Q2 2021 Altus Group Ltd Earnings Call
Yes.
Thank you for standing by this is the conference operator.
Welcome to the Altice group second quarter, 2021 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.
She didn't exist.
Joining the conference call you May signal, an operator by Christmas Dart zero.
I would now like to turn the conference over to Camilla Bartosiewicz. Please go ahead.
Thank you Caitlin and good afternoon, everyone welcome to <unk> group's second quarter results conference call and webcast for the period ended June 30th 2021 the news release announcing our results was issued after market close this afternoon and it's also posted on our website along with our interim M DNA and financial statements.
Joining us today is 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.
Angela will begin by covering off our financial performance during the quarter and then you'll hear from Mike on an operational update.
Before we get started please be advised that some of our remarks on this call may contain forward looking information also please be reminded that Altus group uses certain non-GAAP 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 a related reports of theater, so with that I'll now turn it over to Angela.
Thanks to my luck and thank you all for joining us this afternoon.
We're really pleased with the solid execution in Q2 and that the strong financial performance in the first half of the year, we're making great progress against our strategic initiatives, which gives us a solid foundation for continued growth over the long term.
Turning to the quarter and business segments, given the currency fluctuations in the first half of beer and our increasing mix of international revenue you have started to show revenues and adjusted EBITDA on an as reported basis, while also breaking out what the constant currency growth for a better comparative view about.
Performance without the impact of fluctuations in foreign currency exchange rates against the Canadian dollar.
We have done this by translating monthly results denominated in local currency with the U S dollar the British pound the Euro Australian dollar and other foreign countries at the exchange rates.
The comparable months as we've seen FX fluctuations have been a much more pronounced headwinds in the first half of the.
Particularly for the Altus analytics business.
So with that I'll continue to frame my comments on an as reported numbers and where appropriate we'll speak to constant currency performance drivers.
On a consolidated basis revenues and earnings grew in the double digits.
Revenues increased.
12% to 173, and a half million, while adjusted EBITDA was up 21% to $42.2 million.
And margins from 22% last year to 24% in Q2.2021.
Our year to date margins are also showing strong improvement at 19% compared to 16% in the first half.
And also as analytics, we had healthy growth on a catchy currency basis across all key business lines.
<unk> were up 16% to $59.3 million or 26% on a constant currency basis.
Organically revenues were flat.
As reported but up 10% on a constant currency basis again, and the acquisitions of finance active and strategy analytics represented 16% of the constant currency growth.
Yeah.
Our overtime revenues are a key metric for reporting recurring revenues were up 17% to $15.1 million year over year or 27% on constant currency organically.
Organically overtime revenues were down 1%, 8% again constant currency.
We also had an improvement in adjusted EBITDA, which was up 95 to $8.9 million.
Or 24% again in constant currency.
<unk> earnings were up 6% and 21% constant currency.
To add some color on the revenue performance as we experienced in Q4 and in Q1.
<unk> continued to be a headwind our key rate the U S. D to Canadian rate was 1.39 in Q2 last year versus one point to three this year, causing a significant impact on reported results.
Our overtime revenue base continues to build and.
And we're feeling really good about achieving double digit growth for the full year in 2021 again in constant currency in Q2 over time revenue growth was driven by strong contribution from finance active which is a growing SaaS business and an important component of that strategy.
Your subscription revenues, reflecting the stocking effect that the subscription revenue model of both current and past deals.
And overall higher subscription revenues from our software and data solutions as you'll hear from my shortly were making solid progress transitioning cloud client to AE cloud subscriptions.
And we had steady performance and appraisal management solutions with a healthy cadence of new client additions as well as our existing clients, adding more assets onto the valuation management platform, which was rebranded as far I guess value in shape.
In addition to the healthy overtime gross.
Total revenue growth also benefited from a COVID-19 related recovery in our software consulting and education services.
The strong growth at our 111 software.
Software consulting business, where we support companies on implementation of their technology Roadmaps is a really good indicator of healthy market conditions and companies investing in modernizing and upgrading their technology platforms.
And overall, we had strong gross retention across all of our software data and analytics solutions, many which are considered to be mission critical by our clients. That's.
As an example, our appraisal management business has had zero client churn over the past couple of years, a software maintenance retention is at an industry, leading mid Ninety's range and finance practice also enjoys midnight needs gross retention, our resiliency was proven throughout COVID-19 and with the added folks.
From a customer success program, we see more upside on both gross and net retention.
Following an impressive 42% growth.
42% bookings growth in Q1.
The momentum continued into the second quarter income.
In Q2, we posted a 772% growth.
89% constant currency.
Organic growth in bookings was 63%, 80% on constant currency.
As Mike pointed out in our press release, our organic bookings in the first half of this year equals more than two thirds of total bookings in all of 2020.
As a reminder, our bookings metrics includes all of our altice analytics revenue streams, both the recurring of retirement and the nonrecurring for overtime streams, we take the annual contract value for new sales. This includes software appraisal management solutions and our data subscriptions and then your contract.
We can only the incremental portion that was not in our revenue base previously so to be clear, we do not count renewals.
And for the nonrecurring one time revenues such as consulting training and due diligence work, we take the total contract value.
With respect to bookings it takes about a quarter or two for it to start to flow into revenue per.
Our recurring offerings the value of each new contract adds were already a significant level of overtime revenues and supports our ability to achieve healthy growth and overtime revenues in the coming quarters with non recurring bookings. This will be reflected in point in time revenue and in coming quarters as we deliver on these engagements.
On the earnings front as a reminder, our Q2 margins were impacted by one point.
1.4 million purchase purchase price accounting adjustment to Finance act as deferred revenues.
Bulk of that was recorded in Q2, and this will ramp down in subsequent quarters.
Overall, the purchase price accounting adjustment had a 2% impact on our Q2 margins, which would have otherwise been up year over year in.
In addition, we have also moderately increased our expenses.
The year over year basis to accelerate our data strategy, including building out the strategy analytics platform.
Factoring in the impact of the accounting adjustment, we continue to expect that our full year margins will be similar to last years, and we should see an acceleration next year.
On the whole, we still feel good about delivering double digit EBITDA growth this year.
Turning to the CRE consulting segment.
Property tax it was a record quarter marked by exceptionally strong annuity billings in the U K a.
As a reminder, Q2's, she is a seasonally stronger quarter attacks and our U K annuity revenue stream grows year over year throughout the cycle before it resets the first year of the new cycle.
Our Q2 property tax revenues were up 13% to $86.7 million.
We're at 16% on a constant currency basis and.
And adjusted EBITDA was up 27% to 39.7.
We had solid double digit revenue growth in the U K single digit in the U S. While modestly down.
In Canada.
The U K annuity was a significant contributor representing $25.7 million in revenues compared to $15 million in the second quarter of.
2020, and prior to that approximately $10 million in Q2.2019.
The increase reflects higher cumulative number of the 2017 cycle cases settled.
While strong U K annuity billing was impacted by COVID-19 government subsidy program, which provides a temporary tax relief for companies in the retail hospitality and leisure sectors.
In the U S. We benefited from increased she seasonal case settlements in Texas as well as a catch up on COVID-19 related delays from prior quarters.
In Canada revenues were lower primarily impacted by timing of Ontario settlements some of which were pulled forward into the first quarter as you might recall from our comments on that as well as by lower year over year comparative performance in Montreal, and Manitoba, which were more favorably positioned in your cycles in the prior year, partly offset.
A significant multi year case settlement in Saskatchewan.
Overall it was a solid quarter is characterized by the following appeal settlement volumes moving along and in certain markets picking up sustained high success rates translating to higher savings for our clients and growing pipeline of business as measured by volume of Appeals and total value that's increasing our.
Our market share.
<unk> progress integrating our national practices under a global operating model.
And steady progress against our Digitization efforts.
These trends set us on very strong footing to sustained multi year growth and to deliver another record year in 2020 one.
And finally, our valuation and cost advisory businesses continued to deliver steady performance a solid reflection of their market leadership.
Revenues and earnings were flat at 27.6, and $2.7 million respectively.
Overall, we benefited from higher underlying activity levels over the prior year. However, given the fixed fee entire material nature of these businesses. We did see some impact in the quarter from the cyber security incident like cause certain projects to be deferred.
We estimate the impact to be approximately 1.6 million in the quarter.
Turning to our financial position our balance sheet remains in great shape and our cash flows are strong.
We finished the quarter with a cash position of $74.1 million.
204.
$8.8 million in bank debt.
Ah report a funded debt to EBITDA leverage ratio was 2.2 or three times.
With that I'll now turn it over to Mike.
Thanks, Angela and good afternoon, everyone.
I'm really pleased with the robust topline and earnings performance in the second quarter, which in itself was a record quarter.
2021 is proving out to be reporting building year as we focus on accelerating cloud eight year adoption.
Rising and streamlining our property tax practice implementing a unified enterprise wide go to market plan and expanding into the deck and data initial adjacencies.
Operationally, it's been a very busy and productive first half of the year and I'm really pleased with the solid execution of our strategy and the strong alignment from our team.
With strong operational focus and solid progress against our strategic initiatives.
We continued to deliver solid financial performance against our key metrics.
Our record Q2, and strong first half of the year are the direct result of the hard work and strong execution by our more than 2600 colleagues, who helped drive immense value for our customers.
I wanted to start by thanking them for their efforts and for going above and beyond particularly in the final month of the quarter. When we got disrupted by a cyber security incident.
I'm pleased to share is largely in our rearview mirror.
Let me spend a couple minutes on that because it speaks to the resiliency of our business model. The amazing people, we have been working with at all this and how it accelerated our plans to further modernized and enhanced many of our back and operating system on the cloud platform.
Which in itself is an important initiative and we continue to grow and scale globally for the opportunity ahead of us.
Upon discovery of the ransomware attack on June 13th.
We took immediate action activating our cyber security protocols.
Notified law enforcement.
Gauge with cyber security expert and professional advisors to assist us in resolving the issue as quickly as possible.
Uh huh.
Customer business continuity protocol was implemented.
As a precautionary measure our I T back office systems were temporarily taken offline until we could rebuild them and greenfield environment.
I will emphasize that our client facing cloud based data and software system remained fully operational throughout this incident, which really helped mitigate client disruption.
As our global economy and businesses continue to become more digitized in a post pandemic world Cyber security threats are only going to derive quite materially higher damages for company.
Security has been a big cornerstone of our ESG and enterprise risk management strategies.
Which put us on a strong footing when this happened, enabling us to mitigate the impact.
As we bring as we began to bring our systems back online we have rebuilt stronger and in doing so we brought them up and completely new environments and accelerated our roadmaps and improving our internal system.
We have done this under the guidance of leading cyber security experts and with additional measures to enhance the security of our systems.
Loud and data driving our next phase of growth Cyber security remains a high strategic focus for us. So that we will continue to protect the privacy of client and employee data entrusted to us.
While the investigation continues I am pleased to share that based on the investigation. Today. There is no evidence of any customer or employee data having been impacted as a result of the incident. Additionally, I can confirm that all of our software and anti malware programs are backup to date complete and current and that the majority of the system.
They were taken offline are back up now and the new Greenfield environment.
While the incident caused some internal disruption, particularly as it happened in the final month of the quarter, which tends to be one of our most busiest time and forced us to incur some additional expenses.
The impact to our Q2 revenues would not considered material and limited to only certain areas of our business.
For example projects on a fixed fee or time and materials basis had some revenue impact while our systems were down.
To the extent that we miss out on some opportunities I believe we can recoup the mine future period.
I'll just say we have proven out once again, how resilient our operations are in the face of disruption.
We're very appreciative of the support and patience of our customers and employees during this time.
I would especially like to thank our I T group, who work tirelessly around the clock to get it back up.
True to our corporate DNA of always prioritizing our customers our people stood up to the challenges and found creative and innovative ways to get things done.
Sure. An example to give you a feel for the ingenuity.
And one example, despite not having access to our data and files and with an impending hearing deadline one of our tax professionals.
The way the manually to rebuild the valuation materials and successfully achieved a $16 million tax reduction for our clients.
Definitely ingenuity.
Turning to our cloud migration journey I'm pleased with the steady progress, we're making we're tracking right to our plan.
Accelerating Argus enterprise cloud adoption remains a top priority for us and I believe that as a go to market changes take hold we should see a good inflection point next year, especially as more of our larger customers have indicated interest and plan to move it in the coming quarters.
In Q2, we saw a good pickup for medium sized businesses, finishing the quarter with 26% of our total Argus enterprise user base contracted on the Argus cloud platform a good year over year increase from 8% in Q2 of last year.
I still feel confident about our goal to reach between 35% to 40% penetration by year end.
Migrate to hybrid majority of our user base by the end of 2023.
We are now approaching 580 <unk> cloud customers. This includes both new customers as well as those who have migrated away from legacy on premise version.
This represents a solid base of <unk> customers and thousands of users on the cloud.
We continue to have strong add on purchases for our software products, but equally encouraging we continue to add new clients.
Validating my view, we still have a lot of runway in our large addressable market.
It's also a solid proof point of our improved go to market posture, reflecting our focus on developing our inside sales customer success and new sales strategies.
You may recall that in Q1, we added nearly 270, new software clients across our products.
And in Q2, I'm happy to say, we added approximately 265 new logos.
This is substantially higher than what we were adding on a quarterly basis in 2020.
Even on the software product side, well led by innovation, most impactful to our clients.
As you know, we're focusing on differentiating the cloud version of Argus enterprise to give customers a more compelling reason to move with features and functions that are only available to cloud customers.
Our key software product initiatives. This year include new API enhancements, starting with the already connector, which we launched in may with others coming on later in the year and early next.
Argus data warehouse launched in May.
In our release of Argus Enterprise 14 targeted in Q4.
We're seeing strong interest in the already API connector and the Argus data warehouse.
Feedback has been positive and our pipeline for software opportunities is building.
We continue to expect strong bookings in the second half of the year and given our software pipeline, we anticipate recurring bookings will make up the majority of those bookings in the second half of the year.
Eight years 14 will be an exciting release, including our key collaborations service on the cloud.
Hey.
People have been sharing files back and forth, which is prone to errors and inconsistency on AE 14, there'll be able to invite users to all work on the same model.
With the same data and at the same time.
Our cloud vision will enable this as well as improved integration with Gordon.
As we think ahead on product innovation, we have made solid progress on our data strategy. So I'll take you through a high level overview and we plan to go into a deeper dive at our future Investor day.
This upcoming December.
The rapid evolution in CRE requires data and software solutions to be layered with more analytics and consulting presenting us with opportunities to introduce more predictive analytics and traditional workflows and decision making.
We believe there are three phases to this endeavor.
Traditionally the first phase is focused on what happened.
Which is a hindsight view with the script data.
Second prize shifts to why it happened, which gives us deeper diagnostic insight.
And the most innovative third phase will focus on what will happen next foresight with predictive and prescriptive analytics.
As discussed on our last call. We currently have the tools and solutions that look backward at what happened with the addition of the recently acquired Saturday platform will be a quick but it will be a quick bridge the gap to the why it happened enabled to rapidly transition to predicting what's next.
That in essence is the direction of our data strategy. We're on a path to solve CRE challenges with real time data driven insight predictive analytics and alert capabilities.
Our approach to data will be differentiated from the traditional data Bureau, our vision is to first combine all this data and analytical capabilities with the market leading position of our Argus software and appraisal management solutions to create the next generation of advanced analytics and predictive models in the real estate market.
Second to leverage the data technologies and data science to create useful insights that can drive faster decision, making for real estate professionals uncover hidden opportunities and manage risks.
<unk>.
The amount of data met the.
The data manipulation query and representative beta behavior by automating manual processes.
Organizing data for use in Argus and by leveraging predictive analytics and scores to remove the need for redundant processes and finally.
To work collaboratively with clients leveraging our trusted relationships to assist them in their digital transformation process.
Earlier this year, we advanced on this strategy and with a companywide initiative to identify viable opportunities to create and grow data and analytics offerings. We did this with a view to improve the strategic position of our major lines of business and following months of research, we narrowed down to eight use cases, which we thoroughly research and validated.
With many of the interviews with bleeding.
Customers and with a global management consulting firm to confirm the strength of the ideas.
The willingness to pay the value created and the associated there.
The concept is focused on the development of benchmark indices and scores based on our client activity and our software and advisory solutions development of predictive models to create new insights and capabilities for investment management analytics, and the data integration and workflow solutions to transform asset management tax.
And that workflows.
We have started to move with select use cases by advancing them with some beta clients and expect that we should start to be product is early next year more information will be shared in due course.
As you've heard me say before 2021 is a key execution here, we're investing in our growth engine across all of the orchid and beginning to see operational improvements that in my experience are leading indicators for future revenue growth.
We built out our teams revamped our infrastructure and go to market product strategy and have made excellent inroads into our most strategic market adjacencies and debt and data <unk>.
Operationally, we've accomplished a lot in the first half of the year, while sustaining strong financial performance in delivering on our cloud strategy.
As we move into the second half we are really encouraged by the sustained strong bookings growth as an indicator of future revenue growth at Altus analytics to put this in perspective, our organic bookings in the first half of this year equal more than two thirds of all of our bookings in all of 2020.
Together with a robust backlog of property tax appeals and a growing pipeline of opportunities is our revamped go to market programs begin to take effect, we feel confident about a strong second half of the year.
Property tax we're seeing great results from our operational initiatives under our global operating model with our ongoing focus on business development, which is improving our lead generation and the pipeline coverage, we are well positioned for sustained growth our tax bookings in the first half of the year are up in the double digits over last year.
Providing us with good visibility and predictability on future growth.
And like it all does analytics, we're making solid progress at adding new customers in the first half of the year, we've already added 3200, new logos.
In addition, we are on track, establishing our foundational tech platforms with a single data structure that we expect will open opportunities for improved efficiencies business development and innovation.
As I approach my first year anniversary at all but I'm, even more excited about our potential today than when I first took the job.
Our industry is maturing and we're seeing more consolidation not unlike what was happening in the financial services sector over a decade ago, which I was part of.
Given our exceptionally strong market position and how we strategically we are to our customers and the value chain of CRE. It really puts all of this in a great position to innovate and achieve our potential.
A lot of work ahead, but we have a solid strategy and our execution focus is as strong as ever despite a number of operational challenges in motion. This year overlaid with some uncontrollable headwinds in the first half of the year, we had currency or COVID-19 or the cyber security incident, we continue to prove out the resiliency of our business.
Which reinforces how strategic and mission critical we are to our clients.
Okay now.
Now that that's done let's open it up.
Line for questions operator.
Thank you well now begin the question and answer session to join the question queue Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any case.
To withdraw your question. Please press Star then two.
Our first question is from Daniel Chan with TD Securities. Please go ahead.
Oh, hi, Thanks, nice to see the strong bookings growth can you kind of give us any color on what's driving some of that.
Daniel I think there's a couple of things that we have I mean, we've been working on the go to market teams first I would put in we you know we have a full new pipeline forecasting process I think the second thing that I would say is the cadence and reporting that we've put in has really directed the team.
Are you you see the new growth on the new customers. So I would say the focus inside sales team which has been.
Our revamped as well as I I think just good old fashion account planning has worked out.
The teams now working with a consistent sales methodology and you know more is gonna be coming later in the year as our customer success team ramps up and we are putting more marketing around what we're doing so we feel really good about our where the bookings were in the first half of the year and we we we continue to expect to see that in the second half.
Sounds good good to see the the initiatives are starting to work out also thanks for detailing the data strategy.
MSC I made a major real estate data acquisition recently and I was just wondering if theres any kind of read through to your strategy and potential impact on the competitive landscape. Thanks.
No that's a fair question.
You know MSCI, we actually partner with those guys and we do some work with them. So we're excited to see.
See that they we working more in the data Bureau space argue is that were more working around the data that we have as well as the data analytics and providing the information any insight on top of the data that we see.
We collect a lot of data on our Argus platforms, we collect a lot of data through our appraisal management work and we collect a lot of data through our tax business and we think that the addition that we've seen with the analytics platform, we have as well as leveraging.
The data business that we have in Canada, we think that we can actually bring.
Bring more insight so the view that we have is that we were a great partner with RCA for years before we expect that partnership to continue and then we continue we will put in in our space and the valuation space and the risk management space will provide.
The insights.
And analytics on top of the data some of the data that they provide to us as well as some data that we provide to them. So as far as I'm concerned. This is a fairly good and synergistic for us.
Great. Thank you.
The next question is from Stephen Macleod with BMO capital markets. Please go ahead.
Thank you and good evening.
Yeah.
I just wanted to circle around a little bit Yeah can you hear me sorry, Yeah. I can hear you I was just saying high Bay area with a little bit a little bit of a drag.
Okay.
How do you do.
I just wanted to circle around on the the new AE clients.
Good client growth this year, sorry, this quarter good client growth last quarter can you talk about.
Maybe a bit around where where what segments of the market you're seeing client growth whether it's by size.
Size of client or geography, or anything in any way to stratify it.
Yeah sure. That's a fair question most of the client growth that we're seeing especially on the software side of things.
And the Q1 and Q2 is we're reaching really into what I would call or tier three tier four customers. So small and medium enterprise you know in Q1 a lot of those.
So were you know customers buying two or three licenses and this quarter. It was customers buying three to five licenses. So you know, they're not huge customers, but they're adding things in them and that's really built building out our ecosystem nicely.
Where this work happened and this was primarily in North America. So what we think we've done is we've been able to and it's in a in a part of the world that we are very strong and we've actually started reaching into parts of the business that we were you know.
Never really being taken into account in and we're really.
Providing a very good value proposition around Argus enterprise on the cloud.
As we ramp up then we start to integrate finance active more directly we expect to see the same kind of concept happened in Europe.
And so that's you know are we think that we can probably maintain this pace going into Q3 and Q4 as well and then hopefully accelerate in new geographies is.
We are creating more of an international team.
Okay. That's that's great. Thank you.
And then I know, it's early days, but you acquired straddle damage you talked a little bit about your data your.
Progress on your on your data strategy.
Are you able to give just maybe some color around how <unk> has performed or how it's integrated with your existing business thus far.
Yeah sure I think I mean, I think it's early days I mean, what we liked with them as they felt that they had a very good engine. We felt that there were about a three or four use cases that we can get into very quickly, especially around automated evaluations.
And investment valuations and are really into alerting profiles I think we're running right now a number of beta tests with some of our largest customers.
And where we're at we're expecting a pretty strong second half and then they have with team has jumped right into the into the.
The Altus analytics team and we're seeing activities around our appraisal management business, but we're also starting to see them get engaged especially around the Argus cloud warehouse.
On the Argus side too so what we're looking at is a couple of things number one.
There is a customer the customer work that we're doing are that we can provide our insights to how to improve their investment portfolios and their investment portfolio management, but at the same point with building out for lack of a better term scores.
Hal do assist.
You know people to do valuation management in between appraisals and I think from that perspective, we think those are two very good place for the shred. It emptied once we get those use cases past debated the beta tests and into our production and.
We start to see new clients coming on.
We plan to also then work with the team on the tech side to the equation as well, but that's probably a a number of months out.
Okay. That's that's great color. Thanks, Thanks, Mike.
That's it for me.
Our next question is from Paul steep with Scotia capital. Please go ahead.
Great evening.
Mike can you just recap where we are on the go to market transition you mentioned revamping the team in Q1, I'm, assuming you're largely done but how should we think about the ramp up of the effectiveness of the changes you put in place and then I got one quick follow up.
Okay, Yeah, that's a yes.
We are in the journey is the journey with getting the team in place and the leadership in place and how we look at metrics and pipelines and things like that it is mostly in place and you know we saw especially like on the new sales. The inside sales team is really outperforming so I think those things are pretty efficient and we.
We're gonna see those become more effective in the second half of the year.
What I look at it in the second half of the year as we're as we're starting to talk through things Youre going to see we're going to really get our customer success teams ramped up and focusing on renewals.
And our renewal management and you know, we think that will be very beneficial from us from a gross retention of net retention perspective and user metrics. We're starting to use internally and you know we'll talk more about as we go forward we have.
Also.
<unk> focus more on our demand generation and marketing as I mentioned before we have a new chief marketing officer Clarke and he's focusing on.
Building out or or our go to market around that demand generation from campaigns.
Two channels to reach people too and tying that into the systems that we have that'll be a good focus for the second half of the year and then as I mentioned, a little bit earlier there'll be more metrics I I I I think I. Once said you I was an undergraduate engineering I like metrics. So you know I think that the you know the first part of the year I think we've done a lot more efficient than just one.
These were our cadence and I think you're going to see it effectively.
Hum.
Must be more effective in the second half I think that as we look at this you'll start to see that in the first half we did really well that we had good balance between our bookings of recurring and nonrecurring, but in the second half with that type of focus you'll start to see that our recurring bookings will become more more of the.
<unk> of the bookings versus the nonrecurring and I think that's the how we would measure the effectiveness.
Great and then just on the data strategy. Thanks for the outline there.
Should we or should investors think that you're going to get the final piece of foresight, we should be thinking about either tuck under deal.
In terms of M&A strategy or.
Ultimately pursue something maybe more transformative.
Bring not only those capabilities, but maybe even a broader data stack with it. Thanks.
[laughter], that's a very good and leading question [laughter] I listen I think for US. We are we're confident in how we're approaching our road maps right now I think we feel pretty good with the progress, we're making and the addition of strategy of them got us.
A very far away very quickly.
As we continue down the path of finalizing the strategy if there's.
Interesting assets out there and they make really good sense for us.
We will certainly take a look at them I think but are you know we are I'm planning to be.
Enhancing the strategy doesn't work this year and really launching these things early next year. So I you know I think well stay on on that task right now, but you know I would never you.
You never say never if I you know if there's a good fit and it can accelerate where you wanna be a I think that's the way our team is looking at it.
Great sorry, one one last clarification, just if I could just Angela on bookings.
Is it fair to assume that Q2, 'twenty, given where we were in the pandemic was the low point of bookings over the last sort of six quarters. Thanks.
Yes, I would say so I mean, we're pretty bullish on the numbers. We've shown significant improvement are really beginning this year and as Mike indicated the back half is looking very.
Very strong so I would consider that to be the low point for sure.
Yeah, I would say.
And I would say that Q2 was consistent with where we achieved Q1 bookings in 2021.
Great. Thanks, Mike.
The next question is from Yuri Lynk with Canaccord Genuity. Please go ahead.
Hey, good afternoon.
In the MD&A mentions and oldest analytics are you expect robust revenue growth in the back half of the year.
Which I think in fairness, you would expect given the acquisitions that you've done. So can you talk a little bit about your expectations for organic growth.
Constant currency is fine.
The back half and how that might be supported by the recent strength in bookings.
Yeah.
Yeah, a fair question I'm, not even talking constant currency, if the currency kind of stays as is we feel that we'll see strong double digit growth.
In Q3 and Q4.
Organically.
Yeah.
We've seen you know we saw 42% bookings growth in Q1, we saw a 63% organic growth in Q2, while that's not a direct for direct comparison, we we we believe as long as currency stays as it is today, we will see double digit growth.
On the current currency and in constant currency it would be even higher.
Okay, that's great to hear.
Mike can you just talk a little bit about the digital digitization of the tax business. This is something that's been it's been talked about for a while what's your what's your take on how that's going and is that something that you expect at some point to be.
The part of AR, and Altus analytics offering of some sort to tie the toxin with that.
Yeah, I think Yuri we we we like we like that.
A future direction, maybe call. It Argus tax we haven't gotten to a name yet, but I think the.
We where we are is the work that we've done on our on our code named Delta project in the U K is mostly finished and you can see from just from the work that we've done in the U K and the growth in the U K that we're starting to see benefits, there and and we're now going to start making more of a customer driven we're finalizing.
The work done the last pieces in Canada.
And you know the business in the next couple of months will be on the same platform across all provinces and what we call our leapfrog project in the U S.
Is continuing to be driven to finishing that are hopefully by early next year with connections to all the jurisdictions within the U S and aligning our customers more directly with our practitioners. So I think that what we what we look at and with what we've done we think that it'll be easier for our customers.
To provide their data into our into our solutions give them more value back from a reporting perspective, but at the same time, leveraging what I was talking about was drive them earlier, giving them insights to where information is so that they can rely on our practitioners who are the things that they do very well.
And in the process versus just a.
Who you know holding their hands throughout the process. So we think we're making good progress on that.
We'll be launching more of this to be more customer facing early next year and more to come on that.
Okay sounds good I'll turn it over there thanks guys.
Yeah.
The next question is from Richard Tse with National Bank Financial. Please go ahead.
Yes. Thank you Mike I was wondering if maybe you can just give us bit of an update in terms of the nature of discussions with the large tier one customers. It sounds like you've had some great momentum across the board, but I'm kind of curious to see you know.
What they're saying or are they sort of looking at some of the recent acquisitions like finance active in terms of what they wanted to do just a bit of perspective on that would be helpful. Thanks.
Yes, yes, sure and Ah yeah, the tier one customers in the tier two customers we've had.
Really good engagement with especially as we use started sharing our new road or a new roadmaps with them, which includes both finanz active and shred it them in so it's been good to talk to them about the use cases, we're doing and they and they have been a lot of those are a beta clients and trying out.
The new products I think that most of them are in engagement around.
Identifying when to move to the cloud we expect a.
A strong Q4 on that because we have that's when many of our contracts come up.
We also expect good uptake on our finance active Ah, we when we purchase finance active we were anticipating.
Within the first quarter of just building pipeline and we you know we thought that the sales cycle would take us probably about three to six months, we expect to close what we would call our cross sales with our cross sales team with Finance Act of maybe three or four opportunities this quarter I'm pretty good size.
And hope to double that next quarter. So we see some very good progress on the strategy side of things. We have we have probably about 40 different conversations going on right now and that pipeline is building very nicely as well. So I think that you know as those as those two pieces of the business start to.
Move forward.
It's also having our tier one customers.
Honestly rethinking like how fast they want to move to the cloud and in most cases, they are moving faster than anticipated because of just you know the new connectors and the strategies that we're doing around that but there also.
Trying to think about how they want to have their user base use the cloud more and that's what that's giving.
Giving us some more upsell opportunities as we're moving them to the cloud. So I think that you know we feel pretty good with the conversations we're having with them. We're having a number of executive sessions, So where that's why I think where youre hearing us be fairly positive on the continued bookings in the second half of the year.
Okay. Thanks, and then with respect to the bookings you know obviously the outlook looks strong and you know what you've sort of posted so far has been extremely strong as well did you provide the mix in terms of product are you know.
At the beginning of the call I think I don't know if I missed that or not I joined a little bit light.
On the mix, we don't we don't break it out but it's it's it's it's R. R.
It's probably 50 <unk>, what we see it's about half half recurring to non recurring bookings and then on one of those previous questions or in my previous statements. We expect that to shift more to a majority on recurring bookings in the second half of the year.
Okay, and just one last one for me on the margins I think Angela said that are similar to last year, but accelerate next year does that take into account.
I hope that we're all going to be falling back in the office here and then we'll be traveling to your conferences again.
Well, we would love to see you at a conference I would love to meet most of you live at some point Yeah, No I think for US I mean, the way that we're looking at this are our focus on the first half of the year was to really make sure that that pipeline and bookings were coming through in a very strong way, we know that that will lead to.
You know pretty strong revenue increases in the second half of the year and then that starts to like you know that's then you know you.
As in previous calls them that leads us to.
Starting to expand EBITDA further.
So and that should allow us to run a pretty good connect conference next year I'm looking forward to seeing it.
Okay, great. Thanks, a lot.
Once again, if you have a question first with Star then one.
The next question is from Paul Treiber with RBC capital markets. Please go ahead.
Oh, thanks, so much and good afternoon I just wanted to follow up on your last comment are.
On the synergies that you've seen the cross selling with finance active and started them.
You know at a high level since joining the company.
And what you've seen to date you know, what's your view on the ability to sell additional or adjacent software into a installed base.
So I think that you know I.
To be fair, it's it's one quarter and I think we're building good momentum and good pipeline I think that the way that we're approaching this is we are we see pretty good synergies.
With with Argus enterprise, especially in at the first tier and second tier.
We're debating on how we do it.
The tier three and tier four if we can leverage our inside sales teams for that stratagem.
I'm sorry, that's that's been as active so.
That's where most of our cross selling opportunities are happening that's happening through two different of our channels. One is our obviously our software sales channel, but also our our appraisal management team is doing a great job with that because they are also servicing.
Doing that valuations on top of doing equity valuation. So we see both channels leading to good cross sell abilities for finance acted on the strategy side.
It's it's a it's a it's a very easy conversation to have especially when you're on the investment management side. When you can tell people that you can you can save 150 to 200 basis points and helping them with their portfolio management and a lot of those are already using argus, so being able to leverage the.
Data that they already have an argus or using argus on the cloud providing started them right next door to it.
Yeah, we we think that that will be a a fairly quick sale, even if we had to do a two to three week.
A two to three week a proof of concept I think our biggest concern is given the number of.
<unk> opportunities that we have is really making sure that we have enough people, who can run we're training up our teams to make sure that we.
We can run people through the through the platform. So that we can handle those proof of concepts.
And then when you think about it like a very high level when you look at cloud adoption.
Ramping quite rapidly.
What do you see as the opportunity once you get to 100% cloud adoption is it is it more adjacencies that you can go into that is there are there other solutions that you can sell customers isn't data like how do you think about that opportunity after that cloud adoption rises.
Boy I.
First off I think that you know now that you know we see great Cross sell well first of all we see great upsell opportunities with adding more users onto just Argus enterprise by itself based off the collaboration tools that are coming out in <unk> 14.
That gets us really excited and then when we start re.
Redoing some of the front end work and in next year that will that that that roadmap I think is a winter. So I think we will see good upsell there on the cross sell we have a lot of opportunities just to cross sell boy onto and tally owns in Abi and these products are now all tied on to the Argus cloud two so you're going to start seeing that in the next.
A couple of quarters as well as finance active and strategy and you know as we sit back and we talk to people. Our our our strategy is to build more of a you know, obviously Apis and connectors because you know our customers we've talked to customers and.
Partners and people who are nearby that you know this as you know we wanted to have a fairly open ecosystem and we think that as you know the opportunity comes for us as we see things change around assets and you know we have a fairly.
Straightforward. Good focus you know identity for the building will be able to give really good insights and alerts as things start to rapidly change, especially in between you know actual well, what's actual transactions, but we will be able to give a very good up to date point of view on all of the valuation So I think.
Our view is the data strategy.
You know I always felt when I came here and what I've seen before is that for every every dollar of software that we sell I think that theres about 50 cents and some opportunity on data and analytics and at a at a at a modest level. So that's what that's how we're looking at it.
Great. Thank you.
This concludes the question and answer session I'd like to turn the conference back over to Mike Gordon for any closing remarks.
Well. Thank you for your attention today and your interest in Altice group I.
Also appreciate the questions that were asked today if anyone has any additional questions. You can please contact Camilla directly I. Thank you for your time and I wish you have a good evening and the rest of your summer and look forward to talking to you all soon again.
Yeah.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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