Mr. Jim Hannon reports

ALTUS GROUP REPORTS Q2 2024 FINANCIAL RESULTS AND QUARTERLY DIVIDEND

Altus Group Ltd. has released its financial and operating results for the second quarter ended June 30, 2024. The company's board of directors has approved the payment of a cash dividend of 15 cents per common share for the third quarter ending Sept. 30, 2024. The company has also provided an updated financial outlook for fiscal 2024.

Unless otherwise indicated, all amounts are in Canadian dollars and percentages are on an as-reported basis in comparison with Q2 2023.

Q2 2024 summary:

• Consolidated revenues were $206.7-million, up 0.7 per cent (down 0.6 per cent on a constant-currency* basis).
• Profit was $2.3-million, compared with $11.9-million.
• Earnings per share (EPS) were five cents, basic and diluted, compared with 26 cents, basic and diluted.
• Consolidated adjusted EBITDA* (earnings before interest, taxes, depreciation and amortization) was $36.8-million, down 17.6 per cent (19.2 per cent on a constant-currency basis).
• Adjusted EPS* was 45 cents, compared with 53 cents.
• Analytics revenues were $102.8-million, up 3.0 per cent (1.4 per cent on a constant-currency basis), of which recurring revenue* was $95.2-million, up 7.2 per cent (5.5 per cent on a constant-currency basis), and adjusted EBITDA was $26.8-million, up 12.9 per cent (10.3 per cent on a constant-currency basis), driving an adjusted EBITDA margin* of 26.1 per cent.
• Net cash related to operating activities was $39.8-million, up 83.5 per cent, and free cash flow* was $37.5-million, up 96.4 per cent.

* Altus Group uses certain non-GAAP (generally accepted accounting principles) financial measures such as adjusted earnings (loss) and constant currency; non-GAAP ratios such as adjusted EPS; total of segments measures such as adjusted EBITDA; capital management measures such as free cash flow; and supplementary financial and other measures such as adjusted EBITDA margin, net debt to adjusted EBITDA leverage ratio, new bookings, recurring new bookings, non-recurring new bookings, organic revenue, recurring revenue, non-recurring revenue, organic recurring revenue, and cloud adoption rate.

"Our analytics business continues to deliver resilient and growing recurring revenue and margin expansion, despite a challenging market," said Jim Hannon, chief executive officer. "Importantly, our cash generation continues to improve at a higher conversion rate. With upcoming product enhancements launching later this year, the company remains well positioned to deliver sustained growth in 2024 and beyond."

Q2 2024 review

On a consolidated basis, revenues were $206.7-million, up 0.7 per cent (down 0.6 per cent on a constant-currency basis) and adjusted EBITDA was $36.8-million, down 17.6 per cent (19.2 per cent on a constant-currency basis). Adjusted EPS was 45 cents, compared with 53 cents in the second quarter of 2023.

Profit was $2.3-million and five cents per share, basic and diluted, compared with $11.9-million and 26 cents per share, basic and diluted, in the same period in 2023. Profit (loss) benefited from higher revenues but was offset by higher employee compensation costs, acquisition and related costs associated with the termination of the REVS acquisition, costs relating to the 2024 global restructuring program, and changes in fair value of the company's interest rate swaps.

Analytics revenues increased to $102.8-million, up 3.0 per cent (1.4 per cent on a constant-currency basis). Organic revenue* growth was 1.6 per cent (0.0 per cent on a constant-currency basis). Adjusted EBITDA was $26.8-million, up 12.9 per cent (10.3 per cent on a constant-currency basis), driving an adjusted EBITDA margin of 26.1 per cent, up 230 basis points (210 basis points on a constant-currency basis).

Revenue growth was driven by resilient recurring revenue performance benefiting from new sales, a higher number of assets on the valuation management solutions (VMS) platform and contribution from Forbury (acquired in December, 2023), offset by lower non-recurring revenue* in the quarter compared with the prior year.

Recurring revenue was $95.2-million, up 7.2 per cent (5.5 per cent on a constant-currency basis). Organic recurring revenue* was $93.8-million, up 5.6 per cent (4.0 per cent on a constant-currency basis) from $88.8-million in the same period in 2023. Sequentially, recurring revenue increased by 3.8 per cent from $91.7-million in the first quarter of 2024, driven primarily by seasonality in the VMS business.

New bookings totalled $19.6-million, down 20.6 per cent (21.9 per cent on a constant-currency basis). Recurring new bookings were $12.7-million, down 31.0 per cent (32.2 per cent on a constant-currency basis), and non-recurring new bookings were $6.9-million, up 10.0 per cent (8.3 per cent on a constant-currency basis). New bookings performance continues to be impacted by the current economic environment.

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

Property tax revenues were $76.3-million, up 1.6 per cent (0.0 per cent on a constant-currency basis) and adjusted EBITDA was $18.8-million, down 33.3 per cent (34.4 per cent on a constant-currency basis), driving an adjusted EBITDA margin of 24.7 per cent, down 1,290 basis points (1,290 basis points on a constant-currency basis). The growth was driven by Canada and was offset by an overall decline in the United Kingdom and the United States. The annuity billings that commenced for the new U.K. cycle that reset in 2023 contributed $8.3-million in the quarter.

Appraisals and development advisory revenues were $27.8-million, down 8.9 per cent (8.9 per cent on a constant-currency basis), and adjusted EBITDA was $2.4-million, down 27.0 per cent (27.1 per cent on a constant-currency basis). Adjusted EBITDA declined primarily from reduction in revenues. The performance reflects muted market activity in the current economic environment as the business segment has some exposure to reduced transaction volumes and higher interest rates, resulting in fewer appraisals and new project starts.

Corporate costs were $11.3-million, compared with $10.6-million in the same period in 2023. The increase in corporate costs primarily reflects some one-time expenditures related to strategic corporate initiatives.

In early 2024, the company initiated a global restructuring program as part of a continuing effort to optimize its operating model. Restructuring costs were $2.6-million in the second quarter, totalling $8.0-million year to date. The restructuring costs primarily related to employee severance impacting the analytics and appraisals, and development advisory business segments, as well as corporate functions.

Free cash flow was $37.5-million and net cash related to operating activities was $39.8-million, both up 96.4 per cent and 83.5 per cent, respectively. On a year-over-year view, the second quarter in the prior year was impacted by the anticipated delayed billings from the enterprise resource planning system implementation. However, free cash flow in the second quarter of 2024 was higher than the second quarter of 2022 ($25.8-million), which represents a better comparative period and reflects the company's continued focus on cash generation.

As at June 30, 2024, bank debt was $306.4-million, and cash and cash equivalents were $49.5-million (representing a funded debt to EBITDA ratio, as defined in the company's credit facility agreement, of 2.11 times or a net debt to adjusted EBITDA leverage ratio of 1.97 times).

Q3 2024 dividend

Altus Group's board approved the payment of a cash dividend of 15 cents per common share for the third quarter ending Sept. 30, 2024, with payment to be made on Oct. 15, 2024, to common shareholders of record as at Sept. 30, 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

With the planned divestiture of the property tax business, Altus Group is withdrawing its guidance for the property tax segment and refined its 2024 business outlook at the midyear mark to reflect current market expectations of a slower than originally anticipated market recovery in the second half of 2024. The business outlook for continuing operations in fiscal 2024 by reportable segment is detailed in an attached table.

"As expressed by some of our largest clients, we expected CRE macro pressures to begin easing by the second half of the year, with lower interest rates and improving credit conditions as catalysts for increased market activity," added Pawan Chhabra, chief financial officer. "However, with the U.S. Fed holding off on interest rate cuts longer than anticipated, CRE market activity has not resumed at the levels originally expected. Clients have noted that the ongoing easing of inflation and growing expectations of upcoming Fed rate cuts are increasing their willingness to invest in CRE assets ahead of the anticipated boost in market activity. While we remain cautiously optimistic about a stronger selling environment in the second half of 2024 and into 2025, we believe it is prudent to adjust our full-year outlook to reflect a slower recovery in the second half of 2024.

"The operating and product enhancements we've been driving leave us strongly positioned for the future. We remain confident in our ability to accelerate growth at analytics to achieve double-digit revenue growth and approximately 35-per-cent adjusted EBITDA margin in fiscal 2026."

Key assumptions for the business outlook by segment for fiscal 2024 and analytics for fiscal 2026:

• 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 (commercial real estate) markets;
• Appraisal and development advisory: improved client profitability and improved operating leverage.

The consolidated outlook assumes that the property tax business moves to discontinued operations in 2024 and that corporate costs in the second half of 2024 will be nominally higher than the first half of 2024.

Q2 2024 results conference call and webcast

Date:  Thursday, Aug. 8, 2024

Time:  5 p.m. ET

Webcast:  A webcast will be available.

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

Replay:  A replay will be available on the company's investor relations 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, Altus Group'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 2,900 employees across North America, Europe, the Middle East and Africa, and Asia-Pacific.

We seek Safe Harbor.