Altus Group Limited

Ali Mahdav - Investor Relations Bob Courteau - Chief Executive Officer Angelo Bartolini - Chief Financial Officer

Yuri Lynk - Cannacord Genuity Paul Treiber - RBC Capital Markets Paul Steep - Scotia Capital Richard Tse - National Bank Financial Maggie MacDougall - Cormark Securities Daniel Chan - TD Securities Deepak Kaushal - GMP Securities Stephen MacLeod - BMO Capital Markets

Thank you. Good afternoon, everyone.

And welcome to Altus Group’s Q1 2018 results conference call and webcast for the period ended March 31, 2018. For reference, our earnings news release was issued shortly after the close of market this afternoon, and also posted on 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 first quarter of 2018, including a discussion of our financial results and noteworthy developments.

We will finish by taking questions from analysts. If we miss anyone, please contact me directly after the call.

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 at 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.

These are described in our annual 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 out with a review of our financial performance.

Thank you, Ali. And thank you, all for joining us on the call and webcast this afternoon.

I’ll start off with some highlights of our consolidated financial results, followed by a review by business segment. On the hills of a strong finish in 2017, I am pleased to report that our businesses continued to perform well during the first quarter and despite anticipated variability in some of our business segments, the steady growth in our consolidated results demonstrates the strength of our business model.

Our key financial metrics continue to be strong with double-digit growth in consolidated revenue and adjusted EBITDA, with consolidated adjusted EBITDA margin remaining consistent on a year-over-year basis. All while we work through a phase of investments and talent, technology and overall modernization of our expert services.

During the first quarter at Altus Analytics, where we continue to see long-term growth opportunities globally for our products as data, analytics and software solutions, we continue to make significant incremental investments in ARGUS product development activities given the global opportunity available to us. As a result, we realized lower margins during this period of investment.

Our CRE Consulting practices performed well with a strong contribution from our Property Tax business. We continue to see significant market share growth opportunities in Property Tax business in the U.S.

and UK. Lastly, performance of our Geomatics business reflected the ongoing market pressures in the oil and gas sector in Western Canada.

I'll now provide a summary of our consolidated results for Q1. Consolidated revenues increased 14.1% to $124.7 million.

Acquisitions contributed 4.9% to revenues, while we achieved organic growth revenue of 9.2% despite foreign exchange rate movements, which impacted revenues by negative 0.9%. The strong revenue growth was led by a global Property Tax practices in our CRE Consulting segment.

Our Property Tax practices in Canada, the U.S. and the UK, all showed strong growth and we're up 46.4% in aggregate.

Altus Analytics grew by 3.2% inclusive of currency headwinds of 2.7%. Our Valuation and Cost Advisory businesses held steady, while Geomatics decreased by 17% on weaker oil and gas drilling activity.

Adjusted EBITDA was $15.5 million for the quarter ended March 31st, up16% or $2.1 million from $13.4 million in the same in 2017. While organic growth contributed 22.8% to adjusted EBITDA, acquisitions had an expected offsetting impact of 6.8%, an impact we fully expect to reverse in upcoming quarters.

Exchange rate movements against the Canadian dollar also adversely impacted adjusted EBITDA by negative 3.4%. Earnings growth in the quarter was led by CRE Consulting, up 120.4%, driven by Property Tax.

Earnings in Altus Analytics declined due to previously mentioned product development expenditures. Consolidated loss for Q1 in accordance with IFRS was negative $2.3 million compared to a profit of $0.6 million in the same period 2017.

Basic EPS was negative $0.06 for the quarter versus $0.01 positive last year. Adjusted EPS was $0.23 in Q1 compared to $0.22 during the same period last year.

Moving on to our performance by business segment. In Q1, our Altus Analytics business revenues increased by 3.2% to $40.5 million, impacted by currency movement of negative 2.7%.

Excluding the impact of exchange, the growth rate would have been 5.9%. Recurring revenues increased 1.2% or approximately 3.9% without the impact of FX.

Overall, the performance in Q1 was driven by license revenues where we saw a double-digit increase, consistent with our view of pipeline strength and continued future long-term growth opportunities of our products to new and existing clients, and significant white space opportunities in Europe and Asia. Recurring revenues increased modestly during the quarter, reflecting the drop off of DCF maintenance fees in Q3 2017, and moderate growth in our recurring revenue streams.

For the quarter, adjusted EBITDA declined by 35.5% to $8.2 million. The increase was a result of higher expenses as we increased investments and the ARGUS product roadmap, including cloud functionality and currency headwinds, which had a negative 4.5% impact.

The full run rate of investments in ARGUS caused lower margins during this quarter. We expect to see a reversal of this impact beginning in Q2, and for the remainder of the year.

As our revenue out-run these costs, we expect to return to normalized margins in subsequent quarters. Our CRE Consulting revenues increased by 28% to $73.9 million in Q1.

Our Property Tax business was a strong contributor. It was up 46.4% and $48.6 million in Q1.

During Q1, the Canadian Property Tax practice experienced significant revenue growth in Western Canada, including Vancouver, Alberta and Manitoba. We also had strong revenue contributions across all the tax service lines in the U.S.

and UK, including from the recent CVS acquisition. I should mention that the integration of CVS is going extremely well.

Most of our departments are not fully integrated, and we have a single go to market strategy. We are achieving significant cost synergies, as well as pricing synergies.

In addition, we plan to aggressively grow our market share beyond the previously combined 20% share by volume. Although as expected, CVS negatively impacted adjusted EBITDA in this quarter, we expect a reversal of this impact throughout the year as revenues grow and as synergies take hold.

The valuation and cost advisory practices also performed well with revenues up 3% to $25.2 million Q1. As a result of the revenue growth, adjusted EBITDA for CRE Consulting increased by 120% to $15.7 million in Q1.

Adjusted EBITDA margin increased to 21.2% compared to 12.3% in 2017. Changes in the exchange rate against the Canadian dollar affected CRE Consulting revenues by 0.1% in Q1 while impacting adjusted EBITDA by 1.7%.

Finally, at Geomatics, revenues decreased by 17% to $10.4 million as activity levels remained depressed in oil, drilling and gas exploration. As a result, adjusted EBITDA decreased 96% to $0.1 million.

The challenges in the oil patch in Western Canada are well understood, but a bright spot for the industry is the current price of oil, which could possibly stimulate some activity in the second half of the year. In the meantime, we have taken further actions to reduce costs and right-size the business as we took $3 million restructuring charge in the quarter.

Corporate costs in Q1 were $8.4 million compared to $7.7 million in the same period in 2017. During the quarter, corporate costs increased on higher accrual of variable comps, resulting from increased earnings.

As a result, as a percentage of revenues, corporate costs declined to 6.8% from 7.1% in the same period in 2017. At the end of the first quarter, Altus Group's balance sheet remained strong, giving the Company the financial flexibility to pursue its growth strategy.

The Company's bank debt was $163 million, representing a funded debt to EBITDA leverage ratio of 1.95 times compared to 1.84 times in December 31 2017. Also, the Company's cash and cash equivalents stood at $20.6 million at the end of the first quarter compared to $28.1 million as at December 31, 2017.

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

Thanks, Angelo. We continue to deliver year-over-year growth in our consolidated key financial metrics, while also making excellent progress against our strategy.

I’m really pleased with the performance and our ability to achieve double-digit consolidated year-over-year top line and adjusted EBITDA growth. We had a very productive quarter.

I'm also proud of what our team has accomplished. As we look ahead for remainder of the year, we feel really good about the Company's growth potential in 2018, and as I said before, even more so as we move forward into 2019.

At Altus Analytics, we’re making excellent progress against our strategy, driving higher sales from existing and new customers, market share gains in new geographies and an enhanced value from product improvements. As you recall, our Q4, 2017 numbers that come off a little from a lower trajectory when compared to a normalized quarterly performance as a result of variability to downside, which comes with a transition in business, in our case, a transition towards more technology and automation.

Despite a modest growth rate of 5.9%, net of FX, we continue to see a bit of variability in Q1, while we made strategic investments in talent, technology and our overall platform, as we further transition to an information services company. During the quarter, we continue to focus on deepening our solutions and service offerings with existing customers around the globe, while focusing our sales efforts and leveraging our leadership position as a global standard on new and significant growth opportunities.

We’re tracking well against our objective to take out more than 35 -- our AE customer base from 3,500 customers to over 8,000. Historically, our growth has come from the upgrade cycle.

And the great news is that we are the standard solution now, the standard data solution, in Canada, the U.S. and the UK.

This means that we now have a data platform that serves 60% of the global assets managed by the world’s leading investment managers. Many of these clients are now starting to deploy ARGUS on a global basis.

Thus, representing a significant growth opportunity, and very importantly, creating a downward standard or a downward push into all key geographic markets. As well, a 150 of the top 235 investment managers have acquired ARGUS enterprise and 10 of the top 10 service providers are using ARGUS globally.

Our client base continues to represent a significant opportunity. And now with these investments in the cloud, we will make this sea of data available for our clients, their customers and the market.

In these markets, this has been accomplished through a number of growth strategies, including going into the markets directly, expanding our pipeline outside of traditional market, and we’re dynamically driving a shift to a modernization strategy, will also add to the overall pipeline. We continue to focus on increasing wallet share or spend with our existing and new customers for ARGUS enterprise, up-selling new products into our existing base with a variety of use cases ranging from asset valuation and reporting to decision-making process in the case of global asset managers.

Another area of ongoing focus for our team is the modernization of our expert services business as we continue to transition Altus into an information services company. We see tremendous value in the power of data that we collect and mine on a variety of fronts.

With the ongoing evolution of our technology platform in the cloud and the depth and scale of this data, turning into actionable information available some of the largest industry players, we’re building a platform, which simply cannot be matched or avoided by CRE asset managers and owners around the globe. Our emphasis on time to the small and medium-size business segments in all markets continues to show good traction as well.

Our sales activities partners are showing results. And last week, we held our ARGUS User Conference.

This event was well attended by a wide range of customers across North America, including asset managers, investors and other owners of commercial real estate assets. And this gathering gave us the platforms to not only connect with our customers, but also the thought leaders in our industry.

Given our market position, the industry looks at us to influence best practices on valuation, analysis, return optimization and asset management. And as evidenced by the key themes from client discussions at the conference, demand for Altus Analytics solutions remains robust.

We are also incrementally investing in our cloud applications. In addition to our still strong ARGUS Enterprise on-premise solution, these cloud applications can achieve our objectives in attracting new users, improving industry workflows and creating new applications.

We expect our first solutions to be released in Q3, and we will target the acquisition workflow with ARGUS acquire. We have continuing growth opportunities with ARGUS Enterprise to expand geographically, to add new functionality and increase client usage.

The good news here is that we have a growing pipeline of opportunities with great visibility in this category, which provides us with great confidence of the future. Based on our current visibility with large global clients, we remain confident in the long-term growth prospects of license revenue, which continues to grow in double digits in the first quarter.

As a result, we will continue to invest in the future growth of our business, and particularly in new applications and solutions in the cloud. Our Q1 consolidated results at 14.1% top line growth and 16% earnings growth and nearly unchanged margins, underpins that Altus Group remains in investment and growth mode, increasing market share with our key offerings and delivering on our strategy; all with one focus, sustainable, profitable, long-term growth.

We continue to aggressively pursue growth in new and existing markets and customers, while making important strategic investments to ensure the long-term growth and viability of our of our platform. As Angelo mentioned in the remarks, Altus Analytics posted modest growth in Q1.

And this was accomplished despite currency headwinds during the quarter, and our decision to make strategic investments to underpin and accelerate growth. As most of you are aware, our investments are towards the addition of cloud functionality at Argus, adding talent to support our global expansion and strengthening our ability in on-boarding and servicing the largest investors around the world.

As I mentioned earlier, we continue to make investments to solidify our market leadership position and the depth and innovation of our solutions. One of the areas we’ve been working on is the AE platform for the cloud.

We have increased significantly investments in our development teams, and we’ll continue to add resource as we modernize and extend the ARGUS Enterprise on-premise platform through AOD and fully into cloud that will allow us to develop new interesting Web applications. The early phases of our cloud strategy consist of first developing new applications that will be cloud-based, but synchronized with AE on-premise solutions and the AOD product through application programming interfaces and portal functionality.

These new applications, which will bring new users into the ARGUS Enterprise environment and the Web applications will be sold separately on a SaaS basis, and should generate new incremental sales to existing customers, as well for as well as bringing new customers on the integrated ARGUS Enterprise platform. Our leading expert services and Altus Analytics business collect valuable and detailed CRE industry data, which bodes extremely well as we transition Altus towards becoming a pure play in the information technology services space.

This provides us with the unique, long-term opportunity to utilize and eventually monetize this data to drive differentiation, launch new products and strengthen our recurring revenue streams. We’ve been laying the groundwork for this opportunity by developing technology that captures and organizes the data that we collect across each of our businesses and through partnerships.

In the long-term, this infrastructure will enable us to better integrate our current products, to pursue more data sharing partnerships and to leverage the data to develop new applications and data-driven products. Our goal is to use this infrastructure and capability to ultimately launch new products on a global basis.

We expect to continue to benefit from growing global demand and favorable trends to increase use of technology and data in the CRE marketplace. Our product offerings stand to serve the growing need of professional asset of investor managers for data, analytics tools and software solutions that help them make more timely and informative decisions.

In 2018, we expect our software revenues to be driven primarily by growth in new customer sales, especially in Europe and Asia, and additional license sales for new users and new modules to our existing customer base for ARGUS Enterprise, ARGUS Developer and ARGUS EstateMaster, as the use and adoption of these solutions become more entrenched. We also expected continued growth in our cloud solutions, ARGUS On Demand and Voyanta, as clients trend towards cloud-based technologies.

As well in 2018, we expect to see the launch of our first web applications along with the cloud platform, enabling a further integrated set of applications on our platform. Turning to the CRE Consulting, Property Tax, Valuation and Cost Advisory businesses.

They continue to demonstrate market leadership in their respective practices, all delivering top line and adjusted EBITDA performance, resulting in 120% increase in adjusted EBITDA. We are continuing to see ourselves as the market leader in Property Tax as well as a consolidator.

Property Tax continues to represent an attractive growth area for our business, both in the U.S. and UK, and as we modernize in Canada as well.

For a major player in the category and maybe you heard me say in recent months, I’m very excited of what we’re doing in this segment. Our strategy to transition this segment using automation and technology will enable us to integrate this business into our technology platform, resulting in accelerated growth and higher margins in the future, while being recognized as yet another solution offering to our global CRE clients.

While we’re very bullish on the business, it’s often our market leadership, quarterly fluctuations as a result of the timing that [indiscernible] and other factors like varying tax assessment cycles, will be a part of this business. However, we expect major growth contribution on a year-over-year basis.

And the Property Tax practice is poised for growth over the next few years. We expect our success here to be driven by both organic growth and strategic tuck-in acquisitions.

Our organic growth in this category will also continue to be driven as a result of increasing property values, which will inevitably drive our contingency revenues higher as a percentage of value. Long-term, Property Tax has significant potential for innovation and modernization, and I’m very excited about the opportunity.

The Valuation and Cost Advisory practice enjoyed significant market share in Canada. And as a result, continue to grow modestly and we expect moderate growth in near to medium-term.

Our valuation practice, primarily in Canada, continues to benefit from very strong client retention and our cost practice in North America, continues to diversify as client and industry focus. And in Asia-Pacific, we continue to leverage our global relationships to drive opportunities.

Looking ahead, given the leading market share enjoyed by these groups, we expect the data collection potential from these businesses to be invaluable and support our overall objectives for data growth and our overall long-term growth ambitions. Geomatics remain cautious outlook for our Geomatics business for 2018.

Although oil prices have recently improved, this should translate into improved activity levels for oil drilling. Gas prices do remain depressed, and as a result, we’re seeing lower planned capital expenditures within this segment.

Furthermore, pricing pressures in our industry continue to persist. As a result, we took actions to reduce costs in 2018, and we will continue to closely monitor those market conditions.

In closing, I just want to reiterate that we remain in growth mode. We’re energized.

We’re excited about the new capabilities we’re building. We see substantial market opportunity.

We have an amazing customer base. And we’re going to build on our solid track record of execution, which is a significant market advantage.

And quite frankly, we feel like we've only scratched the surface. We believe in our strategy to transfer in the industry on a global basis, ARGUS as a global standard for real estate data, data shared in the cloud for the benefit of improved insight and planning, and a highly relevant analytics that support greater transparency.

Our Company is positioned to provide a modern platform to the largest companies in the world and give visibility in every important geographic markets. Thanks for your support.

We’ll be happy to take questions, Operator?

Bob, last year, particularly mid-year when we had really strong license revenue, you talked a lot about leveraging the 3, 500 clients and cross-selling other modules and taking them into new geographies, and stuff like that. So I guess what happened to that trend?

It’s definitely fizzles out at least in the last two quarters. And any color you can provide on the license revenue trend.

We had double-digit revenue growth in license revenue this quarter. And if you think about Q4, we had to replace, as I said in the call last quarter, 30% of our revenue in licenses in Q4 of 2016 came from upgrade revenue in the U.S.

And we had a pretty -- actually decent quarter when you take that out. So I think we’re doing really well.

I mean we have told you the variability comes from the fact that we got out-run that 30%. While last year, in 2017, we’re already make the turn to add new customers go to Europe and that.

So there wasn't just upgrade revenue last year in 2016, 2017, we were doing well in license revenue. And that's why we felt pretty good, pretty confident.

And going forward, we still feel pretty good about it. We’re not worried about the license revenue as we go forward.

We’re just worried about comparables.

In the past, you've talked about a 15% annual growth rate for Altus Analytics as a whole. Is that something you still think is achievable for this year?

Well, what I’ve talked about this year is the fact that we want to try and drive a plan that gives strong margins and good growth. And we set out a track there to be around 10% this year as that target for Altus Analytics on revenue and sustain really good margin and invest.

And so it’s a real transition year. The other headwind on overall growth is you got to remember that we took out -- we took down our maintenance revenue as part of the upgrade in the U.S.

to make sure that we move that market. And to your original point, we’re now organized to go after the largest customers in the world around cross-selling with the appraisal management, with Voyanta and the other data areas.

So look, we’re going to -- we absolutely are going to come through this in a way that our company has a good year, and we're positioned for really, really strong growth as we go into 2019. So we got -- we always said we’ll have headwinds this year on comparables, on currency and the like, but we’re not giving that up.

Just want to follow up on last question, just in regards to upgrades. In the past, you have talked about some of these large upgrades, the deals would be chunked and you would see upgrades or expansion overtime.

Just wanted your thoughts on that going forward here?

Again, we had growth in the quarter in ARGUS License. And part of the reason that we think we’re going to have larger deals is because we’re now targeting the largest companies in the world.

We’re selling them on global rollouts. And we’re doing that in new markets, like Europe and Asia, where people -- where we’re replacing multiple evaluated methodologies in different ways of managing their data.

So we're still on track around that. It’s part of why we feel pretty good about the year.

We’ve got a really good pipeline going, and that's the game plan. And as we go forward, we’re going to do that off of foundation where we now have ARGUS as a platform in Canada, the U.S.

and the UK, that’s 60% of the assets that are managed by the world's largest asset managers. So we really believe as we move to the cloud, it even opens up more opportunity to take advantage of that customer base.

And as they want to start operating on a global basis, those large players are the customers they’re going to take it global. It's our strategy.

I mean, we’ve had a silo approach and its worth to upgrade the market, to get into new markets, to reposition our product. And now we’re moving to an integrated model in these new markets where we can sell large enterprise solutions to shift.

We’re in flight on it but we like our pipeline.

And looking at the growth for this year and perhaps into next. What do you think the biggest potential upside to your outlook?

And then what's potential risk, or the challenges that you need to address over the next couple of quarters?

I think the biggest upside to our pipeline is selling large global deals that are integrated with the largest investment managers in the world, as we normalize our products across the problem of global investment management. And look if we look at -- the reason I mentioned the pipeline a few times, we’re seeing really interesting and innovative solutions.

And that is going to be great as we go forward. We continue to believe that we’re going to see a good chunk of our revenue coming from our customer base just through the normal expansion.

I’ve said before that 30% of our revenue is coming from same customer growth. Half of that is call-in revenue where people are adding users and extending capability.

And then finally on the run rate, we got applications to sell as we go forward. The challenge is to changing your business model, right.

We got to execute. We got to get this thing going.

And again, we feel okay about it. But we got to prove it out going into the second half of the year, and going into 2019.

But we’re pretty confident that we can control -- get the margins good this year, get decent growth and position ourselves to have these products in the cloud. And then that changes the whole paradigm of what this Company is about.

And then just one last one from me. Just at a very high level in the past, you talked Altus Analytics, meeting or exceeding the rule of 40.

With the growth outlook that you have and the margins this past quarter, do you still see that as achievable going forward?

When I look in 2019, absolutely than some and if I look at 2018, that’s what we’re trying to do.

Bob, could you talk maybe a little bit about how you position yourself to drive further growth in Europe with the sales force, maybe some of the changes that either you or Carl thought about terms that go to market over there. And then I’ve got one quick follow-up.

So it’s not just [indiscernible] share up. What we were completely focused on up until 2018 was make sure that ARGUS Enterprise is the standard in Canada, the U.S.

and the UK. So the European team was completely preoccupied with making that happen.

And that’s what we’ve targeted in our sales force. Now, we have a global account team that is going to that customer base, and showing them how ARGUS Enterprise can be a global standard.

And we will enjoy larger transactions as they start migrating that product on a global basis and we've already had customer starting to do that. Secondly, the large account teams, our integrated teams who were selling not only ARGUS but our Altus Analytics solutions in terms of appraisal management, data management, integration with third-party applications, where we’ll even host those capabilities for them.

And so this is a paradigm change away from a departmental selling with ARGUS to an enterprise selling with our best account managers, supported by really, really talented specialists around into those product areas. And so that's the big change we made coming into 2018, and we’re diverting a lot of resources around that.

The third part of it is that we’re going to -- part of the push to the cloud is that we’ll be able to absolutely create a platform that allow these customers to manage not only their valuation or the research or their aggregation of data on a global basis using ARGUS Enterprise on-premise, but now they’ll be able to take that data into their workflows. So that’s enterprise selling that’s a big change.

If we switched expert services for a second, you alluded multiple times on the call about modernization of those lines of business. Could you give us a sense of what you're looking to do to benefits and how we should think maybe about the timing and the investment to maybe get to this new world?

Well, tax in the quarter was amazing. We are a company that believes that you can take a business like tax, and not only operated it in a way where you get great performance through greater share, good operational integrity, really understand how you can create efficiency in the model through normal means.

We’re showing again this year this quarter that this is a great business for now and for the future. And then on top of that, in the simple terms, we’ve implemented salesforce.com through the tax team to start getting control of the data and the information around tax both for our teams to support customers nationally and frankly, on a North American basis and eventually globally, but also to get visibility on performance.

We are building solutions that we've already rolled out in parts of Canada that improved the workflow of tax. We are now building capability to take data not only from our tax platform from other areas to improve the way we do appeals.

And we also will get the repeatability of appeals. So if you have a system that is roughly right 80% for one client and you take it to another client, then you take a bunch of the workout by being able to reuse appeals where you have the ability to bring data indirectly.

So there's so much opportunity for modernization. Both in Canada and the U.S., the teams have already started building workflow capabilities and using workflow capabilities that spot opportunities, that create goodwill with the customers, that really create differentiation against the competition.

And frankly, we're the only company that is doing this, so that’s cool too.

Last one for me to not leave Angelo, Angelo in the quarter, Property Tax margins. Could you talk about what drove the outperformance there in the period?

Simply revenues, the revenue projection, the revenue growth drove the margins. Our costs in any given quarter are pretty fixed, and so the incremental, which we are operated to the bottom line.

Bob, what do you think are the biggest gaining factors to see a material acceleration in Altus Analytics? I know it was double-digit growth.

But to get to like the mid-teens and 20s is it the people, the pace of development, the customer awareness of the product. What are the big items there to get going?

It’s product, it’s cloud, it’s restructure of our sales force, it’s taking advantage of our customer base, it’s been adopted as a global solution. All the things we've been doing, like getting ready for the -- I think [indiscernible] our fully integrated platform, which the cloud is a big driver on that and getting that up and running in 2019.

We’re feeling like we’re tracking. The biggest risk on our model was making sure that we control this upgrade to ARGUS in those markets.

Having done that, we’re now going to markets like Germany and France, and others where we can absolutely start building a global model, a global platform in those markets. But I think what's going to happen is you will see a flip with our global account strategy where companies like Blackstone will roll out ARGUS Enterprise globally.

And once that happens, it puts a huge downward pressure on those markets adopted. And so we’re going to -- we think we’ll have pricing power, we’ll have new products with data, we’ll have new functionality with the cloud.

So we think 2019 we’re getting ready to really turn that corner and have products in the market, and 2020 is going to be better than 2019. So we’re on that journey that’s where we’re going.

That’s why we’re investing. We’ve got this that will hit that we’re in right now, but we have incredible conviction of how this thing is going to play out.

And on that I guess with respect to the integrated cloud platform for 2019. So without the -- something that we’ll see in the early part of the year or the back half of the year and…

I'm not even counting necessarily that cloud in itself will be a significant product line in 2019. What it'll cause people to do is buy more of our existing products, and that’s going to create lift.

And the integration of ARGUS Enterprise, ARGUS On Demand and other capabilities where we will lift our ARGUS Enterprise product as a global solution, will be big and because we’ll have that data in the cloud along with appraisal management. We’re now in Europe, fairly strongly with appraisal management.

We’ve created in-roads in Australasia. And that in itself is evidence of the interest in those type of data platform.

We’re just going to put it altogether over this year and through 2019 and do large enterprise deals with the largest companies in the world, while we continue to drive market-by-market to deal with the nuances of the market. The biggest change is we think we can go faster with large customer adoption on a global basis versus going market-by-market as we do this upgrade.

And then one last one here. You seem fairly optimistic about the pipeline and with respect to some large prospects.

So can you give us a bit of color on the nature those discussions? Are you fairly early in the discussions in the middle, like where would you be at there?

I got to close some of those deals this year. So we can continue to deliver on our plan for the year.

And some of them are -- we’re talking to them right now. So, we got to continue to drive our pipeline of customer growth.

But yes, we’ve got a few large transactions that we’re working in the year that have a nice combination of recurring revenue and upfront revenue. So I don’t know exactly -- know how to tell exactly what that means, but we’re trying to close deals now.

This is not an idea. This is like we’ve turned the corner.

We've already started targeting certain customers. And we want to close deals in Q1, Q2, Q3 and Q4, as part of our turn.

I just wanted to ask one question. So I just wanted to ask one quick question on the profile for [indirect] investments for the remainder of the year in terms of magnitude and timing, and when we could expect to see the margin profile on Analytics gradually get back to where it was last year, the year prior.

Thanks.

So magnitude of the investments?

Yes.

What I’ve said, I said in the QA. But what we’re talking about incrementally is 3% on a normalized run rate from last year, 3%, 4%.

So to get your calculator, our revenue last year was about $170 million, and run by memory roughly around there. And so that's the magnitude of the incremental investment.

I will get the back to normalized margins, I’ve got to solve bunch of stuff if you do the math. So that’s where we’re thinking is.

We’re carrying that way on this plus the FX headwinds in 2018, and we’re still trying to figure out how to get to the rule of 40, so no figure. So those may work against us.

We might not get there. But we’re definitely not given it up.

I tried to -- I gave some anxiety at the beginning of the last year and we overrun that. I’m trying to give you material information, but we’re not given up on it and that's why on top this spending, it’s a multimillion dollar investment, that’s incremental, right.

So that means we feel pretty good about our business. So I’d say -- I've said it I think to a few people, maybe all of you couple of times.

If we didn't feel incredibly confident of where this has taken us and how fast we can get there, maybe we would be a little more Canadian in our approach here and be temper our churn to the cloud. But we feel good about the year 2018 and feel great about how we’re going to be able to monetize it.

What I’d add is the significant investment for the development is baked in now. In terms of additional headcount, it will be just incremental with revenue.

So our plan is really as we proceed through the years is to scale up our margins back to normalized levels.

Yes, we’re like 20% margin in the quarter with a fully loaded investment on modest recurring revenue growth. And we want to pick that up through the year and get back to mid 20s, because we have to get to any shot at the rule of 40 on the year.

So this is a couple of quarters of strong property tax performance now. Just wondering if you can give us an update of where the pipeline of cases lie with the Ontario cycle and the UK cycle, and whether you expect, if they haven’t already started trickling, and whether expect more cases to start closing soon?

Part of the quarter was like the beauty of having a larger business, and great market share. We did really well in, as Angelo said, in BC and Alberta, and Western Canada.

And particularly, BC is a very volatile market that created way better upside than we even forecasted coming in the quarter, the way the assessment season set up. And its front end loaded.

So it's a really -- although we’re starting the cycle on Ontario and the UK, we by virtue of how much work we do broadly globally now, you can start seeing contributions broadly. And then I don’t know exactly how you want to characterize that, Angelo.

But I think the line he used in his comments were UK is ahead of schedule, and it’s going well. We are seeing really good performance.

And rather than say that we’re away to the races in the UK now, maybe the way I’d like to say it is like we’ve given you a sign of things to come. So this is really, really -- position nicely the volume of new instructions and new appeals were taken off, is way ahead of our plans, which speaks well of 2019 and frankly, took a bit more cost out.

So we got a little bit more than we were -- as you know, what we’re trying to do in the UK is go for real organic growth. But we’re also going to try and take some cost out as we go along.

So that’s worked up pretty well. Our forecast hasn't changed.

We got a ramp up in the UK and Ontario that we’ve got to work through. But my guess is that we’re ahead of schedule broadly.

And finally, the U.S. had a really good quarter as well.

So the real story last quarter is we got good -- better than forecast performance broadly.

So just some clarification on the UK market. With CVS, you mentioned that you’re still going for market share growth, but continue to cut cost.

So should we expect some of those costs to come out later this year, and how do you expect to grow market share as you cut those costs?

We’ve already started, I mean you would've seen any real significant impact in Q1, because they started to occur in Q1. But just really across the board, whether it's back-office departments, whether it's on our surveying and our business development, marketing, we’re taking the best of the best from the two sides.

And we are getting those synergies. So from a cost standpoint, you will see it.

Having said that though, we’re not scaling back as much as we could on the business development side. We feel that there is still a lot out there for us to grab, and this is the time to do it.

So we’re going after it. But having said that though, we’re at a point right now, because both ourselves and CVS had pretty much started before the end of the last cycle in terms of getting new instructions with new clients.

And so we're at a very strong position right now and we’re continuing to grab market share. It doesn't -- you don't see it all on day one, you just see it over the span of the cycle.

And as I indicated, just from an EBITDA standpoint, we said that this year was going to be neutral from a CVS standpoint. We still believe that, because the front end is a little negative, but we’re now -- it’s a continual scale up with the cost synergies, with the pricing synergies that we’re getting.

So we’re going to see enhanced margins and just overall increased market share so again strong pipeline and we’re very excited about it.

We track -- we have six or seven leading indicators that we track monthly on CVS, virtually every one of them is ahead of schedule. But again, take that as a proxy on 2019 and how that’s going to -- how strong we can get, because basically what you’re going to see is substantial revenue growth and back to normal even better margins.

So it feels pretty good.

I’ve got a couple of minor ones and then maybe one or two bigger ones. Just Angelo, just really quickly, do you guys disclosed the actual license revenue figure, combination of perpetual and subscription?

No we don't. We don't disclose that.

Any plans to or?

Well, we’ve just gone through a little bit of a change in our disclosure given IFRS 15, and we’re disclosing recurring and non-recurring. We’re still actually disclosing recurring in the body of our MD&A.

But we don't, at this time, have any plans on for the disclosures. Having said that, now we’ve gotten some indication in terms of how our heightened sales performance in the quarter…

We’re fussing with that a little bit, Deepak, in context of as you start thinking about bringing cloud product to the market, whether -- if we flip over and go to a common pricing model then we may drop or we might break our recurring revenue as part of the -- breakout more information on recurring revenue. So people will get more visibility.

But we’re just not doing yet.

And then on the subscription side, that still include some maintenance revenue, right?

In the recurring…

On the recurring side, yes…

Yes it does, it includes subscription and it includes -- and so what that -- basically that’s recurring apples-to-apples the way we reported previously on the same basis.

We’ve previously told you that subscription revenue is down, because of the DCF migration -- maintenance revenue…

So two bigger questions I want to ask, and I don’t know how much time you guys have in terms of energy, because it’s been a long call. So maybe you could pick one of them, or answer them both.

I give you the option, because I'm so Canadian. So the first question I had, I guess it comes from talking to your customers last week and last year as well, and you guys mentioned this a lot.

There is a challenge in terms of integration with ERP systems and integration some other data sets out there in the industry. How big of an issue is that for you guys and does your integrated platforms solve some of that, or does something else solve that?

If you want to take -- that’s an option one. And option two would be, you haven’t really talked much about Carl Farrell.

I mean, he was a big part of your show last week. Maybe just some of the rationale but why bring him from the Board onboard and what he brings to table.

Is it just ops analytics you’re looking at or broader across the firm?

The first answer is simple. Part of the reason of creating the cloud platform is that’s the right place to do industry integration.

First partner we’re talking about dealing with his BTS, where we would do native level integration back and forth and build some pretty cool new functionality together. So best place to put APIs in the cloud and its part of the functionality we’re going to bring out in the second half of the year for sure.

And then just one other comment on that, it's really fascinating how the large players in the industry [RD] and MRI talk about this. They’re pretty close in their approach.

And part of our idea is to make it really easy to work with us. And frankly, since we started the upgrade in the UK, they’ve gone from we should think about talking to you to please work with us, because of our standard in the industry.

So we’re going to find a way to monetize that problem, and we’re doing some pretty close stuff around it. On Carl, he’s too busy to talk.

We got him so busy that he can’t even make it to this call. Like you know what funny is Carl -- we did -- this wasn't like a step down off the barn, we did over 12 month search for president of Altus Group.

And what was amazing about that is the quality of candidates that we saw. We have for shortlist candidates, all of which were global executives.

Carl was amazing, because clearly his analytics background, his detail orientation around development, his focus on modernizing services, which he has helped other companies doing, terms of our working relationship, it's amazing because we already have a well-established working relationship. He was like a partner with me on solving some of the big strategic issues on the Company.

And I’m thinking I might get a little bit of a break when this guy came into the company, but we’re both working. We both fill the jar really fast.

And the best way to think about it, he's working on a global strategy to take our technology to 8,000 customers in the cloud, and I’m spending a lot of time on the largest companies in the world on the integrated solution. And there's plenty work to do on both.

So really good synergy, team loves working with them already and we’re often running.

Thank you, guys. I appreciate you taking both of those options, and taking all my questions.

Have a great evening.

Just wanted to close off with one higher level question here, and you talked a lot about the 2018 growth profile and how you expect that to accelerate heading into 2019. When you think about the large enterprise deals that are expected to drive some of the growth, 2019, 2020.

What's the chance or probability that some of those deals get pulled into 2018 and actually drive that growth, expected growth higher?

So the growth that we've already talked about, if you come back to 2016, 2017. At the beginning of 2016, we’re getting like 50%, 55%, 60% of our growth from the upgrade in North America.

By the end of 2016, we had moved that -- we have grown the business overall, and started moving that down to 30% of the growth and little bit of spikes in Q2, Q3 where the end of life on ARGUS Enterprise -- our DCF finished in the U.S. But we've been already down this path.

The growth will come -- the growth for 2018 and 2019 will continue to come from existing customers, expansion and new functionality, which we’re already doing. It’ll come from new customers and new markets, like Europe and Asia and it will come from these enterprise deals.

So the enterprise deals in 2018 will -- so those other areas I talked about, we expect good growth in both those areas as we go forward, same customer and new customer. And then the large customer deals will be on top of that.

And that’s the gap that we got to close, get really good at driving, and we need to build the product functionality to serve that need on a global basis. So we basically are replacing our upgrade revenue with expansion of the other two revenue streams plus its global opportunity that’s in front of us.

Okay, that’s really helpful. I know it’s getting…

And then the next wave after that is cloud revenue, which is going to be -- should be strong. We also -- so anyway, we got a good roadmap for 2018, 2019 and 2020.

We got a pretty good plan.

My presentation is over. Thanks for the questions.

We’re very excited. The ARGUS Connect conference last week, I have people calling me this week talk that weren’t there that were talking to their counterparts and saying I can't believe I missed it; you guys are talking growth; you’re talking innovation; you’re changing the industry; you’re bringing new partners in.

Our team is really, really highly confident about the actions we’re taking, the pace we’re on and where this takes us. So we appreciate the support from our investors, the analyst.

And I always finish by saying thanks to an amazing team, our employees are incredible. So thanks and thanks for joining.

Good night.