All participants, please stand by. Your conference is ready to begin. Good afternoon, ladies and gentlemen. Welcome to Altus Group's fourth 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, and g ood afternoon, everyone, and welcome to Altus Group's fourth quarter and year-end results conference call and webcast for the period ended December 31st, 2018. For reference, our earnings results news release was issued after market close at 4:00 P.M. and is also posted on our website along with our MD&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, including 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 Farrell, 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 successive 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. I will now turn the call over to our CFO, Angelo, who will start with a review of our financial performance.
Thank you, Camillia, and t hank you all for joining us on the call and webcast this afternoon. I will 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 CAD 130.9 million for the fourth quarter, finishing the year at CAD 510.4 million, 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% to CAD 15.1 million in the quarter, down 12% for the year at CAD 70.9 million, reflect continued investments at Altus Analytics and the impact of lower property tax revenues, particularly in Ontario and the U.K.
The loss in accordance with IFRS was CAD 14.7 million in Q4 and CAD 18.4 million for the year. In the fourth quarter, we took an impairment charge on the carrying value of our Geomatics business of CAD 13.7 million, reflecting a prolonged and challenging environment in the oil and gas sector in Western Canada. Adjusted EPS was CAD 0.20 in Q4 and CAD 1.05 for the year. Turning to our business segments, the Altus Analytics business performed well in the fourth quarter 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 Valcap customer base in the U.K. 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 multi-year subscription contract, followed by a large multi-year subscription renewal in the fourth quarter. These contracts were deemed right of use under IFRS 15, and a s 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 MD&A disclosure, grew by 15% in the quarter and by 10% for the full year, standing at CAD 130 million for the year. On adjusted EBITDA, the fourth quarter grew 52% on a year-over-year basis, benefiting from strong revenues, and in particular 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. We expect positive contributions in the year as sales ramp up. As we look out to the first quarter 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 two of our key markets, Ontario and the U.K., 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 U.K. 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 right-sizing 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 CAD 23 million in 2018, up from CAD 22 million 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 CAD 54 million to pay down our bank debt. As at December 31st, 2018, the bank debt stood at CAD 129.2 million, representing a funded debt to EBITDA leverage ratio of 1.79x . That compares to 1.84x 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, a nd 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 five-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 pursued 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 Altus Group 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 fuel by ARGUS conversions 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 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 a s 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, 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.
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. 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. 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 the 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. 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. 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 Cloud, we're offering our clients a hybrid approach.
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. 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. 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.
We think it's prudent to do it this way because there's still much demand for ARGUS Enterprise, and t he way this will work out is as we go into the second half of the year, we will be able to bring ARGUS back onto our platform by consolidating onto a single development environment, so t hat'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 continued to outperform on last year's excellent revenues, have successfully refocused the business for 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 are 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've mentioned, with the shift to the cloud, we're now in a place where we'll be going overweight in subscription revenues in our model, and a s you know, we've already started that move, operating a hybrid model. We'll continue to overweight the opportunity to take contracts and subscriptions. 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 one 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.
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 o ur model will combine those things in a platform for the largest investment managers in Europe. We are first to market, and we have an enviable model. Now we have the capacity in Luxembourg, in Paris with Taliance, and in the U.K. where we have a very strong position, so w e're really, really well-positioned there. In the APAC region, we had another record year 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 third-party valuation oversight.
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 t hat's going to further our goal of serving large clients and moving them onto an 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. 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. 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.
On top of that, they've been innovating with data, thinking about how EstateMaster is going to become a critical asset for them in providing their services, but also, for the customers, the development customers of our cost business practice. As you know, our property tax business faced headwinds in 2018 owing to the process changes Angelo discussed, but n ow 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 past trends. Nevertheless, the trend is encouraging, and as we're now in the third year of a four-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 U.K., interesting, very similarly, it's starting to ramp up, and w e'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. 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've 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 some seasonality in the U.K., and in the second half, we expect to see both the Ontario and U.K. 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 and 2020. 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 Jim. He's an amazing guy. After more than 40 years in the industry, yes, 40 years in the industry, he might not want me to have said that, h e 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.
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 in going global, t hanks so much, Jim. As part of our succession planning, we had regional presidents for our property tax business for quite some time now, including Terry Bishop in Canada, Trey Beasley 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 tax senior leadership team, who are going to lead us towards record revenues in the year. With that, let me open it up for questions.
Thank you, Mr. Courteau . We will now take questions from the telephone lines. If you have a question and you're using a speakerphone, please mute your handset before making your selection. If you have a question, please press star one on your telephone keypad. You may at any time cancel your question by pressing the pound sign. Please press star one at this time if you have a question. There will be a brief pause while the participant register for questions. Thank you for your patience. 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. 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, as I said, we expect it to grow as a result of the deal that we struck.
Okay, j ust 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. It looks like some of your appeals are scheduled to start progressing in Q1. 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.
Yeah. Well, we are seeing sequential growth. There's no doubt about that. What we had in the earlier part of last year, we still had appeals from the previous cycle that we were solving for. We were getting the benefit of that, and it started dropping off as we progressed through the year, so t hat was one factor. The second factor was that in Canada, we had a strong first quarter in Vancouver and Alberta, and so t hat 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, you know, the strength year-over-year.
Okay, t hat'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, U.K., and frankly, across our business in total. We're not just betting on a U.K., Ontario 2019, like a lot of the business is really going well.
Okay, and j ust one final one for me on Property Tax, w e know that business has a lot of operating leverage, as evidenced by it being nearly break even this quarter. How should we think about the margins in that business as it ramps through the rest of the year?
Good.
Yeah, t he 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.
Yeah, so s tarting in Q2.
Okay, great, t hank you.
Thank you. The next question is from Yuri Lynk of Canaccord Genuity. Please proceed.
Hey, good evening, guys.
Hey, Yuri.
Hi, 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 t he 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 a, you know, considered a right of use, so y es, that's one element of that. Really, we don't define it anymore as recurring, non-recurring, it's under IFRS, but ye s, there is that one-time element.
Okay. It did sound a little bit like you softened your tonal 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?
On the tax part.
No, he was talking about.
Are you talking about AE overall?
For Q1?
Yeah, I'll just hang on. Yeah.
Got it, you know, l ook, we provided guidance last time over two quarters. We said mid-teens to low 20s and, you know, on average, we're actually going to overachieve on that when you look at it over the two quarters. Right now, we're just seeing, based on our current view, it's going to be closer into the mid-teens so, you know, w e just refreshed it.
Okay. How do we think about full year?
The full year, we're still expecting strength in the full year given, you know, what we're seeing in terms of the overall pipeline, our sales teams, and that we're growing into Europe. Our same sales to existing clients, we continue to see strength in all our markets.
Continued custom 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 had a fairly significant deal, and their pipeline's pretty damn good going forward. It's not just kind of a one-deal quarter. 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. Obviously, you know, 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.
The risk on all of this is, you know, we did as an example, we did a very large deal with Allianz in Q2 last year, right, and accrued that debt, on the basis of selling the large deal, we're going to start seeing some lumpiness in the quarter, also you end up with these year-over-year kind of challenges as we go forward. We don't mind that. We really actually believe that our volume's good. The new products. We have pretty good pipeline going in our new products. We've already closed some really good recurring revenue deals that, you know, true subscription cloud-based deals, we're going to close some really nice ARGUS Enterprise deals. 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. Bo b 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, not only development, but sales in terms of switching over to a cloud subscription model?
I'll give you some commentary. 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, you know, 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 SMBs 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. They've been working in advance of this for a while now, doing different certifications and trainings. We've been out to our clients as well doing road shows.
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.
Yeah, I think the road shows have been fairly effective, w hat Carl has been doing. I don't want to take credit for it, but I did sit in on one. What we're doing is we're going to our RVA clients, showing them where we're taking our data strategy, how that ties into ARGUS in the cloud, and bringing our salespeople, ARGUS salespeople in, so they get the message, and the interaction from our customers is amazing.
Yeah, I mean, whether the enthusiasm, you know, 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're giving us some great ideas for future product development. It's also promoting the sale of other aligned and associated products like Taliance and Voyanta. We're getting the benefit all around.
Okay. Then if we think about the investment levels between 2017 and 2018, we saw margin compression for a bunch of reasons, m aybe talk about the investment and where we are in 2019. You highlight it 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, o r should we expect, you know, a further lift in cost over the coming quarters? Thanks.
I think I covered that in my comments. 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. We elected to run two development teams, a lot of it's staffed by contractors or offshore capability, c ore is split onto two 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.
Oh, hi. Good evening, guys. Thanks for taking my question. Bob, Angelo, 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 help me understand some of the cause of the sequential?
Yeah, c ertainly, the bonuses is one factor that we do in Q4, which muddies the waters a little bit. The other factor that you need to recall is that with CVS, you know, that business came in, and on a run rate basis, the early years, it was a negative impact to our EBITDA. It's turning the quarter now as we're increasing the volumes, but t hat was certainly a factor in the quarter as well.
Okay. I think on CVS at the time when you guys acquired it, you were contemplating an average over five years of about CAD 40 million in revenue, CAD 11 million in EBITDA. Is that still the quantum of what you expect from t he incremental boost on that?
Yeah, I can't split out the CVS piece anymore, you know, w e've integrated it fully, and we're on one platform now. Our targets is the combination of our legacy business and the CVS business. In fact, our targets are higher, so w e plan significant organic growth on top of what we acquired.
Okay, okay, t hat's helpful. Just wanted to go back to the Allianz deal that you guys got earlier. Anything we can understand about the rollout of that? Are you guys fully up to speed with Allianz? 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 first quartile of the implementation, 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've made sure that we staff the team with the right knowledge and experience. It's our first large multi-product implementation utilizing the integrations between the three products. We've made sure we put all the right people on this deal. 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.
Development.
Development, yeah.
Thanks. Next, Carl, f rom 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 i t's a regular stream now until that deployment is finished.
Okay, great, and then m y 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&A, dividend, you know, share buybacks, whatnot, any changes on those areas that, you know, you're thinking of in the last couple of months?
No, I think 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, e ither private venture-backed real estate tech companies, companies like REIX that was just bought, Moody's entering the market, new PE firms trying to consolidate. I think I picked a really great market to come into and it's alive with opportunity. Our current position is unbelievable given our customer base, and it may not perfectly show up in valuation, but it eventually will.
Okay, and t hings 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, it's like in property tax, U.S., U.K., you know, we absolutely are open for business. We're having conversations. We think we're the preferred consolidator. We're the company people want to go work for.
Okay, e xcellent, t hank 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, j ust following on the last question, sort of a good segue. I'm 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 gone on in the industry lately that you just referenced off.
Yeah, I think that, like y ou've heard me talk about this before, Maggie, and first of all, hi. How you doing?
Thanks.
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, o f course, we're watching that. We've made direct investments. The companies we invested in are doing really well, Honest Buildings, Waypoint, now REIX. They're enjoying these fraught valuation upticks, and w e're partnering with them in creating value for our customers, and lots of good stuff going on there. We see that as, you know, a future area where we can, you know, create consolidation. My goal is to be the front office ERP for the asset management marketplace. A couple of large players, MRI and Yardi, do in 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.
All of this prop tech 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. 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. We think we're in really good position. A further validation is when you see the big players like Moody's and, you know, CoStar, which I've always enjoyed watching how they operate, you know, buying software companies, thinking about going into the 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 moats coming up. We got 4,000 customers on the ARGUS Enterprise platform. Our growth rates on ARGUS On Demand have been phenomenal. We added 100s of new customers last year in the mid-market. Yeah, 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 home market. We're a global company. In the tax business, you saw that Audax invested in Ryan w hich validated, you know, the importance of a large player in tax.
Ryan is primarily a state and local tax provider. They do new property tax. We're primarily a property tax provider that does some state and local. We're going to see them in the market. They're a good competitor, and again, you know, the fact that I would say a mainstream smart investor is spending, you know, quite a bit of money on property tax validates this as a growth opportunity as well and, you know, we like competition, g ets our team running, and w like to win.
Exactly.
It keeps us going. There's some trends for you.
Okay, t hanks very much, and j ust 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 Altus Analytics division as well?
It's going to really help our tax business, but 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. You want to talk about that?
Yeah, we standardized all the technology across all of the expert services divisions. We're going to drive significant efficiencies i nto our tax businesses, starting with Canada, then probably into the U.S. and the U.K. One of the byproducts from that is all the data that we're collecting and how we can assemble that data, aggregate that data in a central place against a single asset identifier. The side benefits from around that business are huge as we go forward, but j ust 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. Treiber, your line is now open. You may ask your question.
Yes. Thanks so much. Can you hear me?
Yes. How you doing, Paul?
Great, g ood, j ust 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. I see those U.S. customers deploying ARGUS everywhere, pushing it into market, so a broad spectrum of opportunity. With the new functionality of cloud, it gives us another at-bat, and it also propagates this ARGUS Everywhere strategy. In Europe, we've already proven to sell large multifunction, multi-product 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 w e're seeing project opportunities there. Obviously, the net new opportunity.
Yeah.
We've invested on the ground in market, and we're building functionality, so we'll see a lot of net new in Europe. Then Asia, we got a really strong team. I mean, every year, to pick a football example, they outkick their coverage, and i t's like they keep on bringing one large customer after another. We're seeing more and more the large North American, European companies going into that market, and they want the same tool, t hey want ARGUS. We got a really good portfolio of things to sell. The wild card for me, and Paul, you can pile on this, is it is hard to sell on-premise and subscription. I've been there before. It's difficult. 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.
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 w e're investing more and more in understanding the value proposition.
Yeah, 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've brought additional strength into our management team and w e made an announcement of Matt Potter joined us. Matt will bring significant large-scale expertise into the teams globally, both in the software and on the expert services side. We're also seeing the opportunity to expand what we're doing on the SMB front. We brought another very strong person, Mary Santoro, to drive our global insight sales for the SMB and mid-market. We saw great volumes in 2018. We're looking to go significantly above those volumes in 2019, so o pportunities everywhere.
That's helpful, just, you know, y ou touched on it, like the sales investments. I know when you're speaking about investments in Altus Analytics, generally, it sounded like you're referring to product development costs declining in the second half of the year, but j ust in terms of sales and investments, how do you see that progressing through the year?
Well, I mean, we made a lot of investments in the end of 2018 and the beginning of 2019 to make sure we were 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 two development teams. We elected to put some more function into the existing platform to get us into those markets, because there's still a lot of demand there. We're going to push cloud right on top of that after we follow that through.
Yeah.
Investment has to go across in a number of areas across AE. It's not just one area.
Paul, this isn't like the investment we made in it. We call it investments, but what we're naturally doing is evolving our sales coverage, right? 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, you know, t his is definitely small eye on a relative basis from an investment perspective.
Yeah.
This is natural evolution of coverage.
Okay. One last one for me, just for Angelo, j ust 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&L or cash flow statement.
Yeah. 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 we're doing with that metric, if it's a different metric, but o n some basis, we're going to normalize it back so we have an apples to apples comparison.
Okay, t hank you, t hat's helpful.
Okay.
Okay. Thanks, Paul.
Thank you. Once again, please press star one on your telephone keypad if you have a question. 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 416-641-9773. We thank you for your participation and ask that you, please, disconnect your line.