Altus Group Limited

Thank you. Good afternoon, everyone, and welcome to Altus Group's Q1 2016 Results Conference Call and Webcast for the 3-month period ended March 31, 2016.

For reference, our earnings results news release was issued earlier after the close of market this afternoon and also posted on our website, along with our MD&A and financial statements. Please feel free to visit altusgroup.com to obtain these documents and for more information.

On today's call, we will begin with an overview of our performance during the first quarter, including a discussion of our financial results and noteworthy developments. We will finish by taking questions from analysts.

Joining us today is our Chief Executive Officer, Bob Courteau; and our Chief Financial Officer, Angelo Bartolini. Before we get started, please be advised that some of our statements today may contain forward-looking information.

Various factors and assumptions were applied or taken into consideration in arriving at the forward-looking information that do not take into account the effect of events announced today. There are also numerous risks and uncertainties that could cause actual results to differ materially from those set out or implied by such statements.

The factors, assumptions, risks and uncertainties that may be relevant to these differences are described in the company's filings on SEDAR. Our comments and answers to any questions must also be considered in the context of the disclosure in those materials.

I will now turn the call over to our CFO, Angelo Bartolini, who will start with a review of our financial performance during the first quarter.

Thank you, Ali, and good afternoon, everyone. Before getting into the numbers, I'd like to take care of some housekeeping items.

As you all know, beginning this quarter, we have made some important changes to our reporting segmentation. These segments, Altus Analytics, Commercial Real Estate Consulting and Geomatics, reflect our growth strategy and evolution towards a high-growth business focused on software and Data Solutions for the commercial real estate market and consistent with recent changes we have made to our organization.

On a couple of smaller matters, given that our focus is on moving toward a subscription and SaaS model, thus growing our recurring revenues, we will no longer separate out license revenues in future quarters. Also, on our profit and loss statement, we have moved disbursement expenses into office and other operating costs.

Now turning to the numbers. In the first quarter, we continued to build momentum with our high-growth, high-margin business offerings, delivering once again strong top line and margin performance.

Let me begin by highlighting some of the key areas where we continued to experience success and improvements.

Altus Analytics continued to deliver robust top line growth of 39.2%, totaling $36.7 million, with recurring revenues increasing 43.4% to $27.7 million, while focus on margin expansion contributed to adjusted EBITDA, outpacing revenue growth at 53.8% to $8.8 million. This is demonstrative of our efforts and success in the growth of our higher-margin sales.

Commercial Real Estate Consulting, which includes results from our Property Tax and valuation and cost and advisory services also generated near double-digit growth with revenues increasing by 9.5% to $58.4 million and adjusted EBITDA margins also improving from 15.8% to 17.8%, amounting to $10.4 million, and we continued to expand our presence in global markets with revenues outside of Canada increasing from 44% to 52%.

Now I will provide a summary of our first quarter 2016 results, including some insights into our 3 business segments' performance. On a consolidated basis, revenues increased by 8.4% to $106.7 million for the quarter, driven by growth in Altus Analytics and Property Tax within the Commercial Real Estate Consulting business.

Despite the continued negative impact of Geomatics, consolidated adjusted EBITDA increased by 1.7% to $12.4 million for the quarter.

Looking at our business segments. Altus Analytics experienced a 39.2% increase in revenues to $36.7 million, driven by both recurring and nonrecurring revenues.

Recurring revenues accelerated by 43.4% at $27.7 million on increased subscriptions for ARGUS Enterprise, Voyanta and data products, as well as from Appraisal Management and maintenance revenues. The 27.5% growth in non-recurring revenues amounting to $9 million was driven by ARGUS Software perpetual licenses and services.

License sales increased by 43.1% to $5.5 million, reflecting a seasonally strong quarter and a relatively weak comparable in the Q1 2015 quarter. In addition, improvements in the exchange rate against the Canadian dollar benefited revenues by 7.6%.

The 53.8% improvement to adjusted EBITDA at $8.8 million was mainly a result of robust revenue growth, changes in foreign exchange benefit at adjusted EBITDA by 6.6%.

Moving on to our Commercial Real Estate Consulting. Global revenues increased by 9.5% to $58.4 million for the quarter.

The CRE Consulting business showed healthy growth with Property Tax revenues up 15.1%. The increase in Property Tax revenues was driven by strong organic growth in Canada and the U.S.

exchange rates, which benefited revenues by 2.2%.

Valuation and Cost Advisory revenues held steady in the quarter.

Adjusted EBITDA increased 23.5% to $10.4 million, benefiting from a strong revenue growth in Property Tax. And finally, at Geomatics, our quarterly revenue performance continued to be impacted by the ongoing challenges brought on by depressed oil prices, resulting in revenues decreasing 37.5% to $11.8 million, and adjusted EBITDA decreasing by 120% to a loss of $644,000.

During the quarter, we further reduced costs and included in these results were severance costs of approximately $600,000. We continue to monitor activity levels and our cost structure on an ongoing basis.

At the end of the quarter, our balance sheet remains strong, with significant flexibility to support our growth strategy. Our bank debt stood at $124 million with funded debt-to-EBITDA leverage ratio of 1.86x.

Our cash position at quarter-end was $23 million, with $76 million of available borrowing room under our current credit facility. We continue to also focus on working capital, and our DSOs declined to 78 days from 82 days in the previous quarter.

With that, I would now like to turn the call over to Bob.

Thanks, Angelo. As you just heard, global recurring revenue growth and margin expansion continued to be the theme in the first quarter, and we remain committed to executing on the strategy with strong performance coming from our high-growth high-margin businesses, while expanding our global reach with more than half of our revenues now coming from markets outside of Canada.

Our performance at Altus Analytics, the industry standard for data and analytics tools, solutions and capabilities for the CRE economy remain very strong with 39.2% top line growth, while margins expanded from 21.7% to 24%. As a result, we experienced a 53.8% increase in adjusted EBITDA in the first quarter.

Simply put, we continue to expand our business in this category, while strengthening our pricing positions and margins. This is consistent with our stated growth strategy and I strongly believe that we're still in the early innings based on the size and number of opportunities that we are seeing, with little competition.

During the quarter, the Altus Analytics team remained busy executing on and identifying new growth opportunities, which will continue to further fuel our recurring revenues, with subscription sales of ARGUS Enterprise, Voyanta and adding more clients and assets on to our Appraisal Management platform. The overall performance of Altus Analytics during the quarter was above typical levels, with meaningful contribution to top line and margins from long-term annual subscription agreements with the likes of CBRE and Cushman & Wakefield, which were both in place during the first quarter, resulting in a lighter revenue base for the first quarter of last year.

Margin expansion during the quarter also came in as a result of strong license sales and the benefit of critical mass as the business continues to grow its customer base and through assets under management. As Angelo mentioned, recurring growth was exceptionally strong at 43.4%, while nonrecurring revenues also increased by an impressive 27.5%.

Extremely pleased with our performance, the continued growth, the depth of our technology-enabled offerings and the market's favorable response to these solutions. We continue the path to augment the quality and visibility of margins associated with the company's revenue.

We also continue to advance on our strategy by becoming a more technology-focused company, increasing collaboration between our software and data offerings, to offer the CRE industry high-value data analytics solutions. I'm very excited and look forward to sharing the continued progress of these initiatives with you in the coming quarters.

Subsequent to quarter-end, we also held our annual ARGUS Connect event. The event was attended by customers from around the globe who are currently on part sub or the full suite of our Altus Analytics platform as well as new perspective clients looking at our solutions and offerings.

We're very pleased to see many of you on the call who also were able to join us at the event.

Aside from having record attendance this year, the feedback was very positive across the board. We saw a sense of excitement from across all audiences about how Altus is changing the face of valuation, analysis, return optimization and asset management in the CRE market through the use of our technology platform.

And there was a lot of thought leadership going on at the event and executives who attended who are bringing back the message to their company.

Turning to the CRE consulting business, where Altus continues to be the market leader in their respective Property Tax and Valuation and Cost Advisory categories, with strong focus on execution, gaining market share, and exploiting growth opportunities in these active markets. The teams in this business continued to deliver, irrespective of macro trends and market conditions influencing or impacting the resilience of our business.

The Property Tax unit within our CRE consulting group, the prominent Property Tax adviser, continued to perform very well, with strong double-digit revenue growth of 15.1% and an impressive 42.1% margin improvement in the first quarter as a result of continued organic growth in Canada and the U.S. Our investment in the growth of this business outside of Canada is delivering great results at the top line and on margin improvement.

We continue to have an attractive growth opportunity in the U.S. and longer term in the U.K.

In the U.S., the market remains largely fragmented relative to the Canadian market, so we see the opportunity as a market consolidator. As mentioned on our last call in the U.K., we're focused on positioning ourselves for the next reevaluation cycle in 2017, so they'll be ready for the rebound.

During the quarter, we completed certain strategic realignments with our leadership team in the U.S. and underwent restructuring activities, which we expect will result in further growth opportunities, critical mass and a better alignment.

Looking ahead, albeit with quarterly fluctuations, which we've described in the past as a result of the timing of contingency settlements and other factors like varying tax assessment cycles across jurisdictions, which could have a big impact on our quarterly performance. On balance, we're very confident about what the next couple of years are going to bring us.

This unit is poised for growth. We expect our success here to be driven by both organic growth and strategic tuck-in acquisition.

The Valuation group and Cost Advisory units within our CRE consulting remain stable and profitable with slightly lower margins in the first quarter. The business unit continues to be an important feeder for relationships of the development community and also plays an important role as we work large institutional players around infrastructure investments.

Our focus in North America will be to diversify our client and industry focus, and in Asia Pacific, we will continue to leverage our global relationships to drive opportunities.

Despite the strong top line and adjusted EBITDA performance at Altus Analytics and CRE consulting services, Geomatics continue to be negatively impacted by the weakness in the oil and gas sector, thus impacting our overall financial results.

To quickly recap the progress we've made in the quarter, at our high-growth Altus Analytics unit, we delivered strong top line growth of 39.2% and adjusted EBITDA growth of 53.8%. Our focus on recurring revenue and market demand and adoption of our data analytics and software solutions is strong.

Our CRE consulting delivered steady stable results, with Property Tax coming in extremely strong as a result of our robust organic growth and also the investments that we've made, particularly in the U.S.

In 2016, we expect continued robust growth and margin contribution from Altus Analytics, albeit Q1 was particularly strong. We also see growth in line with average historical levels within our CRE consulting businesses, while Geomatics, obviously, remains the wild card.

In the long run, obviously, there's more upside than downside, but obviously, there is -- it's a difficult time in the energy sector in Western Canada.

We'll continue to drive growth through our increased license and services revenues, recurring subscription, data and maintenance revenues in 2016. We will also continue to invest in our resources and organization to further support our long-term objectives, with the focus always, on creating shareholder value.

Thanks for your support. And now we'd love to take some questions.

Good quarter on the recurring revenue front, guys, on Altus Analytics. Bob, where are we in the adoption cycle for AE?

Surely, the early adopters have made the switch by now, so what's the profile of the outstanding DCF clients that haven't made the switch? And secondly, what are you seeing in terms of AE adopters that are coming from outside of the DCF eco, sir?

Okay. So first of all, it's a great quarter on license, and obviously, we saw the flow through of some of the large subscription deals that we had last year.

What we're starting to see is a fairly balanced performance across the markets, particularly between the U.S., Canada and Europe, starting in the U.K. So with our last version of ARGUS Enterprise, we added European functionality, and we're starting to see the benefit of that in some of the transactions.

So the way I would describe the cycle that we're in right now is an uptick in revenue in new markets, particularly in Europe, although we had a good quarter in Australia as well. The propagation, or wider use of ARGUS more broadly in customers; so customers buying ARGUS Enterprise in one department and moving it to the other.

And also, customers that have bought it in the United States, moving it to other parts of the company. So we're in an acceptance curve.

We're seeing a -- we're past the early adopter phase, and we're now in the phase where the growth is going to come from early adopter Europe and propagation in the top 200 customers.

And what about a market like Asia right now? Has that been a contributor at all?

Or is that a focus for this year?

Yes, we had a good quarter in Australia. We've historically had some of the larger customers come onto the platform like QIC, GIC, GLP.

We're start -- because of the agreements that we did with the large service providers, they're starting to see more activity in those markets. But I see that as more of a 2017 kind of lift in terms of really being a third leg of the stool.

And right now, it's propagation in large customers and general acceptance in the U.S. And we think we're going to have a real nice run over the next 4 quarters in Europe.

Okay. Sticking with Altus Analytics.

What are you seeing on the competition front? Anything new that might cause you to be a little worried?

And in terms of dealing with any potential new entrants in the market, are you contemplating doing any kind of defensive-type acquisitions to kind of head some of these new entrants off?

No, I've said it before. I mean the threat of everything we're doing in some of the new entrants in the market; in 2012, $150 million was spent in venture capital and last year, $1.5 billion.

And just type in some of these new companies, it's actually quite fascinating to watch how many of them are coming to market with analytics capabilities in similar categories that we think we have privilege. So we're seeing it more on the data side than on the core ARGUS Enterprise portfolio management side.

Obviously, Cougar inside of MRI, they would like to do more in investment management, but they're fairly limited to one small category of investment management. And so we think we're really, really well positioned.

What we're doing to make sure that we protect ourselves defensively is we're spending a lot of time with these companies. We're going to be announcing some partnerships with some of the larger -- sorry, some of the emerging players in the market where we've built a strategy about how we should work with them.

And frankly, I think it's pretty exciting. The more people that come into the market that are building demand for the kind of solutions we have, the more opportunities we're going to have at bats, and we're going to do pretty well because we're 3 years ahead of anybody else and we've got a better balance sheet.

46 of the top 50 largest asset managers in the world are already customers, and it's a lot easier to sell to customers than find a new one. So we think we're creating standards for our solutions, and those guys that are coming to the market are going to have to work around our standard.

And they're all calling us to work with us.

Bob, when you're talking about or looking at your -- the customers for the ARGUS product, what percentage of them do you think really have the potential to be users of the analytics offering?

We are going to build analytics offerings, so all of our customers can use it, particularly in the top 200. We really believe that, by controlling their data, using Voyanta, aggregating that into categories where we can build benchmark tools, attribution tools beyond the open funds is core to our strategy.

Now I may be wrong because it's based on random sampling, but when I was at your ARGUS Software event a few weeks ago, I developed the impression that, certainly, awareness of ARGUS and the use of it in the industry are very high. But my sense was awareness of the analytics offering was still a little bit nascent among the traditional ARGUS customers.

Is that also a fair characterization? And if so, what do you need to do to kind of get them in the door and using it?

Well, our -- first of all, our coverage model is oriented towards the top 100 customers, and we're doubling down by using the RVA team to sell all the products and using the ARGUS team to now sell Voyanta. So clearly, our strategy has always been that if the largest companies in the world adopt our data, Voyanta, ARGUS Enterprise, attribution and other tools, then the market will adopt them more broadly as the standard.

And so that's our game plan. We're just going to make sure that we look at the top 200 and create white space around that, make sure they adopt it in some part of their business and then roll it out globally.

That's what we're up to.

And you feel that sales effort is on track?

Absolutely.

I just wanted to drill down a little bit on the Altus Analytics top line growth. Particularly you talked about the growth being above typical levels.

So I just wanted to get a better understanding of how was it atypical and what you would view maybe more as typical, I think, related to the recurring side of the business?

Yes, you know what, a couple of things that occurred. First of all, we didn't have a particularly strong ARGUS Q1 last year, so that's the first reason why the growth percentage looks higher.

Secondly, we -- it was the last quarter where CBRE is not in the base, meaning that we signed this in Q2 last year. And then we doubled down by signing Cushman & Wakefield in Q1, which added to the overall -- these are fairly large transactions.

And we had a really, really strong -- stronger than normal from a seasonality perspective, license quarter for ARGUS, so that all compiled -- and actually we had a really good RVA quarter. So it's -- I'd like to think we're going to hit on all cylinders every quarter and perhaps we will, but there're a couple of technical elements in there that caused the growth percentage to be fairly high in the quarter, particularly for Q1, which is usually seasonally low, and we had a decent Q4.

So we wanted to emphasize that, Stephen, and make sure that people understood that as we go forward. What's cool about the focus on recurring revenue is all of these things go into the base.

We still want to run, as I told you at ARGUS Connect, we still want to run our recurring revenue at a fairly high level, but I don't know if we'll continue 40%, 45% in perpetuity.

Right. Okay.

And the Cushman deal, was that Q1 '16 or Q1...

Q1 '16.

Q1 '16? Okay.

That's great. And then, on the Property Tax business, was there anything seasonally or contingency base that really drove like the revenue growth and EBITDA growth in this quarter?

Yes. I think we feel like the U.S.

business got -- we restructured the U.S. business, we made note of that.

And we think we're -- and this is something that you just don't do overnight. We've been down a path here in the last couple quarters and we like the way it's organized right now.

They did a really good job in the quarter. We had a nice result in Canada.

And the U.K. came stronger than we thought, so it was one of those quarters where a lot of things came together as well.

Part of the language that I used, I don't try and be operating a code here, but we think that the U.K. authority, as an example, is going to turn themselves through the year to the next appeal cycle, and we're going to have -- we may see some intermittent quarters here as we go forward.

And in the U.S., we continue to put some investments in there in terms of hiring and the like. And so we got away with a really, really good quarter intact.

The other reason -- the other thing that we're trying to do not only in tax but in RVA cost and Altus Analytics is being mindful of margin expansion. Like that's going to be something that we want to go after over the next couple of years.

And what we'll do is continue to make organic investments and where they're material, we'll call them out to you. But our thinking is that we're starting to see some pretty good pricing opportunities in Altus Analytics and Tax, and we're going to try and take advantage of them.

Right. Okay.

And then just along those lines, you did highlight some investments, sort of offsetting the revenue growth to the EBITDA line. Was that something that, I guess, you'll try to continue going forward, but more on a maintenance-type basis, as opposed to investing for significant building up of the infrastructure?

Yes. So if you remember, 12 months ago, I used the "I" word, the investment word, and everybody got all goofy and worried and all that.

But pretty quick return if you look at the kind of clients we're closing and the value that we're creating in the market. And we don't -- we're through a lot of the large transformational investments that we had to work with last year.

So what I was just telling you is like we're not planning to do that in the short term, but if I saw a material acquisition that would, not unlike Voyanta, create some margin pressure because of the early-stage nature of it, but it was innovative, of course, I'm going to do it. I'm not planning on doing it -- don't have anything imminent right now, but I'm just reserving the right to do that.

And in turn, you guys should remember, when we do it, we actually get great results because the payback on that was sub12 months because you're looking at it right now with these kinds of growth numbers.

Just with the integration of ARGUS and RVA Data Solutions complete, could you describe the sales force integration? And then any changes that you've seen so far in the sales pipeline related to cross-selling?

Yes, yes, it's a great question. So the real 2 big elements of the pipeline generation are leveraging our broader ARGUS sales force to sell Voyanta and bringing that into many more transactions.

And we're already seeing the pipeline for Voyanta really picking up. We just had our best quarter ever in terms of bookings for Voyanta.

And so that's after really one quarter of getting this team going. And so we think that, that's going to be one of the triggers on driving recurring revenue.

And then the second big lift that we expect to see is with the largest companies in the world where we're educating them to -- Michael Urlocker's earlier question, we're educating the world on how these products work together, how we might be able to arrange contracts that allow them to buy across a spectrum of products and leverage our relationships not only in the U.S., but piggyback off the U.S. relationships via our RVA business where they work with all of the large asset managers to open doors for our ARGUS sales people in the U.K., in Europe and Asia.

And we're seeing some fairly large transactions creeping in the pipeline that are multiple product line transactions.

And what's the time frame you think for closing those? I mean, is it more like out multiple years?

Or is it something, perhaps, towards -- in several months?

Well, I -- We're already seeing benefit from that in terms of the trajectory of deals. I think the ARGUS license quarter that we just had was benefited in a couple of cases from material relationships that we might have had in other business lines.

But the reality is the way I think about this is I'm protecting growth, Paul, across a spectrum of products and business models. And the whole idea is to continue to operate well above the rule of 40; some combination of margin and overall growth, and this is just one element of that.

So it's product road map, it's go-to-market strategy, it's going into new products, it's new functionality, it's partnerships. And so I would expect that the real payoff for this is in that real or most important objection -- objective is the adoption of these technologies broadly with the top 200 clients.

And we're already seeing pickup in our pipeline, and I would expect we're going to see deals in Q2 that are going to help the growth. But this is about sustaining really, really good growth rather than going from 40 to 70, as an example, right?

We kind of -- I don't mind operating in the 25% to 40% growth and 23%, 24% to 30% margin. If I can operate in those areas, that's a pretty healthy technology business.

And if I can sustain it for a long time, we're going to have a good run.

Okay good to understand. Just wanted to shift to potential uses of cash.

You talked about possible acquisitions in the CRE consulting and maybe tuck-ins like Voyanta and AA -- or Altus Analytics. Could you speak to the opportunity for large or more strategic acquisitions in this software space?

Yes, the next time we get together, Paul, I'll take you through the market. In fact, you know this, I think.

I'm trying to remember on your origination document. Look, there are only of few players out there and none that are innovating like we are, right?

So you look at MRI, Yardi, CoStar, REITs, RCA, there's a very -- less than 10 identified, or a handful of companies that meet the materiality list, right? Most of which are not in our core domain, right?

So our thinking is that we want to continue to focus on being an innovator, being in the market. We do see opportunities in tax to add assets.

We're looking at a few smaller data plays in the business. We're also talking to some cool, early-stage technology companies.

But for me to take a material software or data acquisition, I've got to have a really, really good plan to make sure that I can affect the profitability of those companies because a lot of them that have been around for a long time, and they're stuck on growth, and they're stuck on profitability, right? And so what I'm trying to line up is some partnerships now to evaluate whether I can materially move the dial on some of these companies.

And if I can, then I would apply some capital to them.

Well I think more on a lot of the investments going into the VC investments, if there're any interesting companies there that maybe of the larger size that you may take a look at, either through partnering, but then moving past the partnership stage?

Totally. We will also invest in them.

Like if you look at our investment in Real Matters, that's materially done well. We invested in Voyanta before we bought them, and we're having conversations with a number of companies.

I really believe in the portfolio approach to M&A. You don't only have to buy established companies, you can invest in them and help them grow and benefit from it, either indirectly like Real Matters or directly like Voyanta, we're definitely going to do that.

Okay. Just one last one for me, just on Geomatics.

Do you -- how much room is there to cut back further on spending just to try to get that business back to breakeven? And should we think about it getting back to breakeven for the full year?

There's always more room. It's a direct personnel-leveraged business, right?

And we're -- we've already done a lot of work, including, in Q1, and we are monitoring it effectively weekly. It's a tricky little one in terms of making sure that we can serve some of our customers, while we predict where the gaps are going to be.

But we're doing okay in Saskatchewan, actually, really well. Manitoba is not bad.

So this is an Alberta story right now, and it's tough there. The current crisis in Fort McMurray doesn't help the situation.

Am I going to make money this year in this business? That's my plan.

Am I going to do it? We've got some work to do to get there.

And -- so Angelo's saying we are, and I'm saying it's going to be tough. So somewhere in between, fairly hard to do, and we will, is where we're thinking right now.

I'll just add that end of Q1 and started in Q2, so March, April, we're in our lowest part of the year. We're in that spring thaw period, and so what you're seeing is Q1 really after you add back the severance costs, we did breakeven.

So that's sort of thought of as a one-time. It's still early to really know how we're going to do for the rest of the year.

We'll have a better line of sight towards late May, June time frame when we get back into sort of normal activity levels, and we can then see where the volumes are and sort of what the majors are doing at that point in time.

I just want to dive deeper into the upsell opportunity for products like Voyanta. So let's say you were to sell Voyanta into your entire AE base today or DCF, that entire base.

What would that revenue be? You did $36.6 million in the quarter on analytics, would that be a $50 million number?

Would it be a $60 million number?

Well, the -- first of all, the strategy is to sell it into our RVA base, like our traditional Appraisal Management base, and we have around 60 customers in there and if you're going to go to calculator, sort of average sale and these will be above average, use it as 200,000 a year starting point, and that gives you an idea of where we would like to start. And many of these clients actually will come in much higher than that.

Actually, it's a little higher, it's about 225,000 on average, when we start, but what you'll find is, the 225,000 is usually for like one fund or one part of the bank and then it accelerates pretty quickly. So our goal, Richard, is to really push Voyanta into the RVA install base.

To get it as a plug-in, as part of Appraisal Management right now, we're going to get them to try and turn it on. Once they do, then we can bring debt products in, we can bring closed funds into that and really accelerate the growth of it.

And then, secondly, as I said earlier, the ARGUS sales teams will be out selling this product, and that's kind of important because as we go into new markets in Europe, this is fairly missionary selling. To have another product in the bag like Voyanta that's totally integrated, the customer can start with Voyanta, get their data under control and then drop it into their portfolio -- their ARGUS Enterprise portfolio management investment management solution.

So it gives us another solution that we can sell as we break into new markets. So I'm not sure I'm answering your question perfectly, but there's a strong opportunity, not unlike what I said earlier.

All of these actions or programs are intended to sustain high growth and recurring revenue.

Okay. Yes, what I was trying to get, really, is that it doesn't sound like you've penetrated much of the base at all, so I'm just kind of curious because you're saying that you're seeing a pickup in that Voyanta pipeline.

Yes.

Okay. The other question...

Yes, you're not wrong. Like the focus of Voyanta in the first year was to really energize our platform to re-platform the company.

We took down some fairly large companies that we talked about, Prudential, MetLife. So it's getting pick up and these are slightly bigger contracts than what I talked about at 225,000.

But now, we're really energizing ourselves to get volume up. And I actually believe in the next 2 years that will be probably the biggest contributor to recurring revenue.

I believe Voyanta will be.

Okay. And I guess, when you look at the AE base, I think last time we met, I think you said you were up to 1,300 from 500 year-over-year?

Is that right?

I think that's not exactly right. I think it's like 6 quarters, I think from -- but I'm going -- like I'm pulling that out of nowhere.

It wasn't a straight 1 year increase from 500.

Yes, it's all right. I'm just kind of trying to get a feel for what you're kind of targeting exiting 2016.

Okay. More than 1,300, how is that?

I hadn't even thought about that. It's -- really what I'm on is the top 200 globally and propagating the top 200 in a way where, as they accept it, we get larger deals, we get to sell to more of the banks.

The 1,300, and I've said it, maybe to a couple of people -- I don't think I've said it on the call, but it's worth a minute on that. 1,300 over -- maybe we have now about 5,000 customers in our customer base.

If you think about it on a pyramid basis, the 200 customers at the top are critical in terms of number of users and a company like CBRE or Cushman carries the most significant number of users, and those ones we're taking down. So the measurement of number of customers really starts to get muted as you go down into the bottom ends of the pyramid.

If I get Sally in Kansas to buy one license and add a customer, it's not all that exciting as a metric. We want to get the -- we've nailed the top 50, we want to get the top 200 and then we'll take it to the top 500.

That's really the most important metric. And then the 5,000, that's just going to move naturally because we're going to end-of-life DCF, we're going to force price pressure on some of those companies, we'll start moving companies on to ARGUS On Demand where they'll either buy it on a rental or on a convenience basis.

So it's not, for me, as important a metric as it was in the adoption curve. We're -- sorry, in the front-end of the curve.

As we moved into the adoption curve here, it's not as important a metric to me.

Okay. And just one last one for me in terms of the development road map here.

I think you've got a bunch of products that are out there now. Are there any sort of new developments that may be on the way, or is really the focus on monetizing the products you have in the pipe today?

I'd say that -- I'm trying to remember what Raj presented at the session, so I don't repeat myself. But look, global functionality is really critical and did a pretty good job in the first version; we've got some more stuff coming out in some of the next couple of versions.

A lot of those are customer requests. That is critical functionality.

Right behind that, as I described, the ability to sell Voyanta or ARGUS Enterprise first in new markets, it's really critical that we have a seamless integration between ARGUS Enterprise and Voyanta, so we can fulfill this data promise that we talked about on a global basis. So that'll be part of a new functionality as we go forward, and it creates an opportunity to have a real platform feel for the tools.

So those are the big 2 that I would say. We're doing stuff in the investment management category and there're a few other interesting things that are going on.

But I think from a strategic basis, those are the 2 big ones. Global product and integration with Voyanta.

When you think about those top 200 customers, just a follow on from Richard's question, how many of those customers do you have right now? And how long do you think it takes you to get there?

Is it something where June 2017 you can see a big conversion happening ahead of that? Or could it take a bit longer?

Well if you take the U.S.-based customers, we're -- because it's a standard in the market in the U.S., we're basically there. If you go around the world, we started with this top 50 program, and we closed companies like QIC, GIC, SEGRO, GLP.

So we've been targeting this for the last couple of years in our strategy to get the largest companies in the world to adopt this. If you go to the top 100 companies, we're in fairly good shape.

Once you get into 200, you'd start encompassing sovereign funds, China, South America, and it falls off a little bit like that. In the top 200, there're probably 30 accounts that don't matter in the short term or are not in our priority sequence right now.

So we've made really good progress on that white space in general. And as somebody was asking earlier, now it's a matter of cross-selling against that category, bringing Voyanta in, introducing the Data Solution.

I guess, Michael Urlocker said it, increasing the awareness of the platform, and that's why the Voyanta ARGUS integration is important. If you bought ARGUS, hey, you should be using this Voyanta product, if you're a top 200 customer, is a good control of your data, as an example.

And so that's the way I'd answer the question.

Okay. Good.

And then In terms of the Canadian data offering, you talked about an enterprise warehouse initiative that's ongoing in Canada. Can you talk a bit about how your theme is commercializing that data?

Yes. So the simple answer to the question, the reason that we want to do that, is in our analysis, if you take the competitive landscape of companies that are in the data business, and these are documented, you can pull out REITs or CoStar or RCA -- or not RCA because it's private, but in our research, both directly and in conversation like Bob White of RCA has been at conferences with us.

What we came to understand is that in most cases, 40% to 50% of the data that they sell of those companies goes to banks. We're less than 10% in Canada selling our Data Solutions to banks.

So the idea of collecting data in a way with RealNet, and InSite, and HPI and all these other products, in a way, that's going to be important to those banks is a way of really monetizing an asset that we already own. So that's a good example of how we expect that we'll be able to grow the business for data as we move forward.

We also envision that we could partner with those companies and buy data from them or even build products together, where they can get access to our data in the U.S. and we're looking at that in this concept of a platform as well.

Okay great. And then, just one more for me.

In terms of the tax, the realignment in the leadership team, can you talk a bit about that restructuring and how it's going to improve the position going forward?

Yes, so what we did is -- in line with our strategy, is we went from a regional orientation to a product line orientation. So what that means is that we have a health care leader, we have a hospitality team that sits under that.

We have a specific Property Tax leader that when we bought SC&H, as an example, they had a Property Tax team, they had an incentive group, they had a couple of other products. So we took the health care or the health care group out of SC&H and put it under an integrated team.

We took the Property Tax team and put that on an integrated team. And you get critical mass, you get leadership.

And it's crazy, like -- I'm sure it never happens in your company, but some people -- sometimes, people don't talk to each other unless they're on the same team, and in a very short order by having these teams aligned by product line, now they're sharing leads, customers, they're getting people out, and we can then put new people on that platform that are uniquely focused on that type of tax work or that industry. And we had already always, I think I've said this to you before, had this as part of the vision of our business to be able to grow in the U.S.

rather than trying to do smatterings in 15 or 20 different states. But now we put the structure in place to make it work effectively.

And just the only thing I'd say on that is we were reluctant to do that because these teams have worked together forever, and you don't want to break up that harmony, right? But we kind of bit the bullet and decided to do it.

Well I don't have much more to say, except it was a great quarter. We appreciate you folks coming down to ARGUS Connect.

I had such great feedback from each of you, and it was appreciated, and thanks for the attention and interest to Altus Group. And if you have any additional questions, you can call Ali, myself or Angelo.

Thanks so much.