Mr. Robert Courteau reports
ALTUS GROUP REPORTS SECOND QUARTER FINANCIAL RESULTS FOR 2015
Altus Group Ltd. has released its financial and operating results for the second quarter ended June 30, 2015. On a consolidated basis, gross revenues increased 15.9 per cent to $104.8-million (compared with $90.3-million for the same period in 2014), driven by strong growth at its core high-growth business units. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) increased to $16.4-million (from $16-million in the same period last year). The strong performance from research, valuation and advisory (RVA) data solutions, and property tax significantly contributed to earnings growth during the quarter. However, the continuing impact from lower oil prices resulted in geomatics adjusted EBITDA to decline by $1.8-million year over year. For the six-month period year to date, gross revenues increased 14.8 per cent to $203.2-million (from $177-million last year) and adjusted EBITDA declined by 7.5 per cent to $28.6-million (from $30.9-million). In the second quarter of 2015, adjusted basic earnings per share were 28 cents, consistent with the same period in 2014.
Highlights
-
Maintained double-digit revenue growth for the seventh consecutive quarter;
-
High-growth business units (RVA, Argus software and property
tax) collectively had 13-per-cent organic top-line growth;
-
Sustained strong growth in recurring revenues from global asset and
investment management (GAIM) businesses, which increased by 53.1 per cent
year over year;
-
Returned $5-million to shareholders through quarterly declared
dividends of 15 cents per common share;
-
Strengthened overall offerings with four tuck-in acquisitions.
"I am very pleased with the performance of our high-growth business units, RVA, Argus and property tax, which collectively experienced a 29-per-cent increase in revenues in the second quarter from a year ago," said Robert Courteau, chief executive officer at Altus Group. "These results reflect the value of our growth investments, which position us well for global expansion of our commercial real estate data analytics and software solutions."
SUMMARY OF OPERATING AND FINANCIAL PERFORMANCE
(in thousands of dollars)
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2015 2014 2015 2014
Gross revenues
RVA $ 25,591 $ 21,804 $ 49,555 $ 42,063
Argus software 15,667 11,884 28,801 23,435
Property tax 36,388 26,320 67,451 51,114
Cost 11,433 11,506 22,994 22,713
Geomatics 15,890 18,940 34,809 38,035
Intercompany
eliminations (216) (106) (392) (321)
Total $104,753 $ 90,348 $203,218 $177,039
Recurring revenues
RVA data
solutions (1) $ 13,559 $ 7,817 $ 25,654 $ 15,498
Argus
maintenance and
subscriptions 7,779 6,121 15,022 11,911
Gross revenues $ 21,338 $ 13,938 $ 40,676 $ 27,409
Adjusted EBITDA
RVA $ 4,688 $ 5,553 $ 8,855 $ 9,910
Argus software 3,776 3,875 6,496 7,534
Property tax 11,406 7,913 16,996 14,465
Cost 1,438 2,165 3,131 3,920
Geomatics 2,193 3,968 5,418 8,295
Corporate (7,075) (7,436) (12,282) (13,204)
Total $ 16,426 $ 16,038 $ 28,614 $ 30,920
(1) RVA data solutions recurring revenues exclude Voyanta's
implementation services revenues and other miscellaneous
revenues.
RVA delivered double-digit revenue growth in the second quarter, driven by both organic and acquisitive growth predominantly in its data solutions segment. RVA data solutions increased 75.7 per cent year over year to $13.8-million, of which 40.8 per cent of the growth was organic from the addition of new clients and assets to its appraisal management data platform in the United States and Europe. In addition, the 2014 acquisitions of RealNet Canada Inc. and Voyanta Ltd. contributed to 34.9 per cent of the revenue growth in data solutions. Revenues from RVA's valuations and advisory services segment declined by 15.5 per cent, resulting from a standstill on a right-of-way project in Canada, completion of a significant and non-recurring economic consulting project in the Middle East, and a reduction in infrastructure and land services work in Canada. Growth in adjusted EBITDA was offset by lower revenues from valuations and advisory services and by the investments in data solutions, which included financing the early growth phase of Voyanta, new hires in Europe for appraisal management, and enhancements to the appraisal management data platform to enable integration between DataBridge, Voyanta and National Council of Real Estate Investment Fiduciaries (NCREIF) data.
In the second quarter, Argus delivered double-digit growth across all of its reporting categories, with a solid increase in its recurring revenues. Licence sales were up 27.3 per cent year over year to $5.2-million, benefiting from strong sales of Argus Enterprise (AE), its flagship commercial real estate asset management and investment platform. Maintenance and subscription revenues increased by 27.1 per cent to $7.8-million, supported by high renewal rates, an increased AE user base, a price increase on DCF maintenance contracts and an overall increase in subscription contracts. Additionally, revenues from services were up by 60.3 per cent to $2.7-million, reflecting an enhanced operational focus on the sale of services to AE customers. Adjusted EBITDA declined slightly in the second quarter as investments continued in new product development and expansion of the sales team and operational capacity to support future growth. Strengthening of the exchange rate against the Canadian dollar improved Argus's revenues by 10.2 per cent and adjusted EBITDA by 11.2 per cent.
During the quarter, Argus launched version 10.6 of AE, which includes a number of beneficial enhancements that improve the user experience, including improved productivity features for users accustomed to Argus DCF 15, new reporting capabilities and an enhanced sensitivity module. These enhancements are expected to attract new users and drive additional conversions to AE. During the quarter, Argus also advanced the beta version of Argus Express, a software-as-a-service-based web application that enables users to perform a high-level investment analysis tailored to the specific needs of a user.
In the second quarter, the global property tax business unit delivered strong revenue growth, with a 39.5-per-cent year-over-year increase in North America and a 34.9-per-cent year-over-year increase in the United Kingdom. The strong performance in North America was primarily driven by the 2014 acquisition of the SC&H state and local tax business in the United States (which contributed 34.4 per cent of the growth in North America) and increased settlement of contingency assignments in Canada, while higher activity levels in occupied ratings contributed to increased revenues in the United Kingdom. The improvement in adjusted EBITDA benefited from a 16-per-cent increase in earnings from North America and a 129.2-per-cent increase in earnings from the United Kingdom. The increase in adjusted EBITDA in North America resulted from higher revenues in Canada, as well as acquisitive growth from SC&H state and local tax; however, continued organic investments in the United States and the national tax platform partially offset these gains. In the United Kingdom, adjusted EBITDA improved on increased revenues.
The cost consulting and project management business unit delivered consistent performance in the second quarter, both in North America and in Asia Pacific. Adjusted EBITDA decreased, impacted by higher compensation costs in North America and Asia Pacific.
At geomatics, financial performance continued to be impacted by seasonality and the anticipated challenges associated with the slowdown in capital spending in its core Western Canadian market. Financial results were affected by both reduced activity in the oil and gas sector and overall fee reductions. In response to some of these challenges, the business unit continued to diversify beyond the oil and gas sector and with its various cost-cutting initiatives.
In the second quarter, on a consolidated basis, favourable exchange rates against the Canadian dollar benefited revenues by 3.1 per cent and adjusted EBITDA by 6.4 per cent. Acquisitions contributed 10.9 per cent to gross revenues and 4.6 per cent to adjusted EBITDA.
The company made approximately $3-million in growth investments in the second quarter. These investments are aimed at growing future revenues, including a significant portion of high-margin, recurring revenue streams from data solutions and software offerings.
In the second quarter, corporate costs were $7.1-million, compared with $7.4-million in the same period in 2014. The decrease in corporate costs was due to lower consulting and professional fees. For the six-month period, corporate costs were $12.3-million, compared with $13.2-million for the same period in 2014.
Under IFRS (international financial reporting standards) accounting, profit (loss) for the second quarter was $2.7-million, or eight cents per share basic and diluted, compared with a loss of $700,000, or a loss of two cents per share basic and diluted, in the same period in 2014. For the six months ended June 30, 2015, profit (loss) was $3.4-million, or 11 cents per share basic and 10 cents per share diluted, as compared with $4.2-million, or 15 cents per share basic and 14 cents per share diluted, in the same period in 2014.
During the quarter, the company amended its bank credit facility, further strengthening its financial flexibility. The amendments include a five-year extension, an increased maximum financed-debt-to-EBITDA ratio from 2.75:1 to 3:1, lower bank margins and additional borrowing flexibility. At the end of the second quarter, Altus Group's balance sheet remained strong, giving the company the financial flexibility to pursue its growth strategy. The company's bank debt was $134.5-million, representing a financed-debt-to-EBITDA leverage ratio of 1.98 times.
In recent months, the company completed four tuck-in acquisitions that strengthened its service offerings. The acquisition of Maxwell Brown Group Surveyors Ltd. strengthened the property tax business unit's market share and regional scale in the United Kingdom market and enhanced its United Kingdom tax offering with complementary service lines in support of current growth initiatives. Further, the acquisitions of Hoffer Wilkinson & Associates Ltd., MPC Intelligence Inc. and Integris Real Estate Counsellors all strengthened RVA's Canadian offerings and enhanced expertise with specialized professionals.
2015 second quarter results conference call and webcast
Date: Thursday, Aug. 6, 2015
Time: 5 p.m. (ET)
Webcast: On the Altus Group website under the investors section
Live call: 1-866-225-0198 (toll-free) or 416-340-2218 (Greater Toronto Area and international)
Replay: 1-800-408-3053 or 905-694-9451 (passcode 2255621)
SELECTED FINANCIAL INFORMATION
(in thousands of dollars, except per-share amounts)
Three months ended Six months ended
June 30, June 30,
2015 2014 2015 2014
Gross revenues $ 104,753 $ 90,348 $ 203,218 $ 177,039
Canada 50% 60% 53% 62%
United States 32% 24% 30% 22%
Europe 13% 10% 12% 10%
Asia Pacific 5% 6% 5% 6%
Adjusted EBITDA 16,426 16,038 28,614 30,920
Adjusted EBITDA margin 15.7% 17.8% 14.1% 17.5%
Profit (loss) 2,694 (673) 3,410 4,210
Earnings (loss) per share
Basic $ 0.08 $ (0.02) $ 0.11 $ 0.15
Diluted $ 0.08 $ (0.02) $ 0.10 $ 0.14
Adjusted basic $ 0.28 $ 0.28 $ 0.44 $ 0.54
Dividends declared per share $ 0.15 $ 0.15 $ 0.30 $ 0.30
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands of dollars, except per-share amounts)
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2015 2014 2015 2014
Revenues
Gross revenues $ 104,753 $ 90,348 $ 203,218 $ 177,039
Less disbursements 6,034 6,481 13,451 14,489
Net revenue 98,719 83,867 189,767 162,550
Expenses
Employee compensation 66,245 54,316 130,548 106,634
Occupancy 4,217 3,559 8,482 7,133
Office and other operating 12,885 11,030 22,397 18,576
Amortization of intangibles 8,796 3,827 16,976 7,219
Depreciation of property,
plant and equipment 1,716 1,362 3,224 2,520
Acquisition related expenses
(income) 324 37 324 196
Share of (profit) loss of
associates 790 410 824 813
Restructuring costs 1,200 8 1,200 30
(Gain) loss on sale of certain
business assets (3,483) - (3,483) -
Operating profit (loss) 6,029 9,318 9,275 19,429
Finance costs (income), net 3,473 8,774 6,130 12,535
Profit (loss) before income taxes 2,556 544 3,145 6,894
Income tax expense (recovery) (138) 1,217 (265) 2,684
Profit (loss) for the period
attributable to equityholders $ 2,694 $ (673) $ 3,410 $ 4,210
Other comprehensive income
(loss)
Items that may be reclassified to
profit or (loss) in subsequent
periods
Cash flow hedges 228 198 320 359
Currency translation differences (2,219) (4,326) 14,708 1,217
Share of other comprehensive
income (loss) of associates 658 (28) 1,000 34
Other comprehensive income
(loss), net of tax (1,333) (4,156) 16,028 1,610
Total comprehensive income (loss)
for the period, net of tax,
attributable to equityholders $ 1,361 $ (4,829) $ 19,438 $ 5,820
Earnings (loss) per share
attributable to the
equityholders of the company
during the period
Basic earnings (loss) per share $ 0.08 $ (0.02) $ 0.11 $ 0.15
Diluted earnings (loss) per share $ 0.08 $ (0.02) $ 0.10 $ 0.14
We seek Safe Harbor.
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