Mr. Jim Hannon reports

ALTUS GROUP ANNOUNCES AGREEMENT TO SELL PROPERTY TAX BUSINESS TO RYAN, LLC

Altus Group Ltd. has signed a definitive agreement to sell its global property tax business to Ryan LLC, a leading global tax services and software provider, for total cash consideration of $700-million. In addition to the definitive agreement, Ryan has also committed to enter a $15-million Altus Market Insights subscription agreement at the close of the transaction, with an initial three-year term of $5-million per year.

"This transaction strategically positions Altus Group to focus on the substantial growth opportunities in our core analytics business unit to enhance revenue growth, expand margins and increase cash flows," said Jim Hannon, chief executive officer of Altus Group. "We are monetizing the value of our property tax business today so that we can invest in higher-value growth opportunities at a time when market demand for asset intelligence is accelerating and CRE investment activity is set to pick up. In addition to significantly transforming our company, this transaction improves our financial and strategic flexibility to drive growth and return capital to our shareholders."

"Altus Group has built an impressive property tax business that is highly regarded as a trusted adviser in the industry," commented G. Brint Ryan, chairman and chief executive officer of Ryan. "We believe we are the perfect home for its many talented employees and loyal customers, who will benefit from our combined platform to effectively manage their property tax liabilities. This acquisition, along with the commercial subscription for Altus Group's Market Insights offer, significantly bolsters our growing property tax practice."

Strategic rationale for divestiture

Altus Group and its board of directors routinely consider strategic alternatives to maximize shareholder value. Following a robust review of options for property tax, the company engaged in a sale process to unlock value for Altus Group's shareholders and to find the right long-term home for its property tax business.

Strategic merits of this transaction for Altus Group include:

• Sharpens strategic focus on analytics: concentrate resources on higher-growth analytics business unit, delivering more resilient organic revenue growth and more predictable cash generation. With focused operations, Altus Group can accelerate its strategic plan to lead CRE (commercial real estate) asset intelligence with new advanced analytics;
• Enhances financial and operational flexibility: enables Altus Group to invest organically and via acquisitions in analytics, return capital to shareholders, including through a significantly expanded share buyback program, and pay down debt to target levels. Additionally, Altus Group will benefit from more streamlined operations and a reduced corporate cost structure;
• Strengthens financial profile: Altus Group's revenue predictability will improve due to reduced jurisdictional cyclicality and volatility associated with the timing of tax appeal processing. Earnings quality will improve with an increased mix of high-margin recurring revenue, a reduced debt balance and lower interest expense. Pro forma financial performance is expected to be in line with other leading software, data and analytics companies.

Transaction details

The $700-million total cash consideration represents a 10.1-time 2023 adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) multiple for the business segment and over 16 times 2023 free cash flow (over 14 times net proceeds). After taxes, fees and restructuring expenses, net proceeds are estimated to be approximately $600-million.

At closing, Ryan will also enter into a $5-million-per-year Altus Market Insights subscription agreement with Altus Group, with an initial term of three years.

Altus Group expects the transaction to close in the first half of 2025, subject to customary closing conditions, including receipt of regulatory approvals. The closing of the transaction is not subject to any financing conditions.

Evercore is serving as financial adviser to Altus Group and provided a fairness opinion to Altus Group's board of directors. Stikeman Elliott LLP and Cravath, Swaine & Moore LLP are serving as legal counsel to Altus Group.

Use of proceeds

Postclosing, the company intends to use proceeds from the property tax divestiture to:

• Strengthen the balance sheet: pay down its outstanding bank debt ($328.6-million as at the end of March 31, 2024) to target 2.5 times pro forma financed debt to EBITDA ratio;
• Facilitate value-creating growth investments: pursue organic investments to accelerate the commercialization of advanced analytics offerings and continue evaluating high-quality, strategic acquisitions;
• Return capital to shareholders: following closing, the board of directors intends to expand the company's share buyback program from approximately $72-million today to $250-million and evaluate other options to return excess capital. The company intends to maintain its existing quarterly dividend payments of 15 cents per share;
• Restructure corporate overhead: with a more streamlined business unit structure, Altus Group will simplify back-office operations and ensure no stranded costs related to this transaction.

FY (fiscal year) 2026 targets for pro forma consolidated financial profile

Following the divestiture of property tax, Altus Group expects its new pro forma financial profile for FY 2026 will be:

• Consolidated revenue growth in the high single digits;
• Recurring revenue mix of approximately 75 per cent;
• Consolidated adjusted EBITDA margin between 24 and 26 per cent;
• Adjusted EBITDA to free cash flow conversion between 65 and 70 per cent.

"Sharpening our focus on the analytics business unit is expected to drive double-digit revenue growth and approximately 35-per-cent adjusted EBITDA margin for the segment in 2026," added Pawan Chhabra, chief financial officer of Altus Group. "With simplified and scaled operations, Altus Group will continue to optimize for peak performance."

All FY 2026 targets are presented in constant currency and on an organic basis.

Forecasting future results or trends is inherently difficult for any business and actual results or trends may vary significantly. Key assumptions for the FY 2026 targets assume that Altus Group has successfully divested the property tax business in the first half of 2025 and achieved its cost action plans, including the associated restructuring activities, as well as the following assumptions 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, improved operating leverage, as well as consistent and increasingly stable economic conditions in financial and CRE markets;
• Appraisal and development advisory: improved client profitability and improved operating leverage.

Planned investor updates:

• The company will host a conference call and webcast today (July 9, 2024) at 8 a.m. Eastern Time, to discuss the transaction.
• Altus Group also plans to host a conference call on Aug. 8, 2024, at 5 p.m. Eastern Time, to discuss its second quarter 2024 financial results.
• Following the close of the transaction, Altus Group plans to host an investor day to discuss its go-forward strategy and capital allocation priorities in more detail.

Property tax disposition announcement conference call and webcast

Date:  Tuesday, July 9, 2024

Time:  9 a.m. Eastern Time

Webcast:  A webcast will be available.

Live call:  1-888-660-6785 (toll-free in North America) (conference ID No. 8366990)

Q2 2024 financial results conference call and webcast

Date:  Thursday, Aug. 8, 2024

Time:  5 p.m. Eastern Time

Webcast:  A webcast will be available.

Live call:  1-888-660-6785 (toll-free in North American) (conference ID No. 8366990)

A replay of both webcasts will be available on the company's website.

About Altus Group Ltd.

Altus Group is a leading provider of asset and fund intelligence for commercial real estate. The company 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, the company's 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 3,000 employees across North America, Europe, the Middle East and Africa, and Asia-Pacific.

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