Altus Group Limited

Thank you. Good afternoon, everyone, and welcome to Altus Group's Second Quarter 2016 Results Conference Call and Webcast for the 3-month period ended June 30, 2016.

For reference, our earnings results news release was issued shortly after the close of market this afternoon and also posted to our website, along with our MD&A and financial statements. Please 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 second quarter, including a discussion of our financial results and noteworthy developments. We will finish off 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 Chief Financial Officer, Angelo Bartolini, who will start with a review of our financial performance during the second quarter.

Thank you, Ali, and good afternoon, everyone. In the second 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 continue to experience success and improvements.

Altus Analytics continued to deliver robust top line growth of 18.6%, totaling $36.3 million, with recurring revenues increasing 30% to $27.7 million, while our focus on margin expansion contributed to adjusted EBITDA, coming in at 26.9% or $9.8 million. This is demonstrative of our efforts and success in the growth of our high-margin sales.

Commercial Real Estate Consulting, which includes results from our Property Tax and Valuation and Cost Advisory practices, also generated double-digit growth, with revenues increasing by 10% to $64.3 million, and adjusted EBITDA margins also improving from 23% to 26.7%, amounting to $17.2 million. And we continued to expand our presence in global markets, with revenues outside Canada increasing from 50% to 55%.

Now, I will provide a summary of our second quarter 2016 results, including some insights into our 3 business segments' performance. On a consolidated basis, revenues increased by 5% to $110 million for the quarter, driven by the double-digit growth in Altus Analytics and Commercial Real Estate Consulting, taking into account the negative impact of Geomatics on top line growth, when compared on a year-over-year basis.

Despite the continued negative impact of Geomatics, consolidated adjusted EBITDA increased by a robust 11.3% to $18.3 million for the quarter.

Looking at our business segments. Altus Analytics experienced an $18.6 million increase in revenues to $36.3 million, driven by a 30% increase in recurring revenues amounting to $27.7 million from subscriptions for ARGUS Enterprise, Voyanta and Data products, as well as from Appraisal Management and maintenance revenues.

The 7.6% decline in nonrecurring revenues amounting to $8.6 million for the quarter was primarily a result of fewer transactional due diligence assignments. In addition, improvements in the exchange rate against the Canadian dollar benefited revenues by 3.3%.

The 24% increase in adjusted EBITDA to $9.8 million, was mainly a result of robust recurring revenue growth and cost savings from restructuring activities. Changes in foreign exchange benefited adjusted EBITDA by 4.1%.

Moving on to our Commercial Real Estate Consulting. Global revenues increased by 10% to $64.3 million for the quarter.

The Commercial Real Estate Consulting business showed healthy growth, with Property Tax revenues up 10.6%. The increase in Property Tax revenues was driven by strong organic growth in Canada and the U.S.

Valuation and Cost Advisory revenues also had a strong showing in the second quarter, with 9.1% growth, amounting to $24.1 million.

Exchange rates benefited revenues by 0.8% during the second quarter. Adjusted EBITDA increased 28.1% to $17.2 million, benefiting from a strong revenue growth in both Property Tax and Valuation and Cost Advisory.

And finally, at Geomatics, our quarterly financial performance continued to be impacted by the ongoing challenges brought on by depressed oil prices, resulting in revenues decreasing 39.7% to $9.6 million and adjusted EBITDA decreasing by 147.8% to a loss of $1 million.

At the end of the quarter, our balance sheet remained strong, with significant flexibility to support our growth strategy. Our bank debt stood at $120 million with a bank-funded debt-to-EBITDA leverage ratio of 1.78x.

Our cash position at quarter end was $27.1 million, with $80 million of available borrowing room under our credit facility. And again, we showed improvement in our DSOs, which declined to 76 days from 78 days in the previous quarter.

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

Thanks, Angelo. As you heard during Angelo's financial review, our performance during the second quarter continued to be solid with all of our business segments, with the exception of Geomatics, delivering robust top line and adjusted EBITDA performance while we continue to expand our global footprint, with more than half of our revenues coming from outside of Canada.

I'm really pleased with our continued progress at Altus Analytics. Our streamlining initiatives launched earlier this year have come together very smoothly.

There is significant collaboration within the teams, which now allows us to better focus on a more unified sales and go-to-market platform, which will be further enhanced as we implement tighter integration between our existing solutions.

We're already experiencing some of the benefits of our unified Altus Analytics platform, which is reflected in robust revenue and profit margin performance during the second quarter. We delivered exceptional double-digit growth in recurring revenues with strong margins, and we continue to see this trend carrying on and accelerating.

The Americas, EMEA and APAC.

During the quarter, we made strong progress with our growth strategy, while keeping a close eye on the market and new entrants. The competitive landscape remains very favorable for Altus.

We continue to see investment activity in the CRE technology space, which we are heavily focused on through our partnership platform approach designed to complement our existing innovative offering. A recent example of such partnerships was our technology integration agreement, which we announced during the quarter with Hightower.

Our partnership in this instance could deliver better insight into the impact of leasing decisions and a best-in-class budgeting experience by connecting client leasing management and asset management platforms.

Going forward, we remain focused on opportunities and strategies that complement our strong organic growth momentum with new technology offerings which further enhance and strengthen our platform for our global capability within the global CRE market.

Turning to the Commercial Real Estate Consulting, Property Tax, Valuation and Cost Advisory, they continue to demonstrate market leadership in their respective practices, both delivering strong top line and adjusted EBITDA performance. Coming off an already strong showing in Q1, the Property Tax practice continued to perform very well, with double-digit revenue growth of 10.6% and an impressive 21.4% growth in adjusted EBITDA in the second quarter, as a result of continued organic growth in Canada and the U.S.

Our investments in the growth of this business outside of Canada are delivering great results for the top line and on margin improvement. We continue to see ourselves as a market leader in property tax, as well as being a consolidator.

The North American marketplace remains fragmented, and we are vigilant with opportunities to further augment our organic growth performance. The U.K.

also represents a tremendous growth opportunity for us. Subsequent to quarter end, we announced the acquisition of U.K.-based Rates Recovery.

This acquisition, although small, will further solidify our presence and market position in the U.K. in advance of the next evaluation cycle -- reevaluation cycle in 2017, as we prepare ourselves for a significant growth cycle for our U.K.

practice.

Looking ahead, albeit with quarterly fluctuations as a result of the timing of contingency settlements and other factors, like varying tax assessment cycles across jurisdictions, which have a big impact on our quarterly performance, the Property Tax practice is poised for growth. We expect our success here to be driven by both organic growth and strategic tuck-in acquisitions.

The Valuation and Cost Advisory practice within our CRE Consulting group also had a strong quarter, with near double-digit top line performance and a 66.3% increase in adjusted EBITDA. This practice continues to be an important feeder for relationships with the development community and also plays an important role as we work the 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.

Lastly, Geomatics continued to be negatively impacted by the weakness in the oil and gas sector, thus impacting and offsetting the strength of our overall results.

So to recap, all of our businesses, with the exception of Geomatics, delivered strong revenue and adjusted EBITDA growth. In our high-growth Altus Analytics business unit, we delivered strong top line growth of 18.6% and adjusted EBITDA growth of 24%.

Our focus on recurring revenue growth and market demand and adoption of our data, analytics and software solutions has resulted in a 30% increase in recurring revenues. And our CRE Consulting group delivered strong results, with Property Tax, Valuation, Cost Advisory demonstrating robust organic growth.

Looking at the back half of the year, our objectives remain intact. We continue to use all the levers becoming available to us as a result of our alignment initiatives across the enterprise, particularly at Altus Analytics, to deliver further robust revenue and margin growth while we continue to build out our business units for meaningful global growth and recurring revenues for years to come.

We will continue to work closely and grow with our top 200 customers, forge new partnerships -- and forge new partnerships as we expand our presence globally, with an objective to blanket cover their current assets as well as growing with them as they look to diversify and expand into new markets around the globe. And our CRE Consulting practices will remain market leaders and deliver results with tremendous growth opportunities in their respective markets.

We thank you for your support, and we would welcome any questions. Operator?

Bob, can you flesh out a little bit for us the opportunity or how we should think about the opportunity you have with your top 200 clients? I mean, and what exactly are we talking?

Are these your largest clients that are using one of your services and your, the idea is to sell more into them? Or how do we think about that?

Well, obviously, at the top, if the largest companies in the world are adopting ARGUS Enterprise, it affects the ecosystem, and we've talked about that for a couple of years, and so the first job is to get that adoption. But we marry it up with the success that we have with our RVA business in the U.S., where there is a predominance of large customers.

We have an opportunity to start building integrated solutions with Voyanta that solve for a good investment and portfolio management process in total. And then the idea, Yuri, is to take that global.

And so a lot of the conversations that we're having now are of the enterprise variety. And we have an opportunity to bring a full set of solutions to those customers and build capability that meets their tailored requirements for the largest companies in the world.

And I think it's also fair to say that we have contracting power as they adopt those solutions, where we can be creative in how we put the solutions together for them. So on a multiple of levels, it gives us an advantage in the market.

And I guess the restructuring and the way you're going to market now through Altus Analytics is how you hope to achieve that?

Totally. We have Sung Lee running global business development for us now.

He's got strong relationships with some of the largest real estate companies in the world. He has privilege in understanding their requirements.

He is now working closely with the ARGUS and Voyanta teams to really start presenting our solutions in a way that is going to cause them to want to adopt a broad set of solutions, and of course, we made a lot of progress in making sure that they work well together. So we're getting that on 3 fronts.

One in terms of how we're presenting our solutions, the quality of integration and the ability to contract across the spectrum of our capabilities.

Okay. And secondly, just a follow-up on the margins in the Analytics, really good this quarter.

How do we -- in the past, you've kind of said why the 20 to 30 range. I mean, we are kind of creeping in the top end of that.

How do you describe how we should think about that going forward? And was there anything in the quarter that might have bumped it one way or the other?

Well, we've got -- if you remember what caused us to in some cases go down at the low end of that is, as we acquire for organic strategy organizations like -- sorry, companies like Voyanta, it has an impact on your margins, because they're early stage companies, right? But we've had now Voyanta for over 1.5 years, and we're starting to see the benefits of that solution.

Our cost base has gone down in those, we've been successful. So that's part of it.

We had a good quarter. So that's going to help for sure.

We've added a bunch of new larger customers, our recurring revenue base should be more profitable over time. Where you'll see some variability go forward is as we make investments in new product lines, or if we were to buy another early stage company to address a whitespace requirement, right?

So when we're not doing that, we're going to be above the 25% margin. And over time, if we decide that we like our product set the way it is, then perhaps I'll change my -- or adjust my thinking higher on what the margin potential is.

But I kind of like it right now, as we're growing in the 20% to 30% range.

And would that imply that Voyanta is EBITDA-positive as a stand-alone business, at this point?

It's hardly a stand-alone business anymore. We got the ARGUS team selling...

I get that, but just...

I guess if we were to pull it apart in some fashion, we would say, yes, but we don't even think about it that way. We've completely integrated these businesses.

And frankly, if you look at the Voyanta management team, they're all doing different jobs, virtually the top 4 guys are all in different jobs, right? And so it's kind of a moot point at this point, other than we're having some great success with Voyanta as a product line.

Just wanted to just follow up on the Altus Analytics business. You mentioned in your premed remarks, Bob, that the Altus Analytics unified platform drove some growth in the quarter.

So I just wanted to sort of drill down on kind of what you're seeing -- what benefits are you seeing, and how is that being received by your customer base? Is it really leading to higher cross-selling opportunities?

Or what are really the key drivers there?

Yes. So the answer to that question is that if you think about the largest companies in the world, by virtue of having a series of solutions that we can now start talking about as a full asset management platform or investment management platform, we have the opportunity to go higher in clients and broader.

And so we invested in the last year in resources that carry the largest accounts and carry them on a global basis. And so what we're seeing now is not only are we having good trajectory with ARGUS and Voyanta on a stand-alone basis, but we are starting to see large customers commit to the integrated solution on a global basis, and we're way better organized to do that, as I was talking about with Sung Lee before.

So you're just getting a certain maturity in how we are organized and how we're going to market, and we're already seeing that cooperation evolve last year. By putting the organizations together, it's accelerating.

Okay, that's great. And then in terms of the ongoing customer count increase, I suppose.

How much in the quarter -- or maybe the way to ask the question is, with respect to conversions versus net new customers, are you seeing one accelerating over the other? Or is it pretty even on a growth basis?

Well, I think the last time we talked about it, I'm sure I remember the ratio -- it's about the same as the ratio we had before. Of the 1,200 customers that we talked about, it was like about 300 net new, and we're still seeing that kind of ratio.

Probably doing a little bit better in net new, because we've made more investments in Australia, Asia and Europe around selling resources. So Angelo, you want to...

I would also say that AOD, we're attracting a lot of new clients just even with our AOD solution.

We actually tempered with starting to talk about -- because the pickup in terms of customers on AOD was really, really good in the quarter.

Well, that's great. And then just finally, notwithstanding the secular weakness on the Geomatics business, you highlighted the Fort McMurray wildfires and then other fire hazard concerns stopping work in some, Northern Alberta.

Is there any way to quantify that or was it just general weakness?

I would quantify it by we would have hopefully made money in the quarter if all that stuff hadn't happened. We were positioned to do so, we felt.

Angelo, do you want to...

I would say breakeven to a little bit of money in the quarter. Obviously, we had a -- we were impacted by the lower oil prices, so just on an overall basis, this year's activity levels are down from last year's levels.

The fires, so as you know, Stephen, we have that, the spring breakup that occurs towards late March into April. And so Q2 tends to be the lowest revenue month -- revenue quarter that we have from seasonality standpoint.

This year, that seasonality was elongated just because of the Fort McMurray situation. So we saw -- we didn't really see a pickup until sort of late in the quarter.

So there was an impact, but yes, overall though, we do have lower activity levels than last year.

Okay.

I would just add, though, as you've seen us in many past years, there is a quite clear seasonal pattern. Historically, the second half of the year, as we've experienced, has always been stronger than the first half.

Just to continue on this Geomatics. Following the spring breakup, you said you saw some activity pick up near the end of the quarter.

Does that give you confidence that things will improve significantly in the second half?

Well again, if you go back and you look at our seasonal patterns throughout the year, you will see that the second half is always stronger than the first half of the year, just because of the spring breakup impact. Having said that, though, I mean, oil prices, you've been watching them, started off really, really low, kind of picked up, got into the low 50s and we're back down to the low 40 range.

It seems like they're fluctuating quite a bit. So it is kind of hard to say what exactly is going to happen in the second half.

But again, what we look at is historical patterns, and that is a bit of an indicator, but prices can continue to fluctuate and if there is another shift that can continue to go sideways for us or even downward.

I guess another way to ask it then is where do you see your Geomatics cost base needs to be right now? Is it okay where it's at?

Or are you going to think about removing more costs?

Well, we took actions in the spring. We took quite a bit of cost out, and given the activity levels that we saw for the year, we're still seeing -- we haven't seen a change yet.

And so we -- on that basis, again, we should expect to sort of see the same seasonality by the end of the year. Again, I just want to caution, because if there is a shift downward, that could impact us.

I mean, it could cause us to just be breakeven for the year or it could cause us to go a little bit southward. But at this point, in terms of our cost structure, we're -- and given our expectation for the second half, we're in pretty good shape.

And if things continue at this pace, given early signs in this quarter, we should expect to see the same pattern as in past years.

That's a long way of saying we are going to resist an outlook on Geomatics at this time.

Okay. On Valuation Cost, good growth out of there, the strongest we've seen in quite a while.

What drove that? And can we expect that to continue for the rest of the year?

Well, the market, particularly in the GTA, is continuing to do well. So we -- in our traditional service lines, we're continuing to have good activity levels, and we've been shifting more towards some of the infrastructure type projects.

And that's really been part of the areas that we've been gaining in and we continue to see that continuing.

Bob, I wonder, if we could kind of look at the Analytics business as a whole and if you could offer a bit of context for me here. I may have the wrong perception, but a year ago, I think when we saw the demo of the attribution analysis product, for a guy like me, it seemed very impressive.

And I wonder if you can put that in a context. Is that a significant driver, that functionality, of the growth you're seeing in analytics?

Or would I be emphasizing that too much?

The way I would look at it is that it's a part of the assembly of an overall solution. And what we're doing is, we're selling these assets on an individual basis -- we have historically been selling these assets on an individual basis.

And so specifically, we talked about -- when we talked about attribution, we talked about the success we had at CalSTRS. But more and more, what we're doing is we're presenting this now as an integrated platform, and beauty is in the eye of the beholder.

They really wanted for example, have access to the DataExchange product to collect valuation data, the DataBridge product so they can do analytics. Attribution can be used in a number of different ways, both for benchmarking, but also for evaluating your own internal cost.

And we are now, with the acquisition of Mike Goode's services organization, building custom solutions that take all of these assets and deliver them in a way that customers are going to really adopt the platform broadly. And so the biggest change that's gone on, Mike, since you saw that is how we present this to clients in a way where they can start with 1 solution, but their orientation is to adopt an integrated platform, ergo, enterprise selling.

And so it wouldn't be fair to say that attribution on a stand-alone basis is the driver of growth, but being able to be with the CEO of a company and show them how all of these assets work together, so they have a industry-leading, best-in-class asset management and investment management platform, is how to think about it. And we're doing a lot more of that.

We've hired people to do that, we're doing it more in Canada. We're showing clients how they can achieve a best-in-class environment.

If I just want to play it back, a bit of a summary here to make sure I get you. Again, to go to the equities world where we live, I think what you're saying is a analogy would be, it's not a specific graph function on the Bloomberg terminal that makes it -- that really makes the sale as much as all the multifaceted capabilities of that platform that bring in the customers.

Is that fair?

Yes, and what you're doing is you're able to take standard benchmarks, you're able to look at positioning of your assets in the market and marry industry data that we help collect with proprietary data, to really do some, really good -- best platform in the market to do really good management of your investments.

Okay. And then if I can ask, I am not overly concerned, but we do see a decline sequentially in the license revenue.

And I've observed this in a couple of other software companies in sort of different industries. Is there anything going on in terms of the economic climate or the purchasing method of your customers that would cause further declines in license business?

Well, you can -- most of the decline that you're seeing in one-time revenue is around our -- sorry, the nonrecurring revenue -- was around due diligence. So it was actually more services than license.

Our license was roughly right similar to last year, and obviously, as AOD picks up and as we do more subscription revenue, we've said all along that we'll see some bleeding, but it's not material.

Okay. And if we look at the overall business, I think it's fair to say you're really getting traction on analytics.

Are there any other significant new functionalities that you think that the customers are asking for?

We've got some ideas. We're really balancing, Michael, what we got and getting that organized to deliver in a unified approach, highly integrated, against current customer requirements, but there's areas of the business that we think are going to lead us to add additional functionality as we go forward.

So we've grown our development team, and increased EBITDA margin. So we're fairly ambitious on where we're going to take the product lines.

Just hoping that you could focus in on U.K. for a moment, just in regards with Brexit last couple of weeks in Q2.

Have you seen any change in your pipeline, just regarding to the real estate companies, the real estate environment in the U.K.?

Well, it certainly didn't hurt us in the tax business, we had a good quarter. And we don't expect that, that will change the economics or fundamentals of our tax business whatsoever.

On the analytics side, and with ARGUS, we have not seen any major divestitures, any significant deals slow down as part of our quarter. And our pipeline looks reasonably intact.

We haven't seen anything fall out. What I think is -- what I think will be interesting, honestly, Paul, is that when Brexit occurred, a lot of the large funds closed redemptions.

And what happened was a secondary market emerged pretty fast. And many of the large global real estate players ended up taking positions off market, and I find that really kind of interesting, because one of our views is that there'll be more liquidity in the real estate markets.

And because there is not tools to do this, as we move to things like daily fund valuation and more open trading type of platforms, we think there is an opportunity and what we got from Brexit is an example where a market forum without any kind of supporting systems in place, right? And we would like to think that we can be one of the players, that over time, that could provide that kind of infrastructure.

But to answer your question, we haven't seen any degradation per se.

Okay, that's interesting. Just wanted -- still on Altus Analytics, just in regarding to the balance sheet, deferred revenue kicked up nicely in the quarter.

How do we think about the trend in deferred revenue? Does that just reflect the ongoing momentum in recurring revenue -- the shift to recurring revenue?

Or is also there's some seasonality in renewals for Q1 versus Q2?

We do have some spikes, Paul, with deferred revenue when maintenance contracts come due. Traditionally, they were structured that there were 2 periods, June and then in December, when most of the renewals would take place.

That over the last few years is sort of been smoothing out more. We're not as -- we're not as disciplined or as structured I should say in trying to sort of all have them come due at a single point.

But it's -- so there's not a lot of seasonality, really, it's just a cash flow situation and they relate to the maintenance agreements and they are pretty much recognized on a straight-line basis throughout the year.

Okay. Just lastly, just on the Property Tax business, very strong this quarter.

Was there any unusual large contingency settlements this quarter? And then how do we think about the expectations for the business, heading -- the Property Tax business, heading to the second half of the year?

Well, there wasn't anything as unusual as Q4 of last year, where we had Western Canada really had some major agreements regarding parking lots. So we didn't have that situation, but there is a little bit of seasonality that takes place in the U.S.

So we had a better quarter, better Q2 vis-à-vis Q1. And that tends to continue into Q3 and into the early part of Q4 and tails off towards the end of the year.

But as you may know, when it comes to Property Tax and the contingency, particularly, on the contingency side of the business, we can get that quarterly cyclicality. So sometimes it's hard to gauge exactly when you're going to get a settlement in which quarter.

Canada had another strong quarter on a year-over-year basis. U.S.

did, U.K. held its own.

So we're actually growing the business, particularly in the U.S. So we should overall continue to see upward trends, but quarter-over-quarter, you can get some fluctuations.

Bob, you mentioned the addition of Sung Lee. I was wondering if you could talk a bit about the management bench strength here and whether you're expecting to add more people?

Well, we got a really, really strong bench. I mean, Rick Kalvoda is running Appraisal Management in the U.S.

He was certainly the architect of a lot of the technology behind DataBridge, DataExchange. We are in a position with our ARGUS team where we've got lots of great stability.

We've taken Raj Singh, who was running Voyanta, and he is now developing the overall strategy for the platform for our road map. So we've really taking one of the leading bright architects of real estate technology and using him to go across the whole business.

Steve Bezner, he was the original architect of ARGUS and developed the product. Paul Broadley, was the architect of the U.K.

version. So one of the things I've said to you guys before is that we think we got the best technology team in marketplace.

And we've got the leading products. And part of what we're doing is adding talent with the acquisition of Mike Goode's company as an example.

We're adding more people in Europe. We think the recent momentum we have tells us that we can add more management talent there.

So it's -- we think we're in pretty good shape.

Great. And then on the other side of it, M&A.

Can you talk a bit about your M&A strategy, and if you're looking at adding on some additional functionality here?

I think that we're fairly -- I addressed it in my comments, but we're nicely positioned, I mean, competitively, whether you take ARGUS, Voyanta our RVA, Appraisal Management, now attribution, we're an innovator, we're a leader. And you look at the organic growth we're getting along with that, that some of the M&A that we might consider is with all of this investment in real estate technology, if we saw assets that created a whitespace opportunity relative to an internal development, of course, we're going to look at that.

But we also spend a lot of time on partnering, and we're -- we took one of our senior guys out of the Voyanta team and he is now full-time on partnerships. And I see that as a really good way of creating capability in our overall platform.

Obviously, in tax, we did a small acquisition. We still believe that we can be a consolidator in that market.

And any of the large opportunities in Altus Analytics, we're going to be fairly careful about taking those on. It would have to -- because there isn't -- we really feel that we're leading the value parade here.

We are getting the organic growth. So if we saw an opportunity to do that, where we could enhance their products by bringing them onto our platform, of course, we're going to look at that.

But that would be opportunistic. We're not seeing it as a requirement to be competitive.

Got it. And then in terms of the AE conversion, can you talk about how we should think about the June 2017 end of maintenance for DCF and the growth expected prior to that?

I think we'll see -- we may see some bubble quarters that come out of that. I expect that as we get close, what we're going to do is be doing more, especially with the larger customers, more flexible transactions that will include the full product line and more of an enterprise type of deal.

So with our focus on recurring revenue, that creates an opportunity, as we get closer and closer to that time, where you may find clients that aren't quite ready. And we'll find a way to motivate them to be ready, with offers that could include other aspects of our capability.

And so we may see, like we had a really good Q1. It was almost unexpected.

And part of the reason is that we were in the process of announcing and working with clients around the end of life. And then some of those companies jumped on offers that we put in place.

So we may see another bubble quarter. But I don't know -- I think it will really more help us get organized to start selling other products and move towards enterprise selling.

Well, I really thank everybody for joining. And we're really, really excited about how the quarter went.

And fair amount of enthusiasm for the rest of the year. So look forward to talking to you soon.

Thanks. Bye.