Good afternoon, ladies and gentlemen. Welcome to Altus Group's 4th Quarter and Full Year 2018 Financial Results Conference Call. During the presentation, all participants will be in listen only mode. As a reminder, this conference is being recorded. I would now like to turn the conference over to Ms.
Camilla Bartosiewicz. Please go ahead.
Thank you, Ada. Good afternoon, everyone, and welcome to Altus Group's 4th quarter year end results conference call and webcast for the period ended December 31, 2018. For reference, our earnings results news release was issued after market close at 4 pm and is also posted on our website along with our MD and A financial statements. Please visit altusgroup.com to obtain these documents and for more information. On today's call, we will begin with an overview of our performance, a discussion of our financial results and noteworthy developments.
We'll finish by taking questions from analysts and institutional investors. If we miss any questions, please contact me directly after the call. Joining us today is Bob Courteau, Chief Executive Officer Carl Ferro, President and Angelo Bartolini, Chief Financial Officer. Before we get started, please be advised that some of our statements today may contain forward looking information. Various factors and assumptions were applied or taken into consideration in arriving at the forward looking information that do not take into account the effective events announced today.
There are also numerous risks and uncertainties that could cause actual results to differ materially from those set out or implied by such statements. These are all described in our filings with SEDAR and our comments and questions must also be considered in the context of the disclosure in those materials. And I'll now turn the call over to our CFO, Angelo, who will start with a review of our financial performance.
Thank you, Camilla, and thank you all for joining us on the call webcast this afternoon. I'll start off with a short summary followed by a deeper review by business segment. Starting off with a quick recap of our consolidated performance for Q4 and for the year, revenues grew by 7% to CAD130.9 million in the Q4, finishing the year at $510,400,000 also up 7% with strong revenue contributions from Altus Analytics and Property Tax, offset by declines in Geomatics. Acquisitions contributed 4% on an annual basis. Adjusted EBITDA was down by 24 percent to $15,100,000 in the quarter, down 12% for the year at 70,900,000 dollars reflect continued investments at Altus Analytics and the impact of lower property tax revenues, particularly in Ontario and the UK.
The loss in accordance with IFRS was $14,700,000 in Q4 and $18,400,000 for the year. In the Q4, we took an impairment charge on the carrying value of our Geomatics business of $13,700,000 reflecting a prolonged and challenging environment in the oil and gas sector in Western Canada. Adjusted EPS was $0.20 in Q4 and $1.05 for the year. Turning to our business segments. The Altus Analytics business performed well in the Q4 and full year, especially after a relatively strong 2017 that saw significant DCF upgrade revenues well into late into the year.
Revenues were up 25% in Q4 and 9.4% for the year. Contributors to revenue growth both in Q4 and full year were higher software contract sales, including subscription and renewals, maintenance, appraisal management and software services, offset by lower due diligence assignments. The acquisition of Taliance provided low single digit contribution, while FX was more of a tailwind in Q4, boosting revenues by 3%. Overall, in 2018, we saw significant sales of AE come from add on sales to existing customers, followed by sales to net new customers and from residual conversions of our legacy DialCap customer base in the UK. We also saw an increase in the mix of our software revenues from subscription contracts versus perpetual licenses, coming from both on premise AE subscription contracts and from AOD sales.
As you might recall, in Q2, we benefited from a new significant multiyear subscription contract, followed by a large multiyear subscription renewal in the 4th quarter. These contracts were deemed right of use under IFRS 15. And as a result, a portion of those revenues were recognized upfront at time of delivery rather than ratably over the term of the subscription contract. Altus Analytics recurring revenues, as defined in our MDA disclosure, grew by 15% in the quarter and by 10% for the full year, standing at $130,000,000 for the year. On adjusted EBITDA, the 4th quarter grew 52% on a year over year basis, benefiting from strong revenues and in particular from contract from a contract from the contract renewals.
For the year, however, EBITDA declined by 11%, reflecting our continued investments in cloud development and expansion into Europe. Taliance also had a mild impact to earnings, but we expect positive contributions in the year as sales ramp up. As we look out to the Q1 for AA, we are refining our expectation of revenue growth to the mid teens, still within the range of our previous outlook for the two periods. Turning to our Commercial Real Estate Consulting segment. We had steady annual growth, but slightly underperformed the comparative period in Q4, owing mostly to property tax.
Although property tax delivered an 11% increase in the year, largely as a result of the CVS acquisition, revenue growth in the second half was subdued as 2 of our key markets, Ontario and the UK, underwent government driven changes on tax appeal processes. These changes caused a deferral of case settlements and consequently revenue recognition. As we've said earlier, the economic value of our pipeline of appeals has always remained intact. While the changes were a headwind in 2018, they now provide us with an opportunity for 2019 and position us to generate record property tax revenues as case settlements gradually ramp up through the year. Although we expect sequential Q1 revenue improvement, we only anticipate year over year improvement to actually begin in Q2, reflecting both a gradual buildup of higher case settlements and higher annuity revenues in the UK.
From a seasonality standpoint, we actually expect Q2 to be slightly higher than other quarters as the annuity revenues only occur in Q2. Moving on to other service businesses, valuation and cost advisory had a solid year, growing revenues by 5% and adjusted EBITDA by 6%. This reflected strength across the board in both of our cost and valuation practices. Despite the continuing market challenges, our Geomatics business was able to slightly improve margins through its rightsizing efforts that occurred earlier in the year. Revenues were down 10%, but adjusted EBITDA improved by 3%.
Finally, in our corporate division, corporate costs were $23,000,000 in 20.18, up from $22,000,000 from the previous year. As a percentage of revenues, they were 4.5%, generally consistent with 2017. We expect corporate costs to trend higher proportionately as we continue to scale our business. Altus Group's financial strength remains a key pillar of our investment proposition, benefiting from the strong cash generation of our business. During the year, we sold our stake in Real Matters and used the net proceeds of approximately $54,000,000 to pay down our bank debt.
As at December 31, 2018, bank debt stood at $129,200,000 representing a funded debt to EBITDA leverage ratio of 1.79 times. That compares to 1.84 times at the end of 2017. Our balance sheet has considerable financial flexibility to support our numerous growth initiatives and allows us to continue to deploy capital towards more acquisitions and organic investments. With that, I would now like to turn the call over to Bob.
Hey, thanks, Angelo, and thanks for the summary. 2018 was a very productive year as we further expanded our Altus Analytics business into Europe and Asia with some big blue chip customer wins. We launched ARGUS Cloud. We increased sales to larger clients and we enjoyed some enterprise deals with a higher mix of recurring revenues. And we did all this while maintaining really good traction in the mid market.
We also significantly increased our market share in the property tax business. Overall, I'm pleased with the robust performance across all of our businesses as we had steady annual year over year revenue growth from virtually all of our commercial real estate consulting and Altus Analytics offerings. Having delivered a 5 year 9% earnings CAGR up to 2017, we made a decision last year to increase our investment spending in 2018 to establish ourselves for continued growth and this weighed on our profitability. The investments were primarily geared towards our strategic initiatives to shift our solutions to the cloud, create enterprise offerings, which include the integration of the newly acquired Taliance solution and further our global expansion as we are investing in functionality for Europe. We firmly believe that the investments we pursue are critical to sustain our market leadership and to drive further growth with cloud capabilities and enterprise selling.
Overall, I'm pleased with the financial and operational performance in 2018 and the progress against our strategic initiatives. Our results underpin that our Altus growth is in growth mode and personally, I remain very excited about the growth opportunity ahead for the company. At Altus Analytics, following years of growth fueled earlier fueled by ARGUS conversion sales, growth today is fueled by a broader range of revenue streams. It's a natural evolution, but also strategic on our part as we see a big opportunity with large global CRE firms, both from driving global adoption of ARGUS Enterprise with our top 200 customers and by pursuing more large enterprise deals with global multi product deal for the end to end client needs. In addition, add on sales continue to be very strong and were a significant contributor to total license sales in 2018.
We expect that to continue in 2019. And as Angelo pointed out, in 2018, we saw an increase in the mix of our software revenues from subscription contracts, both on premise ARGUS Enterprise subscription contracts and from growing adoption of our ARGUS On Demand offering, while also including more sales of Taliance and Voyanta. One of the trade offs of being overweight on subscriptions is that it does take away from our quarterly top line growth as generally speaking less revenue is recognized upfront. But as we told you before, we really favor subscription contracts because this is a recurring revenue with higher long term economic value and we will increasingly drive towards a higher recurring revenue mix. This will also drive the right economics and solidify our position in the industry.
Investment at Altus Analytics in addition to more software sales coming to the subscription form impacted our earnings and compressed our margins. But as I just said, we believe the investments we pursued were critical to further push our market leadership and drive future growth with cloud capabilities and enterprise selling. And there's this great intersection of customer demand and these new offerings and capabilities that are going to drive value for those customers. Having completed our conversion to ARGUS Enterprise and establish it as a new industry standard in major commercial real estate markets, this timing was right to make the move to the cloud. That is where the industry is headed, it's what our customers want and it will allow us to extend our solution much easier and more broadly.
And frankly, with the success we're having with Argus On Demand, we have a proof point already of the capability that customers are looking for to run their business. And so we've got a nice set of experience to make this transition. Some of these investments will overlap and take more time to contribute meaningfully to revenues, thus impacting our operating margins and costs. And I wanted to talk about that. As you know, as we move to ARGUS in the cloud, we're offering our clients a hybrid approach.
And what that means is that we will still be able to drive value out of ARGUS Enterprise in the future, while we bring out ARGUS Cloud to tackle new problems for our customers, which then expands our share of wallet and creates much higher value. So what we've intended to do is to increase our development capacity, but make sure that ARGUS Enterprise is still a very viable product for years to come, years to come. And frankly, we're driving ARGUS Enterprise as the solution for Continental Europe, including Germany and France, where we will be bringing out functionality in the middle of the year. Our thinking around this is that as we start completing our requirements for the Continental Europe market, what we'll do is start consolidating our future development onto a common framework where cloud will be the place where we can absolutely put all of our capability. If we think it's prudent to do it this way, because there's still much demand for ARGUS Enterprise And the way this will work out is as we go into the second half of the year, we will be able to bring margin back onto our platform by consolidating onto a single development environment.
So that's our strategy. We're certainly believing that the efforts that we've already made around cloud combined with the acquisition of Taliance and the integration we're doing between this hybrid environment is really going to give us an opportunity to continue to drive large strategic customer value and we will benefit from the opportunity to deploy globally with those solutions. Look, it's been a busy year, but we continue to outperform on last year's excellent revenues, have successfully refocused the business with the opportunities ahead. While there still remains a lot of work ahead of us to offer our clients integrated cloud solutions with data capabilities, we've already come a long way and I'm very pleased with what the team has accomplished, particularly our development team who continues to hit milestone after milestone over the last few years. As we mentioned, with the shift to the cloud, we're now in a place where we'd be going overweight in subscription revenues in our model.
And as you know, we've already started that move, operating in a hybrid model. We'll continue to overweight the opportunity to take contracts and subscriptions. And when we get to the point where we offer a primary subscription solution, we would have already started that turn over the last year and a half as we really started bringing new solutions in and starting to take subscription based contracts. We've always said we want to do this with the lowest amount of disruption to our business model, but we are absolutely committed to a stronger economic model that subscription delivers. Beyond our software strategy, our appraisal management offering continues to be a strong contributor to growth and we made excellent progress in 2018, expanding that offering in new international markets.
Growth was driven by same customer growth, new client additions and expansion into Europe and Asia Pacific. In fact, in Europe, we were recently appointed by 1 of the largest global U. S.-based investment manager to provide full valuation management services and data collection under AIFMD. This win results from a successful collaboration between our appraisal management team and software teams and also included Argus Enterprise Modeling and Support Services to facilitate their adoption of AE, but also to improve their data collection and data consistency. These recent measures the recent measures taken by EU regulators further increase independence and substantiate requirements in the valuation process of real estate funds, which will create opportunities for appraisal management and for ARGUS in Continental Europe and our model will combine those things in a platform for the largest investment managers in Europe and we are first to market and we have an enviable model and now we have the capacity in Luxembourg, in Paris with Taliance and in Europe where we have a very sorry, in the UK where we have a very strong position.
So we're really, really well positioned there. In the APAC region, we had another record years of global fundraising. There is clearly a huge appetite to deploy this capital in open ended fund structures in that region and to implement independent 3rd party valuation oversight. And now we have an APAC presence with our appraisal management group and remain well positioned to support our global clients there and the demand is already in place. We also, not unlike Europe, see our clients, both U.
S. And European clients looking to adopt Argus in Asia as part of this integrated model and that's going to further our goal of serving large clients and moving them on to a Argus everywhere platform where they use Argus not only for global valuation, but it becomes a form of data standard that makes it easier for them to close and understand their assets on a global basis. And our cloud investments are only going to improve that over time. Appraisal Management, the data we collect from it continues to be strategic to our enterprise selling, managed service offering, whereby we can offer our clients a variety of end to end asset management solutions as a global provider of investment and asset management. So we feel really good about the next phase of growth for Altus Analytics and our ability to get back on the path to long term steady double digit top line and profitable growth at expanded margins.
Turning to consulting. Given our market leadership in all of our key practice areas, we continue to benefit from strong client retention and prominent project wins. I would particularly like to acknowledge the contribution from our cost practice, who had a very strong year. And on top of that, they've been innovating with data, thinking about how EstateMaster is going to become a critical asset for them and is providing their services, but also for the customers, the development customers of our cost business practice. And as you know, our property tax business faced headwinds in 2018 owing to the process changes Angelo discussed, but now we're in this opportunity for 2019 that positions us to generate record property tax revenues this year.
In Ontario, the ramp up will be gradual and more skewed towards the second half of the year. Our Q4 settlement volumes were up 50% over Q3, but still off a low volume relative to pass trends. Nevertheless, the trend is encouraging. And as we're now in the 3rd year of a 4 year cycle, we will expect to see acceleration as the authorities start to prepare for the next reassessment. The economic value of our pipeline of appeals remains completely intact.
In the UK, interesting very similarly is starting to ramp up. And we're seeing increased activity with overall increased efficiency in the check stage. Overall, post integration with CVS, we're benefiting from increased market share and a number of synergies. And as a result, we've been able to take our contingencies higher. Our success rates are trending higher.
It's a key driver on the economic model and overall productivity has improved greatly. As Angelo guided, we've maintained our guidance for record annual revenues, but remind you as we said in the past that we expect the bulk of the contribution to be between Q2 and Q4. As we pointed out, Q2 benefits from seasonality in the UK and in the second half, we expect to see both the Ontario and UK hitting new productivity levels as we drive out the year. Overall, property tax continues to represent an attractive growth area for our business. We believe in the technology infrastructure that we're building.
It's an amazing asset for data and we're improving our productivity as we go forward. We are poised for excellent years in 2019 2020. So before I wrap up, I just want to thank each of our employees, many of whom are fellow shareholders for their dedication and outstanding work in 2018. Our people are great and we have the best people in this industry across the spectrum of service professionals, data experts and technology capability. I wanted to take a minute to personally recognize the contributions of our Property Tax Global President, Jim Derbyshire, who recently retired at the end of 2018.
Many of you have met him. He's an amazing guy. After more than 40 years in the industry, yes, 40 years in the industry, you might not wanted me to say that, he has created enormous value all the way back to Derbyshire Consultants, which was one of the original businesses that merged to create Altus Group. With the success of the Canadian practice, Jim oversaw the expansion of our tax practice into the U. K.
And U. S. He drove significant client value and his expertise and success has helped build an incredible business and that's why he has an amazing reputation. And as my friend and on behalf of the company, we thank Jim for his incredible contributions to Altus Group as a founder in formulating growth and going global. Thanks so much, Jim.
As part of our succession planning, we had regional presidents for our property tax business for some quite some time now, including Terry Bishop in Canada, Trey Breezely in the U. S. And Alex Probyn in the U. K. And I can tell you that Jim has taught them well.
We have an amazing lineup of leaders. I have high confidence in our Global Tech senior leadership team, who are going to lead us towards record revenues in the year. So with that, let me open it up for questions.
Thank you, Mr. The first question is from Daniel Chan of TD Securities. Please proceed.
Hi, thanks for taking my questions. Can you guys talk about the big renewal deal in the quarter? Did it expand from the previous agreement for more products and seats and did the mix of recurring revenue increase as well?
The value of the deal overall is greater, Dan. It gave us on a per individual per seat basis greater economic value and also allows us to sell into them more of our other products. So, it provides greater flexibility and greater economic value over the term.
Are you getting more recurring revenue out of it?
The recurring revenue at this point is slightly higher. But as I said, we expect it
to grow as a result of
the deal that we struck.
Okay. Just switching over to property tax. If I look at the Ontario timeline for your appeals, it looks like it really starts to move in 2019 like you guys are saying. But it looks like some of your appeals are scheduled to start progressing in Q1. So I'm kind of curious why you're expecting Q1 to be down on a year over year basis when it looks like some of these appeals should start moving through the pipeline this quarter?
Yes. Well, we are seeing sequential growth. There's no doubt about that. What we had in the earlier part of last year, that we had we still had appeals from the previous cycle that we were solving for. And so, we were getting the benefit of that.
And it started dropping off as we progressed through the year. So, that was one factor. The second factor was that in Canada, we had a strong Q1 in Vancouver and Alberta. And so, that just makes it from a comparable standpoint a little bit more difficult, which is why we're saying, it's really going to be Q2 when we start seeing the strength year over year.
Okay. That's very helpful.
The only thing I would add to that is that we're confident on the year because we like how Q1 is shaping up in terms of the in process measures around that, both Ontario, UK and frankly across our business in total. So we're not just betting on a UK, Ontario 2019 like a lot of the business is really going well.
Okay. And then just one final one for me on property tax. We know that business has a lot of operating leverage as evidenced by it being nearly breakeven this quarter. So how should we think about the margins in that business as it ramps through the rest of the year?
Good. Yes. The
margins will definitely improve. There's no question about it. The majority of the revenues that we add to the top line flow right to the bottom line.
Yes, so starting in Q2.
Okay, great. Thank you.
Thank you. The next question is from Yuri Lynk of Canaccord Genuity. Please proceed.
Hey, good evening, guys. Hey, Yuri.
Bob or Angelo, I don't know who wants to take it, but can you just clarify the boost that we saw in non recurring revenues in the quarter? Was that due to the IFRS classification that you talked about?
That's definitely part of it. There is the one time element that you recognize when you have a subscription contract that is considered a right of use. So, yes, that's one element of that. Really, we don't define it anymore as recurring and non recurring. It's under IFRS.
But yes, there is that one time element.
Okay.
And then it did sound a little bit like your softened your total just slightly on the revenue outlook for the Q1 of 2019. Maybe some color on that? And then really more importantly, what do you expect for AA top line in 2019 overall?
So on the tax part, are you talking about it overall for Q1?
Yes, all the same
lines. Got it. So look, we provided guidance last time over 2 quarters. We said mid teens to low 20s. And on average, we're actually going to overachieve on that when you look at it over the 2 quarters.
Right now, we're just seeing based on our current view, it's going to be closer into the mid teens. So we just refreshed it.
Okay. And how do we think about full year?
The full year, we're still expecting strength in the full year, given what we're seeing in terms of the overall pipeline. Our sales teams that were growing into Europe, so our same sales to existing clients, we just we see we continue to see strength in all of our
Customer demand in all segments as we go forward.
Yeah. In Q4, Yuri, we also closed one of our biggest deals in the quarter was in Asia, where we we had a fairly significant deal and their pipeline is pretty damn good going forward. So it's not just kind of a one deal quarter. And then on top of it in Q4, building on the comments I made before, we closed probably our largest Voyanta deal ever. And that's going to have some impact on recurring revenue down the road.
And obviously, we are turning our sales force towards an orientation towards an environment where more and more we got to get them ready to be selling these large complex solutions. And the risk on all of this is, we did as an example, we did a very large deal with Allianz in Q2 last year, right? And then that on the basis of selling the large deal, we're going to start seeing some lumpiness in the quarter, but also you end up with these year over year kind of challenges as we go forward. But we don't mind that. We really actually believe that our volume is good, the new products are we have pretty good pipeline going in our new products.
We've already closed some really good recurring revenue deals that are true subscription cloud based deals. And we're going to close some really nice ARGUS Enterprise deal. I love the fact that we've got a balanced pipeline and a balanced set of revenue now.
Okay. Thanks for the color, Bob. I'll turn it over.
Thank you. The next question is from Paul Steep of Scotia Capital. Please proceed.
Great. Thanks. Bob or Carl, could you talk a little bit about the cloud transition and how close you think we are in terms of preparation and the team and not only development, but sales in terms of switching over to a cloud subscription model?
Yes, I'll give you some commentary. I mean, first of all, as Bob noted, we released exactly when we expected to release in Q4, the ARGUS cloud platform, with our first piece of functionality on top of the platform. The ARGUS on demand product set has given us the experience of around 800 customers now we're supporting on that platform has given the experiences of the internal process on how to transition internally to cloud and how to sell the SMB initially in those markets. We're taking those experiences and taking them right into the sales teams. As we put more product onto the cloud platform, the teams are going to be well prepared.
We've been working in advance of this for a while now doing different certifications and trainings. And we've been out to our clients as well doing road shows. So we've been out recently doing some road shows, making sure they understand the transition, understand how we're pulling them into the cloud as opposed to pushing them into the cloud. It's been a very positive process to this point.
Yes, I think the roadshows have been fairly effective what we've been what Carl has been doing, I don't want to take credit for it, but I did sit in on one. And so what we're doing is we're going to our RBA clients, showing them where we're taking our data strategy, how that ties into Argus in the cloud and bringing our sales people, ARGUS sales people in, so they get the message and the interaction from our customers is amazing.
No, I mean the enthusiasm, the ability now to join the data together, people are seeing existing users, the ability to go in the cloud, take that data into the cloud, taking some of the new functionality, which we're releasing to do more things with that data in the cloud. They've given us some great ideas for future product development. And it's also promoting the sale of other aligned and associated products like Taliance and Voyanta. So we're getting the benefit all around.
Okay. And then if we think about the investment levels between 2017 2018, we saw margin compression for a bunch of reasons. Maybe talk about the investment and where we are in 2019. You highlighted in the annual report. You've highlighted it on the call.
Are we at run rate in terms of the extra cost needed to get the business to the cloud? Or should we expect a further lift in cost over the coming quarters? Thanks.
I think I kind of covered that in my comments, but we are above run rate, because we made a decision to extend ARGUS Enterprise on premise as the platform where that will give us an opportunity to drive that global valuation standard. In normal circumstances, we would have taken the traditional ARGUS Enterprise team and just drew a line and put all our capacity onto the ARGUS Enterprise Cloud Platform. And we elected to run 2 development teams, a lot of it staffed by contractors or offshore capability, core split onto 2 teams. As we go into the second half of the year, we'll start harmonizing those teams, take our cost base down and then all future development will be on the ARGUS cloud platform. Okay.
Thanks, guys.
Thank you. The next question is from Deepak Kaushal of GMP Securities. Please proceed.
Hi, good evening guys. Thanks for taking my question. Bob, Angela, first question is on property tax. I just want to get some more clarity on the cost side of property tax. When I look at revenue on a sequential basis, revenues seem to be flat between Q3 and Q4, yet margins came down quite a bit.
I know that you guys reallocate some bonuses, but I don't imagine there was much paid out in tax. Can you just tell me understand some of the cause of the sequential market?
Yes. Certainly, the bonuses is one factor that we do in Q4, which kind of muddies the waters a little bit. But the other factor that you need to recall is that with CVS, that kind of that business came in. And on a run rate basis, the early years, it was a negative impact to our EBITDA. And so, it's turning the corner now as we're increasing the volumes, but that was certainly a factor in the quarter as well.
Okay. And I think on CVS at the time when you guys acquired it, you were contemplating an average over 5 years of about $40,000,000 in revenue, dollars 11,000,000 in EBITDA. Is that still the quantum of what you expect
from the
incremental boost on that?
Yes. I can't split out the CVS piece anymore. We've integrated it fully and we're on one platform now. So our target is the combination of our legacy business and the CVS business. And in fact, our targets are higher.
So we plan significant organic growth on top of what we acquired.
Okay. Okay. That's helpful. Just wanted to go back to the Alliance deal that you guys got earlier. Anything we can understand about the rollout of that?
Are you guys fully up to speed with Alliance? And
or is this
kind of a ramp up that's still expanding in terms of the initial deal with them?
No, the team is fully engaged and on-site in Munich. We're well into the 1st quartile of the implementation. So there's a full implementation team working with the Allianz team. We're actually on time at this point. So it's progressing extremely well.
We made sure that we staff the team with the right knowledge and experience. It's our 1st large multi product implementation, utilizing the integrations between the 3 products. So we've made sure we put all the right people on this deal. But it's going well and we're learning a lot from it and we're taking that and pushing it back into the sales teams to deliver the next ones. And development.
And development, yes.
Thanks, Karl. So from a revenue perspective, is that then now a steady revenue stream or is there a ramp up associated with Allianz?
Obviously, there's a revenue stream associated with the deployment of the software. So it's a regular stream now until that deployment is finished.
Okay, great. And then my last question, Bob, I think you went into detail on the investments that you're spending on analytics and moving to the cloud. In terms of capital allocation with respect to M and A, dividend, share buybacks, whatnot, any changes on those areas that you're thinking of in the last couple of months?
No. I think we're we like where we are. If I talked about anything in that regard, the only thing that has evolved for me in the last few months is by looking around at my neighbors, either private venture backed real estate tech companies, companies like REITs that was just bought, Moody's entering the market, new PE firms trying to consolidate, like I think I picked a really great market to come into and it's alive with opportunity. And our current position is unbelievable given our customer base. And it may not perfectly show up in valuation, but it eventually will.
Okay. And things like rolling up the property tax market in the U. S, is that still something that's a priority for you guys or?
Yeah, I mean, look at it, it's like we in property tax, U. S, UK, we absolutely are open for business. We're having conversations. And we think we're the preferred consolidator We're the company people want to go work for.
Okay. Okay, excellent. Thank you for taking my questions. I'll pass the line.
Thank you. The next question is from Maggie MacDougall of Cormark Securities. Please proceed.
Hi, there. Just following on, on the last question, sort of a good segue. Just curious in terms of the competitive landscape in your Analytics division and also the Property Tax division, If you're seeing anything new in terms of competition for organic growth or acquisitions or anything worth mentioning of interest that's come out
of a lot of what's going on in
the industry lately that you just referenced, Bob?
Yes. I think that some of the large like if you look at you've heard me talk about this before, Maggie, in 1st why, how are you doing? The amount of investment continues to grow in property tech. And I think it underscores how we feel about the potential of this market. So of course, we're watching that.
We've made direct investments. Companies we invested in are doing really well, Honest Buildings, Waypoint, now REIX and they're enjoying these frothy valuation upticks and we're partnering with them and creating value for our customers and lots of good stuff going on there. And we see that as a future area where we can provide create consolidation. My goal is to be the front office ERP for the asset management marketplace. Couple of large players MRI and Yardi doing the back office, I want to be the front office player, which means that we will add capability that asset managers and portfolio managers need and want to operate their business.
And all of this PropTech investment is creating opportunities for me to partner with some of those companies to make money together and where it makes sense for both of us to create consolidation. And so we're tracking that aggressively with our venture capital partners and direct investments. And we're now looking at doing data partnerships now that we're going in the cloud, where we can help them monetize our customer base a lot quicker. So we think we're in really good position. And then a further validation is when you see the big players like Moody's and CoStar, which I've always enjoyed watching how they operate, buying software company, thinking about going into institutional business.
This is all for me validation of the opportunity. Sure, it creates competition, but we got an industry position, a standard in the market. We got great motes. We got coming up we got 4,000 customers on the ARGUS Enterprise platform. Our growth rates in ARGUS On Demand have been phenomenal.
We added hundreds of new customers last year in the mid market. Yes, we feel pretty damn good, whether you're a big company coming in or you're a small company going out, very few of those small companies have got out of their whole market. We're a global company. And then in the tax business, you saw that Onyx invested in Ryan, which validated the importance of a large player in property sorry, in tax. Ryan is primarily a state and local tax provider.
They do property tax. We're primarily a property tax provider that does some state and local. So we're going to see them in the market. They're a good competitor. And again, the fact that I would say a mainstream smart investor is spending quite a bit of money on property tax validates this as a growth opportunity as well.
And we like competition. It's our team running, we like to win. So it keeps us going. So there's some trends for you.
Okay. Thanks very much. Just one final thing on the tax platform that you've introduced in Canada and it sounds like you're going to be working on rolling out in other markets soon. Is that going to primarily benefit the tax segment? Or will there be some synergies with your analytics division as well?
Well, it's going to really help our tax business, but I'll I think what was brilliant for Carl is, he took anything where you had common functionality, things like customer portals, data aggregation, and then we turned them into unified projects. I don't you want to talk about that? Yes.
I mean, we standardized as much all the technology across all of the expert services divisions. I mean, we're going to drive significant efficiencies into our tax businesses, starting with Canada, then probably into the US and the UK. What are the byproducts from all the data that we're collecting how we can assemble that data, aggregate that data in a central place against a single asset identifier. So the side benefits from around that business are huge as we go forward. But just to drive the efficiencies for the volumes we're seeing will give us immense benefit as well.
Thanks very much. Have a good evening.
Thanks, Maggie.
Thanks, Maggie.
Thank you. The next question is from Paul Treiber of RBC Capital Markets. Please proceed. Mr. Carver, your line is now open.
You may ask your question.
Yes. Thanks very much. Can you hear
me? Yes. How are you doing, Paul?
Great. Good. Just in regards to Altus Analytics, when you look at 2019, how do you see the growth skewed between either new customers in regions like Europe or Asia versus expanding within the existing customer base?
I see large enterprise transactions in the U. S. I see continued growth in the U. S. In the mid market.
I see crossover into banks in the debt markets. I see us selling lots of Taliance in the U. S. To large pension funds and other asset managers. And I see those U.
S. Customers deploying Argus everywhere, pushing it into market. So a broad spectrum of opportunity. Plus with the new functionality of cloud, it gives us another add back and it also propagates this ARGUS Everywhere strategy. In Europe, we've already proven to sell large multifunction, multiproduct capability and we're starting to see RFPs more in Europe than even in North America, some driven by AIFMD, others driven by a lack of a need by institutional oversight to have good visibility on things like valuation, performance data.
So we're seeing project opportunities there and obviously the net new opportunity. We've invested on the ground in in market and we're building functionality. So we'll see a lot of net new in Europe. And then Asia, we've got a really strong team. I mean, they have out every year they to pick a football example, they out kick their coverage.
And it's like they keep on bringing one large customer after another and we're seeing more and more the large North American, European companies going into that market and they want the same tools. They want ARGUS. And so we got a really good portfolio of things to sell. And the wildcard for me and Charlie you can pile on this is, it is hard to sell on premise and subscription. I've been there before.
It's difficult. So we're envisioning models that allow us to bring expertise to the function rather than worrying about whether it's a cloud or an on premise model. So we've changed our selling model a little bit around the type of need of the customer, whether it's a pension fund, an asset manager, an insurance company, a bank and we're investing more and more in understanding the value proposition.
Yes, we've put a lot more preparation into the sales teams, become a lot more specialized on their approach to these different markets, as Bob mentioned. There's many, many different value propositions. We brought additional strength into our management team. We made an announcement of Matt Carter joined us. Matt will bring significant large scale expertise into the teams globally, both in the software and on the expert services side.
We've also seen the opportunity to expand what we're doing on the SMB front. We brought another very strong person, Mary Santore, to drive our global inside sales for the SMB and mid market, and we saw great volumes in 2018. We're looking to go significantly above those volumes in 2019. So opportunities everywhere.
That's helpful. Just you touched on it like the sales investments, I know when you're speaking about investments in Altus Analytics, generally, it sounds like you're referring to product development costs declining in the second half of the year. But just in terms of sales and investments, how do you see that progressing through the year?
I mean, we made a lot of investments in the end of 2018 and beginning of 2019 to make sure we're ready to start the year. We have to put some investments across the board as we're scaling out. As Bob mentioned, we're still running 2 development teams. We elected to put some more function into the existing platform to get us into those markets. There's still a lot of demand there.
And then we're going to push cloud right on top of that after we follow that through. So investment has to go across in number of areas across AE, it's not just one area.
But Paul, these are this isn't like the investment we made in the we call it investments, but what we're naturally doing is evolving our sales coverage, right? And the idea is this is the normal growth that we've always had as we grow out our product set, go into new geographies. And so I wouldn't this is definitely small eye on a relative basis from an investment perspective. This is natural evolution of coverage.
Okay. One last one for me, just for Angelo. Just in regards to IFRS 16, how should we be thinking about that going into 2019?
From a disclosure standpoint, you mean or?
Disclosure and impact on EBITDA or P and L or cash flow statement.
Yes. It's we haven't we have disclosed in our notes, so you'll see the sort of the balance sheet impact. From an IFRS standpoint, it is going to have a significant benefit back to EBITDA. We haven't landed 100% in terms of doing with that metric, if it's a different metric. But we're going to normal on some basis, we're going to normalize it back.
So we have an apples to apples comparison.
Okay. Thank you. That's
helpful. Okay.
Okay. Thanks, Paul.
Thank you. There are no further questions registered at this time. Ladies and gentlemen, this concludes today's conference call. Should you have further questions, please contact Camilla Bartosiewicz at Altus Group at 416-6419 7 73. We thank you for your participation and ask that you please disconnect your line.