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Altus Group Ltd
Symbol AIF
Shares Issued 45,903,936
Close 2023-11-09 C$ 48.94
Market Cap C$ 2,246,538,628
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Altus Group earns $929,000 in Q3 2023

2023-11-09 17:05 ET - News Release

Mr. Jim Hannon reports

ALTUS GROUP REPORTS Q3 2023 FINANCIAL RESULTS AND QUARTERLY DIVIDEND

Altus Group Ltd. has released its financial and operating results for the third quarter ended Sept. 30, 2023. The company's board of directors has approved the payment of a cash dividend of 15 cents per common share for the fourth quarter ending Dec. 31, 2023.

Q3 2023 summary (unless otherwise indicated, percentages are on an as reported basis in comparison to Q3 2022):

  • Consolidated revenues were $185.2-million, up 4.2 per cent (0.8 per cent on a constant currency basis);
  • Profit was $900,000, compared with $6.8-million;
  • Earnings per share (EPS) were two cents basic and diluted, compared with 15 cents basic and diluted;
  • Consolidated adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $29.7-million, down 9.9 per cent (13.8 per cent on a constant currency basis);
  • Net cash provided by operating activities was $36-million, up 49 per cent, and free cash flow was $34.1-million, up 96.5 per cent;
  • Adjusted EPS were 33 cents, compared with 42 cents;
  • Analytics revenues were $95.3-million, up 8.8 per cent (4.6 per cent on a constant currency basis), of which recurring revenue was $87.4-million, up 13.7 per cent (9.2 per cent on a constant currency basis), and adjusted EBITDA was $23.3-million, up 11.6 per cent (5.7 per cent on a constant currency basis), driving an adjusted EBITDA margin of 24.5 per cent, up 60 basis points (bps);
  • Analytics new bookings were $22.2-million, down 17.3 per cent (21.1 per cent on a constant currency basis), of which recurring new bookings were $13.9-million, down 20.7 per cent (24.3 per cent on a constant currency basis);
  • At the end of Q3 2023, 72 per cent of the company's total Argus Enterprise (AE) user base had been contracted on Argus Cloud (cloud adoption rate), compared with 55 per cent at the end of Q3 2022;
  • Property tax revenues were $60.8-million, up 0.1 per cent (down 4.1 per cent on a constant currency basis), and adjusted EBITDA was $12.7-million, down 28.7 per cent (31.9 per cent on a constant currency basis);
  • Appraisals and development advisory revenues were $29.3-million, down 0.8 per cent (0.6 per cent on a constant currency basis), and adjusted EBITDA was $3-million, down 27.6 per cent (27.4 per cent on a constant currency basis);
  • As at Sept. 30, 2023, funded debt to EBITDA ratio, as defined in the company's credit facility agreement, was 2.08 times, and net debt to adjusted EBITDA leverage ratio was 1.98 times;
  • The company purchased 51,700 common shares in Q3 2023 for a total cash consideration of $2.5-million under its normal course issuer bid (NCIB);
  • Subsequent to quarter-end, the company entered into definitive agreements to acquire the business of Forbury Property Valuations Solutions Ltd. and the commercial real estate valuation services business (REVS) of Situs Group LLC (a SitusAMC company).

Jim Hannon, chief executive officer of Altus, said: "The Altus team continues to improve the fundamentals of the business as we proceed through a protracted pull-back in commercial real estate capital deployment. We have rebalanced investments across business units and P&L [profit and loss] line items. We continue to invest in improving our operations to increase productivity and drive operating leverage. Our cash flow from operations significantly improved in the third quarter with the deployment and adoption of our new ERP systems [enterprise resource planning]. We have returned capital to investors through the repurchase of our shares, as we believe our own stock represents a compelling investment opportunity. And this week's acquisition announcements demonstrate our focus on expanding core capabilities in core markets."

Q3 2023 review

On a consolidated basis, revenues were $185.2-million, up 4.2 per cent (0.8 per cent on a constant currency basis), and adjusted EBITDA was $29.7-million, down 9.9 per cent (13.8 per cent on a constant currency basis). Adjusted EPS was 33 cents, compared with 42 cents in the third quarter of 2022.

Profit was $900,000 and two cents per share, basic and diluted, compared with $6.8-million and 15 cents per share, basic and diluted, in the same period in 2022. Profit was impacted by higher other operating costs and finance costs, due to higher interest rates on the company's bank credit facilities, as well as changes in the fair value of interest rate swaps, partially offset by lower costs due to the completion of the 2022 global restructuring program.

Analytics revenues increased to $95.3-million, up 8.8 per cent (4.6 per cent on a constant currency basis). The year-over-year growth consisted solely of organic revenue. Adjusted EBITDA was $23.3-million, up 11.6 per cent (5.7 per cent on a constant currency basis), driving an adjusted EBITDA margin of 24.5 per cent, up 60 basis points:

  • Revenue growth continues to be driven by strong recurring revenue performance. Growth continues to benefit from the continuing transition to cloud subscriptions, new sales and valuation management solutions asset expansion. Non-recurring revenue declined modestly.
  • Recurring revenue was $87.4-million, up 13.7 per cent (9.2 per cent on a constant currency basis). The company's recurring revenue model has proven to be resilient even though CRE (commercial real estate) transaction volumes are down. Sequentially, recurring revenue decreased modestly by 1.5 per cent from $88.8-million in the second quarter of 2023, primarily driven by seasonality at valuation management solutions.
  • New bookings totalled $22.2-million, down 17.3 per cent (21.1 per cent on a constant currency basis). Recurring new bookings totalled $13.9-million, down 20.7 per cent (24.3 per cent on a constant currency basis), and non-recurring new bookings were $8.4-million, down 11 per cent (15.2 per cent on a constant currency basis).
  • Adjusted EBITDA growth and margin expansion benefitted from higher revenues, operating efficiencies, continuing cost optimization efforts and foreign exchange fluctuations.

Property tax revenues were $60.8-million, up 0.1 per cent (down 4.1 per cent on a constant currency basis), and adjusted EBITDA was $12.7-million, down 28.7 per cent (31.9 per cent on a constant currency basis). The United States and United Kingdom practices posted year-over-year revenue growth, offset by a decline in Canada, where the Ontario cycle extension is impacting growth. Adjusted EBITDA was impacted by flat revenues alongside increasing expenditures related to compensation and investments in technology infrastructure.

Appraisals and development advisory revenues were $29.3-million, down 0.8 per cent (0.6 per cent on a constant currency basis), and adjusted EBITDA was $3-million, down 27.6 per cent (27.4 per cent on a constant currency basis). The appraisals practice was consistent with the prior year, offset by a nominal decrease in the development advisory practice.

Corporate costs were $9.3-million, down from $9.9-million in the same period in 2022.

Free cash flow was $34.1-million, up 96.5 per cent, and net cash provided by operating activities was $36-million, up 49 per cent.

As at Sept. 30, 2023, bank debt was $314.1-million, and cash and cash equivalents was $44.7-million (representing a funded debt to EBITDA ratio, as defined in the company's credit facility agreement, of 2.08 times, or a net debt to adjusted EBITDA leverage ratio of 1.98 times).

In connection with the proposed acquisition of REVS, the company has obtained a commitment from lenders to increase the company's borrowing capacity under its bank credit facilities, as required. The increase to the company's borrowing capacity will be effected by way of an amendment and restatement to the existing credit agreement relating to the company's existing credit facilities, and is subject to completion of the acquisition of REVS, satisfaction of typical conditions precedent and definitive documentation.

Q4 2023 dividend

Altus Group's board of directors approved the payment of a cash dividend of 15 cents per common share for the fourth quarter ending Dec. 31, 2023, with payment to be made on Jan. 15, 2024, to common shareholders of record as at Dec. 31, 2023.

Altus Group's dividend reinvestment plan (DRIP) permits eligible shareholders to direct their cash dividends to be reinvested in additional common shares of the company. For shareholders who wish to reinvest their dividends under the DRIP, Altus Group intends to issue common shares from treasury at a price equal to 96 per cent of the weighted-average closing price of the shares for the five trading days preceding the dividend payment date. Full details of the DRIP program are available on the company's website.

Altus Group confirms that all dividends paid or deemed to be paid to its common shareholders qualify as eligible dividends for purposes of Subsection 89(14) of the Income Tax Act (Canada) and similar provincial and territorial legislation, unless indicated otherwise.

Q3 2023 results conference call and webcast

Date:  Thursday, Nov. 9, 2023

Time:  5 p.m. (ET)

Webcast:  access at the company's website

Live call:  1-888-660-6785 (toll-free) (conference ID: 8366990)

Replay:  access at the company's website

About Altus Group Ltd.

Altus Group is a leading provider of asset and fund intelligence for commercial real estate. It delivers intelligence as a service to its global client base through a connected platform of industry-leading technology, advanced analytics and advisory services. Trusted by the largest CRE leaders, its capabilities help commercial real estate investors, developers, proprietors, lenders and advisers manage risks and improve performance returns throughout the asset and fund life cycle. Altus Group is a global company headquartered in Toronto with approximately 2,900 employees across North America, Europe, the Middle East and Africa, and Asia Pacific.

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