think it's fair to say that, you know, it's somewhere in the middle. We tend to think a large drawdown automatically means that the stock is cheap, but that's obviously not the case. I mean, the problem with valuing Kelly Partners in particular is that it's in such an early stage, you know, with Constellation or with TransTime, you just have a better idea of how many acquisitions you can actually expect from that company, or at least what their impact will be on the overall financials. And in Kelly's case, that's a lot harder to pinpoint. If you look at the latest half-year report, the price to earnings is about 25, and earnings in this case again means NPATA, net profit after taxes before amortization.

1:06:09Shawn O’Malley:However, Kelly Partners gives guidance for the year. Actually, they kind of give two guidances for the year, a low case scenario and a high case scenario. And in the low case, KPGs still expect almost 14 million in profits, which would translate to an earnings multiple closer to 20. In the high case, earnings would be slightly higher and the multiple would be closer to 17. in it. If anything, I think this shows us how much uncertainty there is in the current valuation. We're not even talking about five years out. We're just talking about six months out, right? And in my model, I project revenue growing at about 25 % annually for the next two years, so 2026 to 2028, and then moderating to about 20 % for 2028 to 2030 as the base grows larger.

1:06:52Shawn O’Malley:And this is more or less in line with the historic growth rate of KPG. You know, KPG itself targets $500 million in revenue by fiscal year 31, which implies a similar trajectory if you just calculate that back. And that said, I think the 25 % near-term growth rate does assume continued active deal flow of about six to eight acquisitions per year, broadly in line again with what we've seen in recent years. And if you combine that with, you know, 45 % organic growth, that's kind of the baseline that you have for these multiple cycles. And the deceleration of 20 % in the back half of the forecast simply reflects the reality that if the base is growing, it will get significantly harder to deploy capital at the same rate.

1:07:32Shawn O’Malley:And it's not enough anymore to acquire six businesses, you would need to acquire 12 businesses to get the same growth rate. And since KPG is picky in regard to who they work with, it might get more difficult to keep today's growth rates up if that requires not only 10 companies a year, but 15, 20, 25 companies. On that trajectory, with parent earnings margin recovering modestly from, you know, 6.5 % back towards the 7.5 % range as US overhead scales against the larger revenue base. I think the model arrives at a 2030 EPS of roughly $0.65. And that would be a five-year CAG of approximately 25 % from the base that we currently have.

1:08:09Shawn O’Malley:And that's in line with long historical averages. And then quickly to the end, if we apply a 22 times multiple discount, the cash flow is at this time 10 % just due to the higher uncertainty involved here, and at a margin of safety of 30%, you would get a fair intrinsic value estimate of$6.40. And mind you, all of these numbers are in Australian dollars. And at the current price of$6, in my model, that would imply an 18 % annualized return.

1:08:38Daniel Mahncke:The modeling looks attractive, but I think it's fair to say the range of possible outcomes is a lot wider here for a small company like this. In terms of, you know, what does it mean when I say range of possible outcomes. Well, in terms of how much the intrinsic value could swing in the coming years, then is the case with our other portfolio bets like Alphabet and Netflix and Amazon and so on. This is comparatively a shot in the dark. And honestly, I think there's probably very little value at all in relying on a model for a company at this stage. Modeling is helpful to the extent that it pushes your thinking further to imagine different scenarios.

1:09:19Daniel Mahncke:And it can definitely be more valuable with mature companies where you have a little bit more predictive power about the future, a little more certainty. But this, at the end of the day, is just about trusting management. Do you trust Brett Kelly to be the stewards of our capital? And so we know the strategy generally works and it has been working for KPG. And so, like I said, now it's do we trust the folks running the ship with our money.

1:09:46Shawn O’Malley:One more thing I think is worth mentioning, and it's kind of what probably stops me from investing in KPG right now, is to figure out how many companies they can actually acquire. It's really one thing to say that there are, tens of thousands of companies that are potential targets, but how many actually clean the five-step filtering process? If there are 50 ,000 potential targets, but only 100 of them are actually of the quality and culture that KPG wants to onboard, you'll run into problems in a couple of years from now. I've talked to Ryan recently, who is really one of our savviest members in the intrinsic value community.

1:10:20Shawn O’Malley:And he made the point perfectly. He said to me, you know, the reason why VMS Aquarius works so well is that software is spawning. So there's more and more of it and it basically never stops. There was almost an infinite amount of potential targets. And even a company like Transim or Haiku, you kind of see similar effects. So sure, an airplane, you know, doesn't spawn like software does, but every new plane comes with thousands of new parts and if you combine that with the life cycle of a plane which is 20 years or longer and then you kind of see how long the runway is that you can keep going for these companies taxes and accounting doesn't really work the same way yes you will always need it but it doesn't spawn there's no compounding effect to the same extent in terms of new offices opening up and I would say you could almost compare it to LVMH so there's an infinite number of luxury brands that Bernard Arnault could acquire However, in that case, they can at least spawn more products.

1:11:14Shawn O’Malley:So a brand might start with handbags, then you manufacture coats, then you go to dresses, then shoes, and you know, go from there. To me, this is my main concern with the company because you need to acquire a lot of businesses for this to become, you know, a 10, a 20, or even a 100 bagger. It might not be enough to acquire 10 businesses a year for the next three years, but then it needs to be 15, 25, 30. At some point, you need 50 to 100 businesses per year. and that's the time from that we're talking at which is like 15 20 years or you need to find

1:11:44Daniel Mahncke:bigger businesses which is it's hard to do as well um so yeah i mean kbg is really interesting i'll tell you that much and maybe after we speak with brett in our intrinsic value community which you can sign up and apply to be a member if you want to join the call with us with brett maybe i'll feel differently about it and with these opportunities i do think it makes such a big difference to meet the people behind the scenes. Technion is a serial acquirer in Sweden. And I remember meeting the CEO and CFO at Berkshire in Omaha two years ago and really, really nice guys. And I didn't end up investing personally in Technion, but I could see how it's just a nine day difference.

1:12:25Daniel Mahncke:So I'm trying to read the reports and you're trying to read between the lines and get a feel for how you think these people are. And then you actually meet them in person. and it's a totally different impression. And with Technion, it was a good impression for sure. And so, yeah, for me to personally get comfortable with it, I would just need to do a bit more homework on KPG and like I said, wait to connect with Brett and our community before deciding how I feel about the investment. But if you're really excited about it, I think there's enough upside that we could make it a very small position such that our risk would be hedged, but then we would capture a meaningful amount of upside still if the thesis works out.

1:13:00Daniel Mahncke:and maybe not what you would call a tracker position, but just a small asymmetric bet.

1:13:07Shawn O’Malley:Just for the listeners of the podcast here, Sean and I spend a lot of time talking now about position sizing and all of that and also the difference between what do we consider a tracker position and what do we just consider a small asymmetric bet. So for example, company chapters that we own is when we bought it, we still felt like it's trading significantly above the intrinsic value of the company, which is why it was a position 1 % or less of our portfolio. And technically, that's also what you could do with Kelly Partners. I do think the valuation here is significantly more attractive than the chapters.

1:13:39Shawn O’Malley:But again, it's also a different industry and business. And I do still feel that while I'm confident that Brett Kelly knows all of that, what we talked about, and has a very precise plan for how he makes that work, I still feel like I want to better understand the exact amount of companies in the funnel, and especially in the last type of the funnel. And maybe that's something that we can talk to him about in the community meeting. And until then, I would say it's going onto the wait list, but I would say high up in the spotting of where it stands. All right. With that, how about you give us your hints for next week's episode?

1:14:16Daniel Mahncke:So I am guilty of just wanting to pitch the stocks of companies that I love to use personally, which are, you know, often these large to mega cap names. And Daniel, you are much better about digging into the weeds to pick out something potentially special like KPG today. But yeah, I will be doing more of that. Besides maybe iMessage and of course Slack for work, the company I'm pitching is easily my most used app on my phone. I use it every day, passively in the background. I've done it for at least a decade. And no, I'm not pitching Reddit a second time. I'm also not talking about YouTube, Facebook, or Instagram since we've covered Alphabet and Meta in the past.

1:14:55Daniel Mahncke:And if I cut off any more apps on the list, you'll know exactly what I'm talking about. So I'll leave it there for now, but maybe you can figure out what I'm referring to.

1:15:05Shawn O’Malley:I actually, I don't think it's too easy. I think I have an idea in mind, but I wouldn't be completely certain it is. Although the more I think about it, I think I have a good idea of what company could come up. All right, let me close it for today with a quote by Bernardo, who we just mentioned, who basically is someone who actually inspired Brett Kelly a lot. And he said, money's just a consequence. I always say to my team, don't worry too much about profitability. If you do your job well, the profitability will come. And that's something that Brad Kelly talked a lot about in all of his talks and his podcast.

1:15:35Shawn O’Malley:I hear him talk about it quite often. And with that, I would say we see you next week for the mystery pitch of Sean next Sunday and have a good day.

1:15:56Shawn O’Malley:This podcast is for informational and entertainment purposes only and does not provide financial, investment, tax or legal advice. The content is impersonal and does not consider your objectives, financial situation or needs. Investing involves risk, including possible loss of principle and past performance is not a guarantee of future results. Listeners should do their own research and consult a qualified professional before making any financial decisions. Nothing on this show is a recommendation or solicitation to buy or sell any security or other financial product. hosts guests and the investors podcast network may hold positions in securities discussed and may change those positions at any time without notice references to any third-party products services or advertisers do not constitute endorsements and the investors podcast network is not responsible for any claims made by them copyright by the investors podcast network all rights reserved

1:16:56Thank you.