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Cision Ltd (NYSE:CISN)
Q1 2019 Earnings Call
May. 09, 2019, 5:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good afternoon, and welcome to Cision Ltd.'s first-quarter 2019 conference call. [Operator instructions] Please note, this event is being recorded. Before we get started, we would like to remind everyone that, in our call, we'll be making some statements that are not based on historical fact, including statements about management's beliefs or expectations. These statements are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act and relate to, among other things, our expected operating results and 2019 outlook, our integration of Falcon and TrendKite and the realization of the expected benefits from the transactions, our business strategy and the other matters relating to our business.
These forward-looking statements are intended to be covered by the safe harbors created by the federal securities laws. forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual operating results, financial position or performance to be materially different from those expressed or implied in our forward-looking statements. We believe that all forward-looking statements are based upon reasonable assumptions. However, we caution you, you should not place undue reliance on these statements.
We disclaim any obligation to update those forward-looking statements. For additional information concerning factors that could affect our financial results or cause actual results to differ materially, please refer to the cautionary statements included in our filings with the SEC and the sections entitled Risk Factors, including the risk factors set forth in our most recent annual report on Form 10-K, in which we discuss some important assumptions and business risks that could cause our actual results to differ materially from those in our forward-looking statements. In addition, please note that, on today's call, in our investor relations presentation and in our press release issued earlier today, we refer to the certain non-GAAP financial measures, including EBITDA, adjusted EBITDA and adjusted net income. These measures are reconciled to the most comparable GAAP measures in our financial statements and can be found in the investor presentation posted on our website under the investors tab.
Investors are cautioned that non-GAAP financial measures are not a substitute for GAAP disclosures and are advised not to place undue reliance on non-GAAP information. I would like to now turn the call over to Kevin Akeroyd, Cision's chief executive officer, to begin the call. Kevin?
Kevin Akeroyd -- Chief Executive Officer
Thank you, operator, and welcome, everyone, to Cision's first-quarter 2019 conference call. This afternoon, I will begin with some brief remarks regarding our Q1 FY '19 performance, I'll discuss a few of our recent accomplishments and conclude with an update of our key priorities for the remainder of FY '19. I will then turn the call over to Jack Pearlstein, our CFO, who will discuss our Q1 FY '19 financial results and provide an updated outlook for fiscal-year '19. We'll then turn it back over to the operator to kick off the question-and-answer session.
Both Jack and I will be working from the investor presentation that has been posted on the Investors section of our website. I'm now going to reference Slide 2 in that investor presentation. To kick us off today, we delivered a very solid first quarter of 2019. Our Q1 adjusted revenue, which adjusts for the impact of purchase accounting, came in at $188.9 million.
On a pro forma and constant-currency basis, which adjusts for the acquisitions of TrendKite and Falcon and the divestiture of our email marketing assets, our core PR revenues were up a record 4.9% organically in the first quarter versus the prior year. Our Q1 adjusted EBITDA was also strong, coming in at $63.1 million, up 8.4% versus the prior year. Our adjusted EBITDA margins in Q1 were 33.4%, right on expectations for the quarter as we diligently worked through our post-acquisition cost synergy realization. The strength of the overall business in Q1 provides us with confidence in our outlook as we move through the last three quarters of 2019.
In addition to delivering on the financial side of the business, we also saw continued progress against a number of our innovation priorities as we continue our push to make Cision the transformative cloud platform leader for the earned media and communications markets. Our total C3 customers are close to the 10,000 mark as of March 31, a solid start to the year. Due to our plan to quickly integrate the TrendKite and C3 platforms, we will be revising the C3 customer metric to one that better suits the business in future quarters, so stay tuned. Cross-sell bookings for Q1 came in at $3 million, up 8.4% from the year-ago period, with strong contributions from Cision Insights, distribution and now, for the first time this quarter, Falcon Social.
We anticipate continued momentum and cross-sell to continue to drive organic growth. I'm now going to shift to Slide 3. We continue to see exciting market-validating momentum that is accelerating with our attribution offerings. The overall adoption of this offering has us sitting at just over 2,000 clients now across Cision and TrendKite at the end of the quarter, with just over 500 now incorporating a paid version of the offering into their earned media management programs.
The TrendKite attribution offering has been in the market now for almost two years, and they've been able to monetize it from the beginning, getting up to 30% penetration of their customer base. We believe the lighter TrendKite version of PR attribution is something that will be very appealing to our mid-market customer base and will see broad adoption across thousands of clients over time. As you already know, we've used Impact, the Cision attribute offering, as a catalyst to drive multiproduct subscription-versus-transaction, higher ARPU and lower churn rate adopting customers. This continues to go well in the upper mid-market and lower enterprise market overall and with more clients paying to the entire solution above and beyond the bundled portion for free.
And finally, we continue to get six-figure commitments from clients, paying full freight in the large enterprise market. By combining Cision and TrendKite's attribution products with our in near-term launch of Audiences, which is activating the Cision ID's imitate and own marketing and advertising programs and tapping into the marketing budgets in the process, we feel like we now have the portfolio mix in markets that is really transformative. The overarching strategy at Cision has been that when we not only deliver the industry's first complete and integrated tech stack but introduce business results attribution via Impact and enable activation of pay-to-own and earned campaigns in programs by Audiences will finally enable the PR, comms and earned media professionals to modernize and be the same business results driving line of business function that marketing and advertising has become and budgets will follow. Not only will that allow us to shift material market share away from our existing competitors in our existing budgets and TAM, it'll widen the budgets and TAM that Cision can drive organic growth into.
It's exciting to finally be here, with the only legitimate solution in the entire global industry and that early results in client adoption are promising to say the least. As we roll these out beyond the U.S.A. going forward in the second half '19, really, we believe the momentum will accelerate even faster. Finally, it's worth noting that, as we say here on the slide, our near-term goal is to replicate TrendKite's success selling attribution and reach a similar 30% paying attach rate over the next few years.
On to Slide 4, our pro forma constant-currency organic revenue growth in Q1 of 4.9% was driven by strong performance of the Americas, up 7.1%, and APAC, up 14.1%, offset by weakness in EMEA, which was down 1.3% on continued declines in volume-based media monitoring in France and the U.K. Organic growth across the board was driven by bundled sales of software, analysis and distribution to both new and renewal customers. Excluding our acquisitions of TrendKite and Falcon, as well as our divestiture of the email marketing business, core Cision revenues were up 3% in Q1 on a pro forma constant-currency basis versus the prior year. Our core Americas business grew 7.1% in Q1, excluding our email marketing business, which was our strongest rate of growth in the region in four years.
Distribution revenues were strong in Q1 as were cross-sell booking to software distribution and insights. Our APAC region was up 14.1% organically on a constant-currency basis in Q1, turning in another solid quarter of performance across software distribution and insights. Our EMEA region was down 1.3% on a constant-currency pro forma basis in Q1 as volume-based media monitoring weakness in France and the U.K. offset otherwise solid performance in the Nordics and the rest of the European region.
We've spoken on previous calls about our efforts to turn around these two markets. Progress is being made, and we believe that our two recent senior management additions, Peter Low and Keir Fawcus from Kantar, are making significant progress on quickly lifting us back up to growth. On to Slide 5. Subscription customer growth in Q1 was approximately 5.5% versus the prior year, driven by strong new business wins and steady conversions of transaction contracts and subscription contracts.
ARPU for a subscription customer was also up versus the prior year, with an increase of approximately 0.7%, resulting from our growing the size of the bundle we sell to customers, offset by our shifting in transactional PR Newswire customers subscription contracts, which is great for the increase in proportion of our business under contract to subscription, but unfortunately, these come in at lower ARPU. Transaction trends remained as expected and per our strategy with the number of customers transacting with us during the quarter declining versus the prior-year period, but the transaction revenue per customer during the quarter increasing versus the prior-year period. Before I turn it back over to Jack, I wanted to spend a minute or two providing everyone an update on our integration process with respect to our Falcon and TrendKite acquisitions and to reiterate our strategic priorities for the remainder of 2019. Our acquisitions of Falcon and TrendKite, we've made significant progress over the last three months in integrating the businesses from a go-to-market perspective, from a back-office perspective and from a cultural perspective.
We are on track with our synergy plans for both of these deals, and we expect to slightly exceed our cost savings target for 2019. On the product integration front, we have already completed content integrations and are developing some exciting feature function integrations that will be available to both customer sets and new customers alike by the end of -- excuse me, by the end of Q2 2019. These product integrations and feature enhancements have allowed us to already complete dozens of cross-sell deals across legacy Cision, TrendKite and Falcon customers. The recent feedback from our branded and agency partners alike and the current demand for integrated solutions which we're working to close has us very enthusiastic about the potential of these two acquisitions, and how they can transform the overall business than we were in January when we completed the transactions.
And lastly, a couple minutes on Cision's strategic priorities for the remainder of the year. Our strategic priorities for the remainder of 2019 are to accelerate our organic growth rate across the business, further differentiate our category-leading product and service offering and drive our average revenue per subscription client through enhanced pricing and packaging and the sale of Cision's attribution products. On the product differentiation side, we continue to add features and integrations to the Cision Communications Cloud, or C3, that includes social analytics, sophisticated image monitoring and analytics, streamlined workflows, superior content discovery and even deeper integration back into the paid known systems that our clients have already invested in on the marketing and advertising fronts. This focus is already and will continue to shift to rolling out organic innovation solutions like Impact, Audiences and ImageIQ, as well as toward rapid integration of TrendKite and Falcon into Q3, which will represent exceptional differentiation in the marketplace versus our competitors.
We remain committed to ensuring that Cision has the feature-rich platform for PR and corporate comms professionals in the industry. And we will continue to devote significant development resources to enhance our category-leading product and service offerings that should result in an ever-improving customer experience. And driving increases in ARPU, as I mentioned, the ARPU continues to grow even while having great success converting our lower ASP but equally critical distribution-only customers to subscription versus transaction. However, to accelerate ARPU improvement even with the distribution conversion in full swing, our focus over the next few quarters will be on both pricing and packaging enhancements and continuing to raise the percentage of our deals that contain one or more of our attribution products.
We continue to experience solid traction across our sales organization and with our customers and expect to realize meaningful revenue from these products over the next several quarters. So in summary, a solid start to the year. We feel like we are really well-positioned to capture the growth opportunities in front of us, and we have our heads down on execution. I'll now turn it over to Jack Pearlstein, our CFO, who will provide and discuss our Q1 FY '19 financial results and provide an updated outlook for the remainder of fiscal-year '19.
Jack?
Jack Pearlstein -- Chief Financial Officer
Thanks, Kevin. I'll be begin with a review our first-quarter performance and conclude with an updated outlook for fiscal 2019. A number of the non-GAAP financial measures that I plan to reference have been provided in this afternoon's first-quarter FY '19 earnings release, along with our underlying calculations and definitions. Our Q1 2019 revenue came in at $185.8 million, a 3.6% increase over our Q1 2018 revenue of $179.3 million.
After adjusting for the reduction of GAAP revenue due to purchase accounting, our Q1 revenue came in at $188.9 million, which was up 4.8%. On a pro forma and constant-currency basis, which adjusts for the acquisitions of Falcon and TrendKite and the divestiture of our email marketing assets, our core PR revenues were up 4.9% versus the prior-year fiscal -- first quarter. As Kevin mentioned at the top of the call, our strong organic revenue growth in the quarter was driven by exceptional performance in the U.S., Canada, the Nordics and across our APAC region. We saw solid growth in subscription revenues, transaction revenues and cross-sell bookings during the first quarter in each of these markets., excluding our acquisitions of TrendKite and Falcon, as well as our divestiture of the email marketing business, core Cision revenues were up 3% in Q1 on a pro forma constant-currency basis versus the prior-year quarter.
After adjusting for the impact of currency, pro forma organic revenue growth in our APAC business was up 14.1% in Q1 versus the prior-year period. We continue to see strong momentum in the region with recent launches of sales efforts in South Korea, Japan and Australia and some early success selling software subscriptions and insight services. After adjusting for both the impact of currency and non-core revenues, pro forma organic revenue growth in the Americas was up 7.1% in Q1 versus the prior-year period. As mentioned earlier in the call, we were positively impacted by strong cross-selling, a rebound in transactional revenues, solid sales execution and outsized performance in Canada.
After adjusting for the impact of currency, pro forma organic revenue growth in our EMEA business was down approximately 1.3% in Q1 versus the prior-year period. Declines in our French and U.K. transactional monitoring businesses weighed down otherwise very strong performance across the Nordics, Germany and Portugal. Average number of subscription customers in Q1 2019, excluding email marketing, was approximately 45,300, roughly 5.5% higher than the average number of subscription customers in the same period a year ago.
The average annualized revenue per subscription customer during Q1 2019 on a constant-currency adjusted basis was approximately $11,600, a 0.7% increase versus the prior-year period. As Kevin also mentioned earlier in the call, the solid growth in ARPU on the software side of our subscription business was partially offset by a strong PR and transaction to subscription quarter that converted transaction contracts to subscription at lower than average ARPUs. On a transactional side, excluding email marketing, we had approximately 37,700 customers transact with us during the first quarter, an approximate 6.4% decrease from the same period a year ago. A portion of this decline relates to the conversion of transaction customers to subscription customers.
Average revenue for the quarter from customers that have transacted with us came in at approximately $1,440, which is roughly 4.7% higher than the same period a year ago. For those of you following along with the online presentation, I'm now moving to Slide 6. GAAP gross margin for Q1 2019 was 64.5%. Included in our cost of revenue for the first quarter was approximately $4.9 million of amortization related to acquired intangibles, approximately $0.9 million of acquisition-related costs and expenses and approximately $0.1 million of stock comp charges.
Excluding these items and adjusting revenue for the impact of purchase accounting, gross margin for Q1 2019 would have been 68.1%. For comparative purposes, gross margin for Q1 2018 on the same adjusted basis was 67.8%. Acquisition-related costs and expenses during Q1 2019 were approximately $19.3 million with roughly $0.9 million of these costs included within cost of revenue, $1.6 million included within sales and marketing, approximately $0.6 million included within R&D and approximately $16.2 million included within our general and administrative line. Acquisition-related costs and expenses during the quarter where heavier than normal driven by legal, accounting and a deal costs related to our acquisitions of Falcon and TrendKite.
Our divestiture of our email marketing assets, as well as the synergy actions we undertook in the first quarter to reduce ongoing run rate costs in the business. We expect this number to decline significantly each quarter as we move throughout the remainder of FY 2019. In Q1, we delivered another solid quarter of adjusted EBITDA, which came in at $63.1 million. Our focus on overall cost controls and our continued effort to further drive synergies in the business will continue to be a priority.
Adjusted EBITDA margins were 33.4% in the first quarter of 2019, slightly above our projected adjusted EBITDA margins post the acquisitions and the divestiture. Adjusted net income for the quarter of 2019 was $27 million, slightly below our range for the quarter due primarily to our internal modeling assumptions with respect to amortization expense. Adjusted net income for per share for Q1 came in at $0.19, flat roughly to the prior-year quarter on roughly 21 million more shares. Now onto our updated outlook for fiscal 2019 in Slide 7 on the presentation for those of you following along.
Due to the many moving pieces and parts involved in the two recent acquisitions and the divestiture of the email marketing business, we are providing guidance on a quarterly basis again for both Q2 in addition to the full-year 2019 in order to help everyone that is running a model. Both the Q2 and FY '19 outlook assume the inclusion of results from our acquisitions of Falcon and TrendKite from the date of their respective acquisitions through December 31, 2019 and the inclusion of results from our email marketing asset from January 1, 2019 through the date of divestiture. As highlighted in our earnings release this afternoon, we expect full-year GAAP revenue of between $773 million and $783 million and Q2 GAAP revenue of between $190 million and $192 million. The full-year GAAP revenue numbers were lower primarily because of a larger than anticipated purchase accounting adjustment to deferred revenue, which is, as I'll get to in a minute, despite foreign currency headwinds of approximately $2 million for the back three quarters of the year due to foreign currency exchange that strengthened the U.S.
dollar versus a number of foreign currencies. Excluding the impact from purchase accounting, we expect full-year revenue of between $782 million and $792 million, unchanged despite the $2 million of foreign currency headwinds for the back three quarters of the year that I just mentioned. We expect Q2 adjusted revenue of between $193 million and $195 million, which would imply constant-currency pro forma organic revenue growth of roughly 5% at the midpoint of the range. We expect adjusted EBITDA of between $270 million and $275 million for FY '19, unchanged.
And Q2 2019 adjusted EBITDA of between $65 million and $67 million. The full-year adjusted EBITDA guidance, as I mentioned, remains unchanged despite foreign currency headwinds of approximately $1 million for the back three quarters of the year. We expect adjusted EBITDA to continue to pick up throughout the remainder of the year as we realize the synergies from the Falcon and TrendKite deals, a significant portion of which were completed during Q1, and the predominantly subscription-based businesses of the two acquisitions that will continue to ramp. We expect FY 2019 adjusted net income of between $122 million and $125 million and Q2 2019 adjusted net income of between $28 million and $30 million.
We expect FY '19 adjusted net income per share of between $0.82 and $0.85, and Q2 2019 adjusted net income per share of between $0.20 and $0.21. The full-year 2019 guidance for each of these items was left unchanged, again, despite the currency headwinds. Additionally, within the earnings release furnished this afternoon we provided an updated full-year outlook for a number of other financial items, including depreciation expense, amortization expense, interest expense, cash interest expense, stock-based comp and capex. The outlook items provided on this call, as well as those included in today's earnings release assume exchange rates of $1.29, $1.12 and $0.74, respectively, for the British pound, the euro and the Canadian dollar to the U.S.
dollar. Additionally, our outlook for the fiscal 2019 excludes any additional acquisitions, divestitures or other unanticipated events. That concludes our prepared remarks. So I'll now turn it back over to the operator to begin the Q&A session.
Operator?
Questions & Answers:
Operator
[Operator instructions] The first question today comes from Bob Labick with CJS Securities. Please go ahead.
Bob Labick -- CJS Securities -- Analyst
Good afternoon, and congratulations on a nice start to 2019.
Kevin Akeroyd -- Chief Executive Officer
Thanks, Bob.
Bob Labick -- CJS Securities -- Analyst
I wanted to start with some of the comments, Kevin, you were making regarding the integration of Falcon and TrendKite. I was hoping you could expand a little and describe the cross-selling process a bit. For example, do you have to educate the customers on the social engagement tools of Falcon? Or are they already using social engagement in another way? Or were they already asking for it? How are they going to know about it? How long will it take for them to get to use it? And then likewise, on TrendKite, have your customers already embraced the significantly greater number of social influencers that you're bringing? Or what's it going to take to get into their mix?
Kevin Akeroyd -- Chief Executive Officer
Yeah, Bob, good questions. I would -- and hopefully, this isn't too over simplistic, but I'd think of it in two ways. One, TrendKite plus C3 coming together is one of those one plus one equal 10, right? The integrated comm stack for the comms buyer, right, in the historical and existing budgets and buyers that we sell to right now. We just have a lot more capability and a lot more products and things to sell them now in an integrated fashion.
So that's continuing to grow share and take deals away from our competitors in core communications. Falcon fits over here in the social marketing budget and that competes with people like Sprinklr and FoodSuite and Spredfast and Sprout Social that really is over there in the existing marketing TAM. And we believe that we are positioned really well to grow very aggressively organically in that on a stand-alone basis. And then probably not at the enterprise, but there are tens of thousands of accounts where Suzy is the VP of Marketing at 8 a.m., she is the VP of Advertising at 10 a.m., she is the VP of PR and Communications at noon and she is the VP of Social Marketing at 2 p.m.
and she doesn't want to have to buy Meltwater and FoodSuite. She wants to buy those two things together, which would be the integration between Cision and Falcon. So think of Falcon as an incremental TAM expansion opportunity, as well as even further differentiation in the core comms market. So hopefully that makes sense.
Bob Labick -- CJS Securities -- Analyst
Yeah.
Kevin Akeroyd -- Chief Executive Officer
OK.
Bob Labick -- CJS Securities -- Analyst
Great. Thanks. And then just as it regards to Slide 3 in the deck, the attribution, obviously very exciting stuff. I just wanted to kind of level set us back from kind of -- in Q4, I think, you gave us a 70 paying customers with an ACV of $1 million or so.
Now you have the 511 paying attribution customers. Some of those are TrendKite? Or level set the changes, please.
Kevin Akeroyd -- Chief Executive Officer
Yeah, Bob, the good news there is that hop from 100 to 500 came from all three pistons in the engine. It came from TrendKite customers paying. It came from the enterprise customers ignoring the premium and just paying six-figure full-freight deals. And more of the people that took the integrated premium in the bundle decided that they wanted more and bought up.
So we got it from all three angles, which is obviously fantastic.
Bob Labick -- CJS Securities -- Analyst
Yeah. That's great. Very exciting.
Kevin Akeroyd -- Chief Executive Officer
And good validation that the market really does want this. I'd be remiss if I didn't kind of beat that dead horse. A key part of the strategy has been that if we can finally deliver business results attribution to this market, build it and they will come. And we think that this quarter, right, it's just really good.
It's early days, but we think it's fantastic validation that that part of the strategy was right on.
Bob Labick -- CJS Securities -- Analyst
Great. Last one from me. I'll jump back. But in terms of renewals -- renewal rates of customers that have had C3 for over a year and stuff, how are you seeing the retention? Is it going as expected? Or any update you can give us there?
Kevin Akeroyd -- Chief Executive Officer
It continues to be multiple-hundred bps higher. So that hasn't changed over the last quarter, and it didn't -- that stayed constant in Q1 as well. So right, there's different customer cohorts, but across the board, it's a multiple-hundred bps improvement, and that's not slowing down.
Bob Labick -- CJS Securities -- Analyst
Super. Thanks so much.
Operator
Our next question today comes from Michael Turrin with Deutsche Bank. Please go ahead.
Michael Turrin -- Deutsche Bank -- Analyst
Thanks, and good afternoon. You're making some good progress here on organic revenue at near 5%, but the Q2 numbers may be a touch below what we were expecting on revenue given that tends to be a bit of a seasonally stronger quarter. Just wondering is there anything you have observed to start off the year which could lead toward the shape of this year becoming a bit more back-end loaded than what we've typically observed?
Jack Pearlstein -- Chief Financial Officer
No, I would say we were solidly sort of right in the middle of the guidance range that we posted. We certainly had a few sort of distractions during the quarter. Remember, we brought three different sales forces together. We closed on two acquisitions and divested of another piece of the business.
So I think, it was a challenging quarter for as just internally in terms of the number of distractions and the things we are trying to chase down, view that as behind us. And I think that gives us confidence that we'll pick things back up as we move throughout the rest of the year.
Michael Turrin -- Deutsche Bank -- Analyst
OK. And then on the subscriber -- the pro forma subscriber number, I just want to kind of quickly touch on the puts and takes there. You spelled out what's happening in ARPU there and so understand the mix shift that's taking place. Is there something similar that's happening in the subscriber line as well? The reason I ask is because it's just down a touch sequentially, and I'm just wondering if that's also related to the mix shift that's taking place there or if there's something else that we might not be appreciating that's happening there as well.
Jack Pearlstein -- Chief Financial Officer
I think that's just something that we sometimes see in Q1 and then we typically see that sort of a bounce back up from a sequential standpoint. So I think, on that one, you have to look at it year on prior year as opposed to sequential just because you have a little bit of seasonality in the business with respect to when renewals happen.
Michael Turrin -- Deutsche Bank -- Analyst
Good. Great. That's helpful. Thanks.
Operator
Our next question comes from George Tong with Goldman Sachs. Please go ahead.
George Tong -- Goldman Sachs -- Analyst
Hi. Thanks. Good afternoon. I also wanted to touch on the integration of Falcon and TrendKite.
Can you discuss when you expect these to be fully integrated into the C3 platform from a data and analytics and methodology perspective? And how much of our revenue benefit you might expect from this when it does happen?
Kevin Akeroyd -- Chief Executive Officer
Yeah. I think there is -- again, I'm going to try to keep this answer simple. You got -- you kind of make the progressions from single sign-on, right, with a couple different discrete applications is your first wave, that already exists. Second, you've got UI/UX integrated workflow integration.
When I made the comment that we are planning on launching a few substantial flavors by the end of Q2, i.e., by the end of June, next month. It's that flavor of integration, right, that we're going to actually be rolling impressive integrated workflow and UI level, not just single sign-on level integrations out of the end of Q2. And then there's obviously the back office, right, all the way down in the guts, the content, the data ingestion, right, all the taxonomies. The back office stuff takes the longest.
And we anticipate for TK, TrendKite, right, plus C3 that will be done by -- all the way down in level three will be done by calendar year 2019. So right -- and when I made the comment about C3 metrics, there's really not going to be a line between TrendKite and Cision anymore, two is going to become one. And the new platform will still be called C3, but there'll a lot of TrendKite in there. The Falcon is probably going to be a little bit longer term.
We will be introducing a couple of those workflow in UI sections in second half of 2019 to help facilitate that buyer that wants to buy integrated use cases and workflows. And we probably will never get to seamless integration in the back office because there's a several hundred million dollar suite, Sprinklr, right, killer with that product in and of itself, right? That's going to be a big growth vehicle, and as well as integrating back over with C3 for the comms budget. So as you know, right, we're running that as a separate business unit. And we will do a lot of future function integration with Falcon, but it won't get subsumed inside C3 the way TrendKite will by the end of '19.
George Tong -- Goldman Sachs -- Analyst
Got it. Very helpful. Your average revenue per customer for subscription customers and transaction customers both increased year over year organically, presumably because of mix and upsell. Can you -- aside from those factors, can you talk about some initiatives to further sustain the organic growth in ARPU for both of those types of customers?
Kevin Akeroyd -- Chief Executive Officer
Well, first and foremost, we don't think that we have come anywhere near the maximum optimization or maximum potential of the cross-sell, right? We now have, depending on the cloud, we've got six or seven different spends, right, that they're spending with a competitor right now. And on an average client, we're just shy of two. So we have nowhere near optimized the cross-sell opportunity even within the comms bucket and that's before you start looking at the spends associated in social marketing with Falcon. So I would say, if you want to use a corny baseball analogy, we're in the first inning in cross-sell, and that is going to be the primary answer for a long time is continuing to grow ARPU by going and getting that second, third and fourth product onto the consolidated platform.
And again, the customers are spending the money. They're just spending it across seven different vendors. So we're offering them a better integrated mousetrap, and we're simply collapsing existing spend. So that really is going to be the primary driver No.
1. Primary driver No. 2 is more deals are going to come in as multiproduct, right? There's obviously the upsell, product two, three, four, five, within the installed base. More and more details are actually coming in as full-suite or multiproduct deals.
That's No. 2. No. 3 is, we just continue to improve our win rate against our competition with better mousetraps.
And then No. 4 is, as you -- as we said in Slide 3, we've let the attribution genie out of the bottle. And more and more that is going to come in as paid rather than premium, and that's going to be a material ARPU lever as well. And when all that happens, churn is going to continue to reduce.
So I think those are the five oars in the water that are going to be the slow, steady pistons in the engine that continue to drive organic growth rate higher.
George Tong -- Goldman Sachs -- Analyst
Very helpful. Thank you.
Operator
Our next question comes from Tim McHugh with William Blair. Please go ahead.
Tim McHugh -- William Blair and Company -- Analyst
Thank you. Just wanted to ask -- so excluding TrendKite and Falcon, the 3% kind of organic growth number versus roughly 2% last year, I guess, where did you see the improvement in the core Cision business versus the trends last year?
Jack Pearlstein -- Chief Financial Officer
I think we've seen pretty strong growth in Canada as we mentioned. We've seen it across Europe, ex the sort of U.K. and France countries that we mentioned. APAC has continued to be strong, and we see some decent progress in a couple business units within the U.S.
as well. So I think a little bit comes from everywhere and it all added up to some slightly improved rates of growth.
Tim McHugh -- William Blair and Company -- Analyst
OK. And then on the acquisitions, I think you talked a lot about the product integration and some of those efforts. How has, I guess, the people retention been post deal? Have you been able to retain the key performers? Or I guess just an update on kind of that aspect of the integration process.
Kevin Akeroyd -- Chief Executive Officer
We've been very pleased that that has gone as planned. Obviously, I made the comment we're actually a little ahead on our synergies targets. And while the large synergy number certainly had a lot of people or headcount, right, reduction in it, that wasn't the only thing, but a lot of people in that. That's ahead of schedule.
And then obviously, OK, are you keeping the people that you want? And by and large, the answer to that is yes. And probably the more encouraging, that's at the senior level, right, the mid-level and at the individual contributor level. And as I was on record on in January, talent acquisition not just customer and products acquisition was a nontrivial piece of both of these acquisitions. We really felt like we were getting great people and great talent.
So to see it stick the way it has is really gratifying. I think we're even a little ahead on that. I've lost a few less people than I expected given the magnitude of the transaction.
Tim McHugh -- William Blair and Company -- Analyst
OK. And then, Jack, just to follow-up on the -- I think you were asked earlier about the 2Q guide and you had talked a little about 1Q. I guess, what's the implied pro forma kind of growth rate? Because we don't have the history for TrendKite and Falcon. And I guess, relative to this 5% number we saw for Q1, is it a lot different implied for Q2 or help us out maybe a little bit with that?
Jack Pearlstein -- Chief Financial Officer
No, it's a similar mix. So if you think about, let's just call it for round number purposes, 5%. I think, you sort of get a core growth rate on the legacy Cision side of roughly 3%. And that gets enhanced through the two acquisitions on a pro forma basis to get you up to something like 5%.
So I don't think it changes all that much from what we saw in Q1.
Kevin Akeroyd -- Chief Executive Officer
Maybe just one other reiteration, right, the difference between legacy Cision and TrendKite goes away, right, starting this quarter, it's one product now. So that line is going to continue to blur. So while that's a clean right now, we're not really going to really be talking about acquisition versus core because, right, acquisition and core are going to be the exact same product that customers buy by June.
Tim McHugh -- William Blair and Company -- Analyst
OK. Thank you.
Operator
Our next question comes from Matt Thornton with SunTrust. Please go ahead.
Matt Thornton -- SunTrust Robinson Humphrey -- Analyst
Yeah. Hey, guys. Good afternoon, guys. A couple if I -- a few.
Maybe to start with, Jack, just wondering if you can maybe give us just -- update just how were you thinking about leverage ratio maybe exiting this year or -- I can't remember the bogey you had used, whether it was four quarters or six quarters out, but any update there? And secondly, I think you mentioned maybe giving a different metric away from C3 as maybe not being the right KPI. I'm just kind of curious why that isn't at the right KPI, just any thought there. And then just finally coming back to, again, not to harp on it, but the 2Q guide, it's up about $5 million sequentially, if I did my math right, and last year you guys did $8 million. So it seems well below kind of what the norm has been.
So I guess I wanted to see if there's anything in the acquired businesses that maybe has a different pattern or a different linearity throughout the year that drives that or if there's anything else that maybe we're missing there.
Jack Pearlstein -- Chief Financial Officer
So I'll take the leverage one first. I would say that there we, I think, had said that we would be able to sort of get to something with a three on the front, hopefully, by the end of 2019. I think that given the acquisitions, while it's still possible, we probably think that that moved us back by one quarter. So still possible by the fourth quarter, but more likely in Q1 of 2020.
With respect to the guide, a lot of big currency changes under way between sort of last year Q1 sequentially to Q2 and this year sequentially from Q1 to Q2. And so I think that's a big part of why it looks different. I think the other piece is a little bit of a mix shift just in terms of business. And some of the headwinds that I think we're just trying to be conservative with as it relates to our U.K.
and French businesses. And then I'll turn over the C3 metric to Kevin, which is the last item that you asked about.
Kevin Akeroyd -- Chief Executive Officer
Yeah. I just -- and forgive me for repeating what I said with the last question. But as we basically -- right, we could show inflated -- artificially inflated numbers, right, and say, hey, let's throw x thousands of TrendKite customers or y amount of Falcon customers that also, then, buy a C3 module and to show it that way, but because, right, as I mentioned, those things are coming together and more and more of it is going to be purchased, right, together. It feels like it would be a less meaningful metric, and quite frankly, it would be an artificially inflated one as we put acquisition customers into that C3 number.
Because by definition, the integration is into C3, and therefore definition, right, if they're going to have any piece of C3 we'd put it in that tally. So it becomes a little less meaningful because it's going to be three products into one. And we -- neither Jack and I have any interest in artificially inflating metrics, simply because we're converting, right, a legacy customer installed base over into a new one.
Jack Pearlstein -- Chief Financial Officer
And I think we're intent on providing visibility into obviously what's going on in the business. I think that we just want to find a more meaningful metric that, I think, people can use to gauge the health of the business and the progress that we're making when we talk about organic growth rate.
Matt Thornton -- SunTrust Robinson Humphrey -- Analyst
Perfect. Appreciate the color, guys.
Operator
Our next question comes from Rob Oliver with Baird. Please go ahead.
Matt Lemenager -- Baird -- Analyst
Great. Thanks, guys. It's Matt Lemenager on for Rob. One on the -- the Google Mix recently made some changes to its Chrome browser.
And I was just curious, is there any impact that we should be thinking about? Because it was called out as a having an impact on a few other select software vendors. Can you help us think about what, if anything, that those changes to Google browser mean for either you or the earned media customer base, anything you think about there?
Kevin Akeroyd -- Chief Executive Officer
Matt, really, the answer is, it's going to be a complete nonissue, right? At the core of what Google did is they're going to improve the visibility and the UI of existing functionality. You can view -- whether it's a Google Chrome or whether it's Internal Explorer or the other major browsers, you can go in and you can actually go delete cookies, right, or block cookies now. You've been able to do that for years. Google is simply putting some lipstick on that exact same functionality that's been in Chrome for years.
So unless all of a sudden 15 years of consumer behavior, right, of blocking third-party cookies does some order of magnitude, right, increase because they've tweaked the UI, it's certainly not going to affect, right, Cision ID or Impact or Audiences. And it's probably the reason why you're not seen a bunch of people react to it across the ad tech landscape as a whole is the thought of what they could have done, right, remove cookies, kill them, switch them to Google ID. They could have done something very aggressive that would have been high-impact. What they decided to do is actually going to be extremely low-impact and it really will not affect Cision ID at all.
And the scarier thing, which is even more steeped in vague terms around footprinting or fingerprinting, also does not have an impact on Cision ID, and I won't bore the audience here with why that is. But the short answer to your question is, it's going to be a nonissue.
Matt Lemenager -- Baird -- Analyst
OK. Great. Thanks, Kevin. And then one on the subscription ARPU because that has -- like you've talked about it on this call and in the past, the shifting transaction customers because of headwind there.
Just curious, has that headwind been pretty consistent in terms of like the subscription ARPU up 0.7%, but there's a headwind there, that number would be reported higher. Is that headwind of the number that would be reported higher, has there been any difference quarter to quarter in what that subscription ARPU would be growing? I don't know if that's a calculation you guys do internally, but what that might have looked like without the transaction headwind?
Kevin Akeroyd -- Chief Executive Officer
Yeah. The answer is Q4 of 2018, one quarter ago and this quarter, we've really hit another gear. And we're having a lot of success getting those transaction customers over to subscription customers. So the percentage of them that go into that mix -- they come in at $4,000 or $5,000, right, rather than $12,000 or $15,000 and they just are a bigger percentage of the overall So again, I -- it's a headwind for that metric.
It's certainly not a headwind for the business because it's an extremely important thing for this business to get these things out of transaction and into subscription. So I think I'm stating the obvious, but it's a business tailwind, it's an ARPU metric headwind. And it's because -- it's not because we are not been successful on the software side, it's because we're being more successful in Q4 and Q1 on the conversion of lower priced subscription customers on the wire side.
Matt Lemenager -- Baird -- Analyst
OK. Got it. Thanks, guys.
Operator
Our next question comes from Tyler Radke with Citi. Please go ahead.
Tyler Radke -- Citi -- Analyst
Hey. Thank you. Good evening. I was wondering if you could talk about the European business.
I know you have some headwinds from the transactional piece of the business, but when should we start to expect that to normalize and when do you think that business can grow again on an absolute basis?
Kevin Akeroyd -- Chief Executive Officer
Yeah. I think the same answer that we gave last time. So forgive me for being repetitive. But how we answered that in Q4 was it's going to get incrementally better in Q1, incrementally better again in Q2, incrementally better again in Q3, and it should be mostly out of the system by Q4, right, of 2019.
So we kind of put a four-quarter get-healthy plan in place and that really hasn't changed since this call at the end of Q4. Still the same answer, still the same progress. As Jack mentioned, we have made some nice progress on it. The new leadership team is ramping up very nicely and have made some nice changes.
So progress was being made, but we'll reiterate it's a four-quarter get-healthy plan, it's not a four-month get healthy plan.
Tyler Radke -- Citi -- Analyst
Great. And then if I can ask a follow-up around the attribution product. And it sounds like you have both kind of a mid-market solution with TrendKite and an enterprise solution with Cision ID. But I'm just curious how that revenue breaks out today just between those two products? And where -- like, how we should be thinking about it? I see on Slide 3, you have, I think, 2,000 -- a little over 2,000 attribution customers.
But what is kind of the split between TrendKite and Cision ID there?
Kevin Akeroyd -- Chief Executive Officer
The ASPs we actually sell out, right, kind of the lift. If that was the question is how much less are we getting from it?
Tyler Radke -- Citi -- Analyst
Yeah. I was just curious if you think about your overall data attribution revenue how much of that is coming --
Kevin Akeroyd -- Chief Executive Officer
Three quarters Cision, one quarter TrendKite, right, Jack? Something like that as far as number of customers go? If that was the question is how many of the 2,000 customers are coming from the Cision products versus the TrendKite product? It's about three quarters of them --
Tyler Radke -- Citi -- Analyst
Yeah. That and then --
Kevin Akeroyd -- Chief Executive Officer
Are on the Cision [Inaudible] side. It's probably closer to half-and-half on the revenue side because, again, they charged it -- even though it's a much lower ASP, they charged for it for every single customer. I've, right -- we have chosen not to because we have put something similar to that ASP, see on the slide. We've said, "Hey, if you get off of legacy -- off of a legacy solution like Vocus or Gorkana, if you give us two products instead of one, if you give us the wire at subscription not transactional, right? If you give me that deal and I also know you're going to churn at 300 or 400 bps lower next year, I'm going to bundle x amount of impact in there, right, for free." So that's why you have it closer to half-and-half from a revenue standpoint even though it's three quarters to one quarter Cision on the number of clients side is because we are strategically bundling it without a price tag to shape the core P&L with that fashion where TrendKite didn't.
So hopefully that distinction makes sense.
Tyler Radke -- Citi -- Analyst
Yeah. That makes sense. And just to clarify, on the TrendKite, that's all mid-market ACV, that $7,000 kind of SKU, is that right?
Kevin Akeroyd -- Chief Executive Officer
Yeah. Right. And boy, I'm going to state the obvious here, but, right, if you look at $11,500 ARPU, whether you add the $7,000 number to it or whether you add the much higher Cision number to it, right, if this thing can scale the way we think it can, it goes without saying, this is going to be a very material ARPU improver and a very material organic growth driver. We're not going to proclaim any premature victory here because it's super early, but, right, the number is going to show you the kind of impact on ARPU this thing could have.
And if were right about the penetration rates, it's why we're pretty excited about it.
Tyler Radke -- Citi -- Analyst
Great. Thanks. Good luck.
Operator
Our next question comes from Matt Hedberg with RBC Capital Markets. Please go ahead.
Matt Hedberg -- RBC Capital Markets -- Analyst
Oh, yeah. Hey, guys. Thanks. Kevin, you've had a little bit more time to digest and start to work on the TrendKite integration.
And I'm curious, I mean, I think one of the advantages is this is just a more modern platform there. Can you talk to maybe some of the advantages that both customers might see from sort of a more slick back end of C3 running on TrendKite? And then maybe also sort of how that helps you guys from a cost perspective going forward?
Kevin Akeroyd -- Chief Executive Officer
Yeah. I think speed is one. And obviously, in the world of communications, where information is coming in, in real time, I need you to be able to use platforms like our in real time. The enhanced speed is a big one.
That's No. 1. No. 2, the rapid iteration, right? We are already shifting into that real SaaS company mode, where your shipping quality releases in weekly increments or monthly increments instead of quarterly big bangs.
So the quality level and the velocity of incremental innovation shipping, we can already taste that in additional speed. And then the interoperability, i.e., right, whether it's integrating with partners like MediaMath or [Inaudible] or Adobe or whether it's integrating with ourselves, like C3 [Inaudible] in the order of magnitude easier, faster and better to -- from an integration standpoint into this modern platform. So those are -- I'd say those are probably the top three. From the customers' standpoint, right, it's speed, the visualization and ease of use, it's power yet simplicity, data visualization, speed are some of the customer benefits.
And then, yeah, things like machine-based learning that can actually automate tasks in, say, things like content coding, which are just built into a modern platform like TrendKite that were not built into assets like Cision or Vocus because the code bases are so old that machine-based learning wasn't even a term. We're -- there's a lot of automation and opportunities like machine-based learning for us to take humans and therefore upright cost out of the question because the tech can do more and therefore I can spend less on humans to do it.
Matt Hedberg -- RBC Capital Markets -- Analyst
That's super helpful. And then now that, again, you're sort of -- you're progressing on the integration path of TrendKite and Falcon, as you sort of reassess sort of what will be the new C3, how do you kind of think about the portfolio today? I mean is it more sort of just like smaller tuck-in deals that you might expect going forward? Or is there any sort of broad whitespace that you sort of step back and say that's something that we're -- would be helpful to add to C3 on a go-forward basis?
Kevin Akeroyd -- Chief Executive Officer
I think it's the former. There are -- there will be, in the company's future, TAM expanding, right? Hey, let's go get into another bucket of spend, right? Let's go grow the TAM even further by getting into this category that's a logical bolt-on on to the C3 platform. I really -- that is futures, though. When the company is executing flawlessly on the existing, right, budgets, the existing marketplace share, the existing everything, we really don't need to do anything other than perhaps a tuck-in or two.
There's nothing material we need do on the M&A front to go after the two big buckets, which are the, right, the social marketing in Falcon the communications tech sack, right, with Cision/TrendKite and then the blending of the two. There's nothing left we've got to do other than integrate and execute there. We don't really need to buy much there.
Matt Hedberg -- RBC Capital Markets -- Analyst
Great. Thanks. Good luck, guys.
Operator
Our next question comes from Mark Murphy with J.P. Morgan. Please go ahead.
Matt Coss -- J.P. Morgan -- Analyst
Hi. Good afternoon. This is Matt Coss on behalf of Mark Murphy. Kevin, you mentioned customers buying up from the premium offering and then some of them skipping premium altogether as good market validation.
Is there anything else you've observed maybe not so obvious that you think speaks to the role up that you've been working on for the last couple of years and validating that market in just ways we wouldn't normally think about?
Kevin Akeroyd -- Chief Executive Officer
Well, I think the fact that Cision is back in taking share mode rather than losing share mode is, I think, bullet point one, right? No. 2, the fact that we continue to have more clients buying more products, right, is good validation that, hey, people really do want to buy these things together. They don't want to buy these from seven different vendors. Again, the ARPU impact a little bit muted by the PR Newswire business, but that continues to validate.
The internationalization, right, people not only have been working with seven vendors, but then there's two more in the U.K. and there's three more in Tokyo and there's two more in Shanghai and there's one more in Mexico City. We don't talk a lot about that, but right, not just collapsing it from a functionality standpoint, but from a geographic standpoint because we really are the only global player based on what we've done. So taking incremental categories of spend and taking incremental geos of spend, right, is also coming together nicely to be an organic growth driver.And then attribution, yeah, that's -- we really do think that's going to be the biggie because, again, if you remember, we only give you so much earned media coverage in that premium, and the second you want to track all of your earned media coverage, you're going to go ahead and have to pay for it in 2019.
And then pretty shortly thereafter, we're not going to need to bundle it anymore, right? It's going to come full freight for everybody. So the wave one of people buying up and the wave two of it not being a premium, but it's got a price tag on it right in door for everybody. We've still got those two halo effects of attribution organic growth driving as well. So hopefully that wasn't too much of a mouthful, but those are the things that are telling us that the strategy is intact and starting to work.
Matt Coss -- J.P. Morgan -- Analyst
That's great. Thank you. And one more, have you observed any increased buying in Japan ahead of the consumption tax rolling out there in October?
Kevin Akeroyd -- Chief Executive Officer
Jack, I don't think so. Not really. No, no. Nothing we've seen --
Matt Coss -- J.P. Morgan -- Analyst
OK. And apologies if I missed it, but did you mention the number of Impact to customers?
Kevin Akeroyd -- Chief Executive Officer
Yeah, it's on Slide 3.
Matt Coss -- J.P. Morgan -- Analyst
Thank you.
Kevin Akeroyd -- Chief Executive Officer
You bet.
Operator
This concludes our question-and-answer session. And I'd like to turn the conference back over to Kevin for some brief closing remarks. Kevin?
Kevin Akeroyd -- Chief Executive Officer
Thank you. In closing, I'd like to say that the Cision management team remains truly excited about the opportunities in front of us to continue to drive our revenue and margin growth globally, deliver innovation to our customers and create value for our shareholders. We believe the acquisitions of Falcon and TrendKite and the divestiture of our email marketing assets puts us in an even stronger position to capitalize on these opportunities. And last, I'd like to thank everyone for joining us on the call this afternoon.
Operator
[Operator signoff]
Duration: 60 minutes
Call participants:
Kevin Akeroyd -- Chief Executive Officer
Jack Pearlstein -- Chief Financial Officer
Bob Labick -- CJS Securities -- Analyst
Michael Turrin -- Deutsche Bank -- Analyst
George Tong -- Goldman Sachs -- Analyst
Tim McHugh -- William Blair and Company -- Analyst
Matt Thornton -- SunTrust Robinson Humphrey -- Analyst
Matt Lemenager -- Baird -- Analyst
Tyler Radke -- Citi -- Analyst
Matt Hedberg -- RBC Capital Markets -- Analyst
Matt Coss -- J.P. Morgan -- Analyst
