Altus Group Limited (ASGTF) Q3 2026 Earnings Call Transcript

Operator: Ladies and gentlemen, thank you for joining us and welcome to Altus Group's Q3 2026 financial results conference call and webcast. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Camilla Bartosiewicz, Chief Communications Officer. Camilla, please go ahead. Ladies and gentlemen, it appears we are having technical difficulties. Please hold while we investigate.

Camilla Bartosiewicz: Just going to back up. Should go in the chat, just see if they can hear us.

Mike Gordon: I think it says you're muted.

Camilla Bartosiewicz: Yeah. Hi, operator.

Operator: We can hear you now.

Camilla Bartosiewicz: Okay. Sorry. As I was saying, some of our remarks on this call and in our disclosures may contain forward-looking information based on certain assumptions and are therefore subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the forward-looking information disclaimer in today's materials. We also use certain non-GAAP financial measures, ratios, capital management measures, and supplementary and other financial measures as defined in National Instrument 52-112. We believe that these measures provide useful additional insight into our performance and may assist investors in evaluating our shares. However, they are not standardized under IFRS, may differ from similarly titled measures used by other issuers, and may not be comparable. They should not be considered in isolation or as a substitute for IFRS measures. Further details are provided in today's IR materials. Unless otherwise noted, all percentage and basis point growth rates discussed on today's call are presented on a constant currency basis relative to the comparable period in 2025. With that, I'll now turn it over to Mike.

Mike Gordon: Thanks, Camilla. I'm really pleased with our team's performance in Q3 and the momentum we're seeing as we close out the year. As you saw with our press release, we came in at the high end of our guidance range on revenue, and we beat on adjusted EBITDA margin expansion. As we head into the final stretch of 2026, the work we've done across the business is clearly showing up in our results. Margins keep improving, and the changes we've made to how we operate and go to market are starting to pay off. When we held our investor day almost a year ago, we made a clear set of commitments that we believe will help drive shareholder value. Three quarters in, we've already delivered on all for the year. We finished simplifying our portfolio, we've cut operating expenses, and returned excess capital to shareholders. We kept bringing new capabilities to market, and we're closing in on Rule 40 as we prepare for our U.S. listing in 2027. Here's how that shows up across our four priority areas. First, growing profitably and predictably. Software ARR has now grown by double digits for four quarters in a row, at 6.8% organic constant currency revenue growth to a 32.1% adjusted EBITDA margin, and we exited Q3 at a Rule 39. My personal expectation is that we will be Rule 40 exiting Q4 2026, which is a year ahead of our target. As you'll hear from Katie shortly, our full-year revenue guidance comes in at the higher part of the previous guidance and will narrow it, while at the same time, we're raising our guidance on EBITDA for the full year. Second, maximizing operating leverage. This is simplifying the business is really paying off as our operating leverage is starting to come through. Gross margin was up 230 basis points on flat cost of sales and higher revenue. While there's still more to do in 2027, we're making solid progress and more operating leverage is still to come. This is happening as we continue to invest in areas that drive strong profitable growth. Third is continuously investing, innovating, and improving at a faster pace. ARGUS Intelligence is now an AI-powered platform with ARGUS Assist and our MCP connector. The platform's unified data model connects specialized agents across data, models, and workflows, enabling a seamless client experience. ARGUS Assist is a big part of that, and it's gaining real momentum. We introduced it at Altus Connect in April, where a select group of customers signed up to help shape how it evolved. After the summer, we made our hard push, and to date, from that summer, we've signed more than 60 in the past two months alone. As we bolster ARGUS Assist with additional agents on investment, debt, tenancy, it will also give customers more ways to use it. We've also reached a steady rhythm for rolling out new agents and add-ons. Next up, we're launching our MCP connector at the beginning of December. Our ARGUS Assist MCP enables our users to add CRE-trained AI to their environments to load data, build models, run scenarios, generate insight, build and interrogate reports, and extract data more efficiently and effectively. Underpinning all of this, I want to recognize the team for earning ISO/IEC 42001 certification for responsible AI. It's independent proof that we handle AI the right way, and that matters when customers trust us with their data and the AI outputs we generate. After all this, we will also be releasing Investment Manager, a capability that many of our customers have been asking us for. Customers already run their assets and portfolios in ARGUS, and now Investment Manager will roll that into a fund-level view on a single connected platform. It connects asset-level cash flows to fund structures, NAV and investor returns, so that fund managers can test scenarios and track performance in real time instead of rebuilding multiple Excel models. Similar to launching ARGUS Assist, we have a select group of customers using the product today and giving us feedback. We plan to formally launch it in early 2027. In the fourth category, allocating capital, where it earns the best return, our platform investments are paying off, as you can see in the operating metrics that we presented today. But at the same time, we have returned CAD 522 million to shareholders so far this year as of October, and this is inclusive of dividend payments. And this has reduced our share count by about 22%. As I look back to that investor day about a year ago, we told you what we do, and we are doing it, and we are doing it with pace, and we are starting to see strong initial results. Today, Altus is a more focused, more profitable company with the discipline and financial profile we wanted ahead of our U.S. listing. Our job is simply to keep building upon that. Before I turn the call over to Katie, I wanted to share some feedback from some of the client conversations I have had over the past few months across the world. We held a number of client forums in recent months, including an innovation summit in London, one in Paris, and in Munich. Additionally, we had an investor lens roundtable with select VMS clients in New York. We had a large client reception in Toronto, and our annual customer advisory board offsite with a small group of strategic customers. All of these opportunities were a great chance to get customer feedback on our roadmap and to hear firsthand where Altus adds value in their day-to-day work. Two things came through loud and clear. First, they support the direction that we are taking. And second, what they want most from us is less manual work with fewer spreadsheets, less reconciliation, more aligned and usable data, and more answers that they can act on right away. That is exactly the problems our solutions are built to solve as we simplify things for them. They were also clear that trust comes first. They want AI that speeds up their work and flags what needs attention while their people still can make the judgment calls. That is how we built it, and it is why independent certifications like ISO/IEC 42001 matter so much. You can see this playing out with customers like Stockbridge Capital Group. They manage about $37 billion in assets and have worked with us for a while, using both our valuation management services and our software. Last year, they moved to our ARGUS Intelligence platform, and as you can see from the slide in their quote, ARGUS Intelligence has taken a lot of setup work off their team's plate. This allows them to spend more time on the analysis behind their quarterly valuations. They are also starting to use ARGUS Assist to test how leases affect value and to track shifts in cap rates across their portfolio. I love how they put it. The tools add to the judgment of their investment professionals. With valuation oversight, they already have that. That is exactly the balance our advisory board has asked us for. Stories like this are why I am confident Altus will be one of the clear winners as AI reshapes software. AI is only as good as the data and the workflows underneath it, and that is where we are strongest. Our customers run valuations on billion-dollar assets, where being off by just a percentage point can mean millions of dollars. So our AI has to be trustworthy and consistent. Every output can be traced back to the model and the data behind it, and because of our VMS business, we have deep valuation expertise and years of historical models. So we have trained our AI outputs against real-world results and to make them the most accurate in the world. Our customers gain confidence from ARGUS Assist analysis right from the start when they use it. With that, I will turn the call over to Katie.

Katie Royce: Thanks, Mike, and good evening, everyone. On our last call, Erin asked where I saw the biggest growth opportunity at Altus. Three months in, my view is clear. Our largest opportunity is accelerating organic revenue growth. We see meaningful white space across geographies and customer segments, including lenders, and significant opportunity to deliver more value to existing customers. By bringing together our software, data, and expertise on a common platform, we are extending ARGUS Intelligence beyond a single workflow into integrated solutions that support decision-making across the CRE life cycle. We believe this will deepen customer relationships, increase platform adoption, and drive profitable organic growth. Before we jump into the quarter, one housekeeping note. Our organic revenue definition now excludes One11 from the comparative period, in addition to excluding Valos. As a reminder, we sold the One11 business in April, and it did not qualify for discontinued operations treatment. Taking it out of the comparative period gives a cleaner read on our underlying organic performance. This quarter, the two roughly offset, so organic and total growth were in line. Narrowing in on some of our key metrics. Total revenue grew 6.8% total and on an organic basis, at the top end of our guidance range. Of note, Q3 included some one-time revenue that landed in the quarter versus our expectation in quarter four. But even factoring that in, we would have been well within our range. Recurring revenue grew 7.9% to CAD 112.2 million, and now represents about 96% of our revenue year to date. Adjusted EBITDA increased 42%, and margins expanded by 790 basis points to 32.1%, driven by continued operating leverage across the business. We benefited from productivity gains from AI and platform initiatives, improved resource alignment across products and services, and increased efficiency from ongoing refinements to our go-to-market model, while continuing to advance our product roadmap and deliver for customers. Adjusted EPS increased 87% on an as-reported basis to CAD 0.71 a share, reflecting both stronger earnings and a meaningfully lower share count. By revenue line, year-over-year constant currency growth was led by our flagship offerings. Software grew 14.6%, driven by ARGUS Intelligence. VMS grew 5.9%, reinforcing our ability to grow despite adverse macroeconomic factors. Data declined 6.8%. As previously discussed, we are focused on optimizing our go-to-market motion to improve performance. We are investing in how Reonomy and Data Studio reach customers and fit into their day-to-day workflows, including alongside ARGUS Intelligence and ARGUS Workbook, where data is a critical input. While there is more work to do, we are encouraged by the early customer response to these efforts and remain focused on improving execution in the quarters ahead. Services, now a small part of our overall mix, declined mainly because One11 is still in last year's comparison, and Q3 last year included a one-time implementation project that did not repeat. A quick word on Valos, which sits in our software revenue and ARR. The integration is going well, and their quarterly results are coming in ahead of the plan we underwrote the acquisition on. The teams are working together closely, and we are excited about what it adds to our suite of capabilities, particularly with lenders. One of the clearest measures of our progress as we build organic revenue momentum is ARR. Software ARR grew almost 15% in the quarter. Our reported software ARR now includes Valos. The initial inclusion of the Valos recurring revenue base benefited ARR growth in the quarter. However, ARR grew double digits, excluding this impact, making our fourth consecutive quarter of double-digit software ARR growth. While future growth rates will increasingly reflect performance against a larger combined ARR base as the acquisition becomes fully absorbed in our results, we anticipate Q4 to continue to produce double-digit software ARR growth. Importantly, that growth was supported by improving customer fundamentals. Software gross revenue retention increased 150 basis points to 91.9%, and software net retention improved 110 basis points to 107.5%, reflecting stronger retention and greater cross-sell adoption across our software portfolio, particularly with ARGUS Intelligence. We also saw encouraging traction with new customer acquisition during the quarter. Following the commercial launch of ARGUS Assist, we won a number of new customers who historically relied on spreadsheets and manual workflows rather than purpose-built software solutions, highlighting ARGUS Assist's ability to expand our addressable market and bring in new users into the Altus ecosystem. VMS ARR, which we define as revenue for the trailing 12 months, was up 7.3%, with gross logo retention at 94.8%. As we expand our capabilities on the ARGUS Intelligence platform, we see a lot of opportunity to do more with our VMS customers. Now turning to the P&L breakdown. Gross margin expanded by 230 basis points, reflecting revenue growth and operating leverage in the business. Software, our highest margin business, is a growing share of revenue. In VMS, wider use of ARGUS Intelligence and AI is making delivery more efficient. G&A declined by 160 basis points as a % of revenue, driven by our restructuring actions, portfolio simplification, and disciplined management of corporate costs. Year to date, G&A is down 6.4%, even as cost recoveries under transition services agreements with divested businesses wound down. Turning to the balance sheet. We ended the quarter with CAD 94.7 million of cash, CAD 274.9 million of bank debt, the funded debt to EBITDA of 2.05x, and approximately CAD 370 million of available capital. Our opportunity is not just to grow earnings, but to convert more of those earnings to free cash flow. Together, those two levers can expand the capital we have available to invest in organic growth and returns to shareholders. The business generated CAD 36.9 million of operating cash flow year to date. That number absorbs the cash cost of our transformation this year, including special charges and transaction costs tied to our divestitures and acquisitions. It also reflects lower interest income now that we've deployed the divestiture proceeds, and only a partial year contribution from the businesses we sold. With those moving pieces, last year isn't a like-for-like comparison. As we move past this transition year, operating cash flow will increasingly reflect the cash-generating capacity of the business we have today, one built on simplified, more efficient, and predominantly recurring revenue. Finally, turning to our outlook. We're introducing Q4 guidance, and with it, narrowing our full year ranges. Despite a strong comp against Q4 last year, when most of our customers moved from ARGUS Enterprise to ARGUS Intelligence, and the timing of the one-time revenue opportunity moved to Q3, Q4 is expected to be a solid quarter. For Q4, we expect constant currency organic revenue growth of 5%-7%. We're also refreshing our implied dollar ranges on an as-reported basis. This is for total revenue for continuing operations, inclusive of inorganic contribution and refreshed FX rates. We expect Q4 revenue to be between CAD 119.5 million and CAD 122 million. We expect Q4 adjusted EBITDA margins to expand by 375-475 basis points to between 33.5% and 34.5%. For the full year, we now expect constant currency organic revenue growth of 6.4%-7%, narrowed from 5.25%-7.25%, essentially moving the midpoint higher. We expect full year as reported total revenue for continuing operations to be between CAD 457.5 million and CAD 460 million. On profitability, we're raising margin expansion expectations to 600-620 basis points, up from 510-610 basis points. That puts full year adjusted EBITDA margins at 28.8%-29%. Before we open for Q&A, Mike is going to jump back on for some brief comments.

Mike Gordon: Thanks, Katie. As you've heard, Q3 was a really strong quarter. We're heading into the end of the year with good momentum, and we believe we're well-positioned for 2027. Our model is more focused, sales momentum is building, we're releasing new products on a steady cadence at pace, and our operating foundation is much stronger. All of this gives me confidence that our results will keep improving into next year. Finally, with Katie now on board and our U.S. dual listing ahead of us next year, we're looking forward to hosting our next investor day alongside our Altus Connect Client Conference. Please save the date, April 28th in New York. More details to follow early next year. Operator, with that, let's open the line for questions.

Operator: We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Doug Taylor with National Bank. Your line is open. Please go ahead.

Doug Taylor: Yeah, thanks. Good evening. Mike, I'm going to start with a question about some of the new product initiatives, ARGUS Assist, MCP connector, the work you're doing for investor-focused solutions. A lot to take into consideration here with these that are either recent or soon to come. I guess, what I'd like to ask you is your view on which of these products you think is going to make the most demonstrable impact here on your financial performance, and maybe how you'd rank order them.

Mike Gordon: Good question, Doug. Where I'd start with is I started with ARGUS Assist. That's out the door right now, and we're adding in more agents. Like I said, we've had over 60 customers sign up since early September, and if you look at that on a per business day basis, I always like to hear from the team that we're adding in 1.5 customers per day onto that platform. Given the number of customers we have, we think that we have a pretty long runway with that in the early next year. As we look into the work that we've done with Valos as well as Investment Manager, when Investment Manager comes out next year, one of the reasons why we're running out these products, for lack of better terms, in a controlled environment to test and learn what's happening, is that we get really good customer feedback early in it, and then our teams are able to adjust that in a pretty fast way. So when we launch that in the first quarter, we do expect, similar to what we saw with our friendly product at ARGUS Assist, that we first had about five to 10 customers on that, and then we saw good expansion. What we'd like to be doing is, as we get into the Altus Connect Conference in April, we would like to use that as a good show to have a lot of customers on stage showing how we're using that, how that works with ARGUS, and how that all pulls together. The big thing that I think that I would put underneath that is that the databases will be synced real time, up to speed real time, and from the standpoint, they will be able to look back and use that information. I think right after that, like Katie talked about, we saw some good pickup from Valos as that's come in, and it's grown faster than we expect. We will continue to invest in that heavily, and the faster we can bring that onto the same platform that we can then bring appraisals, valuations, and all this investment guidance into point, that'll be something that we have hopefully expanding at a good rate in the second half of the year as we also bring out Debt Manager, ARGUS Acquisition Manager, and ARGUS Development Manager. It's a big year for us, Doug, but our teams are on path and pace, and this was one of the big investments we made starting at the end of our last Altus Connect Conference.

Doug Taylor: Okay. Moving on from there, the software growth came through in the quarter. Great to see. VMS, last quarter, you were talking about the prospects of re-accelerating there with some initiatives you put in place. Can you maybe refresh us on how those initiatives are progressing? I guess I'll have the same question about the data business as well, so I might as well throw it in at the same time.

Mike Gordon: Okay. I'll start with VMS. On VMS, what we have now is we have a number of offerings that sits in and around our core VMS offering, and we saw some of that happen in our Canadian jurisdiction, which has not typically been a VMS jurisdiction, as we are now starting to offer. We're working with a couple customers to put together an index using our VMS experience, and so we expect to be able to export this to more countries worldwide. Additionally, we have also seen our VMS business in Europe expand. One of the places that we do a lot of work in VMS in Europe is in actually the country of Luxembourg, hence where most of our funds are, and we watched that VMS business expand by about 20% over the last year for the first three quarters of this year. For us, what we're starting to see is we're starting to see that our view is that our core VMS business will continue to grow at a very steady pace, but these other options that are coming out are starting to give us more growth in more spaces, and we expect to be able to continue that really into 2027. Even if interest rates are rising, there's a lot of people who are wanting access to the data that that team has, as well as the expertise. That's the VMS. And on, I'm sorry, and on the data business, the same question, or was there a different question?

Doug Taylor: Well, the gist of the question's the same.

Mike Gordon: I think on the data business, we've been working this year really to go through several pieces of work on the data business. First was reinvesting in the data businesses, both Reonomy and Data Studio, from the standpoint of turning the marketing and the sales engine back on, number one. Number two, refreshing the data and improving upon what data that we're putting on that platform. And number three, connecting that data to the platform, to the Intelligence platform, as well as Workbook. In the past, one of the feedbacks that we've gotten from our customers is that we had disparate data entry points, where they could pull the data into was problematic. Now, what I can say is in Reonomy, we have that data being pulled right into the ARGUS Intelligence platform, and we believe we will see good pickup in the fourth quarter around new customers, or not new customers, but new opportunities with existing customers around the data now that that's being pulled into the platform. And we're doing the same thing with Data Studio early next year.

Doug Taylor: Let me squeeze one last one in here, probably for Katie. You articulated how the cash flow has been obscured by some of the one-time items and nature of this year, and that we should see some normalization next year. I guess I'd ask you if I could maybe, with the current setup of the business, opinion a free cash flow conversion sort of range or any kind of target there. It would really help us, I think, understand what you think the cash generation power is of this business.

Katie Royce: Yeah. Thanks, Doug. It's too early, I think, to give a sort of a conversion rate. I think that's something we're working towards, maybe to give early next year with the next investor day. We've got to see some of these sort of costs that normalize through the P&L and get a better view on the business. I anticipate from where we sit today, though, that from a full year, and I'm going to encourage folks to start to think about free cash flow conversion kind of on a full-year basis. So, always continue to be some variability quarter to quarter, both with timing of renewals of contracts, but just also working capital variability, et cetera. So, I think that the best way to think about it will be on a full-year basis. I think we'll have some meaningful improvement next year, and then remember, there are still some actual cash costs that'll flow through the business next year. So, we should continue to probably have improvement more into 2028. But we'll continue to work on that and have a better point of view on how to guide as we enter into next year.

Doug Taylor: Thank you.

Operator: Your next question comes from the line of Gavin Fairweather with ATB Cormark. Your line is open. Please go ahead.

Gavin Fairweather: Oh, hey. Good afternoon. Maybe just on assets on the platform. I know that's been a big push in 2026. Mike, maybe you can just talk about what inning we're in terms of getting those assets into ARGUS Intelligence. I know that's a big unlock for cross-sell for you.

Mike Gordon: Yeah. Gavin, thanks for that. We have on the platform, through moving customers, we have moved about, I think at this point, about 325,000 assets on. What we are seeing right now is we're probably, we're at a current pace of about 15,000 to 20,000 probably per month. That's what we're seeing. I think the big thing that we've heard from the customers in the events that we've had is as we're putting these things on, it's more also restructuring the data in and around those assets. Using the Knowledge Graph patent that we have, we've been doing that because part of it is, it's also been structuring that. When we first started moving things on, we moved at a faster pace. But now, as we're going back, we've learned that as we're structuring this mostly under an asset-based pace with the valuations all going over those assets and then giving it a time series analysis, customers are getting a lot more feedback on that. The last thing that I, as I said earlier around Investment Manager and a couple of the new franchises that are coming out on the platform, we want to make sure that the data that's being populated through that is consistent going back and forth from ARGUS Enterprise to Asset Manager to Portfolio Manager, and then on to the next parts, Investment Manager and onward. So, probably a little bit slower pace, but we're comfortable with the pace because when we give you that pace, that's across all of the modules that are on ARGUS Intelligence, not just the asset management one.

Gavin Fairweather: Appreciate that. Then just going back to the software ARR added in the quarter outside of Valos, can you just discuss the composition of the bookings there between new logo and expansion and whether that fit into the formula that you are generally targeting?

Katie Royce: Yeah. I would say it is pretty consistent with what we have seen in past quarters. We are seeing continued strong momentum in cross-sell and upsell within software. But overall, pretty consistent with what we have seen in the past quarters.

Mike Gordon: Yeah. Gavin, if I jumped on there again, it was great to give you guys at least a number. You guys always ask for a number around some of our new sales. The ARGUS Assist, we look at that as a, those as good cross-sells for us, and our customers are picking that up at a good pace.

Operator: Your next question comes from the line of Erin Kyle with CIBC. Your line is open. Please go ahead.

Erin Kyle: Hi. Good evening. Just sticking on that software ARR growth topic. I understand the 15% reported includes Valos. Could you just give us a sense of the quantification of Valos added in that ARR or what the underlying organic growth was? I know you said double digit, but did it accelerate sequentially compared to last quarter? Any numbers you can put around the organic metric for us is helpful.

Katie Royce: Yeah. We are not going to break it out. But yes, the organic, to think of it that way, organic ARR growth for software overall in Q3 was stronger and accelerated versus Q2. We again expect kind of, we will continue obviously to keep Valos in the ARR number. It kind of has, when you add in that book of business in the quarter, it sort of has this sort of one-time impact. So, the next quarter from a headline, just to get that out there, it will look like a lower number because the ARR will already be in the base from adding it in this quarter. But basically embedded in the way we have guided for Q4, the expectation is that both with and without Valos in the software ARR, we will continue to have double-digit ARR growth.

Erin Kyle: Okay. The one-time revenue that you called out in Q3, is that related to Valos as well, or is that something else?

Katie Royce: No, entirely different. Again, the best way to think about that is, last quarter when we gave guidance for the full year, this was a piece of one-time revenue that we were anticipating coming in Q4. It happened to land a bit earlier in Q3. So when you think about kind of sequentially and then the way the guide looks, the outlook really for the second half has not really changed. It is just sort of a movement from one quarter to the next.

Operator: Your next question comes from the line of John Shao with TD Cowen. Your line is open. Please go ahead.

John Shao: Hey, thanks for taking my question. You are guiding higher EBITDA margin in Q4 than Q3. Do you think that Q4 level will become the new normal as we head into 2027? As you keep growing revenue higher and maybe maintaining your capital discipline, do you think there will be additional upside to your margins?

Mike Gordon: John, that's a good question. I think as we go into Remember, in our years, our Q1 tends to be what I would say our lowest EBITDA % quarter. With that said, we do expect it to continue. We do expect our Q1 2027 to beat our Q1 2026, and we do expect to be maintaining this growth all the way through 2027. I think we've done a lot of work this year to get ourselves at a much more efficient business, and it's more effective in how it's servicing its customers. I think that there are still opportunities for us going into next year that as we finish this year and we get a full year run rate with some of these savings, you'll continue to see the benefit through 2027. We certainly think that there's more opportunities with the business as we continue to grow it at the pace that it's starting to go at.

John Shao: Yeah. Thanks for the color, Mike. Maybe on that 6% VMS growth this quarter, how much is that driven by market volume? I know it's probably a bit early, but do you see any leading indicators of potential recovery in 2027 of the market?

Mike Gordon: Well, I think that our VMS team, I think in that number, I don't know if I'd call it a recovery. I think that the team is getting into markets, like I talked about on an earlier question, that we have historically not really tried to get into, and what we're seeing is an expansion of that market. Our core VMS is continuing to grow at a pretty good clip, but when you add on a percentage point or two in some of these new areas, as we go into 2027, we think that while the market is recovering to an extent, we also find that the market is pausing to take a look at what the new rates look like. But as I've talked about this, and now going all the way back to November of last year, we don't look at the market on this. We have to find our way and find different markets who use us for different things at different times. Again, we find that the European market and the Canadian markets are offering us different areas of growth, as are some other different types of funds out there than our classic open-end funds.

John Shao: Okay, got it. Maybe my last question is, you're pretty much at the Rule of 40 target you set a year ago. Looking forward, as you cross that line, what other KPIs would you consider as your guiding principle for the near and midterm?

Mike Gordon: I think there will be a couple things that we will talk about certainly next year when we get into things at the investor day. Things that we introduced today and talked about is we did talk about gross margin. We do like that. Our investors like that as well. We did talk about earnings at an EPS level. I think what we are trying to do is give a more fulsome account of things and how we are running the business all the way through. You heard Katie start to talk about cash flow and free cash flows coming out. I thank all of you guys for giving us a little bit of a pass this year to allow us to do the work that we needed to do to start to improve our numbers. Now it is our turn to start getting that free cash flow up in the area that we would expect more for the business from what we are producing and what you see producing from a really a recurring revenue model. Those are kind of the things that, just to give you a little bit of things that we are thinking about, but we will come out with that stuff fully as we give guidance next year in February, and also as we start pushing towards our Investor Day.

Operator: Your next question comes from the line of Paul Treiber with RBC Capital Markets. Your line is open. Please go ahead.

Paul Treiber: Oh, good afternoon. Thanks for taking the question. The MD&A makes a comment that the standard ARGUS Intelligence subscription now includes the ARGUS Assist plus Asset Manager plus Portfolio Manager as of September 1. Can you elaborate on that, and if there was a pricing uplift associated with it?

Mike Gordon: There is a pricing uplift, so let me be clear. The second thing that we've done is, as we learned over the summer, Paul, as we were selling, as we had users using this, we realized that there was an effective way to work to bundle the solution together and really simplify the way the messaging and the value of the business was being sold. A couple things as we've been able to do it. The reason why we can count out, we still keep track of ARGUS Assist separately, and we keep track of all those things separately. But as we do this, we now have a bundle that, A, gives us an uplift, B, it's a faster uplift than just a pricing increase, and C, our customers are telling us we're giving them a lot more value, and they're seeing that value, and they're using Assist with ARGUS and with Portfolio Manager.

Paul Treiber: Okay, that's helpful. In terms of bundling, how do you think about the future opportunity for bundling? You mentioned a number of other products out there. Would you consider adding them to the core bundle, or do you view them more as complementary products and not part of it at the core?

Mike Gordon: I think that's a really good question. It's one of those things that we've been talking about, actually. We've had a couple strategic sessions with our Board and our executive team, and we'll certainly talk more through that next year. But what I would say to you is, we look at some of these products that are coming out as franchises. ARGUS has always been a historic franchise. Valos, we believe, will be a franchise for us, and as will Investment Manager, and the things, Debt Manager, and others that come out after that. What we see that we will work to bundle things in with those is that we'll bundle in ARGUS Assist, Workbook, our data management capabilities into that. We also will probably look at those products to sell on their own as well to expand into other areas. But what our customers have looked at with those horizontal capabilities is that they've asked us to be able to, for them to just sign up. They can sign up to the use of ARGUS Asset Manager or ARGUS by itself, but then pulling that together, that makes it easier for them to adopt. And then from the standpoint now that we are on a fully SaaS platform and we can see how they're using it, and we can help them with using it, now they're seeing the ability to do that. So, while, for instance, ARGUS Assist is bundled in, it is a usage-based solution. While we might think about bundling in ARGUS Workbook going forward, it is a solution that is used by use case. If they're using it for a use case outside of that, they get a taste of that and then move on, and it'd be the same for the Data Manager.

Paul Treiber: Okay. And then just lastly, just as you approach the Rule of 40, how do you think about the balance between profitability and growth at these levels? Meaning, are you willing to push profitability higher, or would you prefer to increase spending to drive stronger organic growth?

Mike Gordon: Well, Paul, you've known me for a lot of years now, and I'm going to tell you what I told you five or six years ago, that if we believe that we can grow faster and we can take more market share, we're going to go after that. We think that with these product sets, we have a good set of opportunities to continue to push up our growth. But at the same point, we have to be disciplined in how we deliver results for our shareholders. And so, once we achieve Rule of 40 or go beyond that, God forbid, even further and further, the goal for us is to manage that depending on how we can get there. But I would tell you that my personal opinion is I like companies that ultimately can get to solid double-digit growth and also have margins over 30%.

Paul Treiber: Thanks for taking the questions.

Operator: Your next question comes from the line of Nevan Yochim with BMO Capital Markets. Your line is open. Please go ahead.

Nevan Yochim: Yeah. Thank you. You have Nevan on for Steve this evening. First off, I just wanted to clarify on your comments on the VMS business, as we've heard from several companies in the CRE industry that activity is being impacted by geopolitical uncertainty and higher interest rates. So, if I understood you correctly, the recent macro deterioration has not impacted the VMS business to date, and you're still expecting solid growth to continue through the fourth quarter?

Mike Gordon: Yes. What I would say is, we feel very good with our growth, and it's going to hit what the numbers that we anticipated going into the end of the year. In the fourth quarter, there was a one-time fee last year for our friends at VMS, so we'll show growth a little bit down compared to other pieces, but we only see that as a one-time issue, and we don't look at the macroeconomic issues impacting VMS as anything that would be slowing it down going into 2027.

Nevan Yochim: Got it. Thank you. Maybe just for Katie, are you able to provide some updated thoughts on capital allocation priorities? How are you thinking about buybacks and potential SIBs this year and then into 2027? I know you previously had a CAD 800 million target. Wondering if that's still in play.

Katie Royce: Yeah. One, I would say, as we think about just in general capital allocation, starting to think really about where we get the best return for those dollars. So, to my comments in the script, we believe there's quite a bit of organic growth, and to Mike's comments around trying to accelerate that growth in a profitable fashion. In terms of capital return to shareholders beyond that, we continue to be active with the NCIB over the course of the quarter and into Q4. We will continue through the rest of this year to assess additional capital returns, including other forms of return in the quarter. So, continue to look at all the options that are available to us. We are in a strong position for the cash position and outlook, so we will continue to weigh our options.

Nevan Yochim: That's helpful. Thanks for taking the questions.

Operator: There are no further questions at this time. I will now turn the call back to Mike Gordon, CEO, for closing remarks.

Mike Gordon: Thanks, operator. Thank you, everyone, for attending the call this evening. As this is the last call of our, I guess, calendar year, I would like to wish everyone on the call an early happy holidays and a happy new year. We look forward to talking to you again in 2027. Have a great evening, everyone. Thanks for the opportunity to talk.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.