Q3 2023 Altus Group Limited Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by.
My name is Cheryl and that'll be a conference operator today at.
At this time.
Like to welcome everyone to the Altice Group Q3, 2023 results conference call and webcast.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question during this time.
Simply press Star followed by the number one on your telephone keypad.
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I would now like to turn the call over to Camilla.
<unk>. Please go ahead.
Thank you operator, and good afternoon, everyone and welcome to Altice Group third quarter results conference call and webcast for the period ended September 30th 20000 feet. They usually need financing. Our results was issued after market close. This afternoon is posted on our website and SEDAR profile along with her.
And do you need an interim financial statements.
A presentation to accompany our prepared remarks has also been posted to our website under the Investor Relations section.
Joining us today are CEO, Jeff <unk>, and our CFO Alessandra.
I will start with some prepared remarks, and then I'll move right into the Q&A session to address any questions. Please contact me directly by email.
Some of our remarks today on this call may contain forward looking information.
This information is based on assumptions and therefore subject to risks and uncertainties that could cause actual results to differ materially from those projected these assumptions risks and uncertainties are detailed in our forward looking statements disclaimer in today's materials.
Please be reminded that all this good use of certain non-GAAP financial measures non-GAAP ratios total segments measured capital management measures in supplements and other financial matters.
National instrument 50 to 11112.
Hey.
We believe that these measures may assist investors in assessing an investment in our shares as they provide additional insight into our performance. We use are cautioned that they are not defined performance measures that do not have any standardized meaning under <unk> and may differ from similar computation.
Sorted by other similar entities and accord or maybe how the comparable financial measures as reported by those entities.
These measures should not be considered in isolation or as substitutes for financial measures prepared in accordance with IRS.
An explanation of these measures are detailed in today's IR materials, including then usually presentation MD&A and other filings with the Canadian Securities regulators.
I would also like to point out that unless otherwise specified all growth rates, we referred to on this call today will be on a constant currency basis over the same period in 2020 to pay over to you Jim.
Thanks.
Thank you everyone for joining us today I'd like to take a minute to discuss our recent M&A activity, which occurred subsequent to the close of the third quarter.
Very pleased that this week, we were able to announce the acquisitions of Rev. Formerly part of <unk> or USD four very two highly regarded players in commercial real estate.
Not only are we complemented the breath of our first for our clients, but most importantly, we have extended the altice team with exceptional talent from both for Barry and Rasmus.
We are excited to have enjoyed the smart dedicated passenger folks already here at all.
Commercial real estate valuation as of the quarter, what we do here at all.
Over the past several years, we've been quite selective with our deployment of capital towards acquisitions.
Consistently message separate focused on opportunities in our core businesses and then our core geographic markets, which include Canada U S U K, France, Germany and Australia.
Thank you.
Looking for the opportunities that are quickly accretive and that allow us to delever back to the low twos.
Two years.
Finally, we look for businesses led by teams that see the power of working together results. This group to offer clients. The best expert services technology and data available in the industry. Both of these acquisitions meet our criteria.
With that as context oven will now walk you through the results in the quarter and then I'll come back and provide some perspectives on our performance and strategy.
What are you.
Thank you, Jim and good afternoon to everyone on the call.
The actual performance in the third quarter of steady underscoring the stability of our business model beginning.
Beginning with our consolidated third quarter results as Canelo pointed out unless specified.
I'll be referencing are on a constant currency basis.
Our consolidated revenue experienced a modest increase over last year.
Ladies continues to exhibit steady growth even as we proceed through one of the slowest commercial real estate transaction levels in over a decade.
Appraisals and development advisory or maintaining stable performance.
The shop strong performance in the first half of the year.
Pretax growth slowed we remain strongly positioned for long term growth.
Adjusted EBITDA.
Down 13, 8%.
Profit was <unk> 9 million in.
Mark and a 31, 8% increase year to date, whereas you're down sequentially on modest revenue growth and higher financing costs.
Adjusted EPS came in at 33 cents.
Free cash flow staring at $34 1 million, our highest level on record and represents a 96, 5% year over year increase.
Here is a function of catch up in our Q3 results from our higher working capital balances in the first half with our transition to our new ERP system.
We are fully operational on our new ERP system and our record results highlight our ongoing focus on driving higher free cash flow conversion of EBIT.
Turning to our business segment performance.
In analytics, we continue to deliver top line growth and margin expansion.
Total revenue was up four 6% recurring revenue was up nine 2%.
Growth in analytics continues to benefit from our ongoing transition to cloud subscriptions valuation management solution asset expansion and the bookings.
Adjusted EBITA is growing driven by higher revenues and improved operating leverage.
Our recurring revenue base continues to Seattle, we do know the year over year.
And 87 million in the quarter recurring revenues were up nine 2% and now represent 90% of the total year to date revenues.
This provides us with a stable revenue base, even in this current macroeconomic environment.
You are aware many of our solutions are considered mission critical with relatively high switching cost.
With year to date commercial real estate transactions down 55% versus 2022.
We're pleased with the resiliency of our recurring revenue model.
They need to invest in our business to drive operational efficiencies and scale.
So that we're well positioned for when the market conditions improve.
With respect to the sequential change from Q2.
This primarily reflects some seasonality valuation management solutions now.
Turning to margins, we remain focused on optimizing our cost structure to drive sustainable improvements across the business.
Margins continue to expand.
60 basis points over last year, and a 480 basis points year to date.
The improved run rate and reflects our focus on achieving our target operating model across all P&L lines.
Turning to property tax.
Revenue came in at $4, 1% below last year.
The U S and the UK practices posted year over year revenue growth.
By a decline in Canada, with the Ontario cycle selection.
Session is impacting growth.
Thank you Tony.
I'll be on theory of reassessment for the 'twenty 'twenty four year growth in Ontario is expected to be muted through 2024.
The U K backlog and high quality Prs continues to grow throughout the year.
Drive additional revenue in Q4 and throughout 2024.
The valuation hospice agencies markets around bottleneck subtract some challenges associated with the end of the 2017.
We are deploying technology from ICR when software to drive efficiency in the U S. Additionally, we've increased our service delivery capacity.
Extending our global service Center in India.
Property tax adjusted EBITDA reflects lower revenues as well as increased expenditures related to compensation.
Washington, our technology infrastructure.
Our property tax processes and drive future margin expansion.
And finally appraisals and development advisory revenue was steady.
The appraisals practices in line with last year and development advisory, which is nominally down.
Turning to our balance sheet.
Finished the quarter with a cash position of $44 7 million and was $314 1 million as bad debt.
Funded debt to EBITDA leverage ratio as defined in our credit agreement was 2.08 times well below our limit of four five times.
Applying our cash and net debt to adjusted EBITDA leverage ratio was 198 times.
As Jim discussed at the opening of the call in relation to the upcoming.
Coming acquisitions on drugs and for very we have obtained a commitment from our lenders.
And increased the borrowing capacity under our bank credit facility as required.
Regarding our capital allocation priorities, we will continue to invest in organic growth via technology service delivery and go to market investments.
Pay down debt and maintain financial flexibility for M&A and stock repurchases as demonstrated in Q3.
Pat back to you Jim.
His phone.
The oldest team continues to improve the fundamentals of the business as we proceed through a protracted pullback in commercial real estate capital deployment.
We've rebalanced investments across business units and P&L line.
We continue to invest in improving our operations to increase productivity and drive operating leverage or cash flow from operations significantly improved in the third quarter with the deployment and adoption of our new ERP system. We have returned capital to investors through the repurchase of our shares as we believe our own stock represents.
Telling investment opportunity and this week's acquisition announcements demonstrate our focus on expanding core capabilities in core markets now focusing back on our key performance indicators, our ongoing transition to Argus cloud is tracking the plan. We ended the quarter was 72% of our Argus enterprise.
Users contracted on the cloud a steady improvement from 55% a year ago.
The reduction percentage will move in step functions of several major clients converged cloud in line with the termination date of their existing contracts. The cloud conversion should be substantially complete near the end of fiscal 2024.
Turning to new bookings this metric captures incremental new business growth.
Unlike recurring revenue the timing of bookings complex fluctuate, particularly in the current macroeconomic environment that said, though down from prior peaks, we're still adding new business in this market new bookings are holding steady in the low $20 million range in line with 2021.
As a matter of fact slightly better than 2021.
While there is significant cash on the sidelines that is great for CRA investments behalf.
Spreads are still high and transaction activity is still muted.
There are already investors are still in price discovery that arent deploying capital at the same levels as recent years.
The commercial real estate industry is navigating a cycle not seen in over a decade and now with additional geopolitical conflicts uncertainty remains regarding the global economy as we head into next year. Our revenue models have proven to be resilient, but organic growth is tied to capital deployment.
Now, let's discuss the RASM for very acquisitions with some more detail.
Now for a bit more background on the two transactions for Berry will provide us with the CRT evaluation software that addresses capabilities required in the Asia Pacific region for various complementary to Argus enterprise and software is widely adopted in the region and serving over 200 firms that over 2000 users.
<unk> acquisition will expand our valuation management solutions capabilities and adds to our recurring revenue base.
<unk> has been consistently growing its top line in the double digits and expects to generate approximately in Canadian dollars $63 $6 million of revenue and Canadian $19 5 million and normalized EBITDA for fiscal 'twenty. That's based on their projections together, we believe we're creating a best in class.
Valuation intelligence.
<unk> led significant talent and with market expertise and credential value professionals to our team, including a sizable service delivery.
In India, where we too have been growing our global service Center.
This will fast track our productivity at lower cost to serve and provide us with building scalability to support our existing and new clients as the market recovers.
We are confident in our investment thesis on both of these acquisitions first.
We both will elevate the value we deliver to our clients second strong strategic fit both derivative.
CRT valuation.
And our tier one geographic markets. Those are recurring revenue models with solutions that are deeply embedded in client workflows.
Additionally, both businesses bring significant asset intelligence, which as you know is core to our long term growth strategy to deliver advanced analytics.
With the office performance platform Foundation in place, we can now more efficiently integrate new capabilities.
Finally, each brings a sizable installed base the type of buyer personas for targeting for advanced analytics, Theres attractive cross sell and up sell opportunities with both revs and formulary.
Post close our funded debt to adjusted EBITDA leverage ratio will be well below our four 5% maximum capacity limit.
Given the expected growth in existing strong cash flows we have a path to steadily delever to our target of two to two and a half times.
Times range by the end of 2025.
To wrap up.
While we cannot control macro market forces, we are managing what is under our control that includes driving towards operational excellence maximizing our operating leverage by strategically positioning ourselves for the opportunity to serve the industry with advanced analytics, our year to date results and this dynamic where it can speak to.
Our execution I.
Analytics recurring revenue was up 15, 7% analytics margins were up 480 basis points, we're adding over 20 billion each quarter and new bookings with analytics.
We're delivering on our cloud transition plans.
The impact of the UK annuity reset in Q2 taxes up nine 8%.
<unk> is up 31, 8%.
Our improved operating foundation sets us up for strong cash generation. This fuels organic investments as we continue to enhance the office performance platform invest in office labs improved service delivery and deploy technology to improve our own processes and it funds our capital deployment strategies, including.
M&A.
The market will eventually turn and when it does it will also coincide with heightened demand for advanced analytics as capital deployment increases CRE professionals believe extra device and data driven intelligence to drive faster better decisions. We will continue to prudently invest to capitalize on the opportunities ahead. Okay.
Let's open it up for questions operator.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
We will pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Daniel Chan with TD Cowen Daniel Your line is open.
Hi, good afternoon, Jim It looks like the <unk> acquisition comes with a fairly sizable team how much of their revenue would you say is tied to technology versus consulting services associated with labor outsourcing.
The roads business is.
Very good.
Analogous to our Vms business and analytics.
So that said, it's heavily reliant on technology.
Clients have had significant input into the technology roadmap.
At <unk> as well as in all of this so there.
We are completely tied together.
Those two elements.
Okay. That's helpful.
And it sounds like they have a lot of institutional customers. So just curious you mentioned that you're expecting a lot of revenue synergies is it from.
New customers complementary sets of customers coming in is it services just any thoughts on what's going to drive or accelerate some of that double digit growth that that there aren't experiencing.
Okay.
Sure.
They were exploring a similar path.
We added almost grew significantly more asset level data in Argus enterprise across all of our enterprise.
So it was just widens the installed base.
There are complementary customer says that the reps team were successful in penetrating.
As.
Yes.
David.
Well with lenders as the.
The <unk> team is particularly.
<unk> daily valuations, which is something that we do but not at the same scale. So it's extremely complementary.
Okay.
Great. Thank you and just one more if I may.
The recurring revenue the new bookings.
We're down year over year.
How much of that is due to strong dms bookings in the year ago quarter, and maybe can you just comment on how the software new bookings are holding up on a year over year basis. Thank you.
Right, we don't really break out.
The bookings.
Other than recurring.
But.
Yes, there is.
It's the slowdown of the capital deployment in the capital ratio.
CRE is CRE.
CRE as.
Investments.
Area continue to raise capital.
In Q3, I would say based on Q2, but there still is.
New capital flowing in.
So that is really what's driving the bookings is as our clients take a pause.
I didn't get there.
A significant amount of dry capital that they have on the sidelines deployed before they go raise new funds.
And Danielle just maybe to add to Jim's comment.
What we're really looking at this year is consistency.
Bookings in the fact that we're maintaining.
$20 million range.
Jim our kitchen as you know as we've talked about several times.
These are creative to our recurring revenue model, where you have low churn so HIV positive indicator for asset base.
In light of the market and in line with what we're seeing happening across the fact, Eric we're maintaining a very consistent model about eight.
Thanks.
That's helpful. Thank you so much.
Your next question comes from the line of Yuri Lynk with Canaccord Genuity. Your line is open.
Yes.
Yes.
Hey, good evening guys.
Hey, Jerry.
Sure.
Just back to the the <unk> acquisition I mean, the last few acquisitions, you've made have been very focused on bulking up your.
Analytics.
And data offering.
And this one maybe I'm wrong, but this one appears to be more of a.
Professional service business with with maybe some some tech so.
My first question is is there any change in strategic tact here.
With this acquisition and secondly.
Just in terms of valuation I mean, it seems based on what you paid for it that would be at the very low end in terms of the valuation multiple that most people put on the analytics business.
So how do we think about that going forward.
Yes.
Right.
The the <unk> business in the Vms business.
The incremental contribution margin from both sides, so whether it's our legacy base or the new base.
And look.
They have a similar profile to data analytics margins.
So these are very tech heavy expert service businesses.
Which allow for significantly higher margins than other types.
Our services business because of the amount of leverage we get out of the Jack <unk>.
Yes.
As we've been saying and as as the rest of team has demonstrated there is leverage in acquiring that.
I was just.
Wage arbitrage, where the global service center approach.
Really talented people in those markets to complement our teams. So it's that combination of GSE and technology deployment and that technology being embedded into client workflows.
That made these businesses very.
Very sticky.
Mission critical and high high contribution margin. So for every incremental dollar is significant.
Significant amount drops to the bottom line.
Okay.
Okay.
So to your point.
The.
The multiple that we pay and Thats why we are.
We feel quite good about this acquisition it was the right timing and the right market conditions to pick up an absolutely fantastic asset.
Okay.
And that as far as strategic Jay There is absolutely no strategic change is selling advanced analytics into the most sophisticated investors in commercial real estate and that is our installed base for BMS and that is the Reds installed base.
Okay.
How did you.
Come across our reps are they a competitor or was this a business that was put up for sale and.
And any color on that was was it a competitive auction type situations.
Uh huh.
Rich has been a formidable competitor.
Cheers.
The the teams have known each other.
My team is <unk>.
Legacy team has added great lease spreads for the for the rescue over the years.
And as we said they've been able to say parts of the market.
That has been complementary to us so we each had our swim lanes.
Okay.
But.
Yes, it's complementary we've known the business for quite a while and they were running through they did run a process to sell it.
As scientists to carve it out.
Okay.
Turn it over thanks.
Okay.
Your next question comes from the line of Kevin with Scotiabank, Kevin Your line is open.
Hey, there good evening just a question. Another question on reps I know you run across them quite often they I'm trying to think of some of the differences, though daily valuation do they.
Target you know different types of CRE assets in any way are you know different verticals.
Is there anything in their business that might be.
Vms that some seasonality in your business if there's anything in their business models that might sort of smooth out some of that seasonality was trying to think of any other differences here of them versus Ian.
Okay.
Okay.
The rescue effected the margins that David wedding.
Pension funds.
Civic area, where.
We're the <unk> team has been quite successful.
Versus all of this.
The daily valuation again is skill sets that we've been automating the.
They've done a great job.
Building out as far as the.
The asset types.
There is.
There is overlap because we.
We both.
Focus on everything other than really residential except where residential represents a commercial real estate asset thesis. So are we.
But besides that.
There is overlap hardcore.
Look at our top let's say.
35, so when you look at their top clients there is a different asset mix in the client portfolios.
But the way.
Fundamental.
Performing valuations.
Both companies cover that.
Yeah, Okay got it.
They're heavily recurring revenue model as well.
Term contracts with clients as well.
Sure sure participating out seasonality.
Okay.
That's helpful I kind of to my next question just so that their recurring revenue than like your recurring revenue is a mix of of Rguest and then B M S.
There is what a lot like essentially like your Vms business, what you would define it for crane revenue in that regard correct.
Correct, which is loans are under contracts.
On the seasonality of your question there.
There is.
You're still at play.
<unk> has a similar profile, where you have your annual valuation that will provide a spike in Q4, let's say versus Q1, and then the second quarter that would be the.
The second quarter the June the June 30 quarter.
You have your semi and <unk>.
So you can just you can follow the quarters and year end at mid year you argue.
We will have higher volumes, so as we've talked about the business, we've talked about price times volume times frequency and frequency for both businesses to increases in Q2 and Q4.
Okay. Okay.
And then and then I guess for modeling if we're looking at that recurring revenue line that was sort of you know down a little bit quarter over quarter as we think about the.
The next point there on Q4, some seasonality to that.
You know should it tick up I guess another way to think about this question is is there a way for us to think about your.
Your recurring base split between Rguest, and then and then Vms just trying to get some comfort around that.
How to think about like a good base for the business and then you layer on Vms on top of that any any color there.
Yes.
Sure.
August looks like.
SaaS business, where its fifth straight ratable by month.
Yes.
Q4 is exactly the answer to the last question, which is a Q4, we're going to see frequency spike up.
For for BMS.
Okay thing to keep in mind.
There is seasonality or its these are fully recurring revenue models.
David you have seasonality that the retention of the stickiness of these offers and Vms, whether it's our Vms business, where the reps new business.
These are highly highly sticky businesses with.
Your net retention rates over 100%.
Okay.
Gotcha, Okay understood.
Just the last one for me then as we look to 2024 and the cloud migration you've got about just under 30% of the way to go how do we think about just the correct.
Uplifting.
Just strictly from the the remainder moving to the cloud in terms of any sort of pricing or upsells or are there other data analytics.
<unk> offers on top just is there any benefit can you help us understand how much more you could get you know in 2024.
On the on the migration of cloud alone.
Okay.
Yeah.
Right.
Yes.
The cloud migration for standard clients, so if they're if they're paying.
Basic maintenance stake there.
We've had maintenance pricing increasing over the years.
So.
They're probably in that two <unk> hundred 2000 range per user.
And the cloud will drive.
Again, depending on the lifecycle of the client.
At this point it will drive about a 50% increase per user.
For se.
Mathematically you look at the 30% last but.
Jeff I'm trying not to them, we're not we're not giving guidance for 2004 so.
To give you as much color on that but.
But obviously we have the.
The adoption curves worked out when the crossover.
The slowdown in growth from cloud list, but as I said in my earlier remarks that transition will take us towards the it all the way towards the end of 2024.
And do you think are the big chunk here ones closer towards that the second half is that how to think about it.
Okay.
The other spread out some there is theres a couple of the contracts expire in 2025, but those clients are already talking to us because.
Yes.
They are partners in their ecosystem many of them most of them have moved already so they get to the compatibility issues. If they are in.
They can't get the same collaboration.
Chanel, either they get they're not.
If they're not in cloud they can.
That rate with others in the ecosystem as efficiently so.
We expect that.
The majority of it will be complete.
2024.
Okay got it that's helpful. Thanks, a lot I'll pass the line.
Your next question. It comes from the line of seventh with BMO. Your line is open.
Great. Thank you good evening.
Well, it's a great color so far so thank you, but I just wanted to follow up on a couple of things.
Specifically as it relates to revs.
I'm just wondering if you could give just a little bit more color around strategically.
What parts of the market.
Does <unk> give you access to that you otherwise wouldn't have been able to conquer.
Conquer on your own given the strength of your existing Vms platform like I'm, just trying to understand what's sort of the client crossover risk or more specifically what part of the market you can get to you mentioned pension funds, but I thought you already had a handful of pension funds pension fund clients already so just hoping to get some more color on that.
Yes, so Steve.
Key takeaway here is that.
As I've said are our Vms business the revenues Vms business is extremely sticky because it's in the workflows of those clients.
And.
They are building out there.
The reps team has a fantastic roadmap for technology.
Going forward is that.
We say, we say right now.
We have the advantage there.
They are building out a platform we're building out the ATP, there's opportunity in there to converge.
They get some synergies out of the two businesses.
But it's some of the functionality like we talked about such as daily evaluations, where they they are ahead of us.
And.
When you get into some of the state relative pension funds those types of areas.
The rest of team as is absolutely fantastic reputation and it's hard to displace them or overcome that on new business.
<unk>.
And it was.
And to the earlier question.
Given the multiple on the business and the synergies.
It was the right time to try to put this business together.
Okay.
Okay. Okay are you able to.
Are you able to give a better sense of what the revenue synergies could look like.
Hi.
It's as we said it's the.
I'm not going to give the exact number.
We baked in to our thesis but.
If you just go to our overall strategy to be advanced analytics strategy that we've been discussing is targeted at our Vms client base. So this gives us a broader base to take the new capabilities that we're building and cross sell into so this is the.
Yes.
Persona is the exact persona for advanced analytics.
As.
Separate companies.
We wouldn't necessarily been offering the advanced analytics.
Two the Ras client base, although many of them are Argus enterprise clients. So there is a synergy there in the office performance LIBOR.
But this is all about.
Expanding our client base, so that we can.
That we can bring the advanced analytics.
And two.
It is with both customer bases.
Okay.
Okay, I see I see okay. Thank you.
And then just just in terms of.
The funding behind the deal and then just some of the math.
Can you just give a little bit of color or maybe something offline, but just around what kind of rate that was associated with the incremental leverage we're taking on and then and then do you have a number for what your pro forma net debt to EBITDA, but it looked like I know you said, it's below a certain level, but I'm just wondering if you can.
Theres anything to be more specific.
Yes, so we have a very strong syndicate partner group associated with our covenants are our pricing remains relatively similar to what we at existing.
For the duration for the duration of our term, which again speaks to the confidence that the lenders have in our model and the partnership that we have with tax that was very.
Favorable on our part to David 18 existing contract.
During the duration of the contract.
Okay, and then a sort of pro forma not to do that like we're looking at a number of kind of a three five times range is that reasonable.
Yeah.
Jim mentioned, our covenant allows us to take out at four five times.
And even when you factor in our own working capital requirements in Q1, we're going to be well below the four five times.
We're going to continue.
Focus on free cash flow generation.
We have a very strong organic growth model the acquisitions are accretive to our growth and so we're going to be able to deleverage very quickly back at roughly the levels that we're sitting at now.
Over the course of the next 18 months.
Okay.
Great and then I'm, just kind of shifting gears entirely to tax.
And just wondering yes.
Ontario cycle timing sort of weighed on the numbers this quarter and it sounds like it's going to continue can you remind us how big Ontario isn't the tax business.
Yeah.
Hi.
It's about it's.
So a good portion of the Canada revenue agency.
It's a question you have.
Hey at least double digit portion of total tax revenues, but that said.
We have a position across many different provinces across Canada, which allows us to balance off the offsets that you may see in a particular cycle, but for sure. It is a meaningful part of our Canada number.
Yes.
We've got a very strong position and are you asking a lot of white space for us to continue to grow there.
Obviously as we get <unk> renewal entered a new cycle within the U K, we're going to continue to build on that base as well a set from a portfolio perspective.
The fact that Ontario is being pushed out.
We do have offsets across the portfolio give us comfort to be able to manage it from a global tax portfolio perspective.
Okay. That's great. Thank you.
Steve.
We've done tours are our folks in Ontario.
Have been fantastic about working across the other provinces.
So as we're seeing growth.
And in Western Canada.
We've been able to accordion, our resources up and down.
Based on the cycle that any one of those provinces and at any given time.
Okay.
Okay, great. Thank you.
Okay.
Your next question comes from the line of Richard National Bank Financial. Please go ahead.
Thank you I had a question on the bookings last quarter. When you had a nice rebound in bookings I got the impression here that you felt reasonably confident that the business sort of had normalized a bit so I'm just trying to understand.
What sort of happened that.
We've seen a bit of a reversion in that bookings.
I get that there's a bit of volatility, but it seems to be a bit more pronounced than we had been expecting.
I think if you go back and you look at the mining province comments you'll.
Youll see that.
There was we think Q1 completely was an overreaction.
Q2, there was a lot of exuberance that we were absolutely say it feels it's the same market guys.
Q3, it's the same market there is lumpiness to big contracts and the timing so that when you do the quarter over quarter versus the prior year and this is kind of going back to the old world of term contracts and software where are you.
You have a big three year contract and you wouldn't need a a big three or five year contract that you would that's kind of the bookings.
The story here, we feel like we've been in the same environment since March.
Clearly March with SBB changed.
The trajectory.
CRE.
But in Q2, we said feels the same as it did in March and were saying in Q3 failed to say.
So we're in that price discovery mode.
Bookings are lumpy.
That lumpiness gas masks when there is a tremendous amount of capital.
Boeing into commercial real estate as an asset class.
Whether there isn't a lot of new capital coming in you can see the lumpiness.
A little more clarity.
And maybe just to add to that again and just as a point of reference I think that it's the consistency.
Our bookings number that we've seen over the course of the nine months that gives us confidence that our clients are still.
Committed pricing locking in resources for our services and so it's really the consistency.
Our total bookings levels that continues to be below the comfort again in a recurring revenue model, where you have a high level of client retention and you have mission critical solutions that you're offering clients.
So things are additive and it's just a matter of timing of duplex right. We don't publish a backlog number.
But the way.
The way to academically think about this is our backlog.
For Dms.
<unk> has continued to increase nicely.
Okay. Thanks, that's helpful.
Sure.
Obviously, we're still trying to get a better understanding of this business.
Business.
Is there or can you talk to any degree of customer overlap because obviously, you've got a broad portfolio. So.
And I know that you know part of it.
The strategy of the revenue synergies potentially but.
Maybe talk about that.
If you're asking is there revenue breakage because of overlap.
There is not.
Okay.
Other than rabbits itself was a small.
A smaller artists client.
Because August is the standard in the industry as you know.
But the client bases are very complementary to we have common clients, we do where we might serve different portfolios.
At the same client, but again the revenue is this.
This is all additive.
Okay and then.
What's been sort of the growth rate or beds over the past call. It three or five years of being kind of get to a run rate just to get some historical perspective on that business.
Okay.
Yes.
It's doubled.
Double digit teens.
Okay. So basically the current run rate that you published.
Yes.
Okay alright, thank you.
Clearly like like capital is flowing.
They had peaks as well but.
Their business is growing.
Similarly to ours.
Yeah.
Okay.
Okay.
Okay.
Thanks Richard.
Sure.
The next question comes from the line of Paul Treiber RBC capital markets. Your line is open.
Oh, thanks, very much and good afternoon, I just wanted to switch gears to four Murray for a couple of questions.
Would you are you know there's no disclosure on the size.
Can you just sort of put the magnitude of it in perspective for us.
Yes, Paul.
It's a smaller acquisition.
It gives us a nice.
Yes.
<unk> <unk> pump.
But.
So this way it's below the materiality threshold of what we would what we would disclose gateway published thereabout.
Category.
<unk>.
Sure Peter outage pilot scale, but they've got a pretty good pace of clients in the Asia Pacific Australia region Atlas, great attractive SaaS, it's a similar profile to our rethink acquisitions on the tax side.
Okay. That's helpful.
What kind of ballpark it.
This strategy. So it gives you the Asia Pacific footprint, how do we think about like the product integration strategy.
You migrate those customers gradually over to Argus cloud.
We run separately, how do you how do you think about that.
Yes.
The ATP allows us to take various applications and tie the datasets together so.
Where we have the data rates with clients, we will be able to ingest the data into the apd.
One is the one of the features that is made for very successful and the region is a simpler user interface. So.
You can think of at AE and for Berry.
Kind of like Excel, where I'm sure Microsoft to make changes to the interfaces and excel, but you have so many users who.
They know how to go in and work with the application. So we're not going to be forcing clients to make any drastic changes other than through our knowledge graph technology, which we picked up with the <unk> acquisition, we will be able to connect data across the various applications.
For the last I guess I've been here now going on three years.
When I came into the analytics business.
Sure.
Each year, we've looked at the investments required to have a fit for purpose products, making a fit for purpose for the Australia market.
And each year we.
<unk> prioritized because for Berry.
So for medical in the region.
By the time, we did the development.
The functionality built to go to market got through the sales cycle sold through for Berry.
This means this has made tremendously more sense too.
So just acquire the leader in the market.
That's good perspective.
Last question just in regards to arrives just trying to look up more information on it is that the same business at sites acquired in 2014. The one that was founded in 1931.
Yes.
Hi.
I don't have that history at my fingertips, sorry, Bob as you guys can see its been a busy week here.
And then talk today about 20 years ago, but it's been in the market for about a decade.
Okay. That's.
That's helpful.
I'll send you the link to the MSA.
<unk>.
Yes. Thank you all personally.
Okay.
Your next question comes from the line of Gavin Fairweather with Cormack Securities. Your line is open.
Oh, Hey, good afternoon, just on rats curious when you model that.
Except where other kind of cost synergies between the two organizations or enhancing the margin of your existing BMS business to kind of scale on their efficiency like what part of what extent was that part of your investment thesis.
There are synergies, particularly in system development as I said some of the raws future roadmap is absolutely fantastic.
Yes.
So we're looking we're looking forward to bringing that together as <unk>.
The reps team was building out what they call a BMS next and as we were building out the <unk>.
Next generation of the Vms platform on the ADP for us.
So theres absolutely synergies there.
<unk>.
This will accelerate.
GSE.
Again, just a fantastic team there so that brings us forward as far as having scalability and we're leveraging the GSC across all of our businesses.
<unk>.
Particularly the tax business.
He has a special focus for us right now on leveraging.
More.
Offshore capabilities.
Got it and just a quick.
Any clarification can you just help us understand kind of the process to close I think you said first half of next year.
Yes, so again one of the things we have our own estimates.
This deal.
Obviously, you're going to be.
<unk> regulatory approval. So there is there is no joint planning that we can do.
With the Reds team until we saw a clear regulatory hurdles.
Even to the point where the.
The client data.
We had to keep it.
Clean rooms, so where our market facing folks and even myself and pavon.
Can't really with three of their client base, but our Vms.
Our Vms team on an anonymised spaces, we were able to go through all of that.
And obviously, our legal teams have been through all of the customer contracts had an 80 basis.
We're not we're not at the point, where we can do joint planning on synergies or.
Go to market until we get that regulatory approval behind us.
Got it that's it for me thank you.
Okay.
Your next question comes from the line of Christian with eight capital question. Your line is open.
Okay.
Hi, Good evening I'll ask one more question on revs.
Just touched on or you know the acquisition closing in the first.
The first half of next year some.
Some are planning to ask you about <unk>.
As we think about the integration.
This model is the pricing strategies is there a big lift to get everything under one umbrella at all this is that the plan to integrate branding and go to market or do you.
Envision keeping the entities sort of separates owning their own domains portfolios for the first debt and so it was a more natural sort of integration.
Great.
Thanks Christian.
Again from.
We can't really lay out go to market plans.
Certainly.
Factoring in pricing at this point until we get through regulatory approvals and then we can start.
Looking at those types of items.
What is really attractive to us again is being able to.
So.
The Rev is based with advanced analytics.
Okay. That's helpful. I'll ask one more question from me.
Our core business, when we think of the model price times volume.
Volume terms frequency and zero in on volume there.
Is it safe to assume you know the number of assets.
It's flattish with the lockups transaction activity or slightly down quarter to quarter or how is that trend or is there any color you can provide around the direction there.
Our number of assets are up because we do have bookings from earlier in the year than in prior years that has those assets are coming online.
So it's not at the same growth curve that it was over the last couple of years, but the number the total number of assets that we're servicing.
In the quarter is up and on an annual basis is still up significantly.
That's great to hear thanks for taking my question I, just said differently. Our revenue continues to grow based on prior bookings.
And we will continue to do so.
Sure.
For the foreseeable future because we are still adding bookings each quarter.
Yes.
Christian do you see your price times volume that frequency.
Frequency application as it related to this quarter.
Versus last quarter versus last quarter, correct correctly as of mid year.
Valuations that you don't get in Q3, we expect that to pick up in Q4.
Just from a from a volume at a frequency basis.
Understood. Thanks for clarifying so Christian hidden.
From a different angle.
When transactions are occurring our clients are also not taking.
Whereas today accounts down right there is natural attrition and puts and takes us.
Our claims.
<unk> portfolios.
But in general this is what this is why we use the word resilient so often around our revenue model the clients are reducing artists seats, but not adding at the same level, but theyre not reducing we have the cloud conversion that'll continue through 'twenty four.
And on the Vms side.
<unk>.
As clients hold those assets they need valuations on them.
In some cases frequency evaluation is going up as Lps want to understand the market better.
A lot of factors that play thanks for all the color.
Did you see volume turn.
In the right direction.
Thank you <unk>.
Next question comes from Scott Blecha Scott.
Your line is open.
Hi, good evening.
Margins at Brad look like they're strong at over 30% can you give us idea of how both levels compared to your Vms business and if they are stronger and what what do you attribute that strength to and can you replicate it going forward.
Art, we have more scale in our business, we put it that way.
So.
Okay.
Yes.
So our margins are a bit better.
Yes.
Really focused on what I have been focused on what the analytics business since I got here is incremental contribution margin leverage.
That's what I'm, saying when I look at that.
My history in data analytics and.
The deployment of technology that we have are incremental leverage looks like your standard P&L.
So think about standard gross margins for a data and analytics company, that's what the BMS margin profile looks like.
Okay.
So.
There's opportunities to combine lift the margins absolutely.
As the market comes back we'll see accelerated margin expansion.
Okay.
Okay. Thanks.
Then I just want to finish by re asking the question earlier in the call. It I think I might've missed that can you give us an idea on a pro forma basis, how much of the analytics recurring line and Vms versus the Argus enterprise business deals directly operate better.
Okay.
Okay.
Okay.
Alright, Thanks Scott.
Your last question comes from the line of status again with BMO. Your line is open.
Oh, great I just had a quick follow up just in terms of the purchase price you can talk about as an acquisition related tax benefit.
Is that something you expect to realize immediately and I guess, how much visibility do you have into that coming to fruition.
That's a present value number.
Are we.
I'll answer that.
Sure.
<unk>.
EBITDA is not exact proxy for the cash flow implications of this deal which is why we thought it was important.
So at least give a flavor for what the tax step up benefit was going to be for us.
Okay.
Okay.
That concludes the Q&A session I will now turn the call back over to Jim.
Alright, well, we appreciate everyone.
Being on the call it's been an exciting week here at Altice group.
For our new colleagues.
Let's say welcome we're really excited.
We're looking forward to getting both of these acquisitions closed.
Great set of questions from the analysts Tonight. Thank you.
And.
I appreciate that we do have a regulatory hurdle to clear and then I'll be able to provide additional clarity once we get past that and we can really started joint planning with the rest of team.
On the for various side, it's not just the recurring revenue that we picked up is that.
Absolutely fantastic reputation in the Asia region. Its a lot of our existing North American clients have operations in that region and used for very so we're really excited to pick up that team and it's not just the financials, but it is.
A great product team.
That will complement the skill sets of the.
Great Technologists that we already have an office. So thank you very much for your time and look forward to speaking to all of you soon.
Ladies and gentlemen that concludes today's call. Thank you all for Johnny you May now disconnect.
Okay.
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