Q4 2022 Altus Group Ltd Earnings Call
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I would now like to turn the conference over to the mill Odebrecht Social Rich. Please go ahead.
Thank you Carl and good afternoon, everyone and welcome to all of US foods fourth quarter and full year results conference call and webcast for the period ended December 31st 2022.
The news release announcing our results was issued after market close this afternoon and it's supposed to sit on our website at SEDAR profile, along with our MD&A and financial statements.
And patients to accompany our prepared remarks as well as the field letter to shareholders has also been posted to our website under the Investor Relations section.
Joining us today, our CEO , Jim Cannon, and our new CFO patterns have dry well start with some prepared remarks, and then we'll move right into the Q&A session. If you Miss any questions. Please contact me directly by email.
Some of our remarks on this call may contain forward looking information forward looking information is based on assumptions and therefore subject to risks and uncertainties that could cause actual results to differ materially from those projected forward looking information is further detailed in todays news release and in a related MD&A.
Peter.
Although the forward looking information discussed today is qualified by the cautionary statements included in those materials and then there's an accompanying presentation.
Please be reminded that all cities of certain non-GAAP financial measures non-GAAP ratios total segments measures capital management measures and supplementary and other financial measures as defined in the national instrument 50 to 112.
We believe that these measures may assist investors in assessing an investment in our shares as they provide additional insight into our performance.
Readers are cautioned that they are not defined performance measures and do not have any standardized meaning under ifr us and may differ from similar computations as reported by other similar entities and accordingly may not be comparable to financial measures as reported by those companies.
Measure should not be considered in isolation or as a substitute for financial measures prepared in accordance with ire for us.
An explanation of these measures are detailed in today's IR materials, including the news release presentation M. D N a as with our filings with the Canadian Securities regulators.
I would also like to point out that unless otherwise specified all of the growth rates will be referring to on the call today are on a constant currency basis over the same period in 2021.
Before I turn the call over to Jim I would just point out some changes in our MD&A, mainly this captures business not Mclean sure that'd be feel reflects more conventional labels and more accurately describes the metric in line with our existing definition.
For example, overtime revenues has now been renamed recurring revenue.
Bookings was renamed new bookings to be clear that this metrics include particularly because we exclude the contract value of renewals.
We're also now providing a split between recurring and non recurring bookings.
To be clear, we are not making any changes to how we account for these metrics thoughtful reconcile with our legacy reporting.
Other changes include branding related tweaks to starting a business people such as Saudi we should've costs now being referred to as appraisal and development Advisory. The addition of free cash flow and your capital management metrics and a refresh of some of our MD&A disclosures to help you investors better understand our business.
In the spirit of continuous disclosure of improvements to be more changes planned for 'twenty 'twenty to be P&L reporting okay over to you Jim Thanks Camilla.
Welcome to your first earnings call at office, we're really excited to have pub and joined the executive team given his impressive track record at high growth Tech companies public is a great addition to the crew.
It's only been not even been a couple of months and public is already making significant contributions with his fresh perspective on the business.
I'll kick off with a brief review of our 22 highlights and then turn it over to pub and to review our fourth quarter results I'll come back at the end to discuss our business outlook and priorities for 2023.
2022 is a beer a period of business transformation and growth for the company.
We made significant progress against our long term strategy, while improving our business operations. This included optimizing our operating model. Our go to market approach platform architecture, as well as our front and back office infrastructure quite a lot to accomplish in a 12 month period I'm incredibly proud of the team.
For the hard work that went into it.
Guided by our management philosophy of simplification focus and execution, we built a solid foundation to drive operational excellence platform economics.
To maximize our operating leverage so that we can scale even more effectively.
And more importantly clients continue to engage with us on their most strategic efforts reinforcing our role as their trusted source for asset and fund level intelligence.
We're quite pleased with our financial performance in 2022.
We finished the year with 735 million in revenues up 18% and 135 million and adjusted EBITDA up 23% with a 90 basis point improvement in our margins.
This translated to $53 million of free cash flow up 15% over 2020, one on an as reported basis and $1 89, and adjusted earnings per share down a penny from 2021 that's due to our primarily due to our restructuring program.
We improved top line growth across all of our business segments, and we grew adjusted EBITDA at the group level driven by the standout performance analytics.
Our property tax revenue while at record levels was moderated by the ongoing slowdown in appeal settlements in the U K.
Our improved operating posture in 2022 demonstrated by our recurring revenue gross new bookings growth and cash flow improvements.
Sets us up for sustained growth in 2023.
More on that after public covers off Q4 results so Kevin over to you.
Thank you, Jim and the entire office team for the warm welcome and good evening, everyone on the call I'm looking forward to meeting many of you in the coming weeks and months.
Excited to be joining the Altice group at a critical inflection point of our transformation to.
The credit of my predecessor, and the rest of the Executive Management Committee. The team has done an outstanding job positioning <unk> for success.
I look forward to building on this foundation and the ongoing execution of our strategy.
In fact, the gyms opening comment on optimizing our front and back office systems I am pleased to share that we have started the year with the new financing ERP system.
The single source of truth won't be the backbone for driving productivity efficiency and increased collaboration across our operations.
Beginning with our consolidated fourth quarter results revenues were up 10%. This represents the seventh consecutive quarter of double digit topline growth of which 6% was organic.
Profit was negative this quarter, primarily due to the restructuring program that Jim just mentioned.
Adjusted EBITDA was up 31% driving a nice 310 basis point improvement in margin, which stood at 19%.
Adjusted EPS came in at 44 cents up.
5%.
And free cash flow was $19 2 million a substantial improvement over the prior year period.
In Q4, we completed our 2022 restructuring program. This resulted in a $17 million restructuring charge in the quarter of which the bulk was related to employee severance.
Full year restructuring program charges $38 9 million.
We expect cost savings related to this program to flow through into 2023.
Turning to our business segment performance starting with analytics.
We have proven that we can drive high growth and expand margins at the same time, that's the path, we're on and analytics.
Revenue was up 27% and notably recurring revenue was up 38% most of that growth being organic.
We're seeing improved sales productivity and continue to benefit from healthy demand for our offers.
High percentage of our revenue growth continues to come from our existing customer base, where we have significant runway for wallet share expansion.
We're also growing internationally, while accelerating growth in North America validating the sizeable opportunity we still have in our core markets.
Adjusted EBITDA continues to grow with the higher revenues and improved operating leverage.
The adjusted EBITDA margin in the quarter reflects revenue growth and improvements in our operating model.
These improvements include focus go to market activities.
Ross border salary leverage streamline processes and better resource management.
Our full year margin of 27, 410 basis point improvement demonstrates our strong operating leverage this reinforces our confidence in continuing to expand margins into 2023.
Recurring revenue growth is an important kpis for us, it's where our investments have been focused.
Really pleased with the 38% growth in the quarter and 44% for the four year.
Mm 302 million for the year recurring revenues represents approximately 87% of total revenues.
This provides us with a resilient revenue base.
Turning to new bookings is Camilla pointed out this metric only captures new business not renewals.
Our new bookings continued to be strong at $34 2 million.
Over an exceptional Q4 the prior year. This is a solid leading indicator of future growth.
Most noteworthy recurring your bookings were $20 8 million up 15% year over year.
Continued absolute recurring bookings growth.
Turning to a quick update on Argus cloud adoption, we ended the quarter with 64% of our Argus enterprise users contracted on the cloud right on plan.
We expect to have a large majority of our Argus enterprise users contracted on the cloud by the end of the year.
Okay.
Turning to our reportable segments under the CRE consulting business unit.
Property tax was down in the quarter consistent with our expectations.
The growth in the U S and Canada was offset by a decline in the U K.
As covered on the last earnings call. The U K continues to be impacted by the slower cadence of settlement volumes due to the valuation offices resource constraints.
This leaves us with a higher backlog of opportunities as the volume throughput at the agency ramps up.
[noise] appraisals and development advisory performed steadily in the quarter. This reflects continued healthy market demand and effective sales execution.
And finally, turning to our balance sheet, we finished the quarter with a cash position of $55 million and with $320 million in bank debt.
The funded debt to EBITDA leverage ratio as defined in our credit agreement and steadily improved to $2 one three times.
A lot of what it was in Q3 and well below our limit of four five times.
Applying our cash and net debt to adjusted EBITDA leverage ratio was 196 times.
Regarding our capital allocation priorities will continue to reinvest in the business to scale effectively opportunistically pay down debt and maintain financial flexibility should attractive acquisition opportunities materialize.
With that I'll now turn it back to Jim.
Thanks Bhavan.
As you just heard a solid finish to 22 against the backdrop of a very busy period of business transformation activities.
Appreciate the tenacity and hard work of my colleagues their efforts and commitment to our mission of driving the growth and future success of the company.
Our mission is to help our clients maximize performance and manage the risk of their commercial assets.
Today's environment of high interest rates and inflation this is especially relevant and drives increased demand for our offers.
We continue to closely monitor leading indicators and customer activity and thus far our outlook remains positive.
Our sales pipeline is building, we have sustained our bookings growth in our sales cycles are project implementation timelines are consistent with our expectations.
Laid out on the slide we believe we have a fairly resilient business model with offers that drive quantifiable value for our clients.
Above all we have flexibility to respond to changing client needs and to pursue our business strategy across various economic cycles and market environments.
The investments, we pursued provide us with sustainable improvements that give us confidence in our ability to successfully navigate a dynamic global business environment.
In 2022, we proved we can significantly grow revenue and expand margins.
Looking out through 2023, we expect to do the same.
We're strongly positioned to grow our consolidated revenue and adjusted EBITDA.
Our 2023 outlook includes sustained consolidated revenue and adjusted EBITDA growth.
On an organic constant currency basis. This includes double digit revenue and adjusted EBITDA growth in analytics with continued margin expansion absorbing.
Absorbing a down year in property tax due to market cyclicality as previously discussed and single digit revenue and adjusted EBITDA growth and appraisals and development advisory.
The analytics business model transition and reorganization.
He is now in the rearview mirror.
Our results demonstrate the benefits of the new model with high growth and recurring revenue and recurring new bookings and adjusted EBITDA margin expansion the.
The momentum is expected to continue into 2023, particularly as we ramp up investments in sales marketing and R&D to further capitalize on the market opportunity in front of us.
Our property tax while we anticipate growth in the U S and parts of Canada, We don't expect to fully offset the impact of the annuity reset in the U K we.
We will continue to invest in customer acquisition activities with focus on strengthening our position for a rebound in 2024 are.
Our pipeline of cases to be settled in future quarters remains robust, which provides a positive backdrop for future growth.
A high percentage of our tax clients engage our services consistently year over year or a cycles occur.
The specific assets may change year to year the clients remain.
To wrap up with the investments and changes in systems architecture and operations largely behind us.
'twenty three is moving from business transformation to scaling profitable growth.
Our focus this year is on the following four priorities.
Priority number one scaling the company will double down on accelerating our expansion by a defending connecting and growing our core franchises be extending those franchises through carefully selected adjacencies and see reaching into new market segments through advanced analytics driven capabilities we.
Believe the ladder will double our total addressable market.
Priority number two operating efficiently we made great strides in 2022 and continuous improvements are critical.
We'll continue to maximize our operating leverage through improved efficiencies prudent expense management and optimizing our investments.
In 2022, our investments, where we're predominantly focused on strengthening the internal processes infrastructure and capabilities of our technology and.
In 2023, we'll be investing in sales capacity marketing client success and R&D.
Priority number three creating customer value will.
We will build on and evolve our capabilities to meet client needs for improved performance and better risk management.
We started the year with a soft launch of our of our latest altice market insights premium edition offer as.
As discussed on the last call. This new offer expands our market intelligence and predictive analytics capabilities.
With this offer were responding to a clear customer challenge customers are looking to bring non traditional data from disconnected systems into their decision making processes.
In short, we're combining disparate data from from all this the market and clients to create unique insights around future market and asset performance such as forecast of future NOI performance and insights into key market risk and growth drivers.
This is the first offer of its kind for altice that connects our valuation expertise and data with data science capabilities to produce valuable insights for our clients.
Equally important it will significantly reduce our client's time from months to weeks to build predictive models for their portfolio, enabling clients to make informed investment decisions faster.
And priority number four engaging talent.
It's about placing the best people in the right roles and empowering them for greater performance.
We're continuing to make investments in our employee programs to position all of this as the employer of choice.
We have a long and global growth runway ahead of us.
CRE is a major asset class yet digital transformation still lags other established sectors.
<unk> and fund level intelligence remains largely fragmented a CRE firms and just vast amounts of unconnected data and grapple with new technologies to extract value from this data.
We're uniquely positioned to connect the dots here.
By connecting high quality asset data and technology.
Complemented by our deep industry expertise to deliver actionable intelligence that drives performance and mitigates risk.
Our investments over the past two years organic and acquisitive.
Has been oriented towards delivering advanced analytics that will bring our industry from insight to foresight.
We remain focused on executing this plan.
I'm looking forward to continued success in 2023.
Okay lets open the lineup for questions.
Operator.
Thank you.
I will begin the question and answer session.
And the question queue. You May Press Star then one on your telephone keypad, you will hear a tone and acknowledging your request.
Using a speaker phone please pick up your handset before pressing any keys.
Draw. Your question. Please press Star then two.
The first question comes from Yuri Lynk of Canaccord Genuity.
Go ahead.
Hey, good evening everyone.
Hey, Gary.
Yes.
Good quarter, especially in analytics.
I want to talk a little bit of both the growth which seem to be driven by.
Same customer expansion.
Is that a reflection of of your move into adjacencies or more a function of selling.
Additional subscriptions of your traditional offerings into existing clients.
Okay.
Great question here, it's a couple of things.
The growth was not limited to just existing clients.
But as we've discussed we have a significant amount of our focus is on our high touch clients, who will who will be consuming.
Consuming in the more advanced offers so.
We added over 240, new logos again to the Rguest portfolio in Q4.
So there is growth at both ends of the market as there has been throughout the year.
And we have large clients, who are taking more advanced capabilities and we are also seeing more moves into valuation around debt portfolios in the market, which was something we were expecting a targeted and are well positioned to help clients with.
Okay, that's fair.
Follow up for me just on the on the analytics margin guidance for the year I understand you're looking for for margin improvement but.
Do you care to put a band on that like 25% to 30%.
The range, we should think of I'm, just trying to think about how we balance that improvement with.
The investments, we're going to be making in the product roadmap R&D sales marketing all of that.
Right.
So the the I think I said this at the end of the Q3 call, where we put up 590 bps of improvement.
The numbers Youre seeing coming through right now.
We will have significant margin expansion. However, we.
Made the conscious decision when we when we flip the analytics operating model to hold off on adding go to market capacity until we were sure that the teams were trained understood. The new offer structures that we had our pricing worked out.
That we had all the sales enablement in place. So it's at this point that we are adding capacity from.
Yeah.
SaaS metrics model, which we don't put out there from an LTV to CAC everything says we should be.
Ramping up those investments now and we will the teams.
To put it.
An entire year, a great recurring bookings.
Are clearly ready to expand.
Moving to more managerial roles and expand our coverage that coverage is not geographic expansion large amount of that growth we expect.
In the U S actually so.
It's doubling down on sales capacity will be increasing R&D investments.
As we're executing towards our target operating model.
Meaning expense to revenue ratios up and down the P&L with cross functional expense.
We realized we needed to increase our investments in marketing, which we're doing as well so margin expansion will be they're not at the same rate as the actuals and that's a that's a conscious investment decision, we're making to capitalize on the market growth opportunities.
Okay.
I'll get back in the queue. Thanks.
Sure. Thank you.
The next question comes from Christian <unk> of eight capital. Please go ahead.
Hi, good afternoon, and thanks for taking my questions Hey, Jim.
The first one I'll ask is on the cloud adoption rate and we achieved our goals for the year, but maybe you could speak a little bit to the piece of migrations to the cloud you know once a it's it's been contracted the piece of our customers are moving over at.
And then how you're thinking about positioning.
The sales strategy.
The smoke.
It's.
Good question Christian.
From a sales strategy. There is obviously still 35% of our current base out there.
But as we said we continue to add hundreds of logos to the Argus franchise every quarter. So there's still a lot of room at the high end the high touch part of the market as well as the scale part of the market to add new clients. So we're constantly changing that numerator and denominator.
But we.
We also expect now I think I said this a year ago, when we were at 42%.
We are at that critical mass, where the largest investors have gone to cloud most of the largest service providers have gone to cloud.
The rest are going to follow where I look at analytics is where a cloud company. So.
We expect a similar rate of growth.
This year, but it's now it's just a matter of when contracts expire and when the clients.
Up their contracts and go to the cloud because that's that's.
That's their choice.
Okay, perfect and the second question.
It would be a great choice from a roadmap perspective to not go to the cloud.
Understood understood I think the second question I had and maybe related you touched on the launch of the ultra smoking insights offer which is no lives.
So any commentary you'd share on the go to market there.
Strategy.
Conversations with customers and if there's been any feedback to date and recognizing it's early days.
Right. So this is where we're seeing the power of of flipping the analytics go to market model, a year ago, or a year and a half ago now.
Where the sales forces, we're very segmented from the folks who did valuations that folks who are.
Argus enterprise experts and then the data people were separate.
We've been cross training that team for 18 months now across colonizing the teams so.
They all sell the whole analytics portfolio and are well versed in doing so.
And we're expecting that connection of.
Of data and then the.
Advanced.
Strategy analytics capabilities, we picked up last year.
It's all converging right now and that those should really not be separable items going forward. So it's just one sales motion we have greatly simplified the portfolio from a.
Consumption by our salespeople in and by our clients going forward as we move to this offer structure you can think of it as good better best type.
Approach, where good is effectively self serve.
Better is.
Expert touch and then.
Full premium is effectively turnkey so we're trying to make the portfolio as simple for the for the sales teams to position and for the clients to consume.
Got it that's all helpful color, Jim Thanks for taking my questions and I'll pass along.
Alright.
Thanks Christian.
The next question comes from Richard Chin of National Bank financial.
Go ahead.
Yes, Thank you hi, Jim Congratulations on the new real power.
If we look that out further you're obviously getting a tremendous amount of operating leverage opportunity in all of those analytics.
When this business hits a scale, but what do you think it's kind of a reasonable normalized level of margins there.
Yeah.
This business will run in.
At scale it will run in the high Thirty's.
Yeah.
Okay now.
Measured March to get there we're constantly balancing the investment in growth and just always testing market assumptions there was a lot of.
Consternation in the market last year with rising interest rates.
What would that mean for our clients our clients are taking advantage of.
Depressed pricing in putting capital to work, which translates into a higher volume for us.
So.
Yeah.
Okay.
Then in terms of acquisitions.
How do you look at acquisitions.
The rising rate environment kind of impact your ability or appetite at all.
As <unk> talked about we have significant capacity.
And our lines.
Last year, we looked at the market and it was almost like try to catch a falling knife.
We have strong partnerships across the ecosystem that could lead to acquisition opportunities. Our approach is primarily.
Let's partner.
Let's build the relationship and let's prove out the combined business models.
Let's let the markets.
Let's ensure that we were heading into a troubled waters, which we were not.
As we've shown.
So with the higher interest rates.
It is.
We have we have higher interest expense.
Expense on the P&L, which you can see from the rates but.
Our capital capacity is stronger than it's been in years.
Okay, and just a really quick one here.
Yeah.
Thank you talked about.
Reasonably strong pick up in terms of selling into the base and then you also said you need to have all the new wins.
Would you be able to share the mix of.
Growth coming from new versus existing customers or is that something that you know.
Sure sure at this point in time.
We're not breaking that out right now.
Any plans there.
Having plans to.
But I assure you we are managing it internally.
As Camillo said we are.
You've seen we've made changes some changes to the.
To the financial statements and the MD&A.
We are looking at.
Getting some more traditional SaaS type metrics in our disclosures.
Not going to commit to Q1, but we are we're setting the teams up to be able to report the business differently and more traditionally with SaaS companies.
Okay fair enough. Thanks, Joe So, yes plans to plant the Richard the answered plants too yes.
Okay. Thanks, a lot thanks Scott.
Yeah.
The next question comes from Daniel Chan of TD Securities. Please go ahead.
Hi.
Large proportion of your user base now in the cloud what would you say are your largest near term opportunities is it still the cloud migration for the remaining third of your customers or is something else now move to the top I know you're very excited about the cross sell so is it that or is there something else.
It's both it's those in combination.
As I said now it's a matter of.
Existing contracts terming out and.
And then getting the conversion of the majority of the rest of the base over.
And with 64% of them there the amount of.
Of our data and derivative analytics that we can do off of that data increases every single day, which just accelerates that cross sell which we are already having success with so it's both.
That's helpful and then on the cross so do those typically happen when the renewals happen or are you able to get those to occur outside of the renewal dates.
The car sales have been happening outside of the renewal dates. So we had a new equity valuation client.
I guess about two years ago that moved into the advanced analytics.
End of last year and have moved into I'm, sorry end of 'twenty one.
And then.
Moved over to their debt portfolios with us. So those are all just new business for us.
Great. Thank you.
It's not really time, the advanced analytics aren't really times with the.
With the Argus enterprise contracts.
However, we've made it where you can't get the advanced analytics unless you're on the cloud.
Thanks.
Okay.
The next question comes from Paul Treiber of RBC. Please go ahead.
Thanks, Thanks, very much and good afternoon, just in regards to bookings.
Good quarter here, you had an interesting comment just about having limited sales capacity this year.
Do you have a sense for the year.
What's the magnitude of bookings that that potentially were constrained just given that the limited sales capacity or maybe another way to ask it is you know what.
Whats the magnitude that Youre current LTV to CAC is higher than what you see as your long term target there.
You know I love that metric path and I want to it's.
There's a lot of capacity to grow.
Okay.
We just we needed to get the machine running smoothly before we brought more capacity in and then had to bring everyone up to speed. It was let's get the the existing team up to speed on the new offers so that you have that water falling effective train the trainers.
And.
And we were watching we're watching the market list.
The macroeconomics of the market throughout last year. So.
Could we have done more.
Yes, we could have covered more market segments.
And now we're very comfortable ramp.
Ramping up those invest those go to market investments to capitalize on that.
And in terms of the offer as you know I think that there actually.
<unk> laid out in the annual report.
For them and then the three different versions and go to market versions.
So the one of them you have a soft launch what's the timing of the others. You know should we expect them through this year and I think a couple of years there.
Then just availability general availability of the you know the three different go to market versions for those.
The general availability will will.
Outside of outside of tax that general availability will be there.
I'm, sorry, I should say outside of tax for all Geos that we currently serve.
All the flavors of the offers should.
In the market in 2023.
So it would be rolling out throughout throughout the quarters.
But most flavors of the offers are there.
Some form today.
You can see our comments were heavily weighted around scaling profitably and that's delivering advanced analytics at scale and that's where.
The architecture.
Altice performance platform that we talked about on the last call comes into play to deliver those advanced analytics with scale.
So we can we can.
Produce the advanced analytics today.
It's about ramping up the volume of doing it.
Speed Trey.
Training the models.
And it's interesting.
Property taxes, when you do mention in the MD&A.
One of the key offers.
Is it because there's you're building that that product.
The offer effectively from scratch for the two other flavors.
You have the turnkey version and is that the reason why it will.
It will take longer.
Lease market.
It will.
The the rethink acquisition from.
Early in 2022 gives us the ITM link products, which allows us to go to market today, we have a fairly large client base of large clients who are <unk>.
Choosing self serve options for managing their tax appeal process.
That product is primarily sold in the U S. Today.
So we have a market.
Go to market plans on that to increase our rollout across the U S and then.
Drive adoption in Canada for the UK market, it's not completely fit for purpose at this moment.
But that's a short development cycle OE.
And all of that is being reconciled with our AP one architecture.
That we're rolling out so that we're ingesting data from all of our franchises.
And we're turning all of that then taking that data linking it together through the technology that we picked up in the <unk> acquisition rolling it into the modeling capabilities that we picked up with the strategy them acquisition, and then absorbing across the Argus enterprise cloud information and our valuation management solutions.
Information, which is very tech oriented already.
Bringing it all the data into one consumable platform to <unk>.
The models to deliver the analytics.
Great. Thanks for taking the questions.
Okay.
Thanks, Paul.
The next question comes from Scott <unk> of CIBC. Please go ahead.
Thank you I wanted to ask.
I ask another question on the property tax then you put a number on the sort of.
The billings, it's not going to come through in 2023, but I'm wondering.
For the is the backlog also go into sort of resulted in this.
On the annuity piece in the U K also declining year over year or maybe you can correct my read of that.
How we should be looking at it.
The specific backlog is not a metric we put out there, but it's one that we watch very closely so we could have mitigated some of the EBITDA decline that we saw in the year that driven by.
Tax side of the business. If we had pulled back our go to market resources more aggressively however, as theres still an opportunity too for the next.
Months about the next month to still pursue clients in the U K against the 2017 list and when we do that.
Yeah that that revenue will flow back for seven years. So these are highly valuable clients to still close so even though we knew the constraint was not go to market it wasn't client acceptance.
Was the throughput of the valuation office, so our backlog for the U K has increased.
It's significantly higher than we had expected because it didn't flow through the P&L, yet, but the backlog has built.
The constraint on next year is not from our side, it's from the resources that the valuation office puts on the processing of appeals. So our backlog is up significantly that will mitigate some of the headwinds and we're continuing to build that backlog because it has a very high.
<unk> right very high predictable.
Conversion rate into revenue for us So we're happy to still.
Pursue those clients and get those appeals filed.
Okay. Thanks.
And then I wanted to ask a question on the new logo sign off.
Are you finding that they're adding the analytics modules at a greater rate than yours.
Existing customer basically or are you finding you're able to do that cross sell at the time of sale a little easier.
Curious on that.
So the most most of the new logos are at scale and of the market. So they are more of the standard edition or the self Sir So Argus Argus enterprise Standalone.
Purchase of licenses. So the new logos are 10 tend to come in on the legacy core franchises.
It's the it's the high touch existing clients, who are coming in on the advanced analytics.
Which makes sense because they want to make sure. They are a trusted partner that theyre turning these types of analytics over two and so having the existing relationship makes sense.
Logical.
Okay.
Just one last one on the restructuring costs.
Obviously you've.
You've got a lot of salaries level over the course of the year with.
Most of that coming from the businesses that you acquired or was there sort of does that.
In addition to that as well.
No most of it was not from businesses acquired in the last couple of years. Some of it is from businesses acquired years and years ago that never really integrated.
And as you take a look at the consolidated P&L, you'll see our compensation expenses actually up so this is Ben.
While many CRE firms that are just their transaction volume based.
<unk> cut.
I guess, there's an industry thousands of jobs and where the tech industry cut thousands of jobs.
We've added we've added jobs on the analytics side of the business. So our head count is up a bit year over year, our compensation expense is up.
So it's been a rebalancing to the high growth parts of the business.
Okay. That's helpful. Thanks, and I'll pass it.
Alright, Thanks Scott.
The next question comes from Stephen Mccleod at BMO Capital markets. Please go ahead.
Thank you good evening.
And thanks for all the color you've given it's been lots of great info. So I don't have a.
Two other questions here, but just wanted to ask about two things.
One is can you just give a little bit of color around you talk about international growth.
Also being up in the quarter and I'm. Just curious if you can sort of give some indication as to where that fits in your priority stack and then secondly.
Are you able to give any more color around ultrathin analytics margins for 2023, and how some of those investments around efficiencies might weigh in the current year.
Right.
Sure.
Thanks, Steve.
International growth as far as.
In the quarter.
Going back again, a year and a half ago, we took.
Then.
Deputy C E O of finance active acquisition.
And he is now the president of analytics for EMEA. So we're.
We're getting the synergy of both of those sales forces selling across the products not everywhere theres. Some theres some parts of the finance active portfolio.
Fit for purpose for a French municipalities, but many of those those team members have taken on the entire office portfolio and.
Having Fred run both organizations get that cross polymerization of the Finance Act is that the Treasury management.
Applications that are going to the market as well so you've got the increased capacity of the teams coming up to speed. The cross selling that's what's driving the growth as far as the focus on priorities. We're staying on our six core markets. So U S, Canada U K, France, Germany, Australia.
And we saw bookings growth in our <unk>.
The Asia Pac region as well.
As we've.
Consolidated efforts down there across a couple of business units, we're seeing the synergies there. So we're.
We're focused on the core markets were not chasing new markets because the addressable market in those six core markets.
So represents such a tremendous opportunity we know how to serve those markets there.
Easy <unk>.
Expansion for us so I'd say easiest might go to market teams rolling their eyes right now but.
We're staying we're staying close to the core here because theres so much opportunity in the core.
Did that address your question.
Yes.
That's great. Thank you and then maybe just on the margins as well.
Okay, Yeah on the margins.
The.
As you know, Steve we don't we don't give guidance on that but we have commented on our capital allocation strategy and I think if you take a look at the full year.
21% to 22.
Is it actually.
It exceeded what we are saying we said when we think about how we do our planning and allocate our capital. We think that that 300 bps of margin expansion is the right balance of maintaining high growth, while expanding margins, we're very comfortable at that level.
The operating leverage will go through if we did nothing else those margins would expand from where they are in Q4, but as I said, we're adding the go to market capacity, we're increasing our marketing spend we're increasing R&D. So we feel like we're putting.
We know we're putting investments in the right places across the business. So that will tamped down the margins as that capacity comes up to speed. As you guys know you add sales capacity youre going to be looking at six to nine months until there.
What we would call off.
Full time equivalent productive.
Contributor. So it's just that's just the nature of getting up to speed on the portfolio and sales in this industry.
Okay that makes that makes sense. Thank you Jim.
Alright. Thanks.
Thanks, Steve.
Our next question comes from Kevin Christian I'm Rodney.
Please go ahead.
Hey, there thanks for taking my question Hey, Jim.
Just a question on the on the bookings the recurring bookings can you talk about the pace of those bookings through the quarter or was it sort of front end loaded that come through the end of the quarter and how do we think about.
The pace of bookings in Q1.
What I'm trying to get at it.
Like the new disclosure, we we know what the recurring revenue basis at the end of Q4.
And I think if we take simply are you recurring bookings divide that by four and add that kind of get a good starting point for Q1, I'm just trying to think about how to how to think through the quarter and I think it would be helpful. If we knew how the how the bookings pace through the quarter.
Okay.
Yes.
Great question.
Some of the largest.
Most of the largest bookings came in pretty evenly throughout the quarter. So we were not scrambling at the end of the quarter to make it we did have a couple of large.
Argus enterprise deals come through right at the end of the quarter, but again makes sense. When you go back to the the legacy of the relationships with these clients. These were used to be term licenses are.
That had renewal date, so you have that end of year push and the old software world.
So the fact that these clients are still on that time line can push them right to the end because they of course want to negotiate right to the end as they should.
But most of the deals came in pretty evenly across the quarter.
Okay.
Any thoughts on what Youre seeing in Q1, so far.
Our.
Our elite are the main leading indicator we cue in on is our pipeline coverage ratio.
And our pipeline coverage ratio.
As we sit today.
Is.
For the for Q1.
About seven or 8% better than it was at this time last year.
That's against the higher bookings number as well so in absolute the pipeline is higher.
And then last year in the coverage ratio is slightly better than last year as a multi year. So we're comparing this to our multiyear trends of what we expect on our coverage ratio. So.
So that's a great sign when we look forward to Q2, so when we look at our Q2 pipeline of deals as of.
At this point in time last year, our pipeline is up about 10% over where we were last year now.
It doesn't mean that it's all going to convert at exactly that right, but that's how we know if our.
Our MQ <unk> turning to Sql's.
That whole mechanism of top of funnel right through execution, we've got metrics on all of it and all of those metrics are saying we're in good shape for the quarter against our 23 bookings plan, which is above our 22 bookings plan.
Even though we haven't added the capacity yet or we're adding the capacity now they won't be productive, but that just the existing team is just continues to up their game.
Okay. That's that's very helpful Super Super helpful. Thanks, Jim.
Second question for your last one Ive got is you.
<unk> talked in the past about moving to more of like a battery based versus seat based.
You know model I'm wondering if you can give us any sense of how to measure I guess I don't know if you want to call. It our appeal, but say like a pure ACD per customer per customer.
Or maybe you want to maybe youre looking at things in terms of attach.
Attach rate as a percentage of AUM.
You know as these customers layer on more and more product. So I'm. Just wondering you know I guess it goes back to share of wallet. So is there anything you can you can provide us in terms of how those are trending and maybe ranges of your top customers might be in terms of attach rate of percentage because a lot of them versus.
Maybe not as highly attached to customers and just give us some views there on the opportunity.
Sure.
The.
Again, great question, it's all of the above right now until we really get to systemically producing the SaaS metrics.
A couple of things in there the RP is going up because it's the high touch existing clients that drove significant amount of the growth.
Those newer clients tend to come up come on in smaller numbers and then grow over time.
So.
Higher so at the high touch because where we're really focusing the majority of our resources there.
And they are expanding into the advanced analytics, we are seeing the <unk> come up.
Not only in the current portfolio as we serve but they're also giving us more portfolios, whether it's on the equity valuation side or the debt valuation side or the market insights type work.
The other way.
We think about that that question is.
We have so we have a stratification of our revenues by client size.
And then we look at our total addressable market.
You talked about attach rate as a percentage of AUM, that's how we size our markets. So we look at what's our revenue conversion or our revenue percentage AUM basis, and then we target the clients we don't have.
And assume that over time, we'll get to that same type of percentage of our AUM.
Then there's the then there is the new offers on top of it which should drive expansion there with the core way.
We're looking at it is back to the LTV to CAC ratio, so where with the new infrastructure. That's that's in play now.
We can segment the market so the LTV to CAC ratio for high touch and scale.
I'm sure you can imagine are different and we think about the investments they're differently. So at the high touch the LTV to CAC is much higher which is telling us double down in those markets, which is why we're doubling down in our core markets, where those large largest clients reside.
At the low at the scale and the LTV to CAC is still telling us that were under invested and so we have a different market pursuit strategy at the lower end, but it's really going to get down to us being able to produce.
Gross churn down through net retention and that was the whole point of making the significant capital expenditures into the infrastructure that we made in 2002.
Got it.
<unk> the context and the color I'll pass the line.
Alright, Thanks, Kevin.
Okay.
This concludes the question and answer session I would like to turn the conference back over to Jim Hatton for any closing remarks.
Alright, well as always thank you everyone for joining us. This evening. This is a very exciting time for.
For Altice and.
Sure we'll be hearing from many of you from the analyst side and the investor side over.
Over the next few days and looking forward to the conversation. So thank you for your time.
This concludes today's conference call.
Do you have any further questions. Please contact Camilla bartosiewicz at all screen.
May disconnect your lines. Thank you for participating and have a pleasant day.
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