Good afternoon, ladies and gentlemen, and welcome to The Altus Group's 2nd Quarter 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 Mr. Avinadabi.
Please go ahead.
Thank you. Good afternoon, everyone, and welcome to Altus Group's Q2 2018 results conference call and webcast the quarter ended June 30, 2018. For reference, our earnings news release was issued shortly after the close of market this afternoon and also posted on our website along with our MD and A and financial statements. Please visit officegroup.com to obtain these documents and for more information. On today's call, we will begin with an overview of our performance during the Q2 of 2018, including a discussion of our financial results and noteworthy developments.
We will finish by taking questions from analysts and institutional investors. If we miss anyone, please contact me directly after the call. Joining us today is our Chief Executive Officer, Bob Courteau and our Chief Financial Officer, Angelo Bartolino. 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 at arriving at the forward looking information that do not take into account the effects of 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 described in our annual filings on SEDAR. Our comments and answers to any questions must be considered in the context of the business of the disclosures in those materials. I will now turn the call over to our CFO, Angelo Bartolini, who will start out with a review of our financial performance.
Thank you, Ali, and thank you all for joining us on the call and webcast this afternoon. I'll start off with some highlights of our consolidated financial results, followed by a review by business segment. I am pleased to report that our businesses continue to perform well and as expected during the Q2. And despite some anticipated variability, the steady growth in our consolidated results demonstrates the strength of our business model. Our key financial metrics continue to be strong as we invest for the future in new technology applications and modernization of our expert services.
During the Q2 at Altus Analytics, we realized long term growth opportunities globally for our data analytics and software solutions with InRoads in Europe. And we continue to make significant progress in furthering development of new upcoming cloud functionality. Our CRE consulting practices performed well across each of our service lines in property tax and valuation and cost advisory. In property tax, we see a significant growth opportunity with the ability to further grow market share in both the U. K.
And U. S. Lastly, performance of our Geomatics business reflected the ongoing market pressures in the oil and gas sector in Western Canada. We've taken further actions this year in reducing our cost structure with the expectation of seeing improving margins as activity levels return. I'll now provide a summary of our consolidated results for Q2.
Consolidated revenues increased 5% to $134,200,000 Foreign exchange rate movements impacted revenues by negative 1.5%. The increase in revenues in the quarter was driven by organic and acquisitive growth in our U. K. Property tax business, offset by a decline in geomatics. The property tax practices showed strong growth and were up 13.4% in aggregate.
In Altus Analytics, we were pleased that revenues were higher by 3.9% on same currency basis, given they came off a very strong quarter last year, which saw record sales of AE following end of DCF maintenance support. Our valuation and cost advisory business also increased 5.1%, while Geomatics declined by 12% on continued weakness in its end market. Adjusted EBITDA was $23,800,000 for the quarter ended June 30, 2018, marginally down by 1% from $24,000,000 in the same period in 2017, a reflection of the product investment we have made with Altus Analytics. Foreign exchange rate movements also impacted adjusted EBITDA by 3%. Consolidated profit in Q2 in accordance with IFRS was $300,000 compared to $104,900,000 in the same period in 2017.
Basic and diluted EPS of $0.01 for the quarter versus $2.75 per share and $2.72 per share on a basic and diluted basis respectively, last year due to an accounting gain on a partial lien disposition and remeasurement of retained interest in the company's investment in real matters during the Q2 of 2017. Adjusted EPS remained unchanged at $0.40 in Q2 when compared to the same period in 2017. Moving on to our performance by business segment. In Q2, our Altus Analytics business revenues increased by 1% to 47,000,000 dollars which were impacted by currency movements of negative 2.9%. As indicated earlier, we faced a strong compare to last year when we saw historic high sales of AE, significantly impacted by conversions due to the end of DCF support.
Yet despite this backdrop, we replaced last year's DCF conversion revenues with new sales with net new sales to new and existing customers. We made inroads this quarter with sales into Europe and with sales to large global clients that included multiple products. Other areas of Altus Analytics such as Appraisal Management and Software Consulting were moderately higher, although due diligence assignments were lower, offsetting revenues and EBITDA. This is a profitable business for us, but very much project based. Recurring revenues was a component of our revenue reporting prior to implementation of IFRS 15 this year.
This metric is no longer consistent with revenue recognition under IFRS 15, but for purposes of benchmarking to past performance, we have disclosed this measure in the MDA, consistent with past practices, which treat the economic contract values of subscription products ratably over the contract term. On this basis, recurring revenues were up 6.1% at $32,600,000 when compared to $30,700,000 in the same period in 2017. For the quarter, adjusted EBITDA declined by 16.9 percent to $12,900,000 impacted negatively by foreign exchange of 3.9%. As well, investments we made in resources to build out our cloud functionality are also impacting adjusted EBITDA. These investments are now included in our run rates and we do not expect any material new investments related to our cloud roadmap.
Our adjusted EBITDA margin for the quarter was 27.4%, up sequentially from Q1. Turning to our CRE consulting, revenues increased by 10.4 percent to $77,100,000 in Q2, while adjusted EBITDA climbed 4% to $19,100,000 Our property tax business continued to be a strong contributor in Q2, up by 13.4 percent at $50,100,000 primarily due to strong organic and acquisitive growth from our UK property tax practice and continuing strong performance in the U. S. In the UK, the integration with CVS is proceeding on schedule as we have been integrating frontline and back office business processes, while still maintaining a strong focus on business development and market share growth. As a result, we expect to see improved efficiencies and margin growth in the UK in future quarters.
As well for the UK, this quarter included the annual billing amounts that apply to a significant number of our client contracts and which will continue to be billed annually in Q2 for the balance of this valuation cycle. In Canada, in the near term, we are being impacted by the new Ontario scheduling processes, which are deferring appeal settlements. However, our pipeline of work remains unaffected and strong and the deferral only stands to benefit future periods. As we are still in the early stages of the tax cycles in both Ontario and the UK, we expect robust growth moving into 2019. The valuation and cost advisory practices also performed well, with revenues up 5.1% on stronger performance from our global cost practice, where we experienced growth in both Canada and Australia.
Finally, at Geomatics, revenues decreased by 12% to $10,400,000 as activity levels remain depressed in oil drilling and gas exploration. Adjusted EBITDA increased 18.3 percent to $900,000 as a result of headcount reductions and other cost initiatives, which were discussed in Q1. Corporate costs in Q2 were $9,100,000 compared to $10,600,000 in the same period in 2017. During the quarter, corporate costs decreased on lower accrual variable compensation and lower corporate technology spend. Corporate costs as a percentage of revenues was 6.8% as compared to 8.3% in the same period last year.
At the end of the second quarter, the company's bank debt was $189,200,000 representing a funded debt to EBITDA leverage ratio of 2.28 times compared to 1.8 times at December 31, 2017. The increase was related to the acquisition of Taliance, which closed on July 1. With that, I would now like to turn the call over to Bob.
Thanks, Angelo, and good afternoon, everyone. In the Q2, we made significant progress with our strategic investments, particularly the development of our first Argus Enterprise cloud application and the acquisition of Taliance, which adds comprehensive investment management capabilities to our product solutions portfolio and which builds on our strategic presence in Europe. These initiatives are foundational as we drive to become an enterprise company. As part of the evolution towards becoming global with the ultimate goal of doing great things for our customers and for our company. We continue to focus on revenue and earnings growth, while moving ahead with smart, well calculated strategic investments.
We had a productive quarter and I'm proud of what the team has accomplished and what is yet to come from our current actions, innovation and investments. And as we look at to the remainder of the year, we feel very positive about the company's growth potential in 2018 and even more so as we move forward into 2019. At Altus Analytics, we're making excellent progress against our strategy, driving higher sales from existing and new customers, market share gains in new geographies and enhanced value from product improvements. During the quarter, we also continue to focus on deepening our solution and service offerings with existing customers around the globe, while focusing our sales efforts and leveraging our leadership position as the global standard on new and significant growth opportunities. We continue to focus on increasing wallet share spend with our existing customers through upselling new products into our existing base of 3,500 clients.
We also further augment our growth efforts through offering our core products and services such as ARGUS Enterprise into our existing client base for a variety of use cases, ranging from asset valuation and reporting to decision making process in the case of Global Asset and investment managers. All of our strategic efforts in expanding outside of traditional markets combined with a holistic service offering continue to fuel our growing and dynamic sales pipeline. This provides us with strong confidence in our success and the future of the business as revenues outpace our investments towards the end of the year and going into 2019. The modernization and technology enablement of our expert service business is underway. And with it, we see tremendous value in the power of our data.
With ongoing evolution of our technology platform in the cloud and with depth and scale of this data as actionable information, We are building an NVivo platform, which will uniquely serve CRE asset and investment managers and owners around the world. We're investing in cloud applications in order to achieve our objectives in attracting new users, improving industry workflows and creating new applications. We expect our first solution to be released in the second half of the year and we will target the acquisitions workflow with Argus Acquire and we have continuing growth opportunities with Argus Enterprise to expand geographically, add new functionality and increase client usage. The good news here is that we have a growing pipeline of opportunities, which provides us with considerable confidence in the future. As Angelo mentioned in his remarkets, Altus Analytics posted modest growth in Q2, while we maintained a 27.4 percent adjusted EBITDA margin.
This was accomplished despite our decision to make significant strategic investments to underpin and accelerate future growth and currency headwinds during the quarter also affected the performance. So we're quite pleased with the adjusted EBITDA margin. And as most of you are aware, our investments have been towards the addition of cloud functionality at Argus and adding talent to support our global expansion and strengthen our ability to onboarding and service the largest commercial real estate investors around the world. There's significant upside opportunity for Altus Analytics software products and Services globally. ARGUS Enterprise, which provides global portfolio analytical capabilities with multi currency adaptability is a standard in North America, the UK and EMEA.
And our goal with AE remains to significantly increase our market penetration through a dual approach. But by taking our top 200 clients global and therefore creating a network effect and by increasing our sales and marketing efforts to new clients in these markets. Our top 200 clients among the world's largest CRE investors and only a few have deployed AA globally. We have developed support programs to help our clients more efficiently and effectively deploy globally. A network effect is created as client partners will require AE to support or transact with clients in local markets.
As mentioned, we continue to work on the AD platform for the cloud. We've increased investments in our development teams as we modernize the current AD platform and develop new web application. The early phase of our cloud strategy consists of 1st developing new applications that will be cloud based, but synchronized with the AE on premise solution and ARGUS on demand product through application program interfaces and portal functionality, which will bring new users to the Argus enterprise environment. We expect to continue to benefit from growing global demand and favorable trends to increase the use of technology and data in the CRE market And our product offerings stand to serve the growing needs from professional asset and investment managers for data, analytical tools and software solutions that will help drive more timely and informed decisions. We expect to see the launch of our first web application along with the cloud platform, enabling future applications.
And we have been investing significantly in this new technology and we'll continue to do so in order to sustain our long term objectives. We're targeting new customers in appraisal management and advisory services and see a growing opportunity for new engagements in global markets as we continue to work with the large global firms. Turning to the CRE Consulting, Property Tax and Valuation and Cost Advisory, they continue to demonstrate market leadership in their respective practices, delivering continued top line and adjusted EBITDA growth. We see ourselves as the market leader in property tax as well as a consolidator. And property tax continues to represent an attractive growth area for our business, both in the U.
S. And in Canada as we implement new data solutions in Canada as well. We're a major player in the category. And as you may have heard me say in recent months, I'm really excited about what we are doing with this segment. Our strategy to transition this segment using automation and technology will enable us to integrate this business into our technology platform, resulting in accelerated growth and higher margins in the future, while offering a valuable service to our CRE clients.
This gives us the existing market share penetration and opportunities for additional share through both organic and acquisitive means. We see attractive top line and earnings growth potential in future quarters. The valuation and cost advisory practices enjoyed significant market share in Canada and result continue to grow modestly. We expect moderate growth in the near to term future. Our valuation practice predominantly operating in Canada continues to benefit from strong client retention.
Our cost practice in North America continues to diversify its client and industry focus. And in Asia Pacific, we continue to leverage our global relationships to drive opportunities. Looking ahead, given the leading market share that is enjoyed by these groups, we expect the data collection potential from these businesses to be invaluable and support our long term growth ambitions. At Geomatics, we maintain a cautious outlook for 2018. Although oil prices have recently improved, this could translate into improved activity levels for oil drilling gas prices remain depressed and as a result we're seeing lower plant capital expenditures within this segment.
Furthermore, pricing pressures in our industry continue to persist. As a result, we've taken further actions in 2018 and we'll continue to closely monitor market conditions. To close, I'd just like to reiterate that we remain in growth mode. We're very energized by the substantial market opportunity ahead of us. We believe in our strategy to transform the industry on a global basis.
Argus as a global standard for real estate data, data shared in the cloud for the benefit of improved end of sight and planning and highly relevant analytics that support greater transparency. Our company is positioned to provide a modern platform to the largest companies in the world and give visibility to the all important geographic markets. Thanks for your support and we welcome any questions.
Thank you. We will now take questions from the telephone line. The first question is from Yuri Lynk from Canaccord Genuity. Please go ahead.
Hey, Bob.
Hey, Eric.
Good quarter, Bob. Looking how do I square the revenue performance year to date at AE? It's been I think it's been the best first half in probably in the history of the company. But the customer count is kind of stuck at 3,500. So how do I square those 2?
You would think that customer count would be creeping up along with the revenues.
Yes. I think what first of all, it's moved past 3,500. We haven't declared on the number in some time. But what's happening now is some of the volume growth is coming out of the UK upgrade, where not only are we getting the benefits of some of that revenue in the UK, but in Europe generally, what we're doing is we're starting to see larger deals like our pipeline in Europe for larger transactions. And frankly, in the quarter, we had some really nice wins, where customers are looking at Argus as a global investment management solution.
So when I talk about shifting to an enterprise company, we believe that will lead us into volume as well. So when we take companies like Blackstone or CBREGI or others that are rolling Argus Enterprise Golgi, as that becomes more of a standard and some of the new customers we're adding in Europe, we expect that the volumes in those markets will pick up as well. That'll be a gear that we get in the medium term as we start becoming stronger in those markets. Really the growth that we see that's going to be substantial in the next couple of years will come from larger transactions with the larger customers, application growth in our base and the ability to go global also with our North American and UK customers. So although we'll go down that road to increase the number of customers in individual markets or geographies.
We expect that our deal size will go up and we'll start doing larger deals with the largest customers in the world. And Taliance is going to really help that as well.
So a customer that deploys globally or in incremental countries still gets counted as a customer, not Yes,
but it's one customer, right? And it's lots more users, right? So what we're we've closed a few deals in the quarter with net new customers that are going to be much larger deals and they're going to open the doors in those markets as well.
Okay. How do you expect
the recurring your recurring revenue to evolve once you get these cloud applications in the market? And could you tighten up the time frame a little bit as to when these will be released?
We will make a decision in 2019 about how we want to drive our pricing strategy between ARGUS Enterprise Classic and the new cloud applications. And that's something that obviously will balance off an increased recurring revenue opportunity. And clearly, what we're trying to do is make sure we do that in a way where we protect our EBITDA margin growth as we go forward. Part of the reason that we're not terribly worried about that transition is that we have a very substantial part of our revenue that's continuing to come out of appraisal management, which will continue to support some of the same quarter margin. So we actually have to factor that in, in a couple of ways.
One is the move to larger customers buying on a global basis that might prefer a subscription type relationship. The fact that we'll have more cloud products in the market, including Taliance, which is effectively only offered as a cloud product. So that as we increase our selling as we give them capacity for selling is going to help. And the bundling of both ARGUS Enterprise on premise and cloud solutions will also probably start moving more towards a subscription type agreement. And so we would expect that recurring revenue will start moving up as we go into 2019 in a very positive way.
Okay. That's it for me. I'll turn it over. Thanks.
Thank you. The next question is from Richard Tse from National Bank Financial. Please go ahead.
Hey, Bob. I was wondering if you guys could maybe give a bit of insight into Altus Analytics in terms of the mix of revenue from new versus existing customers?
Yes. Well, the real story in the quarter is that a huge amount of our revenue last year in Q2 was upgrade revenue in North America. And in this quarter, it was our best quarter ever in Europe. Not all and Continental Europe was really, really strong outside of UK where we had a number of large enterprise transaction deals. And so that's a big mix like the net new customer plus existing customer or our growth in the base really carry the day where we replaced a significant amount of revenue last year.
So we are really, really happy with the quarter. The other thing that is not obvious is that we also had lower due diligence revenue in the quarter, which is a profitable business line that's more project based. And so in many respects, with a combination of a good license quarter, continuing growth in valuation, on balance, it was really a good performance relative to the headwinds of an amazing quarter last year and the fact that we have lower due diligence revenue.
So these larger deals are interesting. Do you guys track like average deal size metric? And if so, can you sort of share what that would have been year over year?
We track it and we're not sharing it yet. But as part of the shift to an enterprise company, we're fussing with some metrics that'll be interesting, particularly in terms of net new customers in Europe and average deal size. The other thing coming sort of a combo question, we're seeing really, really good pickup in the pipeline around managed services for both Voyanta and for Taliance in a short period of time. And so while we imagine we did a deal in the quarter that was a combination of Voyanta, Taliance, Argus Enterprise. Unfortunately, we did it late in the quarter, so we didn't go we didn't collect the Taliance part of that deal, but it was a blueprint for what we're going to try and do, which is a fully integrated global deal where that customer bought ARGUS Enterprise everywhere.
Those deals are going to really populate our pipeline on the go forward and they're a big part of our shift to an enterprise company.
Okay. And just one last one for me. I noticed in the filing that you're doing a bit of restructuring on CVS. I'm kind of curious as to why you're making that decision now when I think you acquired it mid last year. So what's changed to sort of how you do that restructuring here?
That's it. Thanks.
Well, we're getting more cost savings. We're accelerating our plan. We're actually performing quite well. We had a good quarter in CVS. It's we about 3 years ago moved to annualized billing in Altus Classic And that was also a part of the contribution.
So across the board, we've been able to actually accelerate our integration of CVS and we were planning on taking some of those costs out potentially Q3, even Q4, and we moved it forward, increasing our confidence in the new team and how we're organized.
I'll just add, Richard, that we actually started the planning late last year early this year. We did the acquisition combining 2 businesses that were of equal size, having different processes. And so we decided that we would be very careful about the process, and we took our time to plan it. But we're, if anything, ahead of schedule from an integration, and we are taking some significant cost out while actually improving a lot of the frontline business processes.
Thank you. The next question is from Paul Treiber from RBC Capital Markets. Please go ahead.
Thanks very much. Good afternoon. I just want to focus on VALCAP for a moment. Could you just comment on how or what proportion of the AA revenue was related to VALCAP upgrades? And then how much of that opportunity have you upgraded already?
And then what over what timeframe do you expect the remainder?
Yes, we've been pretty steady on VALCAP through the last year since we announced the program and we've moved a lot of the high value customers over the last year. We're still getting what we're actually seeing on VALCAP is that the customers that have bought VALCAP already are extending the use of VALCAP and we're into that second level of selling around that where we're pushing more users inside these customers. And so there's still an opportunity because we're not fully finished the program. But in the quarter, it wasn't a significant it wasn't one of the major contributors to performance and we don't see it as being so in the future. I think the big contributors are going to be large enterprise deals, which are more and more populating our pipeline and frankly set up an opportunity to go into those secondary markets.
We're making some investments now in France and Germany, where we see those markets in 2019 as being ones where we can get volume as well by having lead reference accounts, language and functionality capability. And so those two markets will be the ones where we start picking up the next wave of opportunity. There's also one of the benefits of the Taliance acquisition is that they're the predominant player in that market. So, ValCap is contributor. ValCap upgrade, I should say, is a contributor, but not substantial in the quarter and going forward.
Okay. Then you mentioned international. I noticed the new disclosure in MD and A just regarding Appraisal Management being launched in Asia this quarter. Can you just comment on that?
So as part of our model in terms of targeting large accounts, the same customers that are thinking about ARGUS Enterprise everywhere are looking for independent valuation that's normalized. And we want to take our privilege with the largest customers and give them the opportunity to extend local valuation management on a global basis for their investors, these investors in the open funds and the open funds are going global. And so what we're doing is we're able to invest in a market like Asia where we can get, a large client valuing those assets in a normalized way, globally for our large customer. They can value them on Argus Enterprise, so they get a common valuation methodology. And because we're moving in the cloud, they'll also be able to get a common data repository.
And so that's part of our strategy. We're setting up an end to end capability. And then the aggregation opportunity and reporting opportunity, we can start laying in with Voyanta and Taliance. And so we're preparing ourselves to operate for our customers on a global basis, the ability to have soup to nuts, the software and the service and the data to manage their business for the largest CRE companies in the world. So we're building capability.
It's part of our investment this year towards being a global supplier for the biggest CRE companies in the world where we can support them everywhere. And when they start using Argus in all markets in Asia, including markets like Japan, that's how we're going to increase our volume growth. We'll go in behind that, not unlike we're planning in France and Germany and start building the functionality for the next bigger market. So France, I think think Germany is the 3rd biggest economy in the world, might be 2nd. France is 5th.
Japan is not far behind that. And we have it in our mind that we want to operate in those markets. Australia obviously is already one of the ones where we have a good position in the market.
And then related to that, just in terms of the expectations for revenue contribution from Asia, because I think you mentioned Europe would be a catalyst in the near to medium term. Is Asia probably more in the longer term timeframe?
I think by investing in Asia, we're going to get singles and doubles. And we will build a global account program targeting, you hear me talking about the top 200 in the world. There's 4 or 5 clients over there that we have in our mind could be great target clients to use ARGUS Enterprise to propagate the use in those markets. But next year, it's going to be Europe. It's going to be large customers, it's going to be the exploitation of Taliance, it's going to be the emergence of cloud and the data opportunity in cloud.
And Asia, by having that capability in Asia, it encourages more customers to take Argus Enterprise everywhere. And then we might not record that as Asian revenue, because it will be U. S. And European customers going to Asia with the support in place. And eventually that market will be one that will be well positioned to go after volume market by market, probably with some of the service providers like Colliers or Cushman or CBRE.
Okay. Thanks for taking my questions.
Thank you.
Thank you. The next question is from Deepak Kaushal from GMP Securities. Please go ahead.
Hi, good evening guys. Thanks for taking my questions. Bob, I wanted to ask a follow-up question on surprise, surprise, Office Analytics growth. In terms of the top 200 potential customers, that market opportunity, can you offer any metrics on how many you have today, how many you might expect to add this year and next year?
Yes, we touched, we've said this before, I think it's in one of our investor decks, I think it's 185 of the top 235. I think those are the numbers. And at the extreme, we have significant relationships with 5 or 10 major customers. And at the end, they may have bought a few licenses from Argus, right. But we're sub-ten where we've really exploited those relationships.
But when I talk about CBRE GI or Brookfield or Blackstone, they're starting to use our services broadly on a global basis. And we will and we continue to have opportunities with those customers, but we're just getting going. And that doesn't include the opportunity to sell net new global investment management solutions with our newest acquisition, Taliance, where we have a fully integrated offer. So this is honestly for me, 2019 is continued globalization led by these largest customers and we're closing deals already and we've got a great pipeline.
Okay. And so when we think about those global customers and the decision to go global from regional deployments, what's kind of the internal process or the internal catalysts that have to happen for them to do that? Is it something on your end to prove or is it something on their end in terms of infrastructure? Any kind of sense of that would be helpful.
I've got a follow-up. Like what the companies I just mentioned are what I would call the thought leaders in. They're the most aggressive. They're the ones that are thinking about collecting their data on a standard basis. They're becoming references for others to do it.
A lot of people are looking at it. The driver is consistent global valuation, consistent global data, the ability to look at your investments on a normalized basis, and companies are doing it. And now that we have great references with some of the best companies in the world, it's incumbent on our sales organization to drive it forward. And in Europe, we were starting to knock down some of the leading players in that market. And so we're moving on this.
And just remember, I'll say it again, we replaced a high significant amount of upgrade revenue just 4 quarters ago with new customer revenue and same customer growth. So I feel pretty good about where we are and we feel really strong once we get Argus in the cloud, it gives them another reason to deploy Argus on a global basis.
Excellent. Okay. Just shifting gears a bit, I wanted to ask more about Taliance. Can you talk a little bit about the integration plan for that software package? Can that fully integrate now with ARGUS Enterprise?
And does that by implication, if so, suggest that now you have a true enterprise platform that you can bolt on new acquisitions to quite easily? Or am I getting ahead of myself on that?
So the biggest deal we did in the quarter, last quarter was an integrated Taliance, Argus Enterprise, Voyanta Managed Service transaction that we will we have an agreement with the customer to be a partner in building that integration on a project basis. And it's really we would have liked to have told you it was, but we didn't get approval to talk about it yet. We will in the future. But that is we're in flight and we'd already been working with Taliance for the last year in partnership. And we've got a great development team in France that one of their key priorities is to develop the integration framework with Taliance, which guess what attracts new ARGUS Enterprise users because it moves upstream in terms of financial systems and reporting and investor management.
And so look, all of this comes together in a really nice way. And part of our goal of developing our cloud applications is a big part of that is to create modern APIs with partners, but also within our own development shop as we either acquire or build capabilities, we'll do that through modern APIs. And so teams pull out on that already. And we're not doing it for the future, we're doing it for deals we've already closed.
Okay, excellent. That's very helpful. I appreciate you taking my questions. I'll pass the line.
Thanks, Deepak.
Thank you. The next question is from Steven MacLeod from Nomura Color Markets. Please go ahead.
Thank you. Good evening, guys.
Just wanted
to get some color here on the margin outlook for 2018. So obviously, Q2 coming in quite strong notwithstanding the top line, which was a bit more growth, which is a bit more modest as well as the investments. And I think you referenced that you have full investments, you're reflecting the full run rate of investments. So I just wanted to get some color on how you expect the margins to evolve in the back half of the year in light of further investments as well as implementation?
You said 2 things. You said the back half of the year and you said 2019. Look, I said it all along, like our goal is to we did it before when we bought Voyanta and doubled down on Europe. We made a 1, 2 investment and we got our margins back in 12 months. We want to put we don't want to actually put all this capability in and then take it out.
This is our new cost base. And what we want to do is going into 2019 is outrun the cost base with closer to high 20 margins. We said that before. Last time we did it, we rolled into the 30s. We could see because of and I've told you this for 2018 that these large deals could have an impact on margin in any particular quarter.
But our expectation, leaving any changes in our pricing strategy aside, is to really move back to normal margins, normalized margin and the higher end of our 20 to 30 guidance and make this part of our cost base as we go forward with a lot more products to sell. And so we're like Taliance is an investment as well. Like it's not going to be a significant margin contributor in the back half of the year, But we believe, not unlike our investments in the cloud, we're going to sell the shit out of this thing and we're going to have an opportunity to really make that again part of our cost base. And so that's what we've done for 5 years now. That's what you do in a growth company and we're going to do it again.
Yes. That's great. Okay. That's good color. Thank you.
And then just turning shifting a bit here to the tax business. You mentioned somewhat some delays in the Ontario appeals process. Is that something that's just isolated to Q2? Or is that some change in how your backlog is evolving over the next couple of quarters?
So I'll let Angelo pile on. But I remind you, it doesn't mean the revenue went away. So when I talk about 2019 and where it goes, they change their approach. They change their methodology at the Ontario government about how they want to deal with appeals. And every quarter that goes by that they don't actually deal with the volume of appeals creates a future opportunity that is not going away.
And we've had a great first half in tax, combination of UK this quarter and BC, which we talked about and Manitoba last quarter. And we're not giving up the year. We're ahead of what we probably guided. But we just want to let you know that it could have some impact on Q3. It still is one of our biggest jurisdictions, but hey, we're starting to see the benefit of our investments, the size of our business and frankly, every quarter that goes by 2019 is looking better and better.
I don't know.
I would just say that it's a new process for this year. And so with many new processes, there's a bit of a startup phase. And we're just we're in a bit of a holding pattern. We're not we haven't been selling as many appeals. But again, the number of appeals remain and it's just a question of timing of when.
And so really all it does is it creates more opportunity as we move forward into future quarters. There's a bit of a lag, but it's just because it's still early days.
Yes, right. Okay. Okay, that's very helpful. Thanks guys. Okay.
Thank you. And the next question is from Paul Steep from Scotia Capital. Please go ahead.
Great, thanks. Could you talk
a little bit about how you're thinking about further M and A given just having completed Taliance and then before that CVS where what your comfort level is on further deals? Thanks.
Well, we like tax deals. There's stuff that's going on there. It's not imminent, but there is some interesting things. And there's some other related technologies that we're tracking, reasonable sized companies or smaller that could fill out our white space that's an alternative to peer development. And like although we stretch it out a little bit from where we've been previously, if we see good acquisition opportunities, we'll definitely not let them go by.
And so we're still active and we're looking. And as you go global, it shouldn't be lost on you that we did the deal in Europe to build up capacity with Taliance. It was just such a great deal because in one fell swoop, we have an opportunity to have capability in the French market for our U. S. Enterprise.
We get a leading cloud application. We get a great leader. We get another development capacity and we get a faster growth in Europe. And so part of what we're looking at is other European opportunities that would be complementary to our own development efforts.
Great. And then actually one quick last one. On the sales force and selling AE or Altus Analytics into Europe, what changes did you make to the sales force, Bob, in terms of approaching or sort of go to market this year? And where do you think you are in terms of evolving that sales force? Thanks.
We added capacity. We set up a global like a global account and a strategic account team with some of our best talent. And we've got an amazing team in Europe led by Cassie and Scott. These are guys that are enterprise thinker. They're selling at the CEO level.
We're in it's kind of funny because in my mind, the U. S. Was really critical. North America is really critical to keep our standard move from DCFDA, which we accomplished. But it was more upgrade selling than value selling, while the guys in the Europe were value selling.
Now we're going back to these U. S. And Canadian customers and we're doing value selling and they're learning from the European guys about how to do that. And Taliance really helps in that regard, as does Voyanta. So no, we just added more capacity.
We brought some talent in, and we bifurcated on some of the larger customers. And we actually have people, for example, who've got people at our end market in France and Germany.
Fantastic. Thanks, guys.
Thank you. The last question is from Maggie MacDougall from Cormark Securities. Please go ahead.
Hi. So I just wanted to touch base on the strategic initiatives you mentioned briefly with your new tax platform underway in CRE Consulting? And then also you mentioned enhancing extra services with data and technology, which sounds interesting. I think you've spoken about it broadly before, but just wondering, it seems a bit more imminent now. So wondering what's going on today and where you think this is going over the next year or so and then how you plan to use that competitive advantage for the longer
term? Okay. So we hired Carl Farrell at the beginning of the year and he has been unbelievable in really focusing on the advantage of platforms, machine learning, artificial intelligence, data recompilation, the use of data across other businesses and has doubled down in the focus on the deployment of these applications for value, not to replace old processes for value. And he's done an amazing job of that, increasing dates and accountabilities and priorities. And we rolled out our tax platform in Canada, broadly, not completely.
And the benefit of that is going to come in productivity, data reuse, the ability to forecast better. And remember, we have a high share here, high margin. And so this is going to also create stickiness with our consultants because it will be part of the tool that makes them successful. So it not only in tax, but in RVA and cost, we're exploring these kinds of capabilities to improve the way we do business, but also to be a data contributor. And Carl has been amazing on this.
He's taken it from what I would call really modern thinking to a place where it's going to be incredibly strategic and highly valuable for our company. Angelo, Jed?
Yes. I would just echo that and say that,
I mean, there is a like a
strong focus on delivery execution. And with the tax platform, once we get it rolled out across Canada, and we've actually already started some of the planning, is to tailor it and roll it out into the U. S, which then allows us to grow much more quicker from an organic standpoint and be able to really drive efficiencies. We'll be able to do more with less resources. And so that's strategic advantage of really rolling out these platforms, as Bob talked about.
So is the focus of that, in addition to helping with productivity, forecasting, etcetera, also to attract talented consultants to your platform?
Yes. I mean that's inevitably part of it. It's to create an environment where the ability to get institutional knowledge and keep it becomes embedded integrated with the basic technology platform. Still need the expertise, you need the people and it becomes part of an information services business. But it also done properly, we see cross selling opportunities.
We see cross data sharing opportunities. We see benchmarking opportunities. Always remember tax a benchmark on it, sorry, it's a proxy on expenses. And so we see it as a way of doing business as we create capabilities that serve the largest commercial real estate players in Canada and the U. S.
And the UK.
Okay, that's great. Thanks very much, gentlemen.
Okay. Well, thank you very much. I appreciate everybody joining today and thanks for the support.
Ladies and gentlemen, this concludes today's conference call. Should you have further questions, please contact Ali Meddavi at Altus Group at 416-641-9710. We thank you for your participation and ask that you please disconnect your lines.