Reis' (REIS) CEO Lloyd Lynford on Q4 2017 Results - Earnings Call Transcript

Reis, Inc. (NASDAQ:REIS) Q4 2017 Results Earnings Conference Call March 8, 2018 11:00 AM ET

Executives

Lloyd Lynford - CEO

Mark Cantaluppi - CFO

Analysts

Michael Graham - Canaccord

John Godin - Lake Street Capital Markets

Mike Crawford - B. Riley FBR

Operator

Good day ladies and gentlemen and welcome to the Reis Inc. Fourth Quarter 2017 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today's conference is being recorded.

I would now like to turn the call over to Mr. Lloyd Lynford, CEO. Sir, you may begin.

Lloyd Lynford

Thank you. Good morning. This is Lloyd Lynford, President and CEO of Reis. Joining me on our fourth quarter 2017 conference call are Jonathan Garfield, Co-Founder and Executive Vice President of Reis; Bill Sander, President and CEO of Reis Services; Mark Cantaluppi, Reis' Chief Financial Officer; and other members of Reis' senior management team.

First, I need to provide our legal disclaimer. Today's comments may include forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those described or implied in those forward-looking statements. These statements are based on currently available information. We do not plan to update any forward-looking statements to reflect subsequent events or circumstances or if our expectations change.

For more information relating to the risks and uncertainties involved in our forward-looking statements and the company generally, please see the risk factors and cautionary statements regarding forward-looking statements sections of our recent filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31st, 2017, issued earlier today.

This call is being broadcast live over the Internet and will be available for replay for a period of time following the call. A link to the webcast of this call as well as information on the replay is available at www.reis.com/events. Our earnings press release and Form 10-K were both issued this morning and can also be found at the Investor Relations portion of our website.

Today's call will include my comments on Reis' financial and operational results. I will then ask Mark to review our financial performance. After Mark's comments, we will open the telephone lines for analyst questions.

This morning, we issued two press releases. The first was our earnings press release with our fourth quarter results, which we will discuss in a few minutes. The other press release was an announcement that we have commenced a process to explore strategic alternatives focused on enhancing shareholder value.

Strategic alternatives to be considered may include a sale of the company, a merger or other business combination with another party, continuing with the current business plan or other potential alternatives.

The company has engaged Canaccord Genuity as its financial adviser and Fried Frank Harris Shriver & Jacobson as its legal counsel to assist in evaluating potential strategic alternatives.

There can be no assurance of the exploration of strategic alternatives will result in any transaction or other alternatives. The company has not set a timetable for completion of the process and does not intend to comment further regarding the process unless a specific transaction or other alternative as approved by the Board of Directors or the processes concluded or is otherwise determined that a further disclosure is appropriate or required by law. Also during this period, the company will cease providing guidance. In the Q&A session of this call, we request that you keep all of your questions to fourth quarter results.

The power and scalability of Reis' business model was clearly demonstrated in 2017's fourth quarter. EBITDA rose dramatically, increasing by 62% over the fourth quarter of 2016. The strong finish to 2017 continue to trend that was evident throughout the year.

After a year-over-year decline in the first quarter revenue, which suffered from a difficult comparison as we had enjoyed a significant amount of non-subscription revenue in the first quarter of 2016, each successive quarter posted improving topline results.

In the second quarter, revenue growth turned modestly positive followed by further strengthening to annual rate of 4.8% in the third quarter and to a 6.1% growth rate in the fourth quarter.

These improving results, together with the stabilization in our operating expense structure, which grew by 3.3% in 2017, were responsible for Reis' surging EBITDA growth of 19% in the third quarter and the 62% performance in the fourth quarter.

As we expense -- expect expense growth to remain modest in 2018 and total contracts and revenue to grow, we anticipate further EBITDA margin expansion as 2018 progresses.

Our improving financial performance is attributable, specifically, to higher renewal rates and an increasing level of new subscriptions, outcomes that are the direct result of the multiple investments we've made in recent years to expand our property databases and our disciplined growth in geographic and property type coverage.

The strength of our competitive position is evidenced not only in our revenue and EBITDA performance. Notably, our aggregate revenue under contract will be converted rabidly into revenue over the next 12 months is just under $36 million, a record total. Further indicators of senior management's robust confidence in Reis' future include, as we announced last month, the 12% increase in our quarterly dividend to $0.19 per share.

Along with the moderating pace in our operating expenses, our capital investments having increased in 2016 and 2017 as we built out our property databases are expected to trend lower each quarter during 2018.

The investments we completed in 2017 will, in our view, be transformative for Reis. The dramatic expansion of our cornerstone asset, the Reis property level database, now offers market information, transaction data, and building insights for all commercial properties throughout the nation regardless of location, size, or use type.

The achievement of what we call, Every Property, Everywhere, positions Reis to serve all commercial real estate professionals and use cases, both within and beyond the company's traditional property types and coverage boundaries.

In parallel with the development of Every Property, Everywhere, the company also built a new application programming interface or API, a delivery system that embeds Reis' data, legacy and newly launched into any clients and prospects internal systems regardless of platform.

But we remain relentless in enhancing Reis' competitive position and prospects. With respect to product development, with equipping our sales and marketing teams with the best possible data, analytics and technology, we have not broken stride going into 2018.

Already this year, we have introduced two significant enhancements to Reis SE and one major addition to the API. First, we launched a property lookup feature that provides superior intelligence on any commercially-zoned property or parcel in the nation.

Superior, because it is not merely a raw public record, but it compares a property's competitive position within its market based upon Reis' proprietary market trends and forecasts, all in an efficient and elegant interface that is central to how a subscriber gets maximum benefit from our Every Property, Everywhere capability.

This property lookup feature has long been requested by our user base and will be welcomed in the market as an alternative to the leading vendor the who's pricing and terms have long posed the challenge for many commercial real estate professionals.

Just last week, we more than doubled to a total of 125, the number of cities, for which we provide a full suite of reports and analytics for the self-storage sector at the market, submarket, and property levels.

And finally, we folded our portfolio, CRE solution, into the API for seamless delivery to lenders under pressure of the looming first quarter 2020 Financial Accounting Standards Board compliance deadline.

Taking these accomplishments one by one, let's begin with the property lookup feature or Every Property, Everywhere. This advance is the culmination of a multiyear, three-stage expansion initiative that commenced in 2014 and has borne fruit and milestones along the way. For example, in 2016, we expanded our sales comparables database to include all geographies, property types and transactions.

In 2017, we added all commercial land sales. Both in terms of accomplishable to accelerate our capture of revenue from investment sales brokerages, tax appeal firms, and other commercial real estate professionals operating on the front lines of the flow.

Every Property, Everywhere, which represents the third milestone and the fulfillment of our expansion initiative positions Reis to sell to new user groups within current client firms and to accelerate sales amongst tens and thousands of prospect firms that are operated at least in part beyond Reis' traditional coverage parameters.

Earlier this week, Reis also extended self-storage coverage to an additional 198 submarkets across 75 cities, raising the total number of submarkets and cities coverage to 477 and 125 respectively.

For the newly covered geographies, Reis offers a full suite of reports of the market, submarket, and property level, including rent comparables, sales comparables, and critically, as the sector confronts the possibility of oversupply, the tracking of new construction projects form proposal to completion.

Recent initiated coverage of self-storage in 2012, with the goal of bringing to the sector the same level of transparency and actionable intelligence with which we have long facilitated deal flow in other commercial real estate sectors.

Since then, the self-storage industry has prospered. Our clients' exposure has increased. And not coincidentally, developers introduced new competitive supply both within and beyond our initial set of 50 metropolitan areas.

The expansion of our self-storage coverage is responsive to these evolving realities and positions Reis to capture additional revenue from current clients and new prospects operating in this geographically broader and more competitive environment.

Already this year, we have also reported to our API, which enables us to support Every Platform, Everywhere, all elements of our portfolio, CRE module that addresses the forthcoming Financial Accounting Standard Board's regulatory requirements known as CECL, which stands for current expected credit loss impairment model.

Beginning in the first quarter 2020, CECL will require lenders to calculate the current expected credit loss for each loan at origination. Because all of the nation's 5,500 banks and all non-bank lenders must comply with CECL and none of them know the consulting firm attempting to help them possess the commercial real estate data and economic models necessary to support this new requirement, Reis is in a position to sell directly to lenders and to reach favorable business agreements with consulting firms that would essentially multiply our sales outreach as potential buyers are now in discussions with their auditors about meeting the looming compliance deadline.

Looking ahead, Reis will continue to align its product development investments with emerging trends and corresponding marketplace demand. Later this year, for example, we will more than double our coverage of the warehouse distribution sector, which has been, especially, dynamic of late, in part because it is a critical component of our nation's emerging preference for shopping online.

Product innovation and development remains one of Reis' longstanding competitive advantages. We have, as I stated at the outset of today's call, arrived at a transformational moment for Reis.

While we have long been the leader in providing market analytics and trends to the investor community, the launch of Every Property, Everywhere positions us to penetrate market segments in which we already have a presence, but can rapidly gain wallet share.

We are proud of the quarterly progress that Reis has made during 2017. And we are, especially, enthusiastic that the convergence of our initiatives and what they mean for our ability to grow.

By being able to offer Every Property, Everywhere on Every Platform, Everywhere, to Every User, Everywhere, we will be Reis has never been better poised to achieve sustained and robust revenue and EBITDA growth.

By maintaining our focus on what we do best, building databases, analytical products, and tools would support superior decision-making by commercial real estate professionals, Reis has and will continue to prosper.

Let me now turn the call over to Mark Cantaluppi.

Mark Cantaluppi

Thank you, Lloyd. The financial information I will be presenting this morning is for Reis' fourth quarter and year end 2017, results of which are more fully described in the financial results press release in the Form 10-Q issued earlier today.

In the fourth quarter of 2017, total revenue aggregated $12.2 million, which included $11.839 million of subscription revenue and $424,000 of other revenue. Total revenue increased $709,000 or 6.1%, and subscription revenue increased $500,000 or 4.4% from Q4 2016 to Q4 2017.

For the year ended December 31, 2017, total revenue aggregated $48.2 million, which included $46.8 million of subscription revenue and $1.4 million of other revenue. On an annual basis, total revenue increased $660,000 or 1.4%, and subscription revenue increased $1.4 million or 3.1%.

As a reminder, the subscription revenue is derived from subscription to one of our product offerings. Other revenue, specifically, includes revenue-related contracts for one-time custom data deliverables and one-time fees for settlements of previous unauthorized uses of Reis data.

The fourth quarter of 2017 continued our trend of improving revenue performance over the course of the year and marks our sixth consecutive quarter-over-quarter growth in subscription revenue since the second quarter of 2016 and the third consecutive quarter of total revenue growth.

The accelerating growth in revenue in the fourth quarter of 2017 was achieved with strong new business with a positive trend in our TTM base renewal rates, including price increases, improving to 88.3% at December 31st, 2017 from 85.7% a year earlier.

As the company has worked to improve customer retention, total performing quarterly renewal rates from 2016 have been replaced with higher rates in 2017. Although there may be quarterly variability as we look into 2018, our expectations are for further renewal rate improvements for the annual 2018 period over 2017.

Revenue from new business bookings continued to strong levels in the fourth quarter and were positively impacted by sales that were directly tied to a recent product improvements, including wins associated with our expanded sales transaction database with investment sales broker, property tax appeal firms, and tax assessors.

New business opportunities also come from our compliance team as they resolve cases, in which our intellectual property rights have been breached. The discovery of instances of unauthorized usage continues to create opportunities for Reis' compliance team to engage in productive conversations with firms regarding ongoing access to Reis data in accordance with the terms and conditions of the subscription agreement.

The company has been able to generate revenue through either one-time settlement payments or by signing up the non-compliant firm or individual to annual or multiyear Reis subscription. Although identified instances of non-compliance remain steady, the frequency in dollar amount of one-time settlements can fluctuate from quarter-to-quarter.

Revenue from one-time settlement payments aggregated $424,000 and $215,000 in the three months ended December 31, 2017 and 2016 respectively, and for the year, aggregated $1 million $388,000 and $931,000 in 2017 and 2016 respectively.

As is the case with many companies, net income for Reis was impacted by the effects of tax reform in 2017. For the fourth quarter, the net loss was $4.5 million or negative $0.40 per diluted share compared to the 2016 Q4 net loss of $230,000 or negative $0.02 per diluted share.

For the year ended December 31, 2017, the net loss was $3.2 million or minus $0.28 per diluted share. This is a decrease from the 2016 period net income of $2.8 million or $0.24 per diluted share.

The net losses in the fourth quarter and annual 2017 periods include the effects of the reduction of the federal tax rate from 35% to 21% and its impacts on the deferred tax assets recorded on the balance sheet. As a result of the rate change, we recorded an additional tax expense of $5.142 million at December 31st.

Reis management utilizes and monitors performance measures such as revenue, deferred revenue, aggregate revenue under contract, EBITDA and adjusted EBITDA. EBITDA is a net income before interest taxes, depreciation and amortization expense. Adjusted EBITDA is EBITDA before expenses related to non-cash stock-based compensation.

I would like to refer you to the cautionary language included in the MD&A of our annual report on Form 10-K and in our earnings release, both issued earlier today about the use of EBITDA, adjusted EBITDA, and aggregate revenue under contract as non-GAAP measures and the reconciliations of net income to EBITDA and adjusted EBITDA for the respective periods and deferred revenue to aggregate revenue under contract as of the respective balance sheet dates. These cautionary statements and reconciliations apply to all references made to these metrics on this call today. In addition, we present EBITDA and adjusted EBITDA on a segment and consolidated basis.

Reis Services EBITDA was $4.328 million in the fourth quarter of 2017, growth of $1.663 million or 62.4% over fourth quarter 2016. This net increase was primarily derived from a combination of our 6.1% revenue increase and a 10.7% decline in expenses for the Reis Services segment.

For the year ended December 31, 2017, Reis Services EBITDA was $15.1 million as compared to the 2016 period amount of $15.5 million. This $403,000 or 2.6% decline was primarily due to the higher level of Reis Services expenses in 2017 over 2016 of 3.3%, offset by the revenue growth I described earlier.

Expense declines in the fourth quarter of 2017 are from savings of operations, overhead, and reduced sales and marketing costs. The modest 3.3% expense increases are primarily due to the now normalized level of employment-related costs from hiring that occurred over the last year and our new run rate of overhead and bring expenses.

The effect of the quarterly revenue increase and the expense decline has contributed to the improving EBITDA and EBITDA margins we are reporting today. The EBITDA margin for the Reis Services segment was 35.3% and 31.4% for the quarter and year ended December 31, 2017.

As with total revenue and Reis Services EBITDA, consolidated adjusted EBITDA experienced the same improving trends with each passing quarter. Consolidated adjusted EBITDA for the three months ended December 31, 2017, was $3.784 million, growth of $1.474 million or 63.8%.

Consolidated adjusted EBITDA for the year ended December 31, 2017, was $12.827 million, a decline of 5.3%. Consolidated adjusted EBITDA margins are also improving to 30.9% and 26.6% for the quarter and year ended December 31, 2017 respectively.

We've made significant and well-considered investments in our database and to our delivery systems. As Lloyd spoke to earlier, we launched Every Sale, Everywhere and our API distribution platform in 2017 and recently announced Every Property, Everywhere and the expansion of coverage for self-storage in up to 125 markets. Capital investment supporting these initiatives totaled $8.6 million in 2017.

Following are some consolidated balance sheet statistics. Cash and cash equivalent at December 31st aggregated $19.7 million. During the year, we invested $8.6 million of cash on our website and database development and $1 million for other FF&E additions.

We also utilized over $7.8 million of cash to pay dividends at a quarterly rate of $0.17 per share and spent in excess of $3.4 million on stock repurchases. An annualized return of cash to shareholders of approximately 4.8% from these two resources. Our cash flow benefited from the receipt of option exercise proceeds of $2.9 million in the 12-month period and cash produced from operations of $16.2 million.

A highlight for Q1 2018 is the 11.8% increase in our dividend from $0.17 per share to $0.19 per share for the first quarter of 2018, which will be paid on March 14th. Customer receivables, net of allowances aggregated $9.7 million at December 31st. We are reporting deferred tax assets on the balance sheet of approximately $12.1 million.

Our tax expense and effective tax rate were significantly impacted by the Tax Cuts and Jobs Act enacted this past December, specifically to reduce federal corporate tax from 35% to 21%. As a result, we remeasured our DTAs at December 31st and recorded a provisional estimate of $5.1 million of expense.

Total liabilities aggregated $33.1 million, of which deferred revenue was approximately $26.5 million, the single largest reported GAAP deferred revenue balance for Reis. Additionally, aggregate revenue under contract, which is a balance sheet based performance metric we monitor, is the sum of deferred revenue and future revenue under non-cancelable contracts, for which we do not yet have the contractual right to bill and totaled $52 million at December 31st, our largest December 31st reported balance.

Of that $52 million, approximately $35.9 million relates to amounts under contract for the forward 12-month period through December 31, 2018. This is also the largest forward 12-month amount reported by Reis.

Deferred revenue, aggregate revenue under contract and its forward 12-month component were all positively influenced by the increase in multiyear contract signed in 2017. At December 31st, approximately 45% of our revenue is under multiyear contracts, up from 38% in 2016 and 33% in 2015. The average life of an in-place multiyear contract is 2.2 years.

Stockholders' equity was $88.5 million at December 31st. Total common shares outstanding aggregated 11.5 million, of which our Directors and senior management beneficially own approximately 22%.

This concludes my comments on the financial results for Reis' fourth quarter and year ended December, 2017.

At this time, I would like to open the call for questions.

Question-and-Answer Session

Operator

Yes sir. [Operator Instructions]

And our first question comes from the line of Michael Graham from Canaccord. You may begin.

Michael Graham

Hi. Thank -- and thanks for all the information guys. I just had two questions. One is on the renewal rate improvement. I know that you had been lapping some easier comps coming up because of some of the renewal rate headwinds that you had when you were going through some of the compliance measures that you were working on. But you also now have more a product suite that is becoming more complete. And I know, Mark, you mentioned that you expected renewal rates to keep improving. So, I'm just wondering if you could help us sort of bifurcate how much of that improvement you think is coming from the easier comps versus the product set.

And then, I also just wanted to ask about the CECL development. Have you seen anything in Reis' history that is as significant as that in terms of like increased regulation and just maybe you even give us a feel for what it's done to -- for your business in the past sort of compliance regulatory requirements like this in your customer base in the past. Thanks.

Lloyd Lynford

Sure. Hi, this is Lloyd. Thank you very much Mike. Yes, I would say with respect to the improving renewal rates, I think there are multiple factors of probably all relatively equal impact.

The one you said, which is getting, I think, better at our compliance initiatives, both in terms of discovering cases more quickly and kind of on an ongoing basis so nothing lingers or festers for long and getting people into appropriately-sized contracts, maintaining good relationships with them, getting account management resources deployed appropriately and that has contributed to an increase in what we call our compliance renewal rate, which was one significant factor.

I do think your other point, though, is a good one, which is to say as our product tenant has expanded. More and more people who engage with us, want to enter into multiyear contracts.

And so this increase in multiyear contracts for whatever reason, but that's one rationale, also helps, obviously, push up the renewal rates because it reduces the percentage of open accounts at the outset of any given year. So, there are number of things that, I think, work collectively to improve that rate, so just to give you a little color on that.

I think with respect to your second question, the answer would be, while we have benefited in the past occasionally from some regulatory changes, whether that had been -- was Basel II or Basel III, the implementation of the CCAR stress test on major banks over a few years ago, those have given us some kind of temporary or what do I might call limited benefit, but because they were largely focused on the major, major money center banks.

The difference with CECL, to answer your question, we've never seen anything like this. CECL is a radical change, not just on the banking landscape, not just of the 5,500-plus regulated banks, but all lenders including non-bank lenders, insurance companies, credit unions, thrifts down the pike.

And the other thing that's different it's not really a regulatory in the sense that it's being enforced by the actual regulators themselves, it's actually an accounting change that the auditors of these firms have to, as they work with their clients, ensure that there are appropriate systems and methodologies in place to estimate the loss that is likely to occur in the event of default on any one of these instruments.

So, we have never seen any kind of broad-based regulatory regime that would have as positive an impact on our portfolio CRE. Fortunately, we have had longstanding business in this world. As you know, we built tools and also acquired some assets to augment those tools a couple of years ago and we do some significant work related to portfolios, primarily under the CCAR and DFAST regimes.

But yes, as firms now scramble, particularly the banks scramble now to put their CECL regimes in place. This has significantly created the potential for our portfolio CRE and for Reis SE to benefit. So, I hope that gives you a little bit of color.

Michael Graham

Yes, that's helpful. Thank you Lloyd.

Lloyd Lynford

Thank you.

Operator

And our next question comes from the line of Mark Argento from Lake Street Capital. You may begin.

John Godin

Hey guys, this is John on for Mark. Appreciate you taking questions. Just kind of on the warehouse distribution center coverage. Number one, I guess, what kind of base are you looking out there? And number two, are there any other kind of specific property types in that vein that you'll be focusing on in 2018 on expanding? Thank you.

Lloyd Lynford

Yes, I'm sorry, could you just -- I got the other property types. Could you just restate the first, the warehouse?

John Godin

Yes. Okay. I guess like what kind of base are you working off of with the warehouse distribution center focus. I know you said you wanted a double coverage of that this year.

Lloyd Lynford

Yes. Okay. So, our current coverage of -- so a few years ago, I think it was about six years ago, we took our industrial coverage because -- and we separated it into two major use -- land use types. The market had really evolved to where we were looking at warehouse distribution versus what we might call flex R&D, the components. So, we do that in 47 metropolitan areas.

That was actually oppression distribution, if you will, or bifurcation of the coverage, because in the year since then, as online shopping and same-day delivery have become imperatives among many online retailers, warehouse distribution markets particularly has exploded. And you see a lot of -- we might generally call that the Amazon effect, but it certainly at this point, well beyond just Amazon.

So, having warehouse distribution as a separate breakout from industrial was very, very important to a point where we realized that we needed to significantly expand our coverage to -- we will have the exact number as the year unfolds, but give or take, I would say 100 markets by the end of the year.

Now, our ability to do that and this segues into the second part of your question with some other property types, although I would say they're not necessarily 18 initiatives, they're probably 19 initiatives. But our ability to move now into these property types and to do it more efficiently and quickly than in the past is definitely enhanced by our Every Property, Everywhere build of the database because we've already identified, if you will, much of the standing inventory for these different land use types.

So, yes, we will build out and have been tracking and building up historical time series and trends on warehouse distribution markets as we go to roughly about 100 market coverage by the end of the year, but we see a number of significant property types that are attracting capital flows that really demand, I believe, some enhanced coverage by Reis as the year unfolds.

And that will be, I think, what you're seeing in medical office. I think you're seeing a lot of demand for data centers. And there's another type of transaction that occurs with commercial real estate that is actually referred to as net lease. And net lease has become a particularly attractive form of investment vehicles for funds that cater to retirees given the steady income flow that a net lease can generate, particularly with the triple net expense structure related to it. So, those are just three more examples of property types beyond warehouse distribution that we a Reis think about as we want to build out our suite.

And remember, this is against the competitive landscape where everybody else is either focusing on one property type, whether that's exclusively conventional apartments, they're not even necessarily doing student housing, they're not doing affordable housing, they're not doing seniors housing.

And then across the commercial industrial landscape of multiple types of shopping centers, multiple types of industrial, self-storage, and the three other property types that I just mentioned.

So, this convergence, if you will, of this database that includes every commercial property, every parcel with these very disciplined, curated databases that focus in on the supply, demand and transaction trends within each sector is really, we think, a platform that nobody else has really devoted the time and resources and energy to build, which is why we are so bullish about the transformational opportunity that I spoke to in my opening remarks. Hope that gives you a little color?

John Godin

Yes, very helpful, guys. Thank you for the time.

Lloyd Lynford

Thank you.

Operator

And our next question comes from the line of Mike Crawford from B Riley. You may begin.

Mike Crawford

Thanks. What if, any, activity are you seeing as a result of Xceligent's implosion?

Lloyd Lynford

It's a very good question. So, we have seen specifically an uptick in the inquiries and some contracts from local firm that might have a more local or what we might describe as regional orientation.

So remember, those guys were more focused on the brokerage community than, let's say, Reis has historically been more focused on the debt and equity community with an ancillary kind of ability to service investment sales brokers, but to a -- only to a moderate degree.

And by the way, like I would say to you that the Xceligent's implosion -- but the other is the phasing out of LoopNet premium, which was another service that was designed to address kind of the needs of smaller users in local and regional markets.

So, if you put those two events together, a lot of those firms, who don't want to -- who are no longer using Xceligent or who don't want to necessarily be upsold to a comprehensive service is beyond their budget or their needs, are turning to Reis, particularly now, as we have the Every Sale, Everywhere, the Every Property, Everywhere capability to be able to fill in, and we have obviously backend entitlements that I have spoken to over the years, right, we have backend entitlement, so that we can turn on subscriptions that just meet the economic and business footprint of local and regional players to just those property types, so just those geographies, which dominate their business.

So, these are two very good trends for us as we move forward, particularly, in light of the investments that we have recently consummated and moved into the marketplace. Does that answer your question?

Mike Crawford

Yes. Thanks. And then why, again, were subscription revenues down sequentially in Q4?

Lloyd Lynford

Sequentially, into Q4, right? Subscription went down a little bit from Q3 to Q4. Some of that is a result of the renewal rate in the fourth quarter not being as strong as we would've liked.

There was some -- yes, it was, obviously, greater in fourth quarter of 2017 versus fourth quarter 2016, thus the improvement year-over-year. But it was not as strong as we would've hoped as we came out of the third quarter into the fourth quarter and that's -- that really was a contributing factor to that.

Mike Crawford

Okay. And then last question, as Mark said, that you do expect further renewal rate bookings improvement in 2018, and so -- is that including further aggressive pricing measures or those measures are done and so it's just the like-for-like--

Lloyd Lynford

Yes. No, I would say that we'd spoken to in the past a few years ago, some of our more aggressive pricing pressure to kind of align usage to subscription fees that were being paid, that was pretty much in our past. And I think one of the reasons for confidence, for our bullishness on the improving renewal rate as you have seen even given the modest dip that might have occurred in the fourth quarter, is that -- is what I refer to a little bit earlier in my comments is the increasing proportion of our contract base that is under multiyear. Meaning there is a smaller percentage of our contract base that is what we call an open renewal.

So, it's -- we have a good -- we have good visibility, if you will, on to things like not only revenue, not only cash, but also onto renewal rates given the proportionality of multiyear contracts that are in place.

Mike Crawford

All right. Thank you.

Lloyd Lynford

Thank you.

Operator

And I'm showing--

Lloyd Lynford

No, go ahead. Okay. Thank you all listened and participating on our call today. And we appreciate your continuing to support of Reis. And thank you and have a good day.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may all disconnect. Everyone, have a great day.