Q4 2020 Altus Group Ltd (Ontario) Earnings Call
Thank you for standing by this is the conference operator.
Welcome to Atlas group fourth quarter, and full year 2020 financial results Conference call.
As a reminder, all participants are in listen only mode and the conference is being recorded after the presentation there'll be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad should you need assistance during the conference call you may signal, an operator by pressing star and zero.
I would now like to turn the conference over to Camilla Bartosiewicz. Please go ahead.
Thank you operator, and thank you and good afternoon, everyone and welcome to Altice Group fourth quarter results conference call and webcast for the period ended December 31st 2020 day news release announcing our results was issued after market close this afternoon and it is also posted on our website along with our MD&A and financial statements.
Joining us today, our CEO, Mike Gordon and CFO Angelo Bartolini will start with some prepared remarks, and then we'll move right into the Q&A session.
If we miss any questions. Please contact me directly by email and global began covering all of our financial performance in the business outlook for 'twenty 'twenty, one and then you'll hear from Mike who will provide an update on our strategic priorities for the year and in fact today's announcement on the post acquisition finance assets.
Before we get started please be advised that some of our remarks on this call may contain forward looking information also be reminded that all group uses certain non IDE for our non-GAAP measures as indicators of financial and operational performance forward looking statements and an explanation of these measures are detailed in todays news release and in.
On a related reports on theater.
And with that I'll now turn the call over to Angelo.
Thanks, Camilla and thank you all for joining us this afternoon.
It was a solid finish to the year, considering the backdrop of a challenging external environment for our industry. We are pleased with our performance in 2020, delivering 7% top line and 17% adjusted EBITDA growth and a notable improvement to adjusted EPS.
At $1.67.
In many respects it was a key year of transition for us as we transitioned our employees to work remotely we fully transitioned our software sales model to subscription pricing.
Successfully worked through a CEO transition.
This period of change our execution was strong and our solutions and services stood up to the test has been mission critical for our clients reinforcing the strength and stability of our business model, we have strength in many of our competitive advantages and remain very well positioned for growth in 'twenty 'twenty, one and beyond.
As you will here for Mike today, we're very excited about the opportunities ahead of us this year and we're starting the year, Oxford with strong momentum and accelerating our pace.
Turning to the quarter and the business segments on.
On a consolidated basis revenues were up to 139, and a half million adjusted while adjusted EBITDA improved by nearly 20% to $26 7 million improving our margins to 19, 2%.
I'd also say analytics revenues were up to $61 5 million and earnings improved by 8% to $5 8 million.
For full year EBITDA margin of 18% came within our expected range.
But most notably overtime revenues are key metric.
We're up to.
Sequentially and up 11% year over year to 43, and a half million in the quarter.
To add some color on the revenue performance.
As you're aware, but for.
Fourth quarter still included the impact of the subscription model transition for.
For context in Q4, 2019, we had roughly $3 5 million in upfront perpetual license revenue that did not reoccur in the comparative period of Q4 2020.
Although there will be some lagging perpetual deals and the comparative Q1 2020 number this.
<unk> will be will be largely behind us and will provide for a smoother year over year comparative performance in 2021.
As we had discussed on the last earnings call. We continued to feel the impact of the pandemic primarily on our point in time revenue streams, such as software consulting and training services, which were down year over year.
To a lesser extent than in Q3, we also felt the impact of lower sales volumes in the SMB space and over overall prolonged sales cycles, especially for the larger deals.
That being said our pipeline is building and remains robust and we saw a healthy pick up in larger deals come late in the quarter figures for the two big deals, we announced with global service providers Newmark in J O L. Both which came in late December.
FX was also a bit of a headwind in the quarter and is expected to remain a pressure point going into Q1.
Most notably our overtime revenue base continues to build with sustained double digit growth.
The strength in overtime revenues reflects our strong software subscription subscription revenue base is a reflection of the economic model of both current and past deals higher subscription license sales, reflecting sustained customer expansion and a steady addition of card clients a steady maintenance revenue base supported by an industry leading retention rate.
For Argus enterprise.
So we see some fluctuations on our retention rate throughout 2020, we expect it to remain stable in the mid <unk> range and finally, we had continued strength in our appraisal management solutions and data subscription products. The external environment has truly reinforce the strategic value, we bring to our clients through our analytics and data solutions, which had been real.
Alight upon heavily in managing risk performance during the pandemic.
Our appraisal management solutions grew strongly as we added new clients continue to expand engagement with our existing clients grew international revenues and increased the number of assets on the platform.
On the earnings front I would add that the improvement includes the benefit of the restructuring program that we initiated near the end of Q2.
I'd also remind you of our intention to reinvest for emerging opportunities and to strengthen the capabilities in support of our long term strategy and.
And of course, it reflects some of the cost savings realized from reduced travel and marketing events.
With respect to our customer cloud migration journey, we continue to make progress. Some highlights we finished the quarter with 14% of our Argus enterprise user base contracted on the Argus cloud platform up from just 10% at the end of Q3.
During the quarter, we also surpassed 8000 customer milestone for AE cloud and.
An important momentum indicator as you might recall it took us approximately three years to reach that with our previous on Argus on demand hosted product.
This includes both new AE customers as well as those who have migrated from their legacy on premise version.
While our cloud adoption continues to be SMB, driven we're starting to see more activity with larger clients such as the two notable deals with new marketing and J O L.
Both our global influential service providers, who will help drive broader adoption in the CRE ecosystem.
The API capabilities were a key consideration to both wire for both large deals mentioned.
As they solve for significant pain points, our customers deploy multitude of technology applications to support various workflows and desired transmit information seamlessly and efficiently.
The next day P. I connector on the roadmap will be with you already targeted to be launched next month due to the already API. We talk of two way conduct connector to support the transmission of rent roll financial and valuation data between our systems and this will add significant benefits to you already users.
As we look ahead, we feel good about the opportunities for 2021 is our pipeline builds sales activities ramp up and as SMB volumes in software services begin to gradually rebound as.
As the global economy starts to recover activity levels are expected to rebound as companies worldwide push for more data driven visibility on their CRE assets endeavor to streamline operations with technology and prioritize cloud based solutions.
The revenue impact of the model transition is now largely behind us, which should allow for a cleaner competitor comparative view.
And with respect to Covid, we anticipate a lesser impact in 'twenty 'twenty, one than we experienced in the past year.
We have provided more information in the outlet sections of our MD&A, but in summary summary, we're expecting an acceleration of revenue growth, particularly double digit growth and overtime revenues and year over year and adjusted EBIT margin.
As you'll hear from Mike shortly we're implementing a number of changes to our go to market plans and expect to make significant progress in driving browder cloud adoption in 2021.
As we've said before the acceleration of digital transformation in the CRE industry is a positive catalyst for our long term strategy.
We remain favorably positioned for continued long term growth.
Moving onto our CRE consulting segment.
Property tax Q4 revenues were up 6% for 57, and a half million and earnings were up 24% $12 2 million.
It was another record revenue year at an impressive with an impressive 31.4% annual margin.
Growth in the quarter was driven by a double digit increase in the U K, where we had higher case settlement volumes in the U S. Our pipeline is strong.
But we saw some COVID-19 related delays on settlements, which could have some implications to our seasonal patterns and future in future quarters.
And in Canada, we had growth in Ontario, but it was offset by lower comparative performance in Manitoba, which was at the peak cycle in prior year.
I would also remind you discussed on the past earnings call. We had some expected Q for settlements come forward into the third quarter in both the U K and U S.
Overall it was a fantastic year is characterized by higher appeal settlement volumes higher success rates and higher savings for our clients.
Our growing pipeline of business as measured by volume of Appeals on hand.
Total value.
We continue to onboard new clients and more properties onto our platform, thus increasing our market share property.
Property assessment values continue to rise and we see greater opportunities for savings, particularly in disruptive times like these.
And with the investments, we're making on our technology platforms, we expect to see the continued benefits of improving our CRM and business development capabilities, creating greater efficiencies in our workflows and capturing greater appeal savings through data and analytics.
These trends set us up.
On very strong footing for sustained multi year growth.
To deliver another record year in 2021.
Our outlook is supported by a healthy pipeline of cases to be settled.
Anticipated catch up from Covid related delays and higher annuity billings in the U K.
Long term, we can continue to see great opportunity as we differentiate ourselves from our competitors with technology and data grow on market share and enhance the repeatability of our revenues and our operating leverage.
And finally, our valuation and cost advisory businesses continued to deliver steady performance in these unprecedented times.
A solid reflection of their market leadership there.
They are expected to continue growing modestly driven by operating leverage enhanced efficiency and productivity from technology and improved cross selling across the organization.
Turning to our financial position our.
Our balance sheet remains in great shape, and our cash flows are strong and for.
Our cash generated from operations through handsomely by over $21 million in 'twenty and 'twenty one.
We have a strong cash position of $70 million with a 123 million in bank debt, representing a funded debt to EBITDA ratio of 1.09 times well below our maximum limit of four times on a net cash basis, our leverage ratio as 0.55 times debt to EBITDA.
This provides us with plenty of room to continue investing in our growth.
Organically and through acquisitions with respect to the proposed acquisition of finance active we expect that ask for its cash funding our funded debt to EBITDA ratio would only move to approximately two times still maintaining a very strong financial position.
As I start to wrap up reflecting our commitment to providing investors with more transparency on.
I wanted to highlight some disclosure update that we plan to rollout with our first quarter results in may.
First we will begin to provide a bookings metric for ultrasound analytics with <unk>.
Patrick will include bookings for all of the revenue streams, both overtime and pointing time revenues.
Secondly, we will begin to allocate the variable compensation accruals or in other words bonuses for the altice business segments and each of the quarters throughout the year, rather than making the allocations only in the fourth quarter.
In order to provide visibility of this change to our comparable 2020 numbers.
We are uploading a table on our investor website.
With comparative performance to assist those modeling us.
Okay.
With that I'll now turn it over to Mike.
Okay.
Thanks, Angelo and good afternoon, everyone.
As you said it was a year like no other and we are proud of the accomplishments achieved in 2020 that have put us on a strong foundation for the year ahead.
I wanted to use my time today to lay out our strategic focus for the year and how the proposed acquisition of finance active fits into our strategy.
With respect to long term strategy as I mentioned on the last earnings call I am not looking to make any substantial changes as I agree with your offices vision.
Rather I look forward to building on it and we'll be accelerating our efforts in emerging opportunities in the debt and data adjacencies.
That we believe will provide altice group with important building blocks for the future.
We are excited about the opportunities ahead of us this year.
Which combined with our strong financial position and a positive market outlook makes this the right time to accelerate our strategy in support of our vision and long term growth.
Directionally, we will continue down the path to become a leading CRE information services provider by building market leadership of our key offerings.
Our vision is to be the global leader for the evaluation and management of risk for CRE assets by enhancing the decision making across the value chain.
Through the use of technology.
Data analytics.
Analytics and services.
Operationally the strategic initiatives, we are focused on in 2021 will be foundational to our long term success.
First as a top priority, we remain focused on accelerating AE cloud adoption.
Nothing is more important to us than that and we plan to make significant progress in 2021.
With the signing of the new Mark Ngls deals late last year, we have good momentum with our sales force and we expect more large deals fall of this year for.
For the goal of the contract about 30% of our top 25 customers by the end of the year.
To help drive this we have developed a dedicated team and our focus on supporting our large customers with their moves to the cloud.
With more users moving on our cloud product product and platform. This.
This opens up a number of growth opportunities for us.
Allowing us to further increase the proliferation of applications across our clients' workflows and the CRE value chain.
And to grow our appraisal management and data solutions.
Our focus remains on adding more users and new logos to the Argus ecosystem.
Enhancing cross and Upselling.
Pursuing more multi product enterprise deals.
And expanding internationally in Europe, and Asia Pac.
To help accelerate adoption. We are also evolving our go to market plans to help us capture more opportunities and really to be more aligned around an integrated business model across all of <unk> analytics.
Historically, the focus has been driven by product offerings, but.
But as you know we've been diverting from points point solution, selling and driving towards platform solutions that drive strategic value for our customers.
For organizing our go to market strategies under our regional geographical focus model with integrated account planning.
And greater alignment of product management with sales and marketing.
We will continue to have an enterprise account management team for global platform deals.
And we're launching a dedicated customer success team to identify differentiated and quantifiable customer value propositions to better support our customers.
As part of the integrated approach, we will be bringing more consistency and rigor to our sales forecasting pipeline.
Pipeline development sales model.
And internal training.
Many of these changes reflect the evolution of our growth, making this the right time to better align towards an information services model that is focused on driving recurring revenue.
With respect to our product roadmap.
To drive faster AE cloud adoption, we need to give customers compelling reasons to migrate.
You can do this by better differentiating the value proposition between AE cloud and the legacy on premise version.
This requires product innovation.
And for the future version releases to have greater functionality developed exclusively on the Argus cloud, including additional Apis.
And the interoperability that facilitates the enhanced workflows and collaborations.
Yeah.
Strategically, we're driving towards addressing key CRE workflows to extend our reach in the CRE value chain and above all to keep people on Argus for all their needs.
We're moving from high value point solutions.
To a more ubiquitous model that unifies, our valuation and asset management capabilities onto a single cloud based platform.
Integrates numerous key workflows and enhances data driven insights for the CRE industry.
Okay.
Second we are accelerating our move into CRE debt management.
Today's announcement of the proposed acquisition of finance active is a very exciting one for our company and it has potential to provide us with a strong growth platform interest adjacency with an established market leading SaaS solution.
As many of you are aware, we identified debt as a natural and attractive adjacency for our Altus analytics business.
Which is predominantly focused on the equity side of the equation.
Although we currently provide valuation and risk management solutions to some customers in the debt space and with Argus include.
Including a couple of new debt clients last quarter.
Deeper capabilities are required to fully address this growing market segment.
Our customers and the industry will drive significant value and be better equipped to manage risk performance.
From a fulsome 360 degree view of their assets, the combined equity and debt.
We are very well positioned to leverage our leading and global position with Rguest and appraisal management to further penetrate this adjacency.
Which we plan to do both through organic initiatives and through this proposed acquisition.
With that added to our tech stack, you would enhance our global platform and help us broaden reach across customer segments use cases and workflow.
Finance active has been on our radar.
We have followed the trajectory of their growth.
Got to know the team.
Carefully assess the market opportunity in debt and strategize, how we can leverage our global position to penetrate this adjacency.
It became quickly apparent to me that finance active met our strategic criteria.
And net buying versus building would fast track our move into debt.
Something I believe needed to be accelerating to stay ahead of the demand.
Really.
They met all the criteria and what we look at for a strategic acquisition.
Market leadership, and a strategic adjacent end market and geography.
Our mature native cloud solution that fits in with our overtime revenue model.
And addresses a critical workflow for our product roadmap.
Our strong install base with mutual cross selling potential.
And of course, a strong cultural fit.
We're excited about the growth platform of this proposed acquisition and particularly with the talent on their team, which gives us increased confidence that we can integrate successfully and drive solid execution.
We are working towards closing this transaction in the second quarter.
Third as we think about the opportunity ahead of us in data, we need to accelerate our efforts to launch new data capabilities and revenue streams.
This is something we need to start positioning ourselves for now.
In support of that we have a dedicated project team in place and initiated internal work streams to establish market use cases feasibility studies and a technology roadmap.
On a very high level, it's about adding value through data driven business insights.
We believe the opportunity lies in providing our clients with data architecture and data model solutions enabled by Argus cloud.
She will allow clients to aggregate data sourced from internal systems are.
Our own office data and potentially other third party data providers.
Such a platform with predictive analytics and alert capabilities would enable stakeholders to drive improved investment performance and better manage risk we.
We do not anticipate this to require any material step out investments this year.
In other words, it's in our budget.
And for.
We are continuing down our path on market share growth and digitizing property tax to sustain our double digit revenue growth and high margins.
I believe we can meaningfully enhance the value of this business by making the delivery of our services more tech enabled and supported by data and analytics.
This is a strong performing high margin business with strong cash generation.
Very repeatable revenues and a long growth runway.
Yet there is still more that we can do and will do to modernize it and make this business more predictable.
A key initiative this year will be to align our national operations under a common global operating and technology models.
As we look ahead, it will be a big execution year and to support the go to market changes, we're making across the organization. We have also recently built out our team.
As I reviewed our operating structure against the opportunities driving our next phase of growth in real.
Quired us to realign under new leadership framework and add some new skills.
So we made some changes and built out our team with some new hires.
Particularly with technology and data experience.
You might recall, we made some room for the change through the restructuring program in 2020.
As you have seen through our announcements we brought in Jim Hannan as president of Altus analytics.
Promoted Alex probe into the role of global President of property tax to be supported by restaurant for us as Chief operating officer.
And in March Jorge Blanco will join in the newly created role of Chief product Officer, working closely with Steve Bezner, Our Chief Development Officer.
The New addition to fit well with our business leaders, helping us round out our bench strength for the opportunities ahead.
We continue to invest in our people.
Sales and go to market capabilities, particularly as we have a lot of opportunities ahead in each require specific expertise and boots on the ground in our strategic markets.
With respect to our App, our aspirational goal for Altus analytics business I've spent a significant amount of time with our team to understand and test our different paths for $400 million by the end of 2023.
So let me clarify our path to that number.
Our path includes accelerating AE cloud adoption.
Accelerating our move into strategic Adjacencies in data analytics and debt valuations.
Expanding our strong growth in appraisal management into Europe, and Asia, and continuing to build out data solutions initiatives.
We will achieve these objectives through targeted internal investments and through strategic acquisitions of technology companies with an emphasis in the data and debt segments.
We feel confident in our ability to drive double digit organic top line growth.
By accelerating our move into strategic Adjacencies organically and through acquisitions.
We feel we have a strong and balanced path.
So our aspirational goals.
In closing I will.
Want to thank our customers for their continued commitment to altice chickens.
To congratulate our employees for solid execution during a year like no other.
And say that we look very forward to welcoming the talented finance act with team to office group.
On that note let's.
Open up the line for questions now operator.
Thank you we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you'll hear a tone of acknowledging your request if.
You are using a speakerphone please pick up your handset before pressing any Keith.
Withdraw your question. Please press Star then two real pause for a moment as callers join the queue.
Yes.
Our first question comes from Yuri Lynk of Canaccord Genuity. Please go ahead.
Hey, good evening everyone.
Hi, Jerry.
Hey, Gary.
So Mike interesting on.
Acquisition I guess.
Can I call it on acquisition or maybe you can just clarify on.
And that's exactly what our what we're waiting for before.
This closes.
And then.
Secondly, can you just talk about some of the the revenue synergies what you see.
And maybe Angelo can you touch on any other.
Financial Guideposts for finance locked with besides the revenue.
So share Yuri I think on on finance active as I said earlier, we're very excited too.
Getting into this proposed acquisition I think we're using the term proposed because theres a number of steps that we still have to complete with them.
Based off some requirements.
To be honest in France.
We do look at the proposed.
Acquisition to be.
Uh huh.
Very.
Aligned with our business as.
As we like the.
Certainly the SaaS model that they've developed.
Our customers, we feel are very much aligned and we think that there is a good amount of opportunity to cross sell and up sell our solutions into both customer sets.
You can bet.
That's your bottom dollar that we're going to try to get this done as quickly as possible.
But today, we feel really good that the steps that we're at and look forward to finalizing it.
So.
Yuri in terms of just the metrics given where we are where we are at in the process really all we are disclosing at this point is there a range of purchase price for.
100 million euros.
On approximation of their revenues, which is roughly.
25 million euros.
I did indicate though that this is going to be a deal that we do primarily in cash there is an equity component.
And having said that even after the the funding of this deal the balance sheet remains very strong and a very strong position we're.
We're estimating roughly.
At two times debt to EBITDA ratio, so still lots of potential for do more investments. After this acquisition.
And so is that a net debt to EBITDA.
That's your question.
Okay.
Okay, and then just on the on the outlook.
I appreciate the $400 million.
On aspirational goal I think I think it's fair to say previously that.
I think organic growth was going to play a bigger role in getting there just.
How has your view of the organic portion of that $400 million goal changed over say the last six months and what's been the cause of that and then I'll get back on the queue. Thanks.
What I would say about it is are we still expect organic growth to be.
Firmly in the double digits I think that when we look at our near term pipelines on our long term pipelines.
We feel very confident about double digit organic growth I think as I looked at the different plans and worked with the team to develop like our different paths, we realize that as these adjacencies started.
Really sprouting up like in the debt and the data adjacency it became evident debt to.
Great our position in there, which would actually also accelerated cloud adoption and acquisition became quite useful my view is that organic growth will still be by far the majority of the growth that we're going to do.
But at the same point, we will be adding in.
Acquisitions, and we've always been acquisitive group, but our acquisitions are going to follow more around technology data and analytics and fill gaps where we.
Feel that we were going to build something we might buy it at this point and so that's how I think we're pivoting right now as we move into 2021 and beyond.
Thanks for the color.
Okay.
Our next question comes from Daniel Chan of TD Securities. Please go ahead.
Alright. Thanks.
Just on the finance factors, just wondering by moving into the debt market any idea of how much it increases your you Tim.
Yeah, we believe that our Tam depending on how you calculate it.
It will move up somewhere between.
50 and 75%.
Okay. So significant increase there how should we be thinking about the integration finance active into the company and then kind of bringing our products together before you can start doing some of that cross selling.
I think that Daniel that's a fair question I think for US what we're what we're what we're discussing is.
Really looking at the use cases that our customers need and where our customers can.
Can use both products and that will be the focus of probably 2021 to really get our products cross sold and up sold through their channels and their products crossover enough suite through our channels.
Thank the important thing for us as we go to integrate the business.
We really want the team to continue to.
Work on their own but at the same point integrate some of the backend systems and really get there their services on our cloud as soon as possible because once we start doing that debt starts to be path towards interoperability interconnectedness and that.
It will allow us to unlock.
Other use cases that we can bring to our customers whether that's around the workflows that we discussed or some new data solutions, we're looking into.
Okay. That's helpful and then final one for me.
Any timing on the rollout of the migration of J L. L.
On your Mark to the cloud and how should we think about how it impacts the overall revenue and margins as you.
Take maintenance revenue moving into a subscription type contract. Thank you.
Very fair question, the timing into migrating of those two customers obviously, we have.
There are two of our largest.
Moves for the cloud and we're certainly working through that with them.
Right now as I said earlier, we are dedicating.
A set of resources to make sure that that move is.
Easy steady and valuable to them.
In the 2021 time frame I think Paul actors wanted to make sure that they get the value of what we're putting on the cloud as soon as possible.
As we move them on the cloud, obviously, we will be moving that more to a subscription based model.
And we feel comfortable with what that looks like with them.
We are definitely talking about.
About how we can partner with them more on some of the new solutions and I think our.
As we talked about earlier I think one of your questions was on pricing we are maintaining.
Maintaining where we think our pricing should be for our cloud based products.
Okay.
Our next question comes from Richard Tse of National Bank Financial. Please go ahead, yes. Thank you. So we're kind of at year end. This pans out right now on hard to believe but when.
When you talk to your customers how have they changed the way to think about sort of operating their businesses going forward and how does that impact altice.
Well, our customers I mean, depending on which part of the <unk>.
Commercial real estate, you're in either they've been.
Heavily impacted or they've been benefited by COVID-19.
Think that what we've seen and as I've spent time talking to our customers over the last couple of months.
Uh huh.
They they are in more need of the valuation and risk management solutions now than they have been in the past.
Valuation management.
Advisory appraisal management services, and our solutions around the cloud or being probably leveraged more than ever.
I think that day, I think that there with Covid, there's definitely a.
<unk>.
Macro economic environmental change, that's causing them to.
Look at every one of their valuations and I think we're very well positioned for that.
That's increased a lot of activity.
It's increased a lot of our advisory and then it's also on starting to build.
And make our pipeline is more robust.
While as a whole the market is thinking about what it needs to be.
For CRE and how that impacts the assets out there.
There's a lot of extra.
Extra activity for our part of the market because of where we sit.
Okay.
When you sort of look at the transition to cloud obviously, that's very important in terms of the strategy that you've laid out here.
What do you see sort of the most natural products to kind of upsell on that based on that once that transition is.
Complete or are largely complete.
So I mean, I think that we're building out more of an asset management based platform around our <unk>.
<unk> enterprise on the cloud product. So clearly we think that there will be.
Good upsell and cross sell around that upsell from the standpoint on Argus enterprise to more users leveraging the product not only just for devaluation, but the reporting.
More cross sell around our current products like boy on to.
Tally ounce and then certainly cross sell opportunities around our products and the appraisal management prospect area called data exchange as those move to the products they moved to the cloud as well.
And ultimately as we finish the acquisition.
Our finance active we expect cross sell and up sell there as well.
Okay, Okay, and just one last one for me on this might be for <unk>, but when I look at over time revenue can you maybe sort of split for us.
The proportion that's coming from net new sales versus our customers shifting on the cloud is that sort of on the right way to look at it.
Well right now it does include.
All sources.
On but Richard I'll take that under consideration.
For future disclosures, but at the moment.
It includes both.
And we have a healthy base of new clients.
It is embedded in that metric.
Primarily still given especially early days.
With some of these larger transactions, it's going to be skewed a little bit to sort of existing clients and migrations.
But particularly in the SMB market, we're seeing we're seeing a number of new clients in that segment.
Okay. That's great. Thank you.
Okay.
Our next question comes from Stephanie price of CIBC. Please go ahead.
Hi, good afternoon.
Well, that's what I saw on.
Hi.
Perhaps you have a focus on M&A, just hoping you could talk a bit about the M&A criteria that youre kind of looking at when you are assessing this deal.
For a question I think for us.
We're looking to be a little bit more strategic around our acquisitions.
When I when we think about acquisitions.
As we are continuing to build out their solutions. The first thing that we think about is what the technology with the data with analytics could be.
That could be added into our ecosystem as well as what we can add in around our services business that we have so what were looking at number one is for those those assets as we go into strategic acquisition. This.
The second thing that we.
We're looking for obviously.
Is.
If we can actually leverage any of those to help us and any new end markets or geographies that were wanting to go through.
We feel like that there is.
As we are looking to build out.
Our European operations that there is a number of assets that should help us over there.
When we look at these acquisitions as well.
Very simply that we're looking at recurring revenue.
And what that business looks like so that we can.
Make sure that we add to that.
So.
Acquisitions that have gone through a transition or are close to finishing there is something that we're looking at that allows us to start looking at a very strong install base for cross sell potential. We also want to look for.
Acquisitions that have strong.
Strong net and net.
Net promoter scores for customers.
And ultimately when we go through this.
It has to fit well within our Roadmaps and we need to know exactly.
How that would fit going forward. So as we look at those acquisitions.
We have a well thought through roadmap a plan for integration as well as how we're going to.
Shell and service customer so that's kind of like in a nutshell to for a five things we look at.
That's great color. Thanks.
Just on that cross selling.
Piece on finance active can you talk a little bit about what customers are using for debt and risk management now on whether you have any joint customers with final tax right now.
I would love to talk about more of that now, but probably at this point.
As we are a couple of steps away it probably.
I would have to be happy to talk through that with you at a later date.
What I could tell you is we feel very good about the cross sell potential.
Great and maybe just ask one more.
On the past I think the aspirational target for AA has included kind of EBITDA margin in the plus 30% range, just curious how youre thinking about that targets and on that margin range.
Stephanie we think about <unk>.
As we're growing double digits.
But organically.
At the revenue line, we would like to increase.
Our our EBITDA by a fast for double digit growth and so that's what we're looking at it in our plans going forward.
At this point, we expect that to continue to improve over the next two to three years.
We think that we are doing the right things too.
Really enhance our margins and as we move more to the cloud and start.
Turning off some of our legacy products, that's naturally the fit that you see what happens around this so more to come there.
Great. Thank you very much.
Our next question comes from Stephen Macleod of BMO capital markets. Please go ahead.
Thank you and good evening everyone.
Hi, Stephen Hi, how are you on.
Okay.
I just wanted to follow up a little bit just on the 2023 outlook I mean, obviously it hasnt changed from where you were previously but I.
I would say that the tone is a bit less cautious on it was potentially when you reported Q3. So I was just curious when you think about the cadence towards that 2023 goal.
Is it is it fairly is the growth fairly evenly distributed.
Between now and then and then I guess secondly, you talked about.
Acquisitions, maybe.
Maybe forming more of.
Or are a larger role in achieving that goal. How many do you expect to do other acquisitions. In you know you mentioned debt and data do you expect to do other acquisitions and debt above and beyond the finance active.
Sure. There's a couple of questions. There. So on me, let me start with a gallon I think I I think I. Unfortunately, only got was here for six weeks when I had to give the last.
Last update I think that as I've gotten to know the team more and spend time with the team there.
Something about operationalized, a plan right and we feel very confident with our operational plan and that's allowed us to start thinking about what the different paths are to that number so yeah I feel a lot more confident right now.
Back to the growth trajectory that we look at our.
Listen we are we're expecting to do you know.
Good double digit growth each year, and we expect that to continue to grow as we shift.
Customers over to the cloud.
Build out the adjacency products.
Service to customers across more enterprise solutions.
We think that that will continue to grow but we think that the.
We think that the percentage of gross year over year will be.
Fairly consistent.
And then to your third point around the acquisition, we plan to be acquisitive.
Sure.
Angela had a good overview of where we sit with.
With our balance sheet, we have a very strong balance sheet. Thanks to what he and his team has done.
Debt, we're going to leverage on our balance sheet to continue to look for.
Those acquisitions that fit into the criteria that was asked before around technology data and analytics and we look forward to adding those things as we are.
Filling out the things that we can buy out there too.
Fill out our product roadmap.
Great.
Mike.
And then maybe just secondly, you achieved a couple of significant milestones in Q4 or.
Q4, I guess it wasn't on subsequent.
The two large service providers signing on are transitioning to cloud.
You you surpassed the 1000 customer.
Customer milestone for cloud.
I guess this is actually a two part question.
Would you expect that.
The two large transitions signify that you are getting more success with larger customers despite that longer sales cycle and then maybe secondly beyond 1000 customers.
Whats the next customer milestone.
I'm sorry, you made me smile on the next customer milestone you know these are the things we should be coming up with really quickly to keep you guys at <unk>.
Excited.
First question for.
Listen with it with the two large customers coming on.
We're gonna be expecting more large customers to move on I think that when you when you talk to large customers they understand the value.
But you know they have large complicated.
Distributed.
Enterprises, and as such we really do need to think through how we implement that with them how they how we help migrate them from previous.
Versions of Rguest and you know I think from that standpoint, I think we have we have a pretty good sense of how to do that and you know.
These customers felt that this was the right time for them to move I think that will start to see more customers like that move overtime, especially from the standpoint of just that but also we're starting to like build out what they were hoping that we'd be on our cloud.
As Angela and I've talked about today, those those those connectors coming out and those Apis to other.
Solutions as we connect our ecosystem with others that are out there to make it easier for them to do work.
The collaborative interfaces that we're adding into this the ability for them to look down their chain I think that's all incredibly valuable.
Technology that comes out pretty quickly. So we expect that more large customers would adopt as these guys have and will focus from there as.
As for the next you know the next level I mean, certainly listen I think we will give that will give that information out as we go.
But I think we expect to be.
Thank you should start expecting to see sort of the numbers moving up by a couple of percentage points.
Every quarter our goal is to be a lot more aggressive on that I talked about earlier that we want.
30% of the remaining of our top 25 customers to move to the <unk>.
Cloud we want the next set to have a higher degree than that.
And you know I think this is that the goal is to create that ecosystem and work with those large customers to make sure that they see the value there and get them on as soon as possible.
Yeah, Okay, that's great that makes sense. Thank you so much.
Okay.
Our next question comes from Paul Treiber of RBC capital markets. Please go ahead.
Oh, Thanks, and good afternoon, just wanted to focus a little bit on on the data opportunity you talked about making some early investments now how should we think about the timeframe for monetizing data like is it something that you would anticipate some revenue in the next couple of years or is it is it out longer than that.
It's not it's not longer than that we expect to monetize.
Some of the opportunities that we've identified and are working with with customers.
Hopefully by the end of this year, if not at the beginning of next year.
And based on your experience running other data businesses.
What the what Youre, starting with Altice is you effectively have a large pool of data as cloud adoption increases and then you also have a large customer base. So how rapidly our easily do you expect the data business for scale from that position.
Well I mean, the good news is in you know, we do have a data business in Canada.
That's very successful so we have a lot of experience around this and it just aligning that experience to our Argus cloud.
Think for US it's not just about it's not about.
Building out extra datasets, but it's really trying to drive insights to the data and the changes in the data that our customers are seeing.
To me when we are when I when I have been part of other data businesses, that's the value and it's really the value to help them make the decisions every day and so our data business Center.
It would be remiss to say, our data and analytics business is it going to be focused around that there's a lot of great data providers out there in this industry and they'll they'll do.
What they do our view is to provide more insights around the data that we're seeing flow through our channels.
Helping customers like.
With benchmarks for scores for alerts and really helping them understand when things are changing especially in the environment that Covid has left the commercial real estate.
Sure.
The market and so that's how we're going for it.
Alright, Thanks for taking my questions on my phone.
Our next question comes from Deepak Cushal of Stifel GMP. Please go ahead.
Oh, Hi, good evening, everyone. Thanks for taking my questions.
Mike I know, it's early days on finance octave and just took a quick glance at the website. It seems like they have.
A reasonable portion of their business with non CRE <unk>.
<unk> on their segments can you can you are you able to discuss that a little bit and is there kind of a vision to get into broader data services for.
For for broader industry segments here, how should we think of the top.
So.
I think I'd, probably discuss as much as I can on on finance active.
As we're still is there still is we're still progressing on certain things what I would say is.
You are right. They do they do have a broader set of customers and we see an opportunity.
To really move into new spaces.
With our business that are probably adjacent in the to the commercial real estate business.
Through whether it's through partners or through our own expertise.
See you know.
Debt trading us into banking and the banking workflow and I think that the data that is there around commercial real estate would be very important, especially when you're doing the valuation. So that's something that we see as a good use case that we plan to do some work with.
We've had some discussions with partners we've had discussions on discussions with some players there and we feel very comfortable that that could be a great.
A great use case for us so that's probably one example.
Of us expanding out there's also obviously the opportunity to expand into more <unk>.
Public sector on.
Opportunities, especially when it comes down to some of our.
Software products like developer in the state Master.
So we think that there is a good.
Good work there and then you know.
As we think about just as.
As we can.
Kind of put that 360 degree view of.
Debt.
And equity together for the funds, we would hope that that would help us.
Enter more and more differentiated funds that are out there than just the current funds that we service today. So I think those would be the three for like that in terms of Adjacencies. Other just right next to commercial real estate or <unk>.
One step beyond that we would look at.
Having some fun with it.
Okay, Great and you've mentioned risk management, a couple of times.
Are you, referring to broader risk management services or or is this largely pertaining to hum.
Using the existing <unk>.
Free type of data that you have to provide.
Insights and risk management decisions for your customers, how should we think about volume.
On the on the average the latter versus the former I think we need to work in that area first before we run into something else.
Got it Okay and then just maybe my last question because I know, it's getting late a little late in the evening.
Obviously, youre announcing finance offered before its closed.
How should we think about the risk on deal closure and other segments we've seen.
People proposed acquisitions in France, and they didn't turn out so they didn't get close so how should we think about that what are the kind of milestones we should look for over the next.
Couple of months.
So any color there would be hard for us.
I think I think that's a fair question you know obviously anytime you buy in a new market you have to consider.
How to work with that market.
I have been previous lives closed the deals in France, and Central Europe, and I think that we'll be announcing steps along the way around.
How we get there what I would say right now is.
Based off the conversations I've had with <unk>.
The leadership there.
I feel like they're an amazing cultural fit with our organization.
We both see the world very much.
On the same way and we see the opportunity to really expand both our footprint and so I think youll see things over the next weeks and months that we will do this as quickly as we can.
But more specifically is there like an external requirement like a regulatory requirement or a government kind of security review or financial services revenue that we need to get a stamp on.
There's a couple there's a couple of requirements.
As I understand in France.
Around.
The staff, but we're working through that with them and we will get that started.
Okay. Thanks, I appreciate that I'll pass the line.
Our next question comes from Gavin Fairweather of Cormack. Please go ahead.
Oh, Hey, there good evening.
<unk> for me.
Just on the you already connector.
Obviously, a lot of your clients would be used.
Using your already for some of the back office work can.
Can you just talk about how important that connector is for your enterprise clients and just some.
Some of the workflows and that could unlock that's it for me. Thank you.
Really for a question and thank you for asking that one I think what I would hear from our customers is anything that can.
Can help.
Ease the burden of moving data back and forth across multitude of use cases between us and you're already and ultimately some of the API as we build out there for other systems is incredibly important to them.
Number one it will help them make decisions better in both systems.
Number two it will.
Ease the burden they have on <unk>.
Different versions.
Versions of the product going out there and number three is I think it actually provides a lot more value when they're going between the systems on their own environment and.
So for us like what we've seen and when we started to prioritize the roadmap for especially for cloud based products.
Youll see a steady stream of.
Connectors coming out there are universal API from Us I mean, I am very excited to be doing this.
With the guys from you already they've been a great partner on this and we're excited about this.
Great. Thank you.
Okay.
Our final question comes from Paul steep Scotia capital. Please go ahead.
Great.
Mike can you can you just clarify for us in the MD&A you talk about retooling and scaling your sales organization to better address market opportunities.
Should we take this to mean that there has been a larger reorganization or maybe walk us through what you're alluding to on that front because it sounds fairly broad in scope and then one quick follow up.
Okay Fair enough Paul.
We're evolving from where we were in the past I think that when you take a look at.
What we've heard from our customers.
We're becoming more of a trusted advisor on a number of things in the marketplace. We're also moving for more point in time sales.
For point sales around a product to more enterprise wide solutions that go across not only just our products, but other ecosystems as well.
And as such.
We we are really trying to make sure that.
We talk about selling you know you have a regional construct you have a and accounts construct and then you have a solution construct and what we've been trying to do with our sales teams is to work through.
What the best way to set that up is.
Identify where we have gaps so that we can make sure that.
All of our our customers have good access to the solutions that we have one of the other things that go into this is that I talked about earlier was.
The building out of a strong customer success function and this is a net.
Natural outcome of Av.
Switching more to the cloud because it's not only about.
Obviously building the pipeline and closing that pipeline, but it's also about making sure that our customers are every day seeing the value of that and so that's where a lot of debt activity has gone.
And then just quick follow ups just on M&A. Obviously, you can move quickly already on one possible acquisition that could close.
Maybe talk about your willingness and if theres been any change in view on your use of leverage and maybe even the use of equity to scale up and more aggressively go after the data opportunity. Thanks guys.
Good question I think for I think for US I mean, we are as we are looking at the market, we think that theres a lot of great opportunities.
Our core valuation space in risk management space, but also as we talked about in.
In debt.
Currently data, we do plan to be active in this space I think for us.
We will continue to we will use our strong balance sheet I think that if we find a great acquisition for ourselves and there's something out there that we have to use a combination of.
Debt and share.
Well, we definitely will consider right now I think what we're looking at is acquisitions.
In the size of what we do of the proposed acquisition with finance active.
There might be some smaller there might be some larger but I think.
What we're looking for more is the building blocks.
In data.
To add to that the assets. We currently have.
This concludes the question and answer session I would like to turn the conference back over to Mike Gordon for any closing remarks.
Thank you so much this was a.
I appreciate the evening was always with everybody I think that we're looking forward to.
The new year and as we said we are very excited about.
On our prospects for 2021 and beyond I. Thank everybody for their time on the call and I look forward to working with all of you in the future have a good evening.
This concludes.
Today's conference call should you have any further questions. Please contact Camilla bartosiewicz assets.
Great.
You may disconnect. Your lines. Thank you for participating and have a pleasant day.
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