OCL Research Round 2: Is OCL a Modern Cigar Butt Company?
As I started digging into OCL’s core business and revenue distribution, I found a major headwind. The culprit is M365 Copilot. When you discover that a company like Microsoft is the main threat to a company like OCL, your hopes reduce drastically. In real life, there is often a greater chance that Goliath defeats David than the other way around.
OCL’s business is split into three main segments: Content Solutions represents approximately 68% of revenue, Regulatory Solutions around 20%, and Planning & Building around 11%, with the remainder coming from other software businesses. When I discovered that the largest segment by revenue was also the segment with the greatest exposure to Microsoft, my hopes almost disappeared. I continued the research largely to complete that section of the analysis. As I was mentally walking toward the exit door, I started thinking that there was still some life left in the business. M365 is not going to take over tomorrow. Then I remembered the concept of a cigar butt company and started asking myself whether OCL could be a modern cigar butt company. That line of thinking led to a much deeper investigation and a number of unexpected findings.
A simple summary of the segments and their Microsoft exposure is: • Content Solutions: 68% of revenue. The segment with the greatest risk from M365. • Regulatory Solutions: 20% of revenue. Low direct risk from M365. • Planning & Building: 11% of revenue. Low direct risk from M365.
Why are Regulatory Solutions and Planning & Building less exposed to M365? The answer is specialisation. These are not generic data management products. The software is adapted to specific regulations, workflows, approval processes and compliance requirements. Each regulator, government agency and council operates differently. The software has to reflect those differences. For Microsoft to compete effectively, it would need to specialise deeply in a relatively niche market, which may not be commercially attractive given Microsoft’s size. The opportunity simply may not be large enough to justify that level of focus.
The next step of the analysis was to look at these segments in more detail. There I found a surprise. Planning & Building grew ARR by around 31% while Regulatory Solutions grew ARR by around 17%. These are impressive growth rates. However, they still have a long way to go before replacing the 68% of revenue represented by Content Solutions. So we have two fast growing segments that appear relatively insulated from M365, while the largest segment is facing the full force of Microsoft’s ecosystem.
What is OCL doing about it?
This is where Tony Walls and his team begin to showcase their strategic thinking. Regulatory Solutions and Planning & Building were largely built through acquisitions and subsequent organic development. Looking back through the acquisition history, the acquisitions appear deliberate, complementary and generally successful. That says a lot about management’s capital allocation skills. OCL has generated an average ROIC of approximately 20%+ over the last decade. To me, this suggests management knows where to allocate capital.
The most interesting acquisition was Isovist in 2025. This acquisition extended Planning & Building further upstream in the planning lifecycle. OCL can now participate from the moment someone starts assessing a property and its planning requirements through to application review, assessment and approval. The acquisition appears to have strengthened the moat by making the platform more complete.
The primary competition for this segment appears to come from councils’ existing internal systems, fragmented workflows and spreadsheets, with Civica and TechnologyOne being the closest commercial competitors. However, neither appears to currently offer the same integrated Planning & Building workflow incorporating planning intelligence, application management and technical assessment.
Who are the customers? Large councils and metropolitan councils dealing with significant volumes of development applications. Based on the work completed so far, I estimate that approximately 40-80 councils across Australia and New Zealand may eventually be candidates for software of this type. To maintain the current growth, OCL would only need to win roughly two additional metro councils each year while expanding existing customers by approximately four additional seats or modules per council. That does not appear unreasonable.
Using a Bayesian probabilistic framework and the assumptions outlined throughout this analysis, I estimate the probability of Planning & Building achieving the growth path required to become a major contributor to OCL at approximately 62-65%.
The next part of the assessment was to quantify the impact of M365 on Content Solutions. My conclusion was that the acquisition of Simflofy was strategically important. Simflofy’s technology helps govern and manage information across multiple repositories, including Microsoft environments. In practical terms, Microsoft may become the front end while OCL remains responsible for governance, control and compliance in the background. Will Microsoft take some revenue away from OCL? Probably yes. However, the Simflofy acquisition appears to reduce the risk of OCL being completely displaced by M365 by allowing OCL to remain relevant in governance, compliance and information control even when Microsoft becomes the primary user interface. In my view, M365 concerns and uncertainty around the Defence contract appear to be two of the main reasons investors became concerned and sold the stock. At first glance, when you see Microsoft as the main competitor, that is probably a natural reaction.
On the Regulatory Solutions side, OCL appears to have a solid growth profile combined with a specialised moat. The story shares many similarities with Planning & Building. The main competition often appears to be internal processes and fragmented legacy systems rather than sophisticated specialist competitors. Companies such as Civica and TechnologyOne could eventually invest more aggressively in this area, but OCL appears to have a meaningful head start. The strategy I infer from all this is relatively simple. OCL appears willing to accept some revenue pressure in Content Solutions while remaining relevant through governance and compliance capabilities. At the same time, management appears focused on accelerating growth in Planning & Building and Regulatory Solutions, with Planning & Building acting as the spearhead of the growth strategy.
Translated into growth assumptions, this could mean overall company growth slows toward approximately 13-14% over the next few years as Microsoft impacts Content Solutions and then gradually recovers toward 15% as Planning & Building and Regulatory Solutions become larger contributors. Based on the analysis completed so far, I estimate the probability of this outcome at approximately 62-65%.
Without OCL’s strategy, I estimate growth could fall closer to 10-11%, this is assuming a much larger impact from M365 and less ability for the newer segments to offset the slowdown. My conclusion at this stage is that the road ahead will likely be bumpy. If I were a chess player, I would say there have been some very well thought out moves here and Goliath no longer looks like the clear winner of the position. OCL is starting to look less like a discarded cigar butt and more like a vaping device with plenty of battery left and a replacement battery already on the way.
ARR expectations may need to adjust as the market digests Microsoft’s impact on Content Solutions. We may also see additional price volatility around upcoming results and major contract announcements. I still have parts of the investigation to complete before determining fair value and a final investment decision for my capital. At this stage, I am leaning toward a cautious entry backed by a generous margin of safety to my intrinsic value calculation. For my valuation baseline, I’m using 13.5% organic growth as a base case, assigning roughly a 65% probability that Tony Walls’ strategic pivot plays out as intended and that Mr. Market is pricing in a permanent impairment rather than a temporary transition.
In Part 3, I’ll run the numbers, share my fair value calculation model, reveal my calculated fair value range, and share the strategy for my own portfolio.
What’s your take on OCL? Do you think M365 Copilot will completely eat Content Solutions’ lunch, or is the market underestimating the moat in their statutory vertical software? Let me know in the comments.
I am not a financial advisor. I simply enjoy doing these deep dives and sharing my research. Always do your own due diligence before deploying capital.