Altus Group Limited

Good afternoon and welcome to Altus Group's Q2 2024 financial results conference call and webcast. Please note that today's call is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star then the number one on your telephone keypad. To withdraw your question, press star one again. I will now turn the call over to Camilla Bartosiewicz. You may begin your conference.

Thank you, Brianna. Good afternoon, everyone, and welcome to the conference call and webcast discussing Altus Group's second quarter results for the period ended June 30th, 2024. Our disclosure material, notably the press release and DNA financial statements and the slides accompanying our prepared remarks, are available on our website and, as required, have been filed to Cedar Plus after market close this afternoon. I'm joined today by our CEO, Jim Hannon, and our CFO, Pavan Chopra. Some of our remarks on this call and in our disclosure may contain forward-looking information that is based on certain assumptions and therefore subject to risks and uncertainties that could cause actual results to differ materially from those projected. Please refer to our forward-looking information disclaimer in today's material. Please be reminded that Altus Group uses certain non-GAAP financial measures, ratios, total segments measures, capital management measures, and supplementary and other financial measures as defined in National Instrument 52-112. We believe that these measures may assist investors in assessing an investment in our shares as they provide additional insight into our performance. Leaders are cautioned that they are not defined performance measures and do not have any standardized meaning under IFRS and may differ from similar computations as reported by other entities and accordingly may not be comparable to financial measures as reported by those entities. These measures should not be considered an isolation or a substitute for financial measures prepared in accordance with IFRS. An explanation of these measures is defined in today's IR material. I would also like to point out that unless otherwise specified, all percentage and basis point growth rates we refer to on today's call will be on a constant currency basis over the same period in 2023. Okay, over to you, Kevin.

Thanks, Camilla, and thank you, everyone, for joining us today on the call. Our teams continue to make steady progress against our 2024 goals. and to strategically position Altus to maximize opportunities as market conditions improve. Our Q2 results reflect geographic variability at property tax and a persistently tough selling environment at analytics and at the appraisals of development advisory. Recapping our consolidated metrics, revenue was steady on a constant currency basis with the growth at analytics offset by flat performance at property tax and a decline at appraisals and development advisory. Profit was 2.3 million down year-over-year, which on a comparative view was primarily impacted by higher employee compensation costs, acquisition and related costs due to REVs, our planned restructuring activities, and changes in our financing costs. Adjusted EBITDA was down 19.2% due primarily to lower earnings and property tax. And free cash flow was up 96.4% on an as reported basis over last year, which as you might recall included the impact of our ERP transition. If we were to compare it to Q2 of 2022, which may be a more appropriate benchmark, free cash flow was up 45.6%. Additionally, I would like to highlight that in Q2 we recorded $2.6 million in restructuring costs, impacting our analytics and appraisals and development advisory business segments, as well as our corporate functions. This reflects our ongoing efforts to operate more efficiently and rebalance investments towards future growth initiatives. Now turning to our business segment performance. Analytics continues to grow, putting up both top line growth and margin expansion. Revenue growth is driven by our ongoing transition to cloud subscriptions, new sales, a higher number of assets on our valuation management solutions platform, and contribution from the ForBerry acquisition. The double-digit improvement in adjusted EBITDA reflects higher revenues, operating efficiencies, and our ongoing cost optimization efforts. Recurring revenue now represents 93% of our analytics revenues in the quarter. This is compared to 89% in the prior year. These revenues are comprised of solutions that are embedded in our customers' most critical processes and therefore represent resilient revenue streams with low churn. Recurring revenue grew at 5.5% or 4% organically. Argus and VMS performance was resilient. The moderation in recurring revenue growth reflects softness in data solutions related to lower transaction volumes year over year. As the macroeconomic conditions improve, we expect recurring revenue growth to ramp. Nonetheless, as we've demonstrated over the past several quarters, Recurring revenue continues to grow, even on lower bookings days. You'll hear more from Jim on that in a bit. Our margins continue to expand, up by 210 basis points in the quarter, in line with our expectations. We continue to expect a more meaningful ramp in the second half. We remain committed to our plan to achieve 400 to 500 basis points of annualized margin improvement this year. This will be driven by revenue growth and lower expenses from the continued build-out of our global service center in India and the four-year benefit of our restructuring activities. Turning to property tax, given our recent announcement about the divestiture of this business, we intend to move future results into discontinued operations next quarter, at which point we will no longer review the segment's performance. Property tax in Q2 was flat, and adjusted EBITDA was down 34%. As you may recall, the strength in Q1 reflected some Q2 opportunities getting pulled forward, notably in the U.S. Canada in the quarter was up, and in the U.K., although we had $8.3 million of contributions from annuity billings, Our performance is impacted by both a mix of lower value settlements and ongoing throughput constraints at the valuation office agency. The decrease in adjusted EBITDA reflects higher compensation expenditures as well as geographic variances of our revenue and related cost base on a year-over-year view. And finally, appraisals and development advisory revenue and adjusted EBITDA were down. Similar to what we saw last quarter, the performance reflects muted market activity in the current economic environment as the business segment has some exposure to reduced transaction volumes and higher interest rates, resulting in fewer appraisals and fewer new project starts. Now turning to our balance sheet, we finished the quarter with a cash position of $49.5 million and with $306.4 million in bank debt. Funded debt to EBITDA leverage ratio is defined in our credit agreement was 2.11 times. Applying all of our cash to net debt to adjusted EBITDA leverage ratio was 1.97 times. Our current total liquidity stands at 293.1 million. Additionally, the planned divestiture of property tax business will significantly enhance our financial flexibility with an estimated 600 million in net proceeds. It will enable us to invest organically via acquisitions and analytics, return capital to shareholders, and pay down debt to target levels. Pat, I'll turn it over to Jim.

All right. Thanks, Pelvin. I want to begin by expressing my gratitude to my colleagues for a highly productive first half of the year. It's been a busy period. significant progress in our strategic initiatives, which will drive the long-term growth of Altus. We've remained focused on enhancing operational excellence and strengthening our position as a leader in CRE asset intelligence. During the first half of the year, we sustained analytics growth and margin expansion and significantly improved free cash flow in comparison to last year, and as Pavan said, in comparison to Q2 of 22. We ramped our global service center in India, which has translated the process and margin improvements. We bolstered the capabilities of the office performance platform. These capabilities increase our addressable market and improve internal operations. I'll discuss this more in a moment. We pursued the divestiture of the property tax business in Q2, which we announced in July. This divestiture simplifies the operating model for office group, and maximizes capital to invest in higher value growth opportunities at analytics. We continue restructuring actions and realigning our investments across the P&L towards our target operating model. And we've been readying our sales organization for a market uptick. We recently named Dan Hurley, a seasoned tech executive from SAP, as our new chief revenue officer. Turning to our cloud adoption operating metric, We continue to steadily transition legacy clients from on-premise software to Argus Cloud. We ended the quarter with 76% of our AE users contracted on the cloud. With this base, we now have approximately 14 million valuation models in our cloud environment, representing over 1 million unique properties modeled on Argus globally. This large volume of models in Argus Cloud provides us with significant asset-level intelligence that we can leverage in an aggregated, anonymized manner to enhance the value we bring to our clients. Expanding on my earlier comments regarding innovation, as of April this year, Argus Enterprise has been connected to the Altus Performance Platform. Our data scientists can now tap into the asset-level data with AI tools to analyze exhaust data. We have real-time visibility into modeling metrics such as cap rates, market rents, tenant incentives, and occupancy. This is incredibly valuable benchmarking data for investors. We have unique asset knowledge at this scale. Our investments in the office performance platform with the foundational technologies and talent from our reonomy and stratagem analytics acquisitions enabled us to accelerate the development of the platform. Turning to new bookings. This metric captures incremental new business growth. Our new bookings performance continues to be impacted by the current macroeconomic environment. Argus software bookings have remained consistent for the last four quarters. VMS bookings are down year over year as our clients have an extensive backlog of undeployed capital. Working down that backlog over the next several quarters drives revenue growth without necessarily the need for additional bookings, but we are getting additional bookings. We're updating our guidance for fiscal 2024. As we stated in February, we're listening closely to our clients and their expectations regarding cost of capital and willingness to invest at current price levels. With the US Fed holding off on interest rate cuts for longer, CRE market activity has not resumed at the levels anticipated at the outset of the year. Lower interest rates and improving credit conditions will be catalysts for increased market activity. alleviating financing challenges, and stabilizing asset values. We are cautiously optimistic as our clients are signaling increased activity in Q4. However, given that these cuts are coming later in the year, we've moderated our revenue range. Based on findings from our recent CRE industry conditions and sentiment survey, transaction appetite has been high all year, with clients indicating that they intend to transact as soon as asset values adjust to what they perceive as fairly or attractively priced. As we look at the data, Q2 transaction volumes were still subdued. Based on Altus Reonomy data, on a dollar-volume basis, U.S. transactions were down 9.4% year-over-year, though up 13.9% over the first quarter. On a total count basis, transactions were down 9.1% in Q2 year-over-year and up 11.6% over Q1. so trending in the right direction. Throughout Q2, our clients modeled increasing cap rates, though interestingly, as we analyzed the trends on Arvis, the velocity of the increase in cap rates dropped dramatically, again, trending in the right direction. While the data points suggest we may be closing in on price discovery, market hasn't yet turned. Again, we remain cautiously optimistic about a stronger selling environment in the second half of 2024 and into 2025. Our new business outlook is as follows. Analytics recurring revenue range has been refined to 6% to 9% growth. The low end of the range was previously 8%. While we still expect modest market improvements in Q3 and stronger improvements in Q4, We now anticipate those improvements to come in later than originally anticipated. We're maintaining our guidance of 400 to 500 basis points of annualized adjusted EBITDA margin improvement based on slowing the pace of internal spending and as the result of continued restructuring. We have various levers to execute on our margin plans. Given the lower year-to-date performance at appraisals and development advisory, we're updating our outlook from modest revenue growth to a modest decline. we expect our earnings to improve in the single digits. Tying it all together, ex-property tax, our consolidated outlook continues to reflect single-digit revenue growth, double-digit adjusted EBITDA growth, and year-over-year margin improvement. Underpinning our consolidated adjusted EBITDA guidance, we expect corporate costs will be nominally higher than the first half of the year and decline next year after the property tax transaction closes. As we disclosed in July, providing the medium term view, we remain confident in our ability and analytics to achieve double digit revenue growth and about 35% adjusted EBITDA margin in fiscal 2026. That will be the first full year after the divestiture of the tax business. We have strong backlog of EMS opportunities that we expect will convert to revenue when our clients come out of price discovery and deploy capital. We have new capabilities launching this year and additional technology innovation on the horizon that will provide compelling value to our clients and accelerate growth. And we believe that an inevitable market recovery will also coincide with heightened demand for advanced analytics capabilities and data-driven insights to help our clients maximize opportunities and enhance performance. The operating and technology enhancements we've been implementing leave us strongly positioned for the future. In summary, Q2 was a tremendously important quarter for Altus Group from a strategic perspective. The announcement of the proposed sale of property tax demonstrates our commitment to simplifying the operations of the business and focusing our attention and our capital on the highest growth opportunities for our shareholders. Our development teams and data science groups have delivered innovation in the shape of improved Argus interfaces and capabilities. We're seeing the power of Argus Cloud in the shape of new insights, better data management for clients, leading to faster, smarter decisions. Our advisors and industry experts across all of our business lines remain committed to delivering exceptional service to our clients. And as we've demonstrated for multiple years, we're constantly improving our operations. In the first half of this year, The analytics business posted 6.5% recurring revenue growth against a market backdrop of almost a 14% drop in CRE transactions. Our BMS business and Argus Enterprise revenues both saw steady growth, all while improving analytics EBITDA dollars by 12% and expanding margins 210 bps in the first half. Of course, our transaction related businesses of appraisals, development advisory, Parts of our analytics data business reflect the industry and a lower volume of transactions. That said, CRE volumes appear poised to return, and we expect that we will drive substantial growth across all of our business areas. While our team would prefer to be operating in a more robust CRE environment, we remain bullish on the opportunities at Office Group over the next several years. All right, let's open it up to questions.

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

You mentioned in the past that the low end of the initial guidance range was built by taking the Q423 growth rate and then extending that throughout the year. Then new bookings didn't really need to accelerate. So it seems sufficiently conservative. So what were the major variables that changed over the last three months to change that conservative outlook? And how are you building up the new guidance range?

Yeah, Dan, great question. So the Two things here. One, we are taking our guide from our clients. So as our clients have been out and giving more muted outlooks, we felt, as I said, prudent to take that down. I will tell you that our field, our business units, are still calling slightly above the low end of the original range. when interest rates come down and what's the lag time between those coming down and the deployment of capital. So that's a key driver there. So two things, clients and then our teams are maintaining higher, but that's how we got there.

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

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

Thanks. I'll pass the line.

Our next question comes from the line of Steven McLeod with BMO Capital Markets. Please go ahead.

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

Yes, Steve. So there's a couple of things that we think drive double digit. So when we gave that guidance in July, obviously we knew what our print was on Q2. We were still finalizing numbers at that time, so we weren't ready to pre-report anything. But we had a view as to how the quarter was shaping up. That, knowing that bookings that we were going to take a more muted view towards our recurring revenue growth this year, that revenue doesn't go away. This is a matter of when, not if, it's coming to us. And so that actually pushes out into 2025 and 2026 and gives us tailwinds into both of those years. While we knew we were going to pull down 24, it just flows out into 25 and 26. On top of that, we have new products that we have in the hands of clients right now. We have our Altus Connect event in September where we're going to probably announce new products. We have a robust pipeline of new products that are coming out, and we have some price actions that are kicking in This year and then with new product launches as well. So pricing coming back, organic volumes, industry volumes coming back. And where we said, Puddin said VMS and Argus revenues were strong, remain strong, remain resilient is the word we always use. Because when volumes come down, those revenue streams don't come down. It just impedes our growth rate when we're in a tough interest rate environment. So some spillover from this year into 2025 and 2026, pricing new products, and then the integration implementation of ForBerry into broader markets will also drive growth for us.

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

Sure. The the the advisory doesn't so Steve, as you know, one of the core elements of our platform is the Altus ID. Being in the dev advisory business, we're seeing assets before they're assets. So we're getting visibility into the business cases that's underpinning the underwriting. And we're in the full lifecycle with those developer clients. So we're establishing Altus IDs early on in that asset's life. On the appraisals business, for our largest Canadian clients, they depend on Altus there. That business spins off a tremendous amount of data that we can use in the analytics business. So even though transactions are down, and so the dev advisory, we said transactions, the interest rate environment is... more impactful on the dev advisory versus transactions, but the transaction environment is what drives the appraisals part of the business. So it's an important service that we provide to our largest Canadian clients, and we will continue to do so where we can drive data that informs the advanced analytics that we're bringing to them.

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

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

And we'll be sunsetting the on-prem products. That's right.

Right.

Okay. So, the answer to your question, Yes, thanks.

Okay, perfect. Thanks, Paolo. Thanks, guys. Appreciate it. That's it for me. Thanks, Steve.

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

Oh, thanks very much. Good afternoon. You mentioned that you have a number of levers to drive your margin expansion targets this year for analytics. You mentioned restructuring as one of those Could you elaborate on just where are areas that you are able to pull out some costs?

Yeah.

So, when you think about the drivers of analytics margins, and you've heard Jim and I talk about multiple paths and getting to that guidance range. I guess the right way to think about it, or a way to think about it, is breaking it. A, there's going to be a contribution from a revenue side, so we're going to continue to drive margin through the ongoing class conversions, as we just talked about a second ago. We continue to increase the number of assets, VMS assets, on our platform, so that's going to continue to drive. There's obviously some annual seasonality that drives it in Q4 as well, too, that helps us And we're also moving towards eliminating discretionary discounts as clients renew. So those are all margin drivers from a revenue perspective. From a cost and expense perspective, you know, we started our restructuring activities in late K1. We're obviously going to get the full benefit of the restructuring activities as we analyze the impact for the full year. We remain committed to continue to build out the GSE in India. In addition to the wage arbitrage that we're getting, we're benefiting from the strong talent that's sitting there and the ability to standardize on best-in-class processes centrally for the organization is a phenomenal productivity lift for the organization. We're also, in addition to a lot of the new offers that we're rolling out for clients in Q4. There are internal releases that we have now that we're using internally to drive greater productivity for our people, for efficiencies across data management, data adjustment, and really just overall productivity for our organization. That's just a handful to just give you a flavor of the commentary around the fact that we have multiple paths to be able to get that drive margin for the business.

That's helpful.

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

Sure. I'll take that one, Pavan. Feel free to jump in on it. Paul, it's a lot of the same. So the margin expansion market in the 35, a lot of that is what Pavan just went through. So I won't reiterate those. But as I said, we have new products in the hands of clients right now. We'll be, I'm not sure if you're going to be at the Connect event. We'll be demonstrating those products there, the Go GA. As I said, there's pricing left. The products that Hub and Set are in the hands of our people internally right now, that's driving efficiencies, those were built dual purpose for our own folks as well as for our clients. It's all one platform. So you get the same benefits across both. So we expect our total addressable market is going to expand from these new products. The new products are, so one example is we're using an AI driven valuation model that does rent predictions for our people to make our internal advisors more efficient with their clients. So there's a giant world of CRE clients out there who are not VMS clients who could benefit from that technology. And our core focus is on data, but our near term focus is on data management, mostly around the office ID and asset performance. And again, asset performance expands our adjustable market. So those are two key areas that will drive that growth through 25 and 26 on top of organic market recovery.

That's right.

And the slower transition of the VMS bookings to revenue this year, which was a headwind, relatively speaking, will turn into a tailwind. as that market recovery happens, as we think about 25 and 26, so that gives us additional confidence in regards to our trajectory. You've heard a lot of our peers in the market in general and our clients talk about emerging green shoots that are starting to show in terms of inflation continuing to take a gradual path lower. which is leading us, hopefully, closer to the first rate cuts in the US. We already saw Canada do a second consecutive rate cut, which is increasing our clients' confidence on the stabilization of prices. We heard Jim talk about our own data showing about cap rates increasing at a smaller rate, which is also another green shoot in terms of confidence around price discovery. So just talking to our teams internally and their client roundtables clients are becoming more and more inquisitive in regards to our services and showing a greater increasing willingness to buy assets at the ask. And so all of those to us as you start triangulating those data points gives us comfort in regards to the fact that what Jim says, it's not a matter of if, it's a matter of when. It gives us comfort in reverse as we think about 25 and 26.

Lastly, for me, can you speak to the capital allocation strategy following the divestiture property tax? Just doing basic math, it looks like you'd move into a net cash position. Is that what you expect for the company going forward, or is there other potential uses of cash You know, these acquisitions, buybacks, et cetera, that could consume that cash.

Yeah.

And again, what we tried to outline in our previous conversation a month or so back in regards to capital allocation is really at a high level laying out the capital allocation framework. And so from a framework perspective, We're going to continue to invest organically in the business to drive our EBITDA and revenue growth. We're going to continue to remain committed on our dividend. We've set a target leverage base that gives us capacity to be able to not only do a meaningful share buyback program, which we've talked about, but also give us the capabilities to be able to do strategic M&A if and when it makes sense as it fits into the core of our business. And so, you know, from a from a from a use of cash perspective, that's kind of the the the math in regards to I guess the big picture in regards to how we think about using capital once we have it and deploying that in a very strategic way against a kind of a framework that I just outlined.

Thanks for taking the questions.

Again, if you would like to ask a question, please press star one. Our next question comes from Yuri Link with Canaccord Genuity. Please go ahead.

Hi, guys.

Hi, Yuri.

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

So Market Insights is a broad category. Yuri, the one you saw us talk about was bringing the CAPM approach into commercial real estate. And to do that, you need to be able to identify, so to leverage the analysis that was out there, you need to be able to effectively manage your data to identify your top performing assets, and then evaluate the market for other assets that fit those profiles. The marketing sites business includes Arianomy business. It includes Office Data Studio in Canada. And so there's ongoing interest in that. As we said, that business in Q2, it is transaction related. If they're not doing transactions, they're not looking for those other properties. So great feedback from clients on it. They're saying when we transact, That's where we're going. The second piece of it is the product that we have in beta with several clients now who will be on stage at the Connect event. And that product is all about increasing the use, simplifying the usability of Argus Enterprise and increasing the utility of Argus Enterprise. So it's a very modern product. UX on it, but it also allows clients to model assumption changes in Argus from a very simplistic interface. And we'll also be rolling out benchmarking data to the clients who are on cloud and subscribe to those new interfaces. So this is in the three and a half years I've been with the business. I would say this is by far the greatest period of innovation, of delivered innovation I've seen out of the teams, and the most heightened direct collaboration to get customer input into the developments. So we've shifted to a much more agile development process, and it's paying dividends.

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

Yeah.

So the REVS acquisition would have significantly changed our asset mix in the U.S., which would have mandated in the very near term different filings. So that was driving Some of that cost we contracted to say, how would we, if we chose to at some future point, move to U.S. GAAP? There's a lot of reuse of that work, and some of it we had the teams in place to perform. So some of that's going on. There won't be, over multiple quarters, there will not be any stranded cost from that as we keep our optionality going forward. So that was part of what was driving that additional cost was the advisory fees. So getting those back out, they're in Q3. Q4 will come down a bit, but we just have an exit rate into Q3 that puts us just a bit higher than the first half.

Okay. That's fair. I'll turn it over. Thanks.

Our next question comes from Richard Say with National Bank Financial. Please go ahead.

Yes, thank you. So you made some acquisitions over the past few years for technology and I think you sort of built things organically as well. As you move forward, how should we think about the impact on pricing here? Are you going to sort of go to your existing base and start to, you know, bundle these things to reduce the complexity? And I'm just trying to understand, like,

you know, what's that potential there and how you mechanically go about doing that?

Sure.

There's two things. Richard, you've seen our offer structures where we do essentials, advanced and premium. That will come more into play here as several, I've been talking about several of our largest Argus clients yet to transition to cloud. They've been holding off for innovation and they're seeing the innovation now. So that's why we expect that they're going to move. So with some of those clients, there's for their portfolio parts of their business, they're shifting to the asset pricing model that we've been talking about for a while. So that's one piece of it is an entire shift in how we think about pricing and the value that we deliver to clients. There's still the more base use case of acquisitions where you have a transaction that requires an Argus model. And we're not going to force those clients to take an entire suite of products around that. We understand that use case and we need to protect that use case for our clients. That said, there is more core functionality in all three offers that are going to market. So there'll be a base price increase. Pavan talked about pulling back of discretionary discounting. That says renewals are coming up, and that's today. We're realizing that. The next piece is there will be a list price increase to Argus to accommodate the additional feature functionality. And then there's the asset-based pricing for more of the portfolio management aspects of the product, which commands a significant premium to the current Argus-based case functionality.

Okay. That's helpful. Thanks. And then just a quick one. With respect to organic growth for analytics in the quarter, Are you can you share that number with us?

Or are you talking about the organics recurring revenue growth in the quarter? Correct. For future. Yeah, we're just playing from our DNA.

Yes.

Yeah, so recurring revenue growth in the quarter was 5.5% that we talked about in the opening remarks, and we talked about it being at 4% on an organic basis, getting one from the former acquisition. I think I'm answering your question.

Okay. Maybe I can take it offline.

It's fine. I'm good. Thank you.

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

Hi, are we connected?

Yes, you are connected.

Okay, great.

Sorry, Richard was asking a question.

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

We have no further questions at this time.

with that i will now turn the call back to jim hannon for any closing remarks all right um so i i just want to reiterate to everyone uh well sorry for that drop we don't know what happened there um but um this is uh when we when we gave the guidance for 2020 for 2026 and and the path there um again we knew that we were going to be shifting some revenues out of 24 to 25. So we feel good about our, our paths in 25 and 26. Um, feel like we're going into those quarters with a lot of tailwind. Uh, we should have a much more favorable economic environment. Hopefully just, uh, just the global macros of, of other social drivers there will be okay. Um, and, uh, There's a lot of elements that support that 26 growth rate that we've put out there. So appreciate everyone being on the call and look forward to the one-on-ones. Thank you.

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