Q2 2024 Altus Group Ltd Earnings Call

August 8, 2024

Good afternoon and welcome to Altis Group's Q22024 Financial Results Conference Call and Webcast.

Operator: for Financial Results, Conference Call and Webcast. Please note that today's call is being recorded. All lines have been placed on mute to prevent any background noise.

Operator: Financial Results Conference Call & Webcast Please note that today's call is being recorded. All lines have been placed on mute to prevent any background noise.

Please note that today's call is being recorded. All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question, please press star, then the number one on your telephone keypad. To withdraw your question, press star one again.

After this speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star then the number one on your telephone keypad. To withdraw your question, press star one again. I will now turn the call over to Camilla Bartosiewicz. You may begin your conference.

Camilla Bartosiewicz: I will now turn the call over to Camilla Bartosiewicz.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star, then the number 1 on your telephone keypad. To withdraw your question, press star 1 again. I will now turn the call over to Camilla Bartosiewicz. You may begin your conference.

Brianna: You may thank you, Brianna.

Camilla Bartosiewicz: Thank you, Brianna. Good afternoon, everyone, and welcome to the conference call and webcast discussing Altus Group's second quarter results for the period ended June 30th, 2024. Our disclosure materials, notably the press release, MD&A, financial statements, and the slides accompanying our prepared remarks, are available on our website and, as required, have been filed to CDER Plus after market close this afternoon. I'm joined today by our CEO Jim Hannon and our CFO Pawan Chhabra.

Camilla Bartosiewicz: Good afternoon, everyone, and welcome to the conference call and webcast discussing Altus Group's second quarter results for the period ended June 30, 2024. Our disclosure material, notably the press release and DNA financial statements and the slides accompanying, are prepared remarks. Our available on our website and as required have been filed to seed our costs after March of close this afternoon.

Camilla Bartosiewicz: Our disclosure material, notably the press release, MD&A, financial statements, and the slides accompanying our prepared remarks, are available on our website and, as required, have been filed to CDER Plus after market close this afternoon.

Camilla Bartosiewicz: I'm joined today by our CEO, Jim Hannon, and our CSO pop-in chat room. Some of our remarks on this call and in our disclosure may contain forward-looking information that is based on certain assumptions and therefore subject to risks and uncertainties that could cause actual results to differ materially from those projected. Please refer to our forward-looking information disclaimer in today's materials. Please be reminded that Altus Group uses certain non-gavel financial measures, ratios, total segments measures, capital management measures, and supplementary and other financial measures as defined in National Instrument 52-1-12. We believe that these measures may assist investors in assessing investment in our shares, as they provide additional insight into our performance.

Speaker Change: I'm joined today by our CO, Jim Hannon, and our CFO , Pawan Chhabra.

Camilla Bartosiewicz: Some of our remarks on this call and in our disclosure may contain forward-looking information that is based on certain assumptions and therefore subject to risks and uncertainties that could cause actual results to differ materially from those projected. Please refer to our forward-looking information disclaimer in today's material. Please be reminded that Altus Group uses certain non-GAAP financial measures, ratios, total segment measures, capital management measures, supplementary and other financial measures as defined in National Instrument 52-112.

Camilla Bartosiewicz: Please refer to our forward looking information disclaimer in today's material.

Camilla Bartosiewicz: Please be reminded that Altus Group uses certain non-GAAP financial measures, ratios, total segments measures, capital management measures, and supplementary and other financial measures as defined in National Instrument 52-112.

Camilla Bartosiewicz: We believe that these measures may assist investors in assessing an investment in our shares as they provide additional insight into our performance. However, readers are cautioned that they are not defined performance measures and do not have any standardized meaning under IFRS and may differ from similar computations as reported by other entities and accordingly may not be comparable to 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 IFRS.

Camilla Bartosiewicz: We believe that these measures may assist investors in assessing an investment in our shares as they provide additional insight into our performance.

Camilla Bartosiewicz: We use our caution that they are not defined performance measures and do not have any standardized meeting under our press and may differ from similar computations as reported by other entities, and accordingly, may not be comparable to financial measures as reported by those entities. These measures should not be considered in isolation or a substitute for financial measures prepared in accordance with our press. An explanation of these measures is defined in today's iron materials.

Camilla Bartosiewicz: Leaders are cautioned that they are not defined performance measures and do not have any standardized meaning under IFRS, and may differ from similar computations as reported by other entities, and accordingly may not be comparable to financial measures as reported by those entities.

Camilla Bartosiewicz: These measures should not be considered in isolation or as substitutes for financial measures prepared in accordance with IFRS. An explanation of these measures is defined in today's IR materials.

Camilla Bartosiewicz: I would also like to point out that unless otherwise specified, all percentage and basis point growth rates used for a two-on-three call will be on a constant currency basis over the same period in 2023.

Camilla Bartosiewicz: An explanation of these measures is defined in today's IR material. I would also like to point out that, unless otherwise specified, all percentage and basis point growth rates we referred to on today's call will be on a constant currency basis over the same period in 2023. Okay, over to you, Kevin.

Speaker Change: I would also like to point out that on this other way specified, our percentage and basis point growth rates reduced for a joint race car will be on a constant currency basis over the same period in 2023.

Kevin: Thanks, Camilla, and thank you everyone for joining us today on the call. Our teams continue to make steady progress against our 2024 goals, strategically positioning Altus to maximize opportunities as market conditions improve. A key to results for flood geographic variability at property tax and a persistently tough-showing environment at analytics and at appraisals for development advisory. Recapping our consolidated metrics, revenue was steady on a constant currency basis with the growth at analytics offset by flat performance at property tax and a decline at appraisals and development advisory.

Pawan Chhabra: Thanks, Camela, and thank you everyone for joining us today on the call. Our teams continue to make steady progress against our 2024 goals, and to strategically position all those to maximize opportunities as market conditions improve. Our Q2 results reflect geographic variability at property tax and a persistently tough selling environment at analytics and at the appraisals of the development advisory. Recapping our consolidated metrics, revenue was steady on a constant currency basis; the growth at analytics offset by flat performance at property tax and the decline at appraisals and in development advisory. Profit was 2.3 million down year to year, which on a comparative view was primarily impacted by higher employee compensation costs, acquisition and related costs due to Ravs, our planned restructuring activities, and changes in our financing calls.

Camilla Bartosiewicz: Take over to you, Pawan Ch.

Pawan Ch.: Thanks Camilla and thank you everyone for joining us today on the call. Our teams continue to make steady progress against our 2024 goals and to strategically position Altus to maximize opportunities as market conditions improve.

Speaker Change: Our Q2 results reflect geographic variability of property tax and a persistently tough selling environment at analytics and at the Appraisals and Development Advisory.

Camilla Bartosiewicz: Recapping our consolidated metrics, revenue was steady on a constant currency basis with the growth at analytics offset by flat performance at property tax and a decline at appraisals and development advisory.

Kevin: Profit was $2.3 million down year over year, which on a comparative view was primarily impacted by higher employee compensation costs. Acquisition and related costs due to REVS, our planned restructuring activities, and changes in our financing costs, adjusted to even out, were down 19.2%, due primarily to lower earnings and property taxes. And free cash flow notably was up 96.4% on an as-reported basis over last year, which, as you might recall, included the impact of our ERP transition. However, if we were to compare it to Q2 of 2022, which may be a more appropriate benchmark, free cash flow is up 45.6%.

Camilla Bartosiewicz: Profit was $2.3 million down year-over-year, which on a comparative view was primarily impacted by higher employee compensation costs.

Camilla Bartosiewicz: Acquisition and related costs due to REVS, our planned restructuring activities, and changes in our financing costs.

Pawan Chhabra: Adjusting, even I was down 19.2% due primarily to lower earnings and property tax, and free cash flow notably with up 96.4% on an Azure-ported basis over last year, which, as you might recall, included the impact of our ERP transition. If we were to convert to Q2 of 2022, which may be a more appropriate benchmark, free cash flow was up 45.6%. Additionally, I would like to highlight that in Q2 we reported 2.6 million in restructuring costs, impacting our analytics and appraisals and development advisory business segments, as well as our corporate functions. This reflects our ongoing efforts to operate more efficiently in rebalance investments towards feature growth initiatives.

Speaker Change: The dress had even out was down 19.2%.

Camilla Bartosiewicz: due primarily to lower earnings and property tax.

Speaker Change: and free cash flow, notably with a 96.4% on an Azure-ported basis over last year, which as you might recall, included the impact of our ERP transition.

Speaker Change: If we were to compare it to Q2 of 2022, which may be a more appropriate benchmark. Free cash flow was up 45.6%.

Kevin: Additionally, I would like to highlight that in Q2, we recorded $2.6 million in restructuring costs, impacting our analytics and appraisals and development advisory business segments, as well as our corporate funding. This reflects our ongoing efforts to operate more efficiently and rebalance investments towards future growth initiatives. Now turning to our business segment performance, Analytics continues to grow, posting both top line growth and margin expansion. Revenue growth is driven by our ongoing transition to cloud subscription, new sales, a higher number of assets on our valuation management solutions platform, and contribution from the Forbery Acquisition.

Speaker Change: Additionally, I would like to highlight that in Q2 we recorded $2.6 million in restructuring costs impacting our analytics and appraisals and development advisory business segments as well as our corporate functions.

Speaker Change: This reflects our ongoing efforts to operate more efficiently and revounds and vastments towards the future grant initiatives.

Pawan Chhabra: Now turning to our business segment performance, analytics continues to grow, putting up both top-line growth and margin expansion. Gravity growth is driven by our ongoing transition to cloud subscriptions, new sales, a higher number of assets on our valuation management solutions platform, and contribution from the former acquisition. The double-digit improvement in adjusted EBIT reflects higher revenues, operating efficiencies, and our ongoing cost optimization efforts. Recurring revenue now represents 93% of our analytics revenues in that order. This is compared to 89% in the prior year. These revenues are comprised of solutions that are embedded in our customers' most critical processes and therefore represent resilient revenue streams with low churn.

Speaker Change: Now turning to our business segment performance.

Speaker Change: analytics, continues to grow, putting up those top line growth and margin expansion.

Speaker Change: Revenue growth is driven by our ongoing transition to cloud subscriptions.

Speaker Change: new sales, a higher number of assets on our valuation management solutions platform, and contribution from the Forbery acquisition.

Kevin: The double-digit improvement in adjusted EBITDA reflects higher revenues, operating efficiencies, and our ongoing cost optimization efforts. Recurring revenue now represents 93% of our analytics revenues in the quarter. This is compared to 89% in the prior year.

Speaker Change: The double digit improvement in adjusted e-bid ever flexed higher revenues, operating efficiencies, and our ongoing cost optimization efforts.

Speaker Change: Recurring revenue now represents 93% of our analytics revenues in the quarter. This is compared to 89% in the prior year.

Kevin: These revenues are comprised of solutions that are embedded in our customers' most critical processes and therefore represent resilient revenue streams with loan churn. Recurring revenue grew at 5.5% or 4% organically. Vargas and DMS performance was also resilient.

Speaker Change: These revenues are comprised of solutions that are embedded in our customers' most critical processes and therefore represent resilient revenue streams with low churn.

Pawan Chhabra: Recurring revenue grew at 5.5% or 4% organically. Argus and DMS performance was resilient. The moderation in recurring revenue growth reflects softness in data solutions related to lower transaction volumes here over year. As the macroeconomic conditions improve, we expect recurring revenue growth to ramp. Nonetheless, as we've demonstrated over the past several quarters, recurring revenue continues to grow even on lower booking space.

Speaker Change: Recurring revenue grew at 5.5% or 4% organically.

Kevin: The moderation and recurring revenue growth reflects softness in data solutions related to lower transaction volumes year-over-year. As a macro, economic conditions improve, we expect recurring revenue growth to accelerate. Nonetheless, as we've demonstrated over the past several quarters, recurring revenue continues to grow, even at the lower booking stage; hear more from Jim on that in a bit. Our margins continue to expand by 210 basis points a quarter and in line with our expectations. We continue to expect a more meaningful ramp-up in the second half.

Speaker Change: Argus and the MS Performance with Resilience.

Speaker Change: The moderation and recurring revenue growth reflects softness in data solutions related to lower transaction volumes year-over-year.

Speaker Change: As the macroeconomic conditions improve, we expect recurring revenue growth to ramp.

Speaker Change: On the last, as we demonstrated over the past several quarters, referring revenue continues to grow, even on lower booking space.

Pawan Chhabra: You'll hear more from Jim on that in the bed. From margins continue to expand up by 210 basis points in the quarter to the in line with our expectations. We continue to expect a more meaningful ramp in the second half. We remain committed to our plan to achieve 400 to 500 basis points of annualized margin improvement this year. This will be driven by revenue growth and lower expenses from the continued buildup of our global service center in India. And the full year benefit of our restructuring activities.

Speaker Change: You'll hear more from Jim on that in the bed.

Jim Hannon: From margins continue to expand up by 210 basis points in the quarter to the end line with our expectations. We continue to extracting more meaningful ramp in the second half.

Kevin: We remain committed to our plan to achieve 400 to 500 basis points of annualized margin improvement this year. This will be driven by revenue growth and lower expenses from the continued buildup of our Global Service Center in India and the four-year benefits of our restructuring activities. Turning to property tax, given our recent announcement about the divestiture of this business, we intend to move future results into discontinued operations next quarter, at which point we will no longer review the segment's performance.

Jim Hannon: We remain committed to our plan to achieve 400 to 500 bases.

Jim Hannon: points of annualized margin improvement this year. This will be driven by revenue growth and lower expenses from the continued build-out of our Global Service Center in India and the full year benefit of our restructuring activities.

Pawan Chhabra: Turning the property tax given our recent announcement about the divestiture of this business. We intend to move future results into discontinued operations next quarter, at which point we will no longer review the segment's performance. Property tax in Q2 was slapped and adjusted; even it was down 34%. Did you may recall the strengthen Q1 reflected some Q2 opportunities getting pulled forward, notably in the U.S. Canada in the quarter was up, and in the UK, although we had 8.3 million of contribution from annuity buildings, our performance is impacted by both a mix of lower value settlements and ongoing throughput constraints at the Valuation Office Agency.

Jim Hannon: Turning to property tax, given our recent announcement about the divestiture of this business, we intend to move future results into discontinued operations next quarter, at which point we will no longer review the segment's performance.

Kevin: Property Tax and Q2 was flat, and adjusted even out, it was down 34%. As you may recall, the strengthened Q1 reflected some Q2 opportunities getting pulled forward, notably in the U.S. Canada in the quarter was up. And in the UK, although we had 8.3 million in contributions from annuity billings, our performance is impacted by both a mix of lower value settlements and ongoing throughput constraints at the Valuation Office Agency. The decrease in adjusted EBITDA reflects higher compensation expenditures, as well as geographic variances of our revenue and related cost base on a year-over-year basis. And finally, Appraisals and Development Advisory Revenue and Adjusted EBITDA. We're down.

Jim Hannon: Property tax in Q2 was flat and adjusted EBITDA was down 34%. As you may recall, the strength in Q1 reflected some Q2 opportunities getting pulled forward, notably in the U.S.

Jim Hannon: Canada in the quarter was up and in the UK although we had 8.3 million of contributions from annuity billings, our performance is impacted by both a mix of lower value settlements and ongoing throughput constraints at the Valuation Office Agency.

Pawan Chhabra: The decrease in adjusted EBITDA reflects higher compensation expenditures, as well as geographic variances of our revenue and related cost based on a year-over-year view. And finally, appraisals and development advisory revenue and adjusted EBITDA were down. Similar to what we saw last quarter, the performance reflects muted market activity in the current economic environment, as the business segment has some exposure to reduced transaction volumes and higher interest rates, resulting in fewer appraisals and fewer near-project starts. After any draw, a balance sheet, we finished the border with a cash position of $49.5 million, and with $306.4 million in bank debt.

Jim Hannon: The decrease in adjusted EBITDA reflects higher compensation expenditures as well as geographic variances of our revenue and related cost base on a year-over-year view.

Jim Hannon: And finally, Appraisals and Development Advisory Revenue and Adjusted EBITDA. We're down.

Kevin: Similar to what we saw last quarter, the performance reflects muted market activity in the current economic environment as the business segment has some exposure to reduced transaction volumes and higher interest rates, resulting in fewer appraisals and fewer new projects started. Now turning to our balance sheet, we finished the quarter with a cash position of $49.5 million and with $306.4 million in bank debt, funded debt for which a leverage ratio is defined in our credit agreement was 2.11 times.

Jim Hannon: Similar to what we saw last quarter, the performance reflects muted market activity in the current economic environment. As the business segment has some exposure to reduced transaction volumes and higher interest rates, resulting in fewer appraisals and fewer new projects starts.

Jim Hannon: Now turning to our balance sheet, we finished the quarter with a cash position of $49.5 million and with $306.4 million in bank debt.

Pawan Chhabra: The funded debt that EBITDA levered ratio is defined in our credit agreement was 2.11 dimes; applying all of our cash to that debt, that adjusted EBITDA levered ratio was 1.97 dimes. Our current total liquidity stands at 293.1 million. Additionally, the plan to investiture or property tax business will significantly enhance our financial flexibility, with the estimated 600 million in net proceeds. It will enable us to invest organically via acquisitions and analytics, return capital to shareholders, and pay down debt to target levels.

Jim Hannon: The funded debt to EBITDA leverage ratio is defined in our credit agreement, which is 2.11 times.

Kevin: Applying all of our cash to net debt to adjust it even at a leverage ratio of 1.97 times, our current total liquidity stands at $293.1 million. Additionally, the planned infrastructure of the property tax business will significantly enhance our financial flexibility with an estimated 600 million in that reserve. It will enable us to invest organically via acquisitions and analytics, return capital to shareholders, and pay down debt to target levels. With that, I'll turn it over to Jim.

Jim Hannon: Applying all of our cash to net debt to adjust it even at leverage ratio was 1.97 times.

Jim Hannon: Our current total liquidity stands at $293.1 million.

Jim Hannon: Additionally, the planned investiture of property tax business will significantly enhance our financial flexibility with an estimated $600 million in net proceeds.

Jim Hannon: It will enable us to invest organically via acquisitions and analytics, return capital to shareholders, and pay down debt to target levels.

Jim Hannon: I'll turn it over to Jim.

Jim Hannon: I want to begin by expressing my gratitude to my colleagues for a highly productive first half of the year. It's been a busy period with significant progress on our strategic initiatives, which will drive the long-term growth of Altus. We remain focused on enhancing operational excellence and strengthening our position as a leader in CRE asset intelligence. During the first half of the year, we sustained analytics growth and margin expansion and significantly improved free cash flow in comparison to last year, and, as Pawan said, in comparison to Q2 2022.

Jim Hannon: All right, thanks, Plewin. I want to begin by expressing my gratitude to my colleagues for a highly productive first half of the year. It's been a busy period with significant progress in our strategic initiatives, which will drive the long-term growth of all this. We remain focused on enhancing operational excellence and strengthening our position as a leader in CRE asset intelligence. During the first half of the year, we sustained analytics growth in margin expansion and significantly improved free cash flow comparison to last year, and as Todd said, in comparison to Q222, we ran our Global Service Center in India, which is translated to process and margin improvements.

Jim Hannon: With that, I'll turn it over to Jim.

Jim Hannon: Alright, thanks so much. I want to begin by expressing my gratitude to my colleagues for a highly productive first half of the year.

Jim Hannon: It's been a busy period with significant progress in our strategic initiatives, which will drive the long-term growth of Altus.

Jim Hannon: We remain focused on enhancing operational excellence and strengthening our position as a leader in CRE asset intelligence.

Jim Hannon: During the first half of the year, we sustained analytics growth and margin expansion and significantly improved free cash flow in comparison to last year, and as Pawan said, in comparison to Q2-22.

Jim Hannon: We ramped up our Global Service Center in India, which has translated the process and margin improvement. We bolstered the capabilities of the Altus performance platform. These capabilities increase our addressable market and improve internal operations. We discuss this more in a moment. We pursued the divestiture of the property tax business in Q2, which we announced in July.

Pawan: We ramped our Global Service Center in India, which has translated the process and margin improvements.

Jim Hannon: We bolstered the capabilities of the office performance platform. These capabilities increase our addressable market and improve internal operations. I'll discuss this more in a moment. We pursued the divestiture of the property tax business in Q2, which we announced in July. This divestiture simplifies the operating model for office group and maximizes capital to invest in higher value growth opportunities at analytics. We continue restructuring actions and re-lining our investments across the P&L towards our target operating model. And we've been reading our sales organization for a market uptick.

Pawan: We bolstered the capabilities of the Office Performance Platform.

Pawan: These capabilities increase our addressable market and improve internal operations. I'll discuss this more in a moment.

Jim Hannon: We pursued the divestiture of the property tax business in Q2, which we announced in July .

Jim Hannon: This divestiture simplifies the operating model for Altus Group and maximizes capital to invest in higher-value growth opportunities at Analytics. We continue restructuring actions and realigning our investments across the P&L towards our target operating model. And we've been readying our sales organization for a market uptick. We recently named Dan Hurley, a seasoned tech executive from SAP, as our new chief revenue officer.

Jim Hannon: This divestiture simplifies the operating model for Altus Group and maximizes capital to invest in higher value growth opportunities at analytics.

Jim Hannon: We continue restructuring actions and re-learning our investments across the P&L towards our target operated model.

Jim Hannon: We recently named Dan Hurley, a seasoned tech executive from SAP, and our new Chief Revenue Officer. Turning toward cloud adoption operating metric, we continue to steadily transition legacy clients from on-premise software to Artist Cloud. We ended the quarter with 76 percent of our AE users contracted on the cloud. With this base, we now have approximately 14 million valuation models in a cloud environment representing over 1 million unique properties modeled on. This large volume of models in Argus Cloud provides us with significant asset level intelligence that we can leverage in an aggregated, anonymized manner to enhance the value we bring to our clients.

Jim Hannon: And we've been readying our sales organization for a market uptick. We recently named Dan Hurley, a seasoned tech executive from SAP, as our new Chief Revenue Officer.

Jim Hannon: Turning to our Cloud Adoption Operating Metric, we continue to steadily transition legacy clients from on-premise software to Argus Cloud. We ended the quarter with 76% of our AE users contracted on the cloud. With this base, we now have approximately 14 million valuation models in our cloud environment representing over 1 million unique properties modeled on Argus globally. This large volume of models in Argus Cloud provides us with significant asset-level intelligence that we can leverage in an aggregated, anonymized manner to enhance the value we bring to our clients.

Jim Hannon: Turning to our cloud adoption operating metric, we continue to steadily transition legacy clients from on-premise software to Argus Cloud.

Jim Hannon: We ended the quarter with 76% of our AED users contracted on the cloud. With this base, we now have approximately 14 million valuation models in our cloud environment representing over 1 million unique properties modeled on our disk globally.

Jim Hannon: This large volume of models in artist cloud provides a significant asset level of intelligence that we can leverage in an aggregated, anonymized manner to enhance the value we bring to our clients.

Jim Hannon: Expanding in my earlier comments regarding innovation, as of April this year, Argus Center Prize has been connected to the Altus Performance Platform. Our data scientists can now tap into the asset level data with AI tools to analyze the exhaust data. We have real-time visibility and some modeling metrics such as cap rates, market trends, tenant incentives, tenant incentives, and occupancy. This is incredibly valuable benchmarking data for investors. We are unique asset knowledge at this scale. Our investments in the Altus Performance Platform with the foundational technologies and talent from our reanimated and stradded analytics acquisitions enable us to accelerate the development of the platform.

Jim Hannon: Expanding on my earlier comments regarding innovation, as of April this year, Argus Enterprise has been connected to the Altus Performance Platform. Our data scientists can now tap into asset-level data with AI tools to analyze exhaust data. We have real-time visibility into modeling metrics such as cap rates, market rents, tenant incentives, and occupancy rates, incredibly valuable benchmarking data for investors. We are unique in asset knowledge at this scale. Our investments in the Office Performance Platform, with the foundational technologies and talent from our Reonomy and Stratiderm analytics acquisitions, enabled us to accelerate the development of the platform. Turning to the new book.

Jim Hannon: Expanding on my earlier comments regarding innovation, as of April this year, Argus Enterprise has been connected to the Altus performance platform.

Jim Hannon: Our data scientists can now tap into the asset load data with AI tools to analyze exhaust data.

Jim Hannon: We have real-term visibility and some modeling metrics such as cap rates, market brands, tenant incentives, tenant incentives, and occupancy.

Jim Hannon: This is incredibly valuable benchmarking data for investors.

Jim Hannon: We are unique.

Jim Hannon: asset knowledge at this scale.

Jim Hannon: Our investments in the Altus Performance Platform with the foundational technologies and talent from our Reonomy and Stratiderm analytics acquisitions enabled us to accelerate the development of the platform.

Jim Hannon: Turning to new bookings. This metric captures incremental new business growth. Our new bookings performance continues to be impacted by the current macroeconomic environment. Argus Software bookings have remained consistent for the last four quarters. The MS bookings are down year over year, as our clients have an extensive backlog of unemployed capital. Working down that backlog over the next several quarters drives revenue growth without necessarily the need for additional bookings. We are getting additional bookings. We're updating our guidance for Fiscal 2024. As we stated in February, we're listening closely to our clients and their expectations regarding cost of capital and willingness to invest at current price levels.

Jim Hannon: This metric captures incremental new business growth. Our new bookings performance continues to be impacted by the current macroeconomic environment. However, Argus software bookings have remained consistent for the last four quarters.

Jim Hannon: Turning to new bookings.

Jim Hannon: This metric captures incremental new business growth.

Jim Hannon: Our new bookings performance continues to be impacted by the current macroeconomic environment.

Jim Hannon: Artists software bookings have remained consistent for the last four quarters. The MS bookings are down year over year as our clients have an extensive backlog of underpoint capital.

Jim Hannon: VMS bookings are down year over year as our clients have an extensive backlog of undeployed capital. Working down that backlog over the next several quarters drives revenue growth without necessarily the need for additional bookings, but we are getting additional bookings. We're updating our guidance for fiscal 2020. As we stated in February, we're listening closely to our clients and their expectations regarding the cost of capital and willingness to invest under the current pressure. With the U.S. Fed holding off on interest rate cuts for longer, CRE market activity has not resumed at the levels anticipated at the outset of the year.

Jim Hannon: Working down that backlog over the next several quarters drives revenue growth without necessarily the need for additional buckets. We are getting additional buckets.

Jim Hannon: We're updating our guidance for fiscal 2024.

Jim Hannon: As we stated in February , we're listening closely to our clients and their expectations regarding cost of capital and willingness to invest at current price levels.

Jim Hannon: With the US Fed holding off on interest rate cuts for longer, CRE market activity has not resumed at the levels anticipated at the outset of the year. Lower interest rates and improving credit conditions will be catalysts for increased market activity, alleviating financing challenges and stabilizing asset values. We are cautiously optimistic as our clients are signaling increased activity in Q4. However, given that these cuts are coming later in the year, we've moderated our revenue range. Based on findings from our recent CRE industry conditions and sentiment survey, transaction appetite has been high all year, with clients indicating that they intend to transact as soon as asset values adjust to what they perceive as fairly or attractively priced.

Jim Hannon: With the U.S. Fed holding off on interest rate cuts for longer, CRE market activity has not resumed at the levels anticipated at the outset of the year.

Jim Hannon: Lower interest rates and improving credit conditions will be catalysts for increased market activity, alleviating financing challenges, and stabilizing asset values. We are cautiously optimistic as our clients are signaling increased activity in Q4. However, given that these cuts are coming later in the year, we've moderated our revenue range.

Jim Hannon: Lower interest rates and improving credit conditions will be catalysts for increased market activity, alleviating financing challenges, and stabilizing asset values.

Jim Hannon: We are cautiously optimistic as our clients are signaling increased activity in Q4.

Speaker Change: However, given that these cuts are coming later in the year, we've moderated our revenue range.

Jim Hannon: Based on findings from our recent CRE Industry Conditions and Sentiments Survey, transaction appetite has been high all year, with clients indicating that they intend to transact as soon as asset values adjust to what they perceive as fairly or attractively priced. However, as we look at the data... Q2 transaction volumes were still subdued, based on Altus Reonomy data on a dollar volume basis. U.S. transactions were down 9.4% year-over-year, though up 13.9% over the first quarter.

Jim Hannon: As we look at the data, Q2 transaction volumes were still subdued. Based on all this re-onemy data, on a dollar volume basis, US transactions were down 9.4% year over year, though up 13.9% over the first quarter. On a total count basis, transactions were down 9.1% in Q2 year over year, and up 11.6% over Q1. So trending in the right direction. Throughout Q2, our clients' model of increasing cap rates, though interestingly, as we analyze the trends in Arvis, the velocity of the increase in cap rates dropped dramatically, again trending in the right direction. While the data points suggest we may be closing in on price discovery, the market hasn't yet turned.

Speaker Change: As we look at the data, Q2 transaction volumes were still subdued. Based on Altus Reonomy data, on a dollar volume basis, U.S. transactions were down 9.4% year-over-year, though up 13.9% over the first quarter.

Jim Hannon: Transactions were down 9.1% in Q2 year over year and up 11.6% over Q1, to Trending in the Right Direction. Throughout Q2, our clients modeled increasing cap rates, though interestingly, as we analyzed the trends at ARBIS, the velocity of the increase in cap rates dropped dramatically, again, trending in the right direction. While the data points suggest we may be closing in on price discovery, the market hasn't yet turned.

Speaker Change: On a total count basis, transactions were down 9.1% in Q2 year-over-year and up 11.6% over Q1.

Speaker Change: So trending in the right direction.

Speaker Change: Surround Q2, our client's model increase in cap rates, though interestingly, as we analyze the trends at our base, the velocity of the increase in cap rates dropped dramatically, again, trending in the right direction.

Speaker Change: While the data points suggest we may be closing in on price discovery, the market hasn't yet turned. Again, we remain cautiously optimistic about a stronger selling environment in the second half of 2024 and into 2025.

Jim Hannon: Again, we remain cautiously optimistic about a stronger selling environment in the second half of 2024 and into 2025.

Jim Hannon: Again, we remain cautiously optimistic about a stronger selling environment in the second half of 2024 and into 2025. Our new business outlook is as follows. The Analytics recurring revenue range has been refined to 6% to 9% growth. The low end of the range was previously 8%.

Jim Hannon: Our new business outlook is as follows. Analytics recurring revenue range has been refined to 6% to 9% growth. The low end of the range was previously 8%. While we still expect modest market improvements in Q3 and stronger improvements in Q4. We now anticipate those improvements to come in later than originally anticipated. We're maintaining our guidance of 400 to 500 basis points of annualized adjusted EBITDA margin improvement based on slowing the pace of internal spending and as the results of continued restructuring. We have various letters to execute on our margin plans. Given the lower year-to-date performance at appraisals and development advisory, we're updating our outlook for modest revenue growth to a modest decline.

Speaker Change: Our new business outlook is as follows, analytics recurring revenue range has been refined to 6% to 9% growth.

Jim Hannon: While we still expect modest market improvements in Q3 and stronger improvements in Q4, we now anticipate those improvements to come in later than originally anticipated. We're maintaining our guidance of 400 to 500 basis points of annualized adjusted EBITDA margin improvement, based on slowing the pace of internal spending and as a result of continued restructuring. We have various letters to execute on our margin plan.

Speaker Change: The low end of the range was previously 8 percent.

Speaker Change: While we still expect modest market improvements in Q3 and stronger improvements in Q4, we now anticipate those improvements to come in later than originally anticipated.

Speaker Change: We're maintaining our guidance of 400 to 500 basis points of annualized adjusted EBITDA margin improvement, based on slowing the pace of internal spending and as the result of continued restructuring.

Speaker Change: We have various levers to execute on our margin plans.

Jim Hannon: Given the lower year-to-date performance at appraisals and development advisory, we're updating our outlook for modest revenue growth to a modest decline. We expect our earnings to improve in the single digits. Tying it all together, X Property Tax and Solve Data Outlook continues to reflect single-digit revenue growth, double-digit adjusted EBITDA growth, and year-over-year margin improvement, underpinning our consolidated adjusted EBITDA guidance. We expect corporate costs to be nominally higher than the first half of the year and decline next year after the property tax transaction closes.

Speaker Change: Given the lower year-to-date performance at appraisals and development advisory, we're updating our outlook from modest revenue growth to a modest decline. We expect our earnings to improve in the single digits.

Jim Hannon: We expect our earnings to improve in the single digits. Tying it all together, X property tax, our consolidated outlook continues to reflect single-digit revenue growth, double-digit adjusted EBITDA growth, and year-over-year margin improvement. Underpinning our consolidated adjusted EBITDA guidance, we expect corporate costs will be nominally higher in the first half of the year and decline next year after the property tax transaction closes. As we disclosed in July, providing the medium term view, we remain confident in our ability and analytics to achieve double digit revenue growth and about 35% adjusted EBITDA margin in fiscal 2026. That will be the first full year after the divestiture of the tax business.

Speaker Change: Tying it all together, X-Property Tax.

Speaker Change: Arkansas updated outlook continues to reflect single-digit revenue growth, double-digit adjusted EBITDA growth, and year-over-year margin improvement.

Speaker Change: Underpinning our consolidated adjusted EBITDA guidance, we expect corporate costs will be nominally higher than the first half of the year and decline next year after the property tax transaction closes.

Jim Hannon: As we disclosed in July, providing a medium-term view, we remain confident in our ability and analytics to achieve double-digit revenue growth and about 35% adjusted EBITDA margin in fiscal 2026, which will be the first full year after the divestiture of the tax.

Speaker Change: As we've disclosed in July, providing a medium-term view, we remain confident in our ability and analytics to achieve double digit revenue growth, and about 35% adjusted EBITDA margin in fiscal 2026.

Speaker Change: That will be the first full year after the Investiture of the Tax Business.

Jim Hannon: We have a strong backlog of the MS opportunities that we expect will convert to revenue when our clients come out of price discovery and deploy capital. We have new capabilities launching this year in additional technology innovation on the horizon that will provide compelling value of our clients, accelerate growth. And we believe that an inevitable market recovery will also coincide with heightened demand for advanced analytics capabilities and data driven insights to help our clients maximize opportunities and enhance performance. The operating and technology enhancements we've been implementing leave a strongly positioned future.

Jim Hannon: We have a strong backlog of EMS opportunities that we expect will convert to revenue when our clients come out of price discovery and deploy capital. We have new capabilities launching this year and additional technology innovation on the horizon that will provide compelling value to our clients and accelerate growth. And we believe that an inevitable market recovery will also coincide with heightened demand for advanced analytics capabilities and data-driven insights to help our clients maximize opportunities and enhance performance. The operating and technology enhancements we've been implementing leave us strongly positioned for the future. Summary.

Speaker Change: We have strong backlog of EMS opportunities that we expect will convert to revenue when our clients come out of price discovery and deploy capital.

Speaker Change: We have new capabilities launching this year and additional technology innovation on the horizon that will provide compelling value to our clients and accelerate growth.

Speaker Change: And we believe that an inevitable market recovery will also coincide with heightened demand for advanced analytics capabilities and data-driven insights to help our clients maximize opportunities and enhance performance.

Speaker Change: The operating and technology enhancements we've been implementing leave a struggling position for the future.

Jim Hannon: In summary, Q2 was a tremendously important coder for all this group from a strategic perspective. The announcement of post sale of property tax demonstrates our commitment to simplifying the operations of the business and focusing our attention and our capital on the highest growth opportunities for our shareholders. Our development teams and data science groups has delivered innovation in the shape of improved Argus interfaces and capabilities. We're seeing the power of Argus Cloud in the shape of new insights, better data management for clients, leading to faster, smarter decisions. Our advisors and industry experts across all of our business lines remain committed to delivering exceptional service to our clients.

Jim Hannon: Q2 was a tremendously important quarter for Altus Group from a strategic perspective. The announcement of the proposed sale of property tax demonstrates our commitment to simplifying the operations of the business and focusing our attention and our capital on the highest growth opportunities for our shareholders. Our development teams and data science groups have delivered innovation in the shape of improved RDS interfaces and capabilities. We're seeing the power of Argus Cloud in the form of new insights.

Speaker Change: In summary, Q2 was a tremendously important quarter for Altus Group from a strategic perspective.

Speaker Change: The announcement of the proposed sale of property tax demonstrates our commitment to simplifying the operations of the business and focusing our attention and our capital on the highest growth opportunities for our shareholders.

Speaker Change: Our development teams and data science groups have delivered innovation and the shape of improved RV interfaces and capabilities.

Jim Hannon: Better data management for clients, leading to faster, smarter decisions. Our advisors and industry experts across all of our business lines remain committed to delivering exceptional service to our clients. And, as we've demonstrated for multiple years, we're constantly improving our operation. In the first half of this year, the analytics business posted 6.5% recurring revenue growth, against a market backdrop of almost a 14% drop in CRE transactions. VMS Business and Argus Enterprise revenues both saw steady growth, all while improving analytic feedback dollars by 12% and expanding margins by 210 bps in the first half.

Speaker Change: We're seeing the power of Argus Cloud in the shape of new insights, better data management for clients, leading to faster, smarter decisions.

Speaker Change: Our advisors and industry experts across all of our business lines remain committed to delivering exceptional service to our clients.

Jim Hannon: And as we've demonstrated for multiple years, we're constantly improving our operations. In the first half of this year, the analytics business posted 6.5% recurring revenue growth against a market backdrop of almost a 14% drop in CRE transaction. Our VMS business and Augustine Price's revenues both saw steady growth, all while improving analytics heave at $1.00 by 12% and extending margins 210 bips in the first half. Of course, a transaction-related businesses of appraisals, development advisory and parts of our analytic state of business reflect the lower, reflect the industry and a lower value of transactions. That said, CRE volumes appear poised to return, and we expect that we will address substantial growth across all of our business areas.

Speaker Change: And, as we've demonstrated for multiple years, we're constantly improving our operations.

Speaker Change: In the first half of this year, the analytics business posted 6.5% recurring revenue growth against a marked backdrop of almost a 14% drop in CRE transactions.

Speaker Change: Our VMS business and Argus Enterprise revenues both saw steady growth.

Speaker Change: All of them are improving analytics even though dollars by 12% and expanding margins 210 vips in the first half.

Jim Hannon: Of course, our transaction-related businesses of appraisals, development advisory, and parts of our analytics data business reflect the industry and a lower volume of transactions. That said, CRE volumes appear poised to return, and we expect that we will drive substantial growth across all of our business areas. While our team would prefer to be operating in a more robust CRE environment, we remain bullish on the opportunities at Altus Group over the next several years. All right, let's open it up to questions.

Speaker Change: Of course, our transaction-related businesses of appraisals, development advisory, and parts of our analytics data business reflect the industry and a lower volume of transactions.

Speaker Change: That said, CRE volumes appear employees to return and we expect that we will direct substantial growth across all of our business areas.

Jim Hannon: While our team would prefer to be operating in a more robust CRE environment, we remain bullish on the opportunities that Altus Group over the next several years.

Speaker Change: While our team would prefer to be operating in more robust CRD environment, we remain bullish on the opportunities that all this creep over the next several years.

Operator: for Financial Results, Conference Call and Webcast. Please note that today's call is being recorded. All lines have been placed on mute to prevent any background noise.

Operator: Thank you. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. To withdraw your question, press star 1 again. If you are dialed in and listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Our first question comes from the line of Daniel Chan with TD Cowan. Please go ahead.

Operator: Alright, let's open up to questions. Thank you. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. To withdraw your question, press star one again.

Speaker Change: Alright, that's open up to questions.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star then the number one on your telephone keypad. To withdraw your question, press star one again.

Speaker Change: Thank you. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. To withdraw your question, press star 1 again.

Operator: If you are dialed in and listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Camilla Bartosiewicz: I will now turn the call over to Camilla Bartosiewicz. You may thank you, Brianna. Good afternoon, everyone, and welcome to the conference call and webcast, discussing Altus Group's second quarter results for the period ended June 30, 2024.

Speaker Change: If you are dialed in and listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Daniel Chan: Our first question comes from the line of Daniel Chan with TD Cowan. Please go ahead. You mentioned in the past that the low end of the initial guidance range was built by taking the Q423 growth rate and then extending that throughout the year. Then you book and send really needs to accelerate. So it seems sufficiently conservative.

Speaker Change: Our first question comes from the line of Daniel Chan with TD Cowen. Please go ahead.

Daniel Chan: You mentioned in the past that the low end of the initial guidance range was built by taking the Q4-23 growth rate and then extending that throughout the year, and then new bookings didn't really need to accelerate. So it seems sufficiently conservative. So what were the major variables that changed over the last three months to change that conservative outlook, and how are you building up the new guidance?

David Ross: David Ross.

Camilla Bartosiewicz: Our disclosure material, notably the press release and DNA financial statements and the slides accompanying are prepared remarks. Our available on our website and as required have been filed to seed our costs after March of close this afternoon.

David Ross: He mentioned in the past that the low end of the initial guidance range was built by taking the Q423-Grow 3 and then extending that throughout the year.

Speaker Change: And then new bookings didn't really need to accelerate. So it seems sufficiently conservative. So what were the major variables that changed over the last three months to change that conservative outlook? And how are you building up the new guidance range?

Jim Hannon: So while we're the major variables that changed over the last three months to change that conservative outlook, and how are you building up the new guidance range? Yeah, Daniel, great question. So the two things here. One, we are taking our guide from our clients. So, as our clients have been out and getting more muted outlooks, we felt, like, as I said, prudent to take that down. I will say that our field, our business units are still calling slightly above the low end of the original range. Pub and I are taking that down as really get when interest rates come down and what's the lag time between those coming down and the deployment of capital.

Camilla Bartosiewicz: I'm joined today by our CEO, Jim Hannon and our CSO pop-in chat room. Some of our remarks on this call and in our disclosure may contain forward-looking information that is based on certain assumptions and therefore subject to risks and uncertainties that could cause actual results to different materials from those projected. Please refer to our forward-looking information disclaimer in today's materials.

Jim Hannon: Yeah, Dan, great question. So D-D-D-D-D-D. Two things here.

Speaker Change: Yeah, Dan, great question.

Jim Hannon: One... We are taking our guide from our client. So, um... As our clients have been out and giving more muted outlooks, we felt, as I said, prudent to, take that down. I will tell you that our field, our business units, are still calling slightly above the low end of the original range. Puvitt and I are taking that down as we'll get when interest rates come down and what's the lag time between those coming down and the deployment of capital. So that's a key driver there. Two things, Connie, it's, And then our teams are maintaining hire but, That's how we got there.

Speaker Change: 3, that, that, that.

Speaker Change: Two things here. One, we are taking our guide from our clients.

Speaker Change: So, um...

Speaker Change: As our clients have been out and getting more muted outlooks, we felt, as I said, prudent to

Camilla Bartosiewicz: Please be reminded that Altus Group uses certain non-gavel financial measures, ratios, total segments measures, capital management measures, and supplementary and other financial measures as defined in national instrument 52-1-12. We believe that these measures may assist investors in assessing investment in our shares as they provide additional insight into our performance. We use our caution that they are not defined performance measures and do not have any standardized meeting under our press and may differ from similar computations as reported by other entities and accordingly, may not be comparable to financial measures as reported by those entities. These measures should not be considered an isolation or a substitute for financial measures prepared in accordance with our press.

Speaker Change: to take that down. I will tell you that our field, our business units.

Speaker Change: are still calling.

Pavan: slightly above the low end of the original range. Pavan and I are taking that down as we'll get when interest rates come down and what's the lag time between those coming down and the deployment of capital.

Jim Hannon: So that's a key driver there.

Daniel Chan: So two things. And then our teams are maintaining higher, but that's how we got there. Okay, that's helpful. Thanks for that.

Pavan: So that's a key driver there.

Speaker Change: So two things, clients, and then our teams are maintaining higher, but that's how we got there.

Jim Hannon: Okay, that's helpful, thanks for that. Despite the challenging macro, you're still booking about $20 million of new business. What is the biggest source of those new bookings? I know you called out Argus Software. Continue to stay consistent. So is it for new software? Is it new seats? Are companies adding anything to their contracts?

Pawan Chhabra: Despite the challenging macro, you're still booking about $20 million of new business. What is the biggest source of those new bookings? I know you called out. Argus Software. Continuous day consistent. So, is it for new software? Is it new seats are? Are companies adding anything to their contracts? As public said, it's new logos at the smaller end of the market. There's not a large bunch of launching the moment. There's some. It's across it's across offer as we said, the MS is down. So it's across the rest of the lines. We'd like that growth rate to be higher, but as you said, we're putting up recurring bookings numbers that allow us to maintain our model.

Speaker Change: Okay, that's helpful. Thanks for that.

Speaker Change: Despite the challenging macro, you're still booking about $20 million of new business.

Camilla Bartosiewicz: An explanation of these measures is defined in today's iron materials. I would also like to point out that unless otherwise specified all percentage and basis point growth rates used for a two-on-three call, we'll be on a constant currency basis over the same period in 2023.

Speaker Change: What is the biggest source of those new bookings? I know you called out our Get Software Continuous Bay Consistent. So, is it for new software? Is it new seats?

Jim Hannon: As Pawan said, it's new logos at the smaller end of the market. There are not a lot of large funds launching at the moment. There's some. It's a cross-offer. As we said, VMS is down, so it's across the rest of the lines. We'd like that growth rate to be higher, but as you said, we're putting up recurring booking numbers that allow us to maintain our model, our long-term model, and And the one-time bookings have picked up, but again, we prefer stronger recurring revenue, but at a level where we can make our guidance.

Pawan Chhabra: Okay, over to you, Clevver. Thanks, Camela, and thank you everyone for joining us today on the call. Our teams continue to make steady progress against our 2024 goals, and to strategically position all those to maximize opportunities as market conditions improve. Our Q2 results reflect geographic variability at property tax and a persistently tough selling environment at analytics and at the appraisals of the development advisory. Recapping our consolidated metrics, revenue was steady on a constant currency basis, the growth at analytics offset by flat performance at property tax and the decline at appraisals and in development advisory.

Speaker Change: James Hannon, Camilla Bartosiewicz, Pawan Chhabra, Pawan

Speaker Change: As Pawan said, it's new logos. At the smaller end of the market, there's not a large fund if you're launching for the moment. There's some...

Speaker Change: It's a cross-offer. As we said, VMS is down, so it's across the rest of the lines.

Speaker Change: We'd like that growth rate to be higher, but as you said, group.

Speaker Change: We're putting up recurring bookings numbers.

Pawan Chhabra: And a long term model and. and the one-time bookings have picked up. But again, we prefer stronger recurring, but at a level where we can make our guides.

Speaker Change: that allows us to maintain our model and our long-term model.

Speaker Change: And the one-time bookings have picked up, but again, we prefer stronger recurring, but at a level where we can make our guidance.

Pawan Chhabra: Profit was 2.3 million down year to year, which on a comparative view was primarily impacted by higher employee compensation costs, acquisition and related costs due to Ravs, our planned restructuring activities, and changes in our financing calls. Adjusting even I was down 19.2% due primarily to lower earnings and property tax and free cash flow notably with up 96.4% on an Azure-ported basis over last year, which as you might recall included the impact of our ERP transition.

Daniel Chan: Thanks, I'll pass the line.

Speaker Change: Thanks, I'll pass a line.

Stephen Macleod: Our next question comes from the line as Stephen MacLeod with BMO Capital Markets. Please go ahead. Thank you. Good evening, everyone. Just, I know you sort of reiterated, or not sort of, you reiterated the 2026 guidance that you released in July. And I'm just curious; previously, you talked about 2025 analytics work being the midteens. Is that, is that still a target that is valid? Or does that change with the expectation for, you know, more muted transaction activity? That's the, so there's a couple of things that we think drives double digit. So when we gave that guidance in July, obviously we knew what our print was on Q2. We were still finalizing numbers at that time, so we weren't ready to pre-report anything.

Stephen Macleod: Our next question comes from the line of Stephen MacLeod with BMO Capital Markets. Please go ahead.

Speaker Change: Our next question comes from the line of Stephen MacLeod with BMO Capital Markets. Please go ahead.

Stephen Macleod: Thank you. Good evening, everyone.

Stephen Macleod: Just, I know you sort of reiterated, or not sort of, you reiterated the 2026 guidance that you released in July. And I'm just curious, previously you talked about 2025 analytics throughout being in the mid-teens. Is that still a target that is valid, or does that change with the expectation for more muted transaction activity?

Stephen Macleod: Thank you, good evening everyone. Just, I know you sort of reiterated, or not sort of, you reiterated the 2026

Stephen Macleod: guidance that you released in July , and I'm just curious, previously you talked about 2025 analytics were up being in the mid-teens.

Stephen Macleod: Is that, is that still a target that is valid or does that change with the expectation for, you know, more muted transaction activity?

Pawan Chhabra: If we were to convert to Q2 of 2022 which may be a more appropriate benchmark, free cash flow was up 45.6%. Additionally, I would like to highlight that in Q2 we reported 2.6 million in restructuring costs, impacting our analytics and appraisals and development advisory business segments, as well as our corporate functions. This reflects our ongoing efforts to operate more efficiently in rebalance investments towards feature growth initiatives.

Jim Hannon: Thank you. So there's a couple of things that we think drive double-digit, so when we gave that guidance in July, obviously, we knew what our print was for Q2. We were still finalizing numbers at that time, so we weren't ready to pre-report anything, but we had a view as to how the quarter was shaping up. That... Knowing that bookings that we were, we were going to take a more muted view towards our recurring revenue growth this year, that revenue doesn't go away.

Steve: That's Steve.

Speaker Change: So there's a couple of things that we think drive double digit, so when we gave that kind in July, I was saying we knew what our print was.

Steve: and Q2. We were still finalizing numbers at that time, so we weren't ready to pre-report anything. But we had a view as to how the quarter was shaping up.

Jim Hannon: But we had a view as to how the quarter was shaping up. That, knowing that bookings that we were, we were going to take a more muted view towards our recurring revenue growth this year, that revenue doesn't go away. This is a, this is a matter of when, not if it's coming to us. And so that actually pushes out into 2025 and 2026 and gives us tailwinds into both of those years. So while we, while we knew we were going to pull down 24. It's, it's just, it flows out into 25 and 26. On top of that, we have new products that we have in the hands of clients right now.

Pawan Chhabra: Now turning to our business segment performance, analytics continues to grow, putting up both top line growth and margin expansion. Gravity growth is driven by our ongoing transition to cloud subscriptions, new sales, a higher number of assets on our valuation management solutions platform, and contribution from the former acquisition. The double-digit improvement in adjusted EBIT reflects higher revenues operating efficiencies and our ongoing cost optimization efforts. Recurring revenue now represents 93% of our analytics revenues in that order.

Stephen Macleod: That knowing that bookings that we were gonna take a more muted view towards our recurring revenue growth this year.

Jim Hannon: This is a matter of when, not if, it's coming to us. And so that actually pushes out into 2025 and 2026 and gives us tailwinds into both of those years. So while we knew we were going to pull down on 24, it just flows out into 25 and 26.

Steve: That revenue doesn't go away. This is a matter of when, not if.

Steve: It's coming to us.

Steve: and so that actually pushes out into 2025 and 2026.

Steve: and gives us tailwinds into both of those years.

Steve: While we while we knew

Steve: We were going to pull down 24, it just flows out into 25 and 26.

Jim Hannon: On top of that, we have new products that are in the hands of clients right now. We have our Altus Connect event in September where we're going to broadly announce new products. We have a robust pipeline of new products that are coming out, and we have some price actions that are kicking in this year and then with new product launches as well. So pricing coming back, organic volumes, industry volumes coming back, and where we said, Pavan said VMS and Argus revenues were strong, remained strong, and remained resilient is the word we always use because when volumes come down, those revenue streams don't come down.

Steve: On top of that, we have new products that we have in the hands of planes right now. We have our office connect event in September where we're going to probably announce new products.

Jim Hannon: We have our, our office connect event in September where we're, we're going to probably announce new products. We have a robust pipeline of new products that are coming out. And we have some price actions that are kicking in this year and then with, with new product launches as well. So pricing coming back, organic volumes of industry volumes coming back. And where, where we said, we've said VMS and argues revenues were strong. Remain strong, remain resilient is the word we always use because the volumes come down. Those revenue streams don't come down. It just impedes our growth rate when we're in a tough interest rate environment.

Pawan Chhabra: This is compared to 89% in the prior year. These revenues are comprised of solutions that are embedded in our customers' most critical processes and therefore represent resilient revenue streams with lung churn. Recurring revenue grew at 5.5% or 4% organically. Argus and DMS performance was resilient. The moderation in recurring revenue growth reflects softness in data solutions related to lower transaction volumes here over year. As the macro economic conditions improve, we expect recurring revenue growth to ramp. Nonetheless, as we've demonstrated over the past several quarters, recurring revenue continues to grow even on lower booking space.

Steve: We have a robust pipeline of new products that are coming out, and we have some price actions that are kicking in this year and then with new product launches as well.

Steve: pricing coming back, organic volumes, industry volumes coming back, and where we said, Pavan said, VMS

Speaker Change: and Argus revenues were strong, remain strong, remain resilient is the word we always use because when volumes come down those revenue streams don't come down. It just impedes our growth rate when we're in a tough interest rate environment.

Jim Hannon: It just impedes our growth rate when we're in a tough interest rate environment. So, some spillover from this year into 25 and 26, pricing new products. And then... The integration implementation of ForBerry into broader markets will also drive growth.

Jim Hannon: So, so some spillover from this year into 25 and 26 pricing new products. And then the integration implementation of Forberry into broader markets will also try to grow for us.

Steve: I'm...

Speaker Change: So some spillover from this year into 2025 and 2026, pricing new products, and then the integration and implementation of ForBerry into broader markets will also drive growth for us.

Jim Hannon: Okay, that's, that's helpful. Just thinking about the appraisals and development advisory business, you know, as you think about this year calling for single digit adjusted the dog growth. You know, just curious, having sold the tax business. Can you talk a little bit about the strategic sort of benefits of continuing down the appraisals and development advisory business? Sure. The dev advisory business, so one of the key core elements of our platform is the Altus ID. Being in the dev advisory business, we're seeing assets before their assets. So we're getting visibility into the business cases that are underpin the underwriting, and we're in the full life cycle with those developer clients.

Jim Hannon: That's all, Paul. Just thinking about the appraisals and development advisory business, you know, as you think about this year calling for single-digit adjusted EBITDA growth, you know, I'm just curious, having sold the tax business, can you talk a little bit about the strategic sort of benefits of continuing to own the appraisals and development advisory business?

Pawan Chhabra: We remain committed to our plan to achieve 400 to 500 basis points of annualized margin improvement this year. This will be driven by revenue growth and lower expenses from the continued buildup of our global service center in India. And the full year benefit of our restructuring activities.

Speaker Change: Okay, that's all, that's all, that's it.

Speaker Change: Just thinking about the appraisals and development advisory business.

Speaker Change: As you think about this year, calling for single-digit adjusted EBITDA growth.

Speaker Change: You know, just curious having sold the tax business.

Pawan Chhabra: Turning the property tax given our recent announcement about the divestiture of this business. We intend to move future results into discontinued operations next quarter, at which point we will no longer review the segments performance. Property tax in Q2 was slapped and adjusted, even it was down 34%. Did you may recall the strengthen Q1 reflected some Q2 opportunities getting pulled forward notably in the U.S. Canada in the quarter was up, and in the UK, although we had 8.3 million of contribution from annuity buildings, our performance is impacted by both a mix of lower value settlements and ongoing throughput constraints at the valuation office agency.

Speaker Change: Can you talk a little bit about the strategic sort of benefits of continuing to own the Appraisals and Development Advisory Business?

Jim Hannon: Sure, the Dev Advisory Building. Steve, as you know, one of the key, core elements of our platform is the Altus ID. Being in the dev advisory business, we're seeing assets before they're assets. So we're getting visibility into the business cases that are underpinning the underwriting, and we're in the full life cycle with those developer clients. So we're establishing Altus IDs early on in that asset's life cycle.

Speaker Change: Short, the dev advisory doesn't so see as you know, one of the key, the core elements of our platform is the ulti-side-day.

Speaker Change: Being in the David Viseries business, we're seeing assets before their assets.

Speaker Change: So we're getting visibility into the business cases that are that's underpin the underwriting and we're in the full life cycle with those developer clients.

Jim Hannon: So we're establishing Altus ID's early on in that asset's life. On the appraisals business for our largest Canadian clients, they depend on Altus there. That business spins off a tremendous amount of data that we can use in the analytics business. So even though transactions are down and so the dev advisory, we said transactions. The interest rate environment is more impactful on the dev advisory versus transactions, but the transaction environment is what drives the appraisals part of the business. So it's an important service that we provide to our largest Canadian clients, and we will continue to do so where we can drive data that informs the advanced analytics that we're bringing to them.

Speaker Change: So we're establishing Altus IDs early on in that asset's life. On the appraisals business, for our largest Canadian clients, they depend on Altus there. That business spins off.

Jim Hannon: On the appraisals business, for our largest Canadian clients, they depend on Altus there. That business spins off a tremendous amount of data that we can use in the analytics business. So even though transactions are down, and so the debt advisory, we said transactions, the interest rate environment is more impactful on the debt advisory versus transactions, but the transaction environment is what drives the appraisals part of the business. So it's an important service that we provide to our largest Canadian clients. And we will continue to do so where we can drive data that informs the advanced analytics that we're bringing to them.

Pawan Chhabra: The decrease in adjusted EBITDA reflects higher compensation expenditures as well as geographic variances of our revenue and related cost-based on a year-over-year view. And finally, appraisals and development advisory revenue and adjusted EBITDA were down. Similar to what we saw last quarter, the performance reflects muted market activity in the current economic environment, as the business segment has some exposure to reduced transaction volumes and higher interest rates, resulting in fewer appraisals and fewer near-project starts.

Speaker Change: a tremendous amount of fear that we can use in the analytics business.

Speaker Change: So even though transactions are down, and so the debt advisory, we said transactions, the interest rate environment is more impactful on the debt advisory versus transactions, but the transaction environment is

Speaker Change: is what drives the appraisals part of the business. So, it's an important service that we provide to our largest Canadian clients and we will continue to do so where we can drive data that informs the advanced analytics that we're bringing to them.

Pawan Chhabra: After any draw a balance sheet, we finished the border with a cash position of $49.5 million, and with $306.4 million in bank debt. The funded debt that EBITDA levered ratio is defined in our credit agreement was 2.11 dimes, applying all of our cash to that debt that adjusted EBITDA levered ratio was 1.97 dimes. Our current total liquidity stands at 293.1 million.

Jim Hannon: Right, okay, that makes sense, that's what I was expecting. And then maybe just finally, with respect to the cloud transition, do you still expect an incremental, I think it was sort of in the 10 percentage point range through the end of 2024 to the sort of mid 80s, mid 80% range?

Jim Hannon: Right. Okay. That makes sense. That's what I was expecting. And then maybe just finally, with respect to the cloud transition, you still expect an incremental, I think it was sort of in the 10% percentage point range through the end of 2024 to the sort of mid 80s. Yeah, mid 80% range. Yeah, they have several large clients that will move the needle in a big clip in Q3 and Q4. So to get us into the mid 80s range and then, as we mentioned from there, you know, we'll see smaller and committed moves, but essentially, at that point, you would consider ourselves pretty much fully transitioned over to the cloud.

Speaker Change: And then maybe just finally with the effect of the cloud transition, you still expect an incremental, I think it was sort of in the 10% and 10% of the point range.

Pawan Chhabra: Additionally, the plan to investiture or property tax business will significantly enhance our financial flexibility with the estimated 600 million in net proceeds. It will enable us to invest organically via acquisitions and analytics, return capital to shareholders, and pay down debt to target levels.

Speaker Change: through the end of 2024 to the sort of mid-80s, mid-80% range.

Jim Hannon: Yeah, we have several large clients that will move the needle in a big clip in Q3 and Q4. So, to get us into the mid-80s range, and then, as we've mentioned from there, we'll see smaller and commensurate moves, but essentially, at that point, we would consider ourselves pretty much fully transitioned over to the cloud at that point.

Speaker Change: Yeah, they have several large clients that are moved in the middle and in a big clip of Q3 and Q4. So to get us into the mid 80s range of them.

Speaker Change: As we mentioned from there, you know, we'll see smaller and commensurate moves, but essentially at that point, we would consider ourselves pretty much fully transitioned over to the cloud at that point. And we'll be sunsetting the on-prem products. That's right.

James Hannon: I'll turn it over to Jim. All right, thanks, Plewin. I want to begin by expressing my gratitude to my colleagues for a highly productive first half of the year. It's been a busy period with significant progress in our strategic initiatives, which will drive the long-term growth of all this. We remain focused on enhancing operational excellence and strengthening our position as a leader in CRE asset intelligence. During the first half of the year, we sustained analytics growth in margin expansion and significantly improved free cash flow comparison to last year, and as Todd said in comparison to Q222, we ran our Global Service Center in India, which is translated to process and margin improvements. We bolstered the capabilities of the office performance platform. These capabilities increase our addressable market and improve internal operations. I'll discuss this more in a moment.

Jim Hannon: And we'll leave some setting beyond from products. That's right. Right now. Okay. Yes. Okay.

Jim Hannon: And we'll be sunsetting the on-prem products.

Stephen Macleod: Right, okay. OK.

Speaker Change: Right, okay. So, to answer your question, yes, thanks.

Stephen Macleod: Okay, perfect. Thanks, Pawan. Thanks, guys. Appreciate it. That's it for me.

Paul Treiber: Perfect. Thanks, Paula. Thanks, guys. Appreciate it. That's it for me. Thanks.

Speaker Change: Okay, perfect. Thanks Pawan. Thanks guys. Appreciate it. That's it for me.

Paul Treiber: Our next question comes from the line of Paul Tribor with RBC Capital Markets. Please go ahead. Okay, so much in the afternoon.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Paul Treiber with RBC Capital Markets. Please go ahead.

Stephen Macleod: Thanks very much and good afternoon. You mentioned that you have a number of levers to...

Pawan Chhabra: The you mentioned that you have a number of levers to drive your margin expansion targets this year for analytics. You mentioned restructuring as one of those. Could you elaborate on just where are areas that you are able to pull out some costs? Yeah, so when you think about the drivers of analytics margin that you've heard Jim and I talk about multiple paths again, for that kind of strange. I guess the right way to think about it, or any way to think about it, is breaking it A. There's going to be a contribution from a revenue side.

Paul Treiber: All things you're asking afternoon, you mentioned that you have a number of levers to drive your margin expansion targets this year for analytics. You mentioned the restructuring as one of those, could you elaborate on just where are areas that you are able to plot some costs?

Pawan Chhabra: Yeah, so when you think about the drivers of the analytics margin, and you've heard Jim and I talk about multiple paths of getting to that kind of range, I guess the right way to think about it, or one way to think about it is breaking it.

Speaker Change: Yeah, so when you think about the drivers of analytics margin, you've heard Jim and I talk about multiple paths of getting to that kind of range.

James Hannon: We pursued the divestiture of the property tax business in Q2, which we announced in July. This divestiture simplifies the operating model for office group and maximizes capital to invest in higher value growth opportunities at analytics. We continue restructuring actions and re-lining our investments across the P&L towards our target operating model. And we've been reading our sales organization for a market uptick.

Paul Treiber: I guess the right way to think about it, or a way to think about it, is breaking it. A, there's going to be a contribution from a remedy side, so we're going to continue to drive margin through the ongoing cloud conversions, as we just talked about a second ago.

Pawan Chhabra: A, there's going to be a contribution from the remedy side, so we're going to continue to drive margin through the ongoing cloud conversions, as we just talked about a second ago, continue to increase the number of assets, VMS assets on our platform. So that's going to continue to drive there's obviously some annual seasonality that drives it in P4 as well too that helps us. And we're also moving towards eliminating discretionary discounts as clients renew.

Pawan Chhabra: So we're going to continue to drive margin through the ongoing cloud conversions, as we just talked about them a second ago. You continue to increase number of assets via less assets on our platforms, so that's kind of continuing to drive. There's obviously some annual seasonality that drives it in towards volunteer that helps us, and we're also living towards eliminating discretionary discounts. It's clients' renew, so those are all margin drivers from a revenue perspective.

Paul Treiber: continue to increase number of assets, VMS assets, on our platform so that's going to continue to drive. There's obviously some annual seasonality that drives it in P4 as well too that helps us.

James Hannon: We recently named Dan Hurley, a seasoned tech executive from SAP, and our new chief revenue officer. Turning toward cloud adoption operating metric, we continue to steadily transition legacy clients from on-premise software to artist cloud. We ended the quarter with 76 percent of our AE users contracted on the cloud. With this base, we now have approximately 14 million valuation models in a cloud environment representing over 1 million unique properties modeled on This large volume of models in Argus Cloud provides us with significant asset level intelligence that we can leverage in an aggregated, anonymized manner to enhance the value we bring to our clients.

Paul Treiber: And we're also moving towards eliminating discretionary discounts as clients renew. So those are all margin drivers from a revenue perspective.

Pawan Chhabra: We're also an expense perspective. You know, we started our restructuring activities in late one. We're obviously going to get the full benefit of the restructuring activities as you analyze the impact for the full year. We remain committed to continuing to build out the GSE in India, in addition to the wage arbitrage that we're getting. We're benefiting from the strong talent that's sitting there, and the ability to standardize on best-in-class processes and centrally for the organization is a phenomenal productivity list for the organization. You know, we're also in addition to a lot of the new offers that we're rolling out for clients in Q4.

Pawan Chhabra: So those are all margin drivers from a revenue perspective. From a cost and expense perspective, you know, we started our restructuring activities in late Q1. We're obviously going to get the full benefit of the restructuring activities as we annualize the impact for the full year. We remain committed to continuing to build out the GSE in India. And in addition to the wage arbitrage that we're getting, we're benefiting from the strong talent that's sitting there, and the ability to standardize on best-in-class processes, and centrally for the organization, is a phenomenal productivity lift for the organization.

Speaker Change: From a cost and expense perspective, you know, we started our restructuring activities in late Q1. We're obviously going to get the full benefit of the restructuring activities as we analyze the impact for the full year.

Paul Treiber: We remain committed to continuing to build out the GSE and Indiana in addition to the wage arbitrage that we're getting. We're benefiting from this strong talent that's sitting there.

James Hannon: Expanding in my earlier comments regarding innovation, as of April this year, Argus Center Prize has been connected to the Altus Performance Platform. Our data scientists can now tap into the asset level data with AI tools to analyze the exhaust data. We have real-time visibility and some modeling metrics such as cap rates, market trends, tenant incentives, tenant incentives, and occupancy. This is incredibly valuable benchmarking data for investors. We are unique asset knowledge at this scale. Our investments in the Altus Performance Platform with the foundational technologies and talent from our reanimated and stradded analytics acquisitions enable us to accelerate the development of the platform.

Paul Treiber: And the ability to standardize on best-in-class processes centrally for the organization is a phenomenal productivity lift for the organization.

Pawan Chhabra: You know, in addition to a lot of the new offers that we're rolling out for clients in Q4, there are internal releases that we have now that we're using internally to drive greater productivity for our people for efficiencies across data management, data adjustment, and really just overall productivity for our organization. So, you know, that's just a handful to just give you a flavor of the commentary around the fact that we have multiple paths to be able to get that drive margin for the business.

Speaker Change: We're also, in addition to a lot of the new offers that we're rolling out for clients in Q4, there are internal releases that we have now that we're using internally to drive

Pawan Chhabra: There are internal releases that we have now that we're using internally to drive greater productivity for our people, for the efficiencies across data management, data management, and really just overall productivity for our organization.

Speaker Change: Greater productivity for our people, for efficiencies across data management, data adjustment, and really just overall productivity for our organization.

Pawan Chhabra: So, you know, that's just a handful to just give you a flavor of the commentary around the fact that we have multiple paths to be able to get the drive margin for the business. That's helpful.

Speaker Change: That's just a handful to just give you a flavor of the commentary around the fact that we have multiple paths to be able to get that drive margin for the business.

James Hannon: Turning to new bookings. This metric captures incremental new business growth. Our new bookings performance continues to be impacted by the current macroeconomic environment. Argus software bookings have remained consistent for the last four quarters. The MS bookings are down year over year, as our clients have an extensive backlog of unemployed capital. Working down that backlog over the next several quarters drives revenue growth without necessarily the need for additional bookings. We are getting additional bookings.

Pawan Chhabra: That's helpful. Just in regards to the outlook, for 26 minutes, nice to see that you're reiterating it, but can you help explain what you see as the drivers? I know there would be a typical recovery in the market, but can you elaborate on your confidence in either secular drivers or product catalysts that you may have between now and then that would help drive that growth and margin expansion?

Jim Hannon: Just in regards to the outlook for 26 minutes, nice to see that you're reiterating it, but can you help explain what you see as the driver than there would be like a typical recovery in the market, but can you elaborate on your confidence in either secular drivers or product catalysts that you may have between now and then that would help drive that growth in margin expansion? Sure, I'll update that one. I feel free to jump in on it. Upon it, it's a lot of the same from, so the margin expansion market in the 35. A lot of that is what Pub and just went through, so I won't reiterate those.

Speaker Change: That's helpful.

Speaker Change: Just in regards to the outlook...

Speaker Change: for 26 minutes. Nice to see that you're reiterating it.

Speaker Change: Can you help explain what you see as the drivers of a typical recovery in the market, but can you elaborate on your confidence in either secular drivers or product catalysts you may have between now and then that would help drive that growth and margin expansion?

James Hannon: We're updating our guidance for fiscal 2024. As we stated in February, we're listening closely to our clients and their expectations regarding cost of capital and willingness to invest at current price levels. With the US Fed holding off an interest rate cuts for longer, CRE market activity has not resumed at the levels anticipated at the outset of the year. Lower interest rates and improving credit conditions will be catalysts for increased market activity, alleviating financing challenges, and stabilizing asset values. We are cautiously optimistic as our clients are signaling increased activity in Q4.

Jim Hannon: Sure, I'll take that one, Pawan, feel free to jump in on it. Paul, it's a lot of the same, so the margin expansion part, getting a 35, a lot of that is what Pawan just went through, so I won't reiterate that.

Speaker Change: i

Speaker Change: I'll take that one, Pawan, feel free to jump in on a pause. It's a lot of scenes from the margin expansion work in the 35, a lot of that is what Pawan just went through.

Jim Hannon: But, as I said, we have new products in the hands of clients right now. We'll be, I'm not sure if you're going to be able to be connected then. We'll be demonstrating those products there. They'll go GA. As I said, there's there's pricing left. The products that pub and set are in the hands of our people internally right now; that's trading efficiencies. Those were built tool purpose for our own folks as well as for our clients. It's all one platform, so you get the same benefits across both. So we expect our total addressable market is going to expand from these new products.

Jim Hannon: But as I said, we have new products in the hands of clients right now. I'm not sure if you're going to be at the Connect event. We'll be demonstrating those products there, the GoGA. As I said, there's pricing left. The products that Pub and Set are in the hands of our people internally right now. That's striving for efficiencies.

Speaker Change: So I won't reiterate those, but as I said, we have new products in the hands of clients right now.

Speaker Change: I will be...

Speaker Change: I'm not sure if you're going to be at the Connect event. We'll be demonstrating those products there, the GoGA. As I said, there's pricing left. The products that

James Hannon: However, given that these cuts are coming later in the year, we've moderated our revenue range. Based on findings from our recent CRE industry conditions and sentiment survey, transaction appetite has been high all year with clients indicating that they intend to transact as soon as asset values adjust to what they perceive as fairly or attractively priced. As we look at the data, Q2 transaction volumes were still subdued. Based on all this re-onemy data, on a dollar volume basis, US transactions were down 9.4% year over year, though up 13.9% over the first quarter.

Speaker Change: Cub and Set are in the hands of our people internally right now.

Jim Hannon: Those were built with dual purpose for our own folks as well as for our clients. It's all one platform, so you get the same benefits across both.

Speaker Change: that's driving efficiencies.

Speaker Change: Those were built dual purpose for our own folks as well as for our clients. It's all one platform, so

Speaker Change: You get the same benefits across both. So we expect our total addressable market

Speaker Change: is going to expand from these new products.

Jim Hannon: The new products are, so one example is we're using an AI-driven valuation model that does rent predictions for our people to make our internal advisors more efficient with their clients. So there's a giant world of CRE clients out there who are not VMS clients who could benefit from that technology. And our core focuses on our near-term focuses on data management mostly around the office ID and asset performance. And again, asset performance expands our addressable market. So those are two key areas that will drive that growth 325-26 on top of organic market recovery. That's right, and the slower transition of the VMS bookings to revenue this year, which puts a headwind, relatively speaking, we'll turn into a tailwind as that market recovery happens. As we think about 25 and 26, that gives us additional confidence in regards to our trajectory.

Jim Hannon: So we expect our total addressable market is going to expand from these new products. The new products are, so one example is we're using an AI-driven valuation model that makes rent predictions for our people to make our internal advisors more efficient with their clients. So there's a giant world of CRE clients out there who are not VMS clients who could benefit from that technology. And our core focus is on data, like our near-term focus is on data management, mostly around the Altus ID, and asset performance. And again, asset performance expands our adjustable market. So those are two key areas that will drive that growth through 2025 and 2026, on top of organic market recovery.

Speaker Change: The new products are, so one example is we're using an AI-driven valuation model that does rent predictions for our people to make our internal advisors more efficient with their clients.

James Hannon: On a total count basis, transactions were down 9.1% in Q2 year over year, and up 11.6% over Q1. So trending in the right direction. Throughout Q2, our clients' model of increasing cap rates, though interestingly, as we analyze the trends in Arvis, the velocity of the increase in cap rates dropped dramatically, again trending in the right direction. While the data points suggest we may be closing in on price discovery, market hasn't yet turned.

Speaker Change: So, there's...

Speaker Change: A giant world of CRE clients out there who are not the MS clients who could benefit from that technology.

Speaker Change: and our core focus is on date, like our near-term focus is on data management.

Speaker Change: mostly around the office ID, and asset performance. And again, asset performance expands our adjustable market. So those are two key areas that will drive that growth through 2025 and 2026, on top of organic, you know, just market recovery.

James Hannon: Again, we remain cautiously optimistic about a stronger selling environment in the second half of 2024 and into 2025.

Pawan Chhabra: That's right, and the slower transition of the VMS bookings to revenue this year, which was a headwind, relatively speaking, will turn into a tailwind as that market recovery happens, as we think about 25 and 26, and so that gives us, You know, additional confidence in regards to our trajectory. You've heard a lot of our peers in the market in general and our clients talk about, you know, emerging green shoots that are starting to show We already saw Canada do a second consecutive rate cut, which is increasing client confidence in the stabilization of prices.

James Hannon: Our new business outlook is as follows. Analytics recurring revenue range has been refined to 6% to 9% growth. The low end of the range was previously 8%. While we still expect modest market improvements in Q3 and stronger improvements in Q4. We now anticipate those improvements to come in later than originally anticipated. We're maintaining our guidance of 400 to 500 basis points of annualized adjusted EBITDA margin improvement based on slowing the pace of internal spending and as the results of continued restructuring. We have various letters to execute on our margin plans.

Speaker Change: That's right, and the...

Speaker Change: You know, the slower transition of the VMS bookings to revenue this year, which was a headwind relatively speaking, will turn into a tailwind as that market recovery happens, as we think about 25 and 26 events. So that gives us

Jim Hannon: If you've heard a lot of our peers in the market in general, and our clients talk about emerging green shoots that are starting to show in terms of inflation continuing to take a gradual gap lower, which is leading us hopefully closer to the first rate cuts in the U.S., we already saw a Canada deal with a second consecutive rate cut, which is increasing our client's confidence on the stabilization of prices. Jim talked about our own data showing about cap rates, increasing at a smaller rate, which is also another green shoot in terms of confidence around price discovery.

Speaker Change: additional confidence in regards to our trajectory. You've heard a lot of our peers in the market in general and our clients talk about emerging green shoots that are starting to show in terms of

James Hannon: Given the lower year-to-date performance at appraisals and development advisory, we're updating our outlook for modest revenue growth to a modest decline. We expect our earnings to improve in the single digits. Tying it all together X property tax, our consolidated outlook continues to reflect single digit revenue growth, double digit adjusted EBITDA growth and year-over-year margin improvement. Underpinning our consolidated adjusted EBITDA guidance, we expect corporate costs will be nominally higher in the first half of the year and decline next year after the property tax transaction closes.

Speaker Change: The situation continues to take a gradual gap, a lot more, which is meeting a sole free closure to the first rate cuts in the U.S. reality column, Canada, to do with the second consecutive rate cuts, which is increasing.

Pawan Chhabra: We've heard Jim talk about our own data showing cap rates increasing at a smaller rate, which is also another great issue in terms of confidence around price discovery. You know, just talking to our teams internally and their client roundtables, clients are becoming more and more inquisitive in regards to our services, and it's showing a greater increasing willingness to buy assets at the off. And so all of those, to us, as you start triangulating those data points, gives us comfort in regards to the fact, in fact, that what Jim says, it's not a matter of if, it's a matter of when. And it gives us comfort as we think about 25 and 26.

Speaker Change: Our client's confidence on the stabilization of prices.

Jim Hannon: We heard Jim talk about our own data showing about cap rates increasing at a smaller rate, which is also another great issue in terms of confidence around price discovery.

Pawan Chhabra: Talking to our teams internally and their client round tables, clients are becoming more and more inquisitive in regards to our services, and showing a greater increasing willingness to buy assets at the ask. And so all of those to us as you start training, you're letting those data points give us comfort in regards to the fact that with Jim says it's not a matter of if, it's a matter of when, and then they get just comfort in regards to we think about 25 and 26.

Speaker Change: You know, they're just talking to our teams internally and they're quiet, round tables quiet for becoming more and more inclusive in regards to our services, showing a greater increasing willingness that the bias that's at the ask.

James Hannon: As we disclosed in July, providing the medium term view, we remain confident in our ability and analytics to achieve double digit revenue growth and about 35% adjusted EBITDA margin in fiscal 2026. That will be the first full year after the divestiture of the tax business. We have strong backlog of the MS opportunities that we expect will convert to revenue when our clients come out of price discovery and deploy capital. We have new capabilities launching this year in additional technology innovation on the horizon that will provide compelling value of our clients, accelerate growth.

Jim Hannon: and and so all of those to us as you start triangulating those data points gives us comfort in regards to the fact in fact that what Jim says it's not a matter of if it's a matter of when and it gives us comfort in regards as we think about 25 and 26.

Pawan Chhabra: Lastly, for me, can you speak to the capital allocation strategy following the divestiture property tax? Just doing basic math, it looks like you'd move into a net cash position. Is that what we should expect for the company going forward, or are there other potential uses of cash, acquisitions, buybacks, etc., that could consume that cash?

Pawan Chhabra: Lastly, lastly for me, just can you speak to the capital allocation strategy following the investor property tax? Just doing in a basic math, it looks like you'd move into a net cash position. So where is that? Is that will she expect to the company going forward, or is there other potential uses of cash, you know, the acquisitions, buybacks, et cetera, that could consume that cash. Yeah, and again, what we tried to outline in our, you know, previous conversation, the monitor show back in regards to capital allocation is really at a high level, laying out the capital allocation framework.

Speaker Change: Lossley Lossley for me, just to speak to the topo allocation strategy following the divesture property tax, just doing basic math, it looks like you'd move into a net cash position. So is that what you can expect for the company going forward, or is there other potential uses of cash?

James Hannon: And we believe that an inevitable market recovery will also coincide with heightened demand for advanced analytics capabilities and data driven insights to help our clients maximize opportunities and enhance performance. The operating and technology enhancements we've been implementing leave a strongly positioned future.

Speaker Change: You know, these acquisitions, buybacks, et cetera, that could consume that cash.

Pawan Chhabra: Yeah, and again, what we tried to outline in our previous conversation a month or so back in regards to capital allocation is really at a high level laying out the capital allocation framework. And so from a framework perspective, you know, we're going to continue to invest organically at the business to drive our EBITDA and revenue growth. We're going to continue to remain committed to our dividend. We've set a target leverage base that gives us the capacity to be able to not only do a meaningful share buyback program, which we've talked about, but also give us the capabilities to be able to do strategic M&A if and when it makes sense, as it fits into the core of our business.

Jim Hannon: [inaudible]

Speaker Change: Yeah, and again, what we tried to outline in our, in our previous conversation a month or so back in regards to capital allocation is really.

James Hannon: In summary, Q2 was a tremendously important coder for all this group from a strategic perspective. The announcement of post sale of property tax demonstrates our commitment to simplifying the operations of the business and focusing our attention and our capital on the highest growth opportunities for our shareholders. Our development teams and data science groups has delivered innovation in the shape of improved Argus interfaces and capabilities. We're seeing the power of Argus cloud in the shape of new insights, better data management for clients, leading the faster smarter decisions.

Pawan Chhabra: And so, from a framework perspective, you know, we're going to continue to invest organically in the business to drive our even revenue growth. We're going to continue to remain committed on our dividend. We've said a target leverage base that gives us capacity to be able to not only do a meaningful share buyback program, which we've talked about. But also give us the capabilities to be able to do strategic emanate if and when it makes sense as it fits into the core of our business. And so, you know, from a, from a, from a use of cash perspective, that's kind of the math in regards to, I guess, the big picture in regards to how we think about using capital once we have it.

Speaker Change: at a high level, laying out the capital allocation framework, and so from a framework perspective, we're going to continue to invest organically at the business to drive our EBITDA and remedy growth.

Jim Hannon: We're going to continue to remain committed on our dividend.

Jim Hannon: We started to take target leverage based and get this capacity to be able to not only do a meaningful share by back program, which we've talked about.

James Hannon: Our advisors and industry experts across all of our business lines remain committed to delivering exceptional service to our clients. And as we've demonstrated for multiple years, we're constantly improving our operations. In the first half of this year, the analytics business posted 6.5% recurring revenue growth against a market backdrop of almost a 14% drop in CRE transaction. Our VMS business and Augustine Price's revenues both saw steady growth, all while improving analytics heave at $1.00 by 12% and extending margins 210 bips in the first half.

Jim Hannon: but also give us the capabilities to be able to do strategic M&A if and when it makes sense as it fits into the core of our business.

Pawan Chhabra: And so, you know, from a use of cash perspective, that's kind of the map in regards to, I guess, the big picture in regards to how we think about using capital once we have it and deploying that in a very strategic way against the kind of a framework that I just outlined.

Jim Hannon: and so, you know, from me, from a used-of-cash perspective, that's kind of it.

Speaker Change: See, the math in regards to, I guess to think Victor in regards to how we think about using capital once we have it at the point that in a very strategic way, it's just kind of a framework that's an international line.

Operator: And deploying that in a very strategic way, it's just kind of a framework that I just outlined. All right, thanks for sticking the questions. Again, if you would like to ask a question, please press star one.

Operator: Thanks for taking the questions. Again, if you would like to ask a question, please press star 1.

Speaker Change: Thanks for taking the questions.

Speaker Change: Again, if you would like to ask a question, please press star 1.

Yuri Lynk: Our next question comes from Yuri Lynk with Canaccord Genuity. Please Okay. Most of my questions have been answered. Maybe just a little bit on what your clients are saying in terms of the new product rollouts, especially the ones leveraging AI. I think you're going to be able to market insights. Yeah, so market insights is a broad category. Yuri, the one you saw us talk about, was bringing the CAPM approach into commercial real estate. And to do that, you need to be able to identify, sort of, to leverage the analysis that was out there. You need to be able to effectively manage your data to identify your top performing assets and then evaluate the market for other assets that fit those profiles.

Yuri Lynk: Our next question comes from Yuri Lynk with Canaccord Genuity. Please go ahead.

Speaker Change: Our next question comes from Yuri Lynk with Canaccord Genuity. Please go ahead.

James Hannon: Of course, a transaction-related businesses of appraisals, development advisory and parts of our analytic state of business reflect the lower, reflect the industry and a lower value of transactions. That said, CRE volumes appear poised to return and we expect that we will address substantial growth across all of our business areas. While our team would prefer to be operating in more robust CRE environment, we remain bullish on the opportunities that Altus Group over the next several years.

Yuri Lynk: Yeah, most of my questions have been answered. Maybe just a little bit on what your clients are saying in terms of the new product rollouts, especially the ones leveraging AI. I think some of those launched last year, and I was just wondering what the uptake is on Altus Market Insights.

Jim Hannon: Megan.

Jim Hannon: Bye-bye!

Yuri Lynk: Yeah, most of my questions have been answered.

Speaker Change: Maybe just a little bit on...

Speaker Change: what your what your clients are saying on in terms of the the new

Speaker Change: The new product rollouts, especially the ones leveraging AI, I think some of those launched last year and just wondering what the uptake is on Altus Market Insights.

Operator: To withdraw your question, press star one again. If you are dialed in and listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Jim Hannon: And so market insights is a broad category. Yuri, the one you started to talk about was bringing the CAPM approach into commercial real estate. And to do that, you need to be able to identify, so to leverage the analysis that is out there, you need to be able to effectively manage your data to identify your top performing assets and then evaluate the market for other assets that fit those profiles.

Speaker Change: Yeah, so market insights is a broad category. You're in the one you saw talk about was

Speaker Change: Bringing the CAPM approach into commercial real estate, and to do that you need to be able to identify, so to leverage the analysis that was out there, you need to be able to

Speaker Change: Effectively manage your data to identify your top performing assets.

Speaker Change: and then evaluate the market for...

Pawan Chhabra: So while we're the major variables that changed over the last three months to change that conservative outlook and how are you building up the new guidance range? Yeah, Daniel, great question. So the two things here. One, we are taking our guide from our clients. So as our clients have been out and getting more muted outlooks, we felt, like as I said, prudent to take that down. I will say that our field, our business units are still calling slightly above the low end of the original range. Pub and I are taking that down as really get when interest rates come down and what's the lag time between those coming down and the deployment of capital. So that's a key driver there.

Jim Hannon: So the marketing sites business includes our anatomy business includes all the state of Studio in Canada. And so there's ongoing interest in that. As we said, that business in Q2. It is transaction related. If they're not doing transactions, they're not looking for those other properties. So great feedback from clients on it. They're saying, when we transact, that's where we're going.

Jim Hannon: So the marketing sites business includes our Reonomy business, it includes Office Data Studio in Canada, and there's ongoing interest in that. As we said, that business in Q2 is transaction-related. If they're not doing transactions, they're not looking for those other properties.

Speaker Change: and other assets that fit those profiles. So the Marketing Sites business includes our Reonomy business. It includes Office Data Studio in Canada.

Daniel Chan: So two things. And then our teams are maintaining higher, but that's how we got there. Okay, that's helpful. Thanks for that.

Speaker Change: So then there's...

Jim Hannon: So great feedback from clients on it. They're saying when we transact, that's where we're going. The second piece of it is the product that we have in beta with several clients now who will be on stage at the Connect event. And that product is all about increasing the use, simplifying the usability of Argus Enterprise, and increasing the utility of Argus Enterprise. So it's a very modern UX on it, but it also allows clients to do model assumption changes in ARGIS from a very simplistic interface.

Speaker Change: Great feedback from clients on it. They're saying when we transact, that's where we're going. The second piece of it is the product that we have in beta with several clients now who will be on stage.

Jim Hannon: The second piece of it is the product that we have in beta with several clients now who will be on stage at the connective end. And that product is all about increasing the use simplifying the usability of Argus Enterprise. And increasing the utility of Argus Enterprise. So it's a very modern UX on it. But it also allows clients to take you model assumption changes in in Argus from a very simplistic interface. And we'll also be rolling out benchmarking data to the clients who are on cloud and subscribe to those new interfaces.

Speaker Change: at the Connect event, and that product is all about increasing the use, simplifying the usability of Argus Enterprise.

Speaker Change: and increasing the utility of Argus Enterprise. So it's a very modern UX on it, but it also allows clients to

Speaker Change: Do model assumption changes in ARGIS?

Pawan Chhabra: Despite the challenging macro, you're still booking about $20 million of new business. What is the biggest source of those new bookings? I know you called out. Argus software. Continuous day consistent. So is it for new software? Is it new seats are? Are companies adding anything to their contracts? As public said, it's new logos at the smaller end of the market. There's not a large bunch of launching the moment. There's some. It's across it's across offer as we said, the MS is down.

Speaker Change: from a very simplistic interface, and we'll also be rolling out benchmarking data to the clients who are on cloud and subscribed to those new interfaces.

Jim Hannon: So this is in the three and a half years I've been with the business. I would say this is by far the greatest period of innovation of delivered innovation. I've seen that of the teams. And the most heightened direct collaboration to get customer input into the developments. So we've shifted to a much more agile development process, and it's paying dividends.

Jim Hannon: And we'll also be rolling out benchmarking data to the clients who are on the cloud and subscribe to those new interfaces. So this is, in the three and a half years I've been with the business, I'd say this is, by far, the greatest period of innovation, of delivered innovation, I've seen from the teams, and the most heightened direct collaboration to get customer input into the developments. So we've shifted to a much more agile development process, and it's paying dividends.

Speaker Change: So, this is, in the three and a half years I've been with the business, I would say this is, by far,

Speaker Change: The greatest period of innovation, of delivered innovation, I've seen that of the teams.

Speaker Change: and the most heightened.

Speaker Change: direct collaboration to get customer input into the developments. So.

Speaker Change: We've shifted to a much more agile development process, and it's paying dividends.

Jim Hannon: Okay, just a follow-up on your comment on corporate costs. Initially, corporate costs were going to be elevated this year because of regulatory approvals on the REVS acquisition. That goes away. But you're still kind of pointing to higher corporate costs in the back half of the year. And I thought they might have gone down in the back half. So just what's driving that?

Pawan Chhabra: So it's across the rest of the lines. We'd like that growth rate to be higher, but as you said, we're putting up recurring bookings numbers that allow us to maintain our model. And a long term model and, and the one-time bookings have picked up. But again, we prefer stronger recurring, but at a level where we can make our guides.

Pawan Chhabra: Just a follow-up on your comment on corporate costs. I thought initially corporate costs were going to be elevated this year because of regulatory approvals on the Rebzak position, and then that goes away, but you're still kind of pointing to higher corporate costs in the back half of the year, and I thought they might have gone down in the back half. So just what's driving that? Yeah, so the Rebzak position would have significantly changed our asset mix in the US, which would have mandated, in the very near term, different filings. So that was driving the cost.

Speaker Change: Okay, just a follow-up on your comment on corporate costs. I thought initially corporate costs were going to be elevated this year because of regulatory approvals on the the REVS acquisition and then

Speaker Change: And that goes away, but you're still kind of pointing to higher corporate costs in the back half of the year. And I thought they might have gone down in the back half. So just what's driving that?

Daniel Chan: Thanks, I'll pass the line.

Jim Hannon: Yeah, so... The REVS acquisition would have significantly changed our asset mix in the US, which would have, in the very near term, different filings. So that was driving the cost. Some of that cost, we contracted to say, how would we, if we chose to at some future point, move to U.S. GAAP? There's a lot of reuse of that work, and some of it we had the teams in place to perform.

Stephen Macleod: Our next question comes from the line as Stephen MacLeod with BMO Capital Markets. Please go ahead. Thank you, good evening, everyone. Just, I know you sort of reiterated or not sort of, you reiterated the 2026 guidance that you released in July. And I'm just curious, previously you talked about 2025 analytics work being the midteens. Is that, is that still a target that is valid? Or does that change with, with the expectation for, you know, more muted transaction activity?

Speaker Change: And yes, so...

Speaker Change: The REVS acquisition would have significantly changed our asset mix in the U.S. which would have

David Ross: Many of David's...

David Ross: in the very near term, different flyways.

Pawan Chhabra: Some of that cost we contracted to say, how would we, if we chose to, at some future point, move to a US GAAP? There's a lot of reuse of that work, and some of it we had the teams in place to perform. So some of that's going on. There won't be over multiple quarters. There will not be any stranded costs from that as we keep our optionality going forward. So that was part of what was driving that additional cost was the advisory fees. So getting those back out, they're in Q3; Q4 will come down a bit, but we just have an exit rate into Q3 that puts us just a bit higher than the first half.

Speaker Change: So, that was driving the cost. Some of that cost, we contracted to say, what, like, how would we, if we chose to at some future point, move to a U.S. gap?

Speaker Change: There's a lot of reuse of that work and some of it we had the teams in place to perform. So some of that's going on. There won't be, over multiple quarters, there will not be any stranded cost.

Jim Hannon: So some of that's going on. There won't be, over multiple quarters, there will not be any stranded costs from that as we keep our optionality going forward. So that was part of what was driving that additional cost was the advisory fees. So getting those back out, they're in Q3. Q4 will come down a bit, but we just have an exit rate into Q3 that is just a bit higher than the first half.

Stephen Macleod: That's the, so there's a couple of things that we think drives double digit. So when we gave that guidance in July, obviously we knew what our print was on Q2, we were still finalizing numbers at that time, so we weren't ready to pre-report anything. But we had a view as to how the quarter was shaping up. That, knowing that bookings that we were, we were going to take a more muted view towards our recurring revenue growth this year, that revenue doesn't go away.

Speaker Change: From that, as we keep our optionality going forward, so that was part of what was driving that additional cost was the advisory fees.

Speaker Change: So, getting those back out, they're in Q3. Q4 will come down a bit, but we just have an exit rate into Q3 that puts us just a bit higher than the first half.

Pawan Chhabra: Okay, that's fair.

Yuri Lynk: Okay, that's fair. I'll turn it over, thanks.

Pawan Chhabra: I'll turn it over. Thanks.

Stephen Macleod: This is a, this is a matter of when, not if it's coming to us. And so that actually pushes out into 2025 and 2026 and gives us tailwinds into, to both of those years. So while we, while we knew we were going to pull down 24. It's, it's just, it flows out into 25 and 26. On top of that, we have new products that we have in the hands of clients right now.

Speaker Change: Okay, that's fair. I'll turn it over. Thanks.

Richard Tse: Our next question comes from Richard, say with National Bank Financial. Please go ahead. Yes, thank you. So you made some acquisitions over the past few years for technology, and I think you sort of built things organically as well. As you move forward, how should we think about the impact on pricing here? Are you going to sort of go to your existing base and start to bundle these things to reduce the complexity? I'm just trying to understand with that potential there and how you mechanically go about doing that. Sure. There's two things. Richard, you've seen our offer structures where we do it.

Richard Tse: Our next question comes from Richard Tse with National Bank Financial. Please go ahead. Yes, thank you.

Speaker Change: Our next question comes from Richard Tse with National Bank Financial. Please go ahead.

Richard Tse: Yes, thank you. So you've made some acquisitions over the past few years in the technology sector, and I think you've sort of built things organically as well. As you move forward, how should we think about the impact on pricing here? Are you going to sort of go back to your existing base and start to, you know, bundle these things to reduce the complexity? And I'm just trying to understand, like, you know, what that potential there is and how you mechanically go about doing that.

Speaker Change: [inaudible]

Richard Tse: Yes, thank you. So you've made some acquisitions over the past few years for technology and I think you've sort of built things organically as well.

Richard Tse: As you move forward, how should we think about the impact on pricing here? Are you going to sort of go to your existing base and start to, you know, bundle these things to reduce the complexity? And I'm just trying to understand, like...

Stephen Macleod: We have our, our office connect event in September where we're, we're going to probably announce new products. We have a robust pipeline of new products that are coming out. And we have some price actions that are kicking in this year and then with, with new product launches as well. So pricing coming back organic volumes of industry volumes coming back. And where, where we said, we've said VMS and argues revenues were strong.

Jim Hannon: Sure. There's, there's, there's two things.

Jim Hannon: Richard, you've seen our offer structures, where we do Essentials, Advanced, and Premium. That will come more into play here as I talk about several of our largest Argus clients yet to transition to the cloud. They've been holding off for innovation, and they're seeing the innovation now. So that's why we expect that they're going to move.

Speaker Change: There's two things.

Speaker Change: Richard, you've seen our offer structures.

Jim Hannon: Essentials Advanced in Premium. That will come more into play here as several; I haven't talked about several of our largest Argus clients yet to transition to cloud. They've been holding off for innovation, and they're seeing the innovation now. So that's why we portfolio parts of their business. They're shifting to the asset pricing model that we've been talking about for a while. So that's one piece of it is an entire shift in how we think about pricing and the value that we deliver to clients. There's still the more Face use case of acquisitions, where you have a transaction that requires an August model, and we're not going to force those clients to take an entire suite of products around that.

Richard: where we do Essentials, Advanced, and Premium. That will come more into play here as

Richard Tse: Several, I'm going to talk about several of our...

Stephen Macleod: Remain strong remain resilient is the word we always use because the volumes come down. Those revenue streams don't come down. It just impedes our growth rate when we're in a tough interest rate environment. So, so some spillover from this year into 25 and 26 pricing new products. And then the integration implementation of forberry into broader markets will also try to grow for us.

Speaker Change: largest Argus clients yet to transition to cloud. They've been holding off for innovation and they're seeing the innovation now so that's why we expect that they're going to move. So with some of those clients there's for their portfolio parts of their business

Jim Hannon: So, with some of those clients, there are, for their portfolio parts of their business, they're shifting to the asset pricing model that we've been talking about for a while. So that's one piece of an entire shift in how we think about pricing and the value that we deliver to clients. There's still the more... base use case of acquisitions where you have a transaction that requires an ARGUS model, and we're not going to force those clients to take an entire suite of products around that.

Speaker Change: They're shifting to the asset pricing model that we've been talking about for a while.

Speaker Change: So that's one piece of it is an entire shift in how we think about pricing and the value that we deliver to clients. There's still the more...

Stephen Macleod: Okay, that's, that's helpful. Just thinking about the appraisals and development advisory business, you know, as you think about this year calling for single digit adjusted the dog growth. You know, just curious having sold the tax business. Can you talk a little bit about the strategic sort of benefits of continuing down the appraisals and development advisory business? Sure. The dev advisory business, so one of the key core elements of our platform is the Altus ID.

Speaker Change: face use case of acquisitions where you have a transaction that requires an Argus model and we're not going to force those clients to take

Jim Hannon: We understand that use case, and we need to protect that use case for our clients. That said, there is more core functionality in all three offers that are going to market, so there will be a face price increase. Hannon talked about pulling back of discretionary discounting. That says renewals are coming up, and that's today for realizing that. The next piece is there will be this price increase to August to accommodate the additional feature functionality, and then there's the asset base pricing for more of the portfolio management assets of the products, which commands a significant premium to the current artist-based case functionality.

Jim Hannon: We understand that use case, and we need to protect that use case for our clients. That said, there is more core functionality in all three offers that are going to market, so there'll be a base price increase. Haven talked about pulling back discretionary discounting. That says renewals are coming up, and that's today. We're realizing that. The next piece is there will be a list price increase for Argus to accommodate the additional functionality, and then there's the asset base pricing for more of the portfolio management aspects of the product, which commands a significant premium over the current Argus base case functionality.

Speaker Change: An entire suite of products around that. We understand that use case and we need to protect that use case.

Speaker Change: for our clients.

Speaker Change: That said, there is more core functionality in all three offers.

Speaker Change: that are going to market. So they'll be a base price increase. Pawan talk about pulling back of discretionary discounting. That's as renewals are coming up and that's today. We're realizing that.

Stephen Macleod: Being in the dev advisory business, we're seeing assets before their assets. So we're getting visibility into the business cases that are that's underpin the underwriting and we're in the full life cycle with those with those developer clients. So we're establishing Altus ID's early on in that asset's life. On the appraisals business for our largest Canadian clients, they depend on Altus there. That business spins off a tremendous amount of data that we can use in the analytics business.

Speaker Change: The next piece is, there will be a list price increase to ARGUS to accommodate

Pawan: the additional feature functionality, and then there's the asset base pricing for more of the portfolio management aspects of the products.

Pawan: which commands a significant premium to the current Argus base case functionality.

Jim Hannon: Okay, that's helpful. Thanks.

Richard Tse: Okay, that's helpful. Thanks. And then just a quick one.

Pawan Chhabra: And then just a quick one, which are spent to organic growth for analytics in the quarter. Can you share that number with us? Or do you document the organic recovery revenue growth in the quarter? For futures. Yeah, we'll just land from our DNA. Yeah, so the recovery revenue growth in the quarter was 5.5% that we talked about in the opening remarks. We talked about it being at 4% on that, on an organic basis, getting one from the 4% position. I think I'm answering your questions.

Speaker Change: Okay, that's helpful, thanks. And then just a quick one, with respect to organic growth for analytics in the quarter, can you share that number with us?

Richard Tse: With respect to organic growth for analytics in the quarter, can you share that number with us?

Richard Tse: Are you talking about the organics recurring revenue growth in the quarter? Correct, for Q-tips.

Stephen Macleod: So even though transactions are down and so the dev advisory, we said transactions. The interest rate environment is more impactful on the dev advisory versus transactions, but the transaction environment is what drives the appraisals part of the business. So it's an important service that we provide to our largest Canadian clients and we will continue to do so where we can drive data that informs the advanced analytics that we're bringing to them.

Speaker Change: [inaudible]

Speaker Change: Are you talking about the organics recurring revenue growth in the quarter? Correct.

Pawan Chhabra: Yeah, we're just pulling in from our...

Jeff: Thank you, Jeff.

Jeff: Good morning.

Speaker Change: Get rid of this land from our DNA.

Speaker Change: Thanks for watching!

Speaker Change: Thank you.

Speaker Change: It's a recurring revenue growth in the quarter was

Pawan Chhabra: Its recurring revenue growth in the quarter was 5.5%, which we talked about in the opening remarks. And we talked about it as being at 4% on an organic basis. So, getting one from the former acquisition.

Speaker Change: 5.5%.

Speaker Change: that we talked about in the opening remarks. And we talked about it being at 4% on an organic basis, meaning

Speaker Change: Getting left from the former acquisition.

Stephen Macleod: Right. Okay. That makes sense. That's what I was expecting. And then maybe just finally with respect to the cloud transition, you still expect an incremental, I think it was sort of in the 10% percentage point range through the end of 2020, 2024 to the sort of mid 80s. Yeah, mid 80% range. Yeah, they have several large clients that will move the needle in a big clip in Q3 and Q4. So to get us into the mid 80s range and then as we mentioned from there, you know, we'll see smaller and committed moves, but essentially in that point, you would consider ourselves pretty much fully transitioned over to the cloud. And we'll leave some setting beyond from products. That's right. Right now. Okay. Yes. Okay. Perfect. Thanks, Paula. Thanks guys. Appreciate it.

Pawan Chhabra: I think I'm answering your question. Okay, maybe we can take it offline. It's fine.

Pawan Chhabra: Okay, maybe we can take it off fine. It's fine. I'm good. Thank you.

Speaker Change: I think I'm answering your question.

Speaker Change: Okay, maybe we can take it offline. It's fine. I'm good. Thank you.

Operator: We have no further questions at this time. This will conclude our question and answer session.

Operator: We have no further questions at this time. This will conclude our question and answer session. I'll now turn the call back to Jim Hannon for his closing remarks.

Speaker Change: We have no further questions at this time. This will conclude our question and answer session. I'll now turn the call back to Jim Hammond for closing remarks.

Stephen Macleod: That's it for me. Thanks.

Jim Hannon: I'll now turn the call back to Jim Hannon for closing remarks. Thank you.

Jim Hammond: Thank you very much for joining us today.

Jim Hammond: www.globalonenessproject.org

Speaker Change: Thank you very much for watching this video.

Jim Hannon: Hi, are we connected? Yes, you are connected. Okay, great.

Jim Hannon: Hi, are we connected?

Speaker Change: www.globalonenessproject.org

Operator: E.E.

Speaker Change: Hi, are we connected?

Operator: Okay, great. Richard was asking me a question.

Paul Treiber: Our next question comes from the line of Paul Tribor with RBC capital markets. Please go ahead.

Speaker Change: Yes, you are connected.

Jim Hannon: Richard was asking the question. As we said in the prepared remarks, recurring revenue did grow 5.5% in the quarter, with your question was on the organic growth. It's 4% on an organic basis. Getting about a point and a half left from the 4% acquisition. I think it's important to note in there though that that artist and VMS revenue performance is pretty resilient in the quarter. We did get the moderation in that growth rate as it related to the data solution to be so answer your question 5.5% all in 4% organic.

Speaker Change: Okay, great. Richard was asking the question. Yeah, I'm not sure, but David, you heard my answer or not, I'm just just...

Paul Treiber: Okay, so much in the afternoon. The you mentioned that you have a number of levers to drive your margin expansion targets this year for analytics. You mentioned restructuring as one of those. Could you elaborate on just where are areas that you are able to pull out some costs? Yeah, so when you think about for the drivers of analytics margin that you've heard Jim and I talk about multiple paths again, for that kind of strange.

Speaker Change: As we said in the prepared remarks, recurring revenue did grow 5.5% in the quarter, your question was on the organic growth.

Pawan Chhabra: Yeah, I'm not sure if you heard my answer or not. As we said in the prepared remarks, recurring revenue did grow 5.5% in the quarter. Your question was about organic growth. It's 4% on an organic basis, so you're getting about a point-and-a-half lift from the forgery acquisition. I think it's important to note, though, that ARGIS and VMS revenue performance was pretty resilient in the quarter, and we did get the moderation in that growth rate as it related to the data solutions piece. So, to answer your question, five-and-a-half, all in, 4% organic.

Speaker Change: It's 4% higher than organic basis, which is an antibiotic point and a half left from the former acquisition.

Speaker Change: I think it's important to note in there, though, that

Speaker Change: The Army's NDMS revenue performance just green resilient in the quarter. We did get the moderation and that growth rate is related to the data solutions piece. So, thanks for your question, five and a half. All in four percent organic.

Paul Treiber: I guess the right way to think about it or any way to think about it is breaking it A, there's going to be a contribution from a revenue side. So we're going to continue to drive margin through the ongoing cloud conversions as we just talked about them a second ago. You continue to increase number of assets via less assets on our platforms, so that's kind of continuing to drive. There's obviously some annual seasonality that drives it in towards volunteer that helps us and we're also living towards eliminating discretionary discounts. It's clients renew, so those are all margin drivers from a revenue perspective.

Operator: We have no further questions at this time.

Operator: We have no further questions at this time. With that, I will now turn the call back to Jim Hannon for any closing remarks.

Speaker Change: [inaudible]

Jim Hannon: With that, I will now turn the call back to Jim Hannon for any closing remarks. All right, so I just want to reiterate everyone. Well, sorry for that drop. We don't know what happened there, but this is when we gave the guidance for 2020 for 2026 and the path there. Again, we knew that we were going to be shifting some revenues out of 24 to 25. So we feel good about our paths in 25 and 26. I feel like we're going into those quarters with a lot of tailwind. We should have a much more favorable economic environment; hopefully, just the global macros of other social drivers there will be okay.

Speaker Change: We have no further questions at this time. With that, I will now turn the call back to Jim Hannon for any closing remarks.

Jim Hannon: All right, so I just want to reiterate to everyone, well, sorry about that drop, we don't know what happened there, but when we gave the guidance for 2020, for 2026 and the path there, again, we knew that we were going to be shifting some revenues out of 24 to 25. So we feel good about our paths in 25 and 26, feel like we're going into those quarters with a lot of tailwinds.

Speaker Change: Alright, so I just want to reiterate to everyone, sorry for that drop, we don't know what happened there, but...

Speaker Change: When we gave the guidance for 2026 and the path there, again, we knew that we were going to be shifting some revenues out of

Pawan Chhabra: We're also an expense perspective. You know, we started our restructuring activities in late one. We're obviously going to get the full benefit of the restructuring activities as you analyze the impact for the full year. We remain committed to continuing to build out the GSE in India in addition to the wage arbitrage that we're getting. We're benefiting from the strong talent that's sitting there and the ability to standardize on best-in-class processes and centrally for the organization is a phenomenal productivity list for the organization.

Speaker Change: 24 to 25, so we feel...

Speaker Change: Good about our paths in 25 and 26.

Speaker Change: I feel like we're going into those quarters with a lot of tailwind. We should have a much more favorable economic environment. Hopefully

Jim Hannon: We should have a much more favorable economic environment. Hopefully, just the global macros of other social drivers there will be okay. You know, there's a lot of drive, there's a lot of elements that support that 26 growth rate that we've put out there. So I appreciate everyone being on the call and look forward to the one-on-ones. Thank you.

Speaker Change: Just the global macros of other social drivers there will be okay.

Jim Hannon: And, you know, there's a lot of drive. There's a lot of elements that support that 26% growth rate that we've put out there.

Speaker Change: You know, there's a lot of drive, there's a lot of elements that support that 26 growth rate that we've put out there. So, appreciate everyone being on the call and look forward to the one-on-ones. Thank you.

Pawan Chhabra: You know, we're also in addition to a lot of the new offers that we're rolling out for clients in Q4. There are internal releases that we have now that we're using internally to drive greater productivity for our people, for the efficiencies across data management, data management, and really just overall productivity for our organization.

Jim Hannon: So, appreciate everyone being on the call and look forward to the one-on-ones.

Operator: Thank you.

Operator: This will conclude today's conference call. Thank you all for your participation. You may now disconnect.

Operator: This will conclude today's conference call. Thank you all for your participation.

Operator: You may now disconnect.

Speaker Change: This will conclude today's conference call. Thank you all for your participation. You may now disconnect.

Pawan Chhabra: So, you know, that's just a handful to just give you a flavor of the commentary around the fact that we have multiple paths to be able to get the drive margin for the business.

Pawan Chhabra: That's helpful. Just in regards to the outlook for 26 minutes, nice to see that you're reiterating it, but can you help explain what you see as the driver than there would be like a typical recovery in the market, but can you elaborate on your confidence in either secular drivers or product catalysts that you may have between now and then that would help drive that growth in margin expansion? Sure, I'll update that one.

Speaker Change: Thank you for watching!

Pawan Chhabra: I feel free to jump in on it. Upon it, it's a lot of the same from, so the margin expansion market in the 35. A lot of that is what pub and just went through, so I won't reiterate those. But as I said, we have new products in the hands of clients right now. We'll be, I'm not sure if you're going to be able to be connected then, we'll be demonstrating those products there.

Pawan Chhabra: They'll go GA. As I said, there's there's pricing left. The products that pub and set are in the hands of our people internally right now that's trading efficiencies. Those were built tool purpose for our own folks as well as for our clients. It's all one platform, so you get the same benefits across both. So we expect our total addressable market is going to expand from these new products. The new products are, so one example is we're using an AI-driven valuation model that does rent predictions for our people to make our internal advisors more efficient with their clients.

Speaker Change: [inaudible]

Pawan Chhabra: So there's a giant world of CRE clients out there who are not VMS clients who could benefit from that technology. And our core focuses on our near-term focuses on data management mostly around the office ID and asset performance. And again, asset performance expands our addressable market. So those are two key areas that will drive that growth 325-26 on top of organic market recovery. That's right, and the slower transition of the VMS bookings to revenue this year, which puts a headwind relatively speaking, we'll turn into a tailwind as that market recovery happens, as we think about 25 and 26 and that gives us additional confidence in regards to our trajectory.

Operator: Thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much for your time, thank you very much.

Pawan Chhabra: If you've heard a lot of our peers in the market in general, and our clients talk about emerging green shoots that are starting to show in terms of inflation continuing to take a gradual gap lower, which is leading us hopefully closer to the first rate cuts in the U.S., we already saw a Canada deal with a second consecutive rate cut, which is increasing our client's confidence on the stabilization of prices. Jim talked about our own data showing about cap rates, increasing at a smaller rate, which is also another green shoot in terms of confidence around price discovery.

Pawan Chhabra: Talking to our teams internally and their client round tables, clients are becoming more and more inquisitive in regards to our services, and showing a greater increasing willingness to buy assets at the ask. And so all of those to us as you start training, you're letting those data points give us comfort in regards to the fact that with Jim says it's not a matter of if it's a matter of when and then they get just comfort in regards to we think about 25 and 26.

Pawan Chhabra: Lastly, lastly for me, just can you speak to the capital allocation strategy following the investor property tax, just doing in a basic math, it looks like you'd move into a net cash position. So where is that is that will she expect to the company going forward or is there other potential uses of cash, you know, the acquisitions buybacks, et cetera, that that could consume that cash. Yeah, and again, what we tried to outline in our, you know, previous conversation, the monitor show back in regards to capital allocation is really at a high level, laying out the capital allocation framework.

Pawan Chhabra: And so from a framework perspective, you know, we're going to continue to invest organically in the business to drive our even revenue growth. We're going to continue to remain committed on on our dividend. We've said a target leverage base that gives us capacity to be able to not only do a meaningful share buyback program, which we've talked about. But also give us the capabilities to be able to do strategic emanate if and when it makes sense as it fits into the core of our business.

Pawan Chhabra: And so, you know, from a, from a, from a use of cash perspective, that's kind of the math in regards to, I guess, the big picture in regards to how we think about using capital once we have it. And deploying that in a very strategic way, it's just kind of a framework that I just outlined.

Paul Treiber: All right, thanks for sticking the questions.

Operator: Again, if you would like to ask a question, please press star one.

Yuri Lynk: Our next question comes from Yuri Lynk with Canacord Genuity. Please Okay. Most of my questions have been answered. Maybe just a little bit on what your clients are saying in terms of the new product rollouts, especially the ones leveraging AI. I think you're going to be able to market insights. Yeah, so market insights is a broad category. Yuri, the one you saw us talk about was bringing the CAPM approach into commercial real estate.

Yuri Lynk: And to do that, you need to be able to identify, sort of, to leverage the analysis that was out there. You need to be able to effectively manage your data to identify your top performing assets and then evaluate the market for other assets that fit those profiles. So the marketing sites business includes our anatomy business includes all the state of studio in Canada. And so there's ongoing interest in that. As we said, that business in Q2.

Yuri Lynk: It is transaction related. If they're not doing transactions, they're not looking for those other properties. So great feedback from clients on it. They're saying when we transact, that's where we're going. The second piece of it is the product that we have in beta with several clients now who will be on stage at the connective end. And that product is all about increasing the use simplifying the usability of Argus enterprise. And increasing the utility of Argus enterprise.

Yuri Lynk: So it's a very modern UX on it. But it also allows clients to take you model assumption changes in in Argus from a very simplistic interface. And we'll also be rolling out benchmarking data to the clients who are on cloud and subscribe to those new interfaces. So this is in the three and a half years I've been with the business. I would say this is by far the greatest period of innovation of delivered innovation. I've seen that of the teams. And the most heightened direct collaboration to get customer input into the developments. So we've shifted to a much more agile development process and it's paying dividends.

Yuri Lynk: Just a follow-up on your comment on corporate costs. I thought initially corporate costs were going to be elevated this year because of regulatory approvals on the Rebzak position, and then that goes away, but you're still kind of pointing to higher corporate costs in the back half of the year, and I thought they might have gone down in the back half. So just what's driving that? Yeah, so the Rebzak position would have significantly changed our asset mix in the US, which would have mandated in the very near term different filings.

Yuri Lynk: So that was driving the cost. Some of that cost we contracted to say, how would we, if we chose to, at some future point, move to a US gap? There's a lot of reuse of that work, and some of it we had the teams in place to perform. So some of that's going on. There won't be over multiple quarters. There will not be any stranded costs from that as we keep our optionality going forward.

Yuri Lynk: So that was part of what was driving that additional cost was the advisory fees. So getting those back out, they're in Q3, Q4 will come down a bit, but we just have an exit rate into Q3 that puts us just a bit higher than the first half. Okay, that's fair.

Yuri Lynk: I'll turn it over. Thanks.

Pawan Chhabra: Sure. There's two things. Richard, you've seen our offer structures where we do it. Essentials advanced in premium. That will come more into play here as several, I haven't talked about several of our largest Argus clients yet to transition to cloud. They've been holding off for innovation and they're seeing the innovation now. So that's why we portfolio parts of their business. They're shifting to the asset pricing model that we've been talking about for a while.

Pawan Chhabra: So that's one piece of it is an entire shift in how we think about pricing and the value that we deliver to clients. There's still the more Face use case of acquisitions, where you have a transaction that requires an August model, and we're not going to force those clients to take an entire suite of products around that. We understand that use case and we need to protect that use case for our clients.

Pawan Chhabra: That said there is more core functionality in all three offers that are going to market, so there will be a face price increase. Hannon talked about pulling back of discretionary discounting. That says renewals are coming up and that's today for realizing that. The next piece is there will be this price increase to August to accommodate the additional feature functionality, and then there's the asset base pricing for more of the portfolio management assets of the products, which commands a significant premium to the current artist-based case functionality.

Richard Tse: Okay, that's helpful. Thanks.

Pawan Chhabra: And then just a quick one, which are spent to organic growth for analytics in the quarter. Can you share that number with us? Or do you document the organic recovery revenue growth in the quarter? For futures. Yeah, we'll just land from our DNA. Yeah, so the recovery revenue growth in the quarter was 5.5% that we talked about in the opening remarks. We talked about it being at 4% on that on an organic basis, getting one from the 4% position. I think I'm answering your questions.

Operator: Okay, maybe we can take it off fine. It's fine. I'm good. Thank you. We have no further questions at this time.

Operator: This will conclude our question and answer session.

James Hannon: I'll now turn the call back to Jim Hannon for closing remarks. Thank you. Hi, are we connected? Yes, you are connected. Okay, great. Richard was asking the question. As we said in the prepared remarks, recurring revenue did grow 5.5% in the quarter with your question was on the organic growth. It's 4% on an organic basis. Getting about a point and a half left from the 4% acquisition. I think it's important to note in there though that that artist and VMS revenue performance is pretty resilient in the quarter. We did get the moderation in that growth rate as it related to the data solution to be so answer your question 5.5% all in 4% organic. We have no further questions at this time.

James Hannon: With that, I will now turn the call back to Jim Hannon for any closing remarks. All right, so I just want to reiterate everyone, well, sorry for that drop. We don't know what happened there, but this is when we gave the guidance for 2020 for 2026 and the path there, again, we knew that we were going to be shifting some revenues out of 24 to 25. So we feel good about our paths in 25 and 26.

James Hannon: I feel like we're going into those quarters with a lot of tailwind. We should have a much more favorable economic environment, hopefully just the global macros of other social drivers there will be okay. And, you know, there's a lot of drive. There's a lot of elements that support that 26 growth rate that we've put out there. So, appreciate everyone being on the call and look forward to the one-on-ones. Thank you.

Operator: This will conclude today's conference call. Thank you all for your participation. You may now disconnect. [inaudible]

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