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Altus Group Ltd
Symbol AIF
Shares Issued 45,867,817
Close 2024-02-22 C$ 46.30
Market Cap C$ 2,123,679,927
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Altus Group earns $10.23-million in 2023

2024-02-22 16:28 ET - News Release

Mr. Jim Hannon reports

ALTUS GROUP REPORTS Q4 AND FISCAL 2023 FINANCIAL RESULTS; ANNOUNCES QUARTERLY DIVIDEND PAYMENT

Altus Group Ltd. has released its financial and operating results for the fourth quarter and year ended Dec. 31, 2023. The company's board of directors has approved the payment of a cash dividend of 15 cents per common share for the first quarter ending March 31, 2024. The company has also provided its financial outlook for fiscal 2024.

Q4 2023 Summary :

  • Consolidated revenues were $191.6 million, up 4.3 per cent (2.8 per cent on a constant currency basis).
  • Profit (loss) improved to $(0.1) million from $(8.8) million.
  • Earnings per share ("EPS") were $(0.00) basic and diluted, compared with $(0.20) basic and diluted.
  • Consolidated Adjusted EBITDA was $34.2 million, down 2.2 per cent (3.4 per cent on a constant currency basis).
  • Net cash provided by operating activities was $44.7 million, up 62.7 per cent, and Free Cash Flow was a record $40.1 million, up 109.3 per cent.
  • Adjusted EPS improved to $0.46 from $0.44.
  • Analytics revenues were $103.2 million, up 7.4 per cent (6.1 per cent on a constant currency basis), of which Recurring Revenue was $93.0 million, up 8.4 per cent (7.0 per cent on a constant currency basis). Adjusted EBITDA was $28.1 million, up 9.0 per cent (7.9 per cent on a constant currency basis), driving an Adjusted EBITDA margin of 27.3 per cent, up 40 basis points (40 basis points on a constant currency basis).
  • Analytics New Bookings were $26.3 million, down 23.2 per cent (23.4 per cent on a constant currency basis), of which Recurring New Bookings were $18.2 million, down 12.5 per cent (12.6 per cent on a constant currency basis).
  • At the end of Q4 2023, 74 per cent of the Company's total ARGUS Enterprise ("AE") user base had been contracted on ARGUS Cloud (Cloud Adoption Rate), compared with 64 per cent at the end of Q4 2022.
  • Property Tax revenues were $60.5 million, up 8.4 per cent (up 5.9 per cent on a constant currency basis), and Adjusted EBITDA was $13.3 million, down 7.6 per cent (10.5 per cent on a constant currency basis).
  • Appraisals and Development Advisory revenues were $28.0 million, down 12.5 per cent (12.4 per cent on a constant currency basis) and Adjusted EBITDA was $2.3 million, down 59.6 per cent (59.6 per cent on a constant currency basis).
  • As at December 31st 2023, Funded debt to EBITDA ratio as defined in the Company's credit facility agreement was 2.06 times, and Net debt to Adjusted EBITDA leverage ratio was 1.98 times.
  • The Company purchased 53,700 shares in Q4 2023 for $2.1 million under its Normal Course Issuer Bid ("NCIB").

2023 Summary:

  • Consolidated revenues were $772.8 million, up 5.1 per cent (2.2 per cent on a constant currency basis).
  • Profit (loss) was $10.2 million, compared with a loss of $(0.9) million,
  • Earnings per share ("EPS") were $0.23 basic and $0.22 diluted, compared with $(0.02) basic and diluted.
  • Consolidated Adjusted EBITDA was $135.0 million, down 0.2 per cent (4.2 per cent on a constant currency basis).
  • Net cash provided by operating activities was $71.4 million, down 7.3 per cent, and Free Cash Flow was $58.9 million, up 12.0 per cent.
  • Adjusted EPS was $1.64, compared with $1.89.
  • Analytics revenues were $392.9 million, up 13.5 per cent (9.4 per cent on a constant currency basis), of which Recurring Revenue was $354.6 million, up 17.5 per cent (13.2 per cent on a constant currency basis). Adjusted EBITDA was $95.5 million, up 33.1 per cent (26.1 per cent on a constant currency basis), driving an Adjusted EBITDA margin of 24.3 per cent, up 360 basis points (320 basis points on a constant currency basis).
  • Consistently delivered over $20 million in New Bookings per quarter despite a challenging external environment. Analytics New Bookings totalled $94.5 million, down 16.0 per cent (19.1 per cent on a constant currency basis), of which Recurring New Bookings were $64.5 million, down 13.3 per cent (16.3 per cent on a constant currency basis).
  • Reflecting the reset of the U.K. annuity billings, Property Tax revenues were $263.1 million, down 2.0 per cent (4.6 per cent on a constant currency basis), and Adjusted EBITDA was $69.3 million, down 20.9 per cent (23.1 per cent on a constant currency basis). Excluding the $33.2 million impact of the U.K. annuity billings in 2022, revenue growth was 11.8 per cent (8.9 per cent on a constant currency basis).
  • Appraisals and Development Advisory revenues were $117.6 million, down 3.2 per cent (3.1 per cent on a constant currency basis) and Adjusted EBITDA was $11.5 million, down 32.5 per cent (32.3 per cent on a constant currency basis).
  • The Company purchased 105,400 shares in FY 2023 for $4.6 million under its NCIB.

"2023 was a year of significant progress driving revenue, profit and free cash flow growth," commented Jim Hannon, Chief Executive Officer of Altus Group. "Looking ahead to 2024 and beyond, I'm excited about our innovation roadmap which will help clients achieve superior asset level and fund performance. Our technology will also drive continued operating efficiencies for our internal teams fuelling better customer service, margins and cashflow generation. With the anticipation of a more stable interest rate environment and increased CRE activity in the second half of 2024, we are well-positioned for success."

Q4 2023 Review

On a consolidated basis, revenues were $191.6 million, up 4.3 per cent (2.8 per cent on a constant currency basis), and Adjusted EBITDA was $34.2 million, down 2.2 per cent (3.4 per cent on a constant currency basis). Adjusted EPS improved to $0.46 from $0.44 in the fourth quarter of 2022.

Profit (loss) was $(0.1) million and $(0.00) per share, basic and diluted, compared with $(8.8) million and $(0.20) per share, basic and diluted, in the same period in 2022. Profit benefitted from higher revenues and lower costs following the completion of the 2022 global restructuring program, offset by higher operating costs as well as expenses associated with the Company's recently announced acquisitions.

Analytics revenues were $103.2 million, up 7.4 per cent (6.1 per cent on a constant currency basis). Organic Revenue growth was 6.9 per cent (5.6 per cent on a constant currency basis). Adjusted EBITDA was $28.1 million, up 9.0 per cent (7.9 per cent on a constant currency basis), driving an Adjusted EBITDA margin of 27.3 per cent, up 40 basis points (40 basis points on a constant currency basis). Revenue growth was driven by robust Recurring Revenue performance benefitting from the ongoing transition to cloud subscriptions, new sales, and a higher number of assets on the Valuation Management Solutions ("VMS") platform.

Recurring Revenue was $93.0 million, up 8.4 per cent (7.0 per cent on a constant currency basis). Sequentially, Recurring Revenue increased by 6.4 per cent from $87.4 million in the third quarter of 2023, driven primarily by seasonality in new sales and the frequency of valuations at VMS.

New Bookings totalled $26.3 million, down 23.2 per cent (23.4 per cent on a constant currency basis). Recurring New Bookings totalled $18.2 million, down 12.5 per cent (12.6 per cent on a constant currency basis), and Non-Recurring New Bookings were $8.0 million, down 39.8 per cent (40.2 per cent on a constant currency basis). New Bookings performance and growth was primarily impacted by the current economic environment.

Adjusted EBITDA growth and margin expansion benefitted from higher revenues, operating efficiencies, ongoing cost optimization efforts, and foreign exchange fluctuations.

Property Tax revenues were $60.5 million, up 8.4 per cent (5.9 per cent on a constant currency basis), and Adjusted EBITDA was $13.3 million, down 7.6 per cent (10.5 per cent on a constant currency basis). Growth in the U.S. and the U.K. was partially offset by a decline in Canada where the Ontario cycle extension is impacting growth. Adjusted EBITDA reflects higher compensation expenditures and ongoing investments in the Company's cybersecurity and other technology infrastructure, as well as geographic variances of the revenue base on a year-over-year view. The margin contribution varies by geography with the U.K. operations having the highest margin profile.

Appraisals and Development Advisory revenues were $28.0 million, down 12.5 per cent (12.4 per cent on a constant currency basis), and Adjusted EBITDA was $2.3 million, down 59.6 per cent (59.6 per cent on a constant currency basis). The performance reflects muted market activity in the current economic environment.

Corporate Costs were $9.5 million, down from $10.9 million in the same period in 2022.

Free Cash Flow was $40.1 million, up 109.3 per cent, and net cash provided by operating activities was $44.7 million, up 62.7 per cent.

As at December 31, 2023, bank debt was $308.6 million and cash and cash equivalents was $41.9 million (representing a Funded debt to EBITDA ratio as defined in the Company's credit facility agreement of 2.06 times, or a Net debt to Adjusted EBITDA leverage ratio of 1.98 times).

Q1 2024 Dividend

Altus Group's Board of Directors approved the payment of a cash dividend of $0.15 per common share for the first quarter ending March 31, 2024, with payment to be made on April 15, 2024 to common shareholders of record as at March 31, 2024.

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 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.

2024 Business Outlook

The business outlook is presented on a constant currency basis over fiscal 2023. Future acquisitions are not factored into this outlook.

"Looking ahead, we expect that the CRE macro pressures will begin to ease by the second half of the year as interest rates and credit conditions begin to stabilize," said Pawan Chhabra, Chief Financial Officer. "The top end of our Analytics outlook range assumes growth ramping in the second half. We remain focused on what's within our control - improving earnings and maximizing cash generation - which we're confident we can do even on a single-digit topline growth rate."

In fiscal 2024 management expects to grow consolidated revenue in the single digits, grow Adjusted EBITDA in the double digits, and improve Adjusted EBITDA margin over 2023. The business outlook for fiscal 2024 by reportable segment is as follows:

Key assumptions for the business outlook by segment:

Analytics : consistency and growth in number of assets on the Valuation Management Solutions platform, continued ARGUS cloud conversions, new sales (including New Bookings converting to revenue within Management's expected timeline), client and software retention consistent with 2023 levels, pricing action, the successful integration of Forbury, improved operating leverage, as well as consistent and increasingly stable economic conditions in financial and CRE markets.

Property Tax : continued market share gains, new sales, optimized client outcomes that result in improved contingency payments, and improved operating leverage with technology.

Appraisal & Development Advisory : improved client profitability and improved operating leverage.

Q4 & FY 2023 Results Conference Call & Webcast

Date: Thursday, February 22, 2024

Time: 5:00 p.m. (ET)

Webcast: https://events.q4inc.com/attendee/963724916

Live Call: 1-888-660-6785 (toll-free) (Conference ID: 8366990)

Replay: https://www.altusgroup.com/investor-relations/

About Altus Group

Altus Group is a leading provider of asset and fund intelligence for commercial real estate. We deliver intelligence as a service to our global client base through a connected platform of industry-leading technology, advanced analytics, and advisory services. Trusted by the largest CRE leaders, our capabilities help commercial real estate investors, developers, proprietors, lenders, and advisors manage risks and improve performance returns throughout the asset and fund lifecycle. Altus Group is a global company headquartered in Toronto with approximately 3,000 employees across North America, EMEA and Asia Pacific. For more information about Altus (TSX: AIF) please visit www.altusgroup.com.

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