AIF:CC - Altus Reports First Quarter 2022 Financial Results

TORONTO, May 04, 2022 (GLOBE NEWSWIRE) -- Altus Group Limited (?Altus” or “the Company”) (TSX: AIF), a market leading Intelligence as a Service provider to the global commercial real estate (“CRE”) industry, announced today its financial and operating results for the first quarter ended March 31, 2022.

First Quarter 202 2 Summary:

Unless otherwise indicated, all amounts are unaudited and in Canadian dollars and percentages are in comparison to the same period in 2021.

• Consolidated revenues were $167.6 million, up 22.2% (23.6% on a constant currency* basis).
• Consolidated profit (loss), in accordance with IFRS, was $(11.5) million, down from $2.6 million.
• Consolidated earnings (loss) per share, in accordance with IFRS, was $(0.26) per share basic and diluted, compared to $0.07 and $0.06 respectively.
• Consolidated Adjusted EBITDA* was $17.7 million, up 2.9% (4.3% on a constant currency basis).
• Adjusted EPS* was $0.27, down from $0.34.
• Altus Analytics revenues were $80.3 million, up 48.1% (50.0% on a constant currency basis), of which Over Time revenues* were $68.0 million, up 59.0% (60.2% on a constant currency basis), and Adjusted EBITDA was $11.2 million, up 10.0% (11.2% on a constant currency basis).
• Altus Analytics Bookings* totaled $28.0 million, up 31.7% (32.4% on a constant currency basis), of which organic growth in Bookings* was 11.8% (12.5% on a constant currency basis).
• At the end of the first quarter, 44% of the Company’s total ARGUS Enterprise (“AE”) user base had been contracted on ARGUS Cloud (cloud adoption rate)*.
• CRE Consulting revenues were $87.4 million, up 5.4% (6.4% on a constant currency basis) and Adjusted EBITDA was $16.2 million, up 8.1% (9.2% on a constant currency basis).
• Entered into a Normal Course Issuer Bid to repurchase for cancellation up to 1,345,142 common shares.
• As at March 31, 2022, bank debt was $306.7 million and cash and cash equivalents were $46.8 million (representing a funded debt to Adjusted EBITDA leverage ratio of 2.60 times, as such ratio is defined in the Company’s credit facility agreement, or a net debt to Adjusted EBITDA leverage ratio* of 2.37 times).
• Subsequent to quarter end, acquired Rethink Solutions Inc., the developer of the itamlink property tax management software.

*Altus Group uses certain non-GAAP financial measures such as Adjusted EBITDA, Adjusted EPS, constant currency, and net debt to Adjusted EBITDA leverage ratio, as well as supplementary financial measures and other measures such as Bookings, Organic Bookings, Over Time revenues, and cloud adoption rate. Since these measures are not standard measures under GAAP, they may not be comparable to similar measures reported by other entities. Refer to the “Non-GAAP and Other Measures” section for more information on each measure and a reconciliation of Adjusted EBITDA to Profit (Loss) and Adjusted Earnings (Loss) per Share to Profit (Loss).

Jim Hannon, Chief Executive Officer of Altus said:

“Altus delivered a solid first quarter with robust financial performance and steady progress against our strategic initiatives to strengthen our position as the leading Intelligence as a Service provider to the commercial real estate industry. The investments we have been making in our business are generating clear results, as demonstrated by the strength of our double-digit organic sales growth. As we look to the balance of 2022, we remain strongly positioned to deliver sustained topline growth at expanded margins.”

Summary of Operating and Financial Performance by Business Segment:

Comparative figures have been restated to reflect accrued variable compensation costs within the respective business units.

*Altus Group uses certain supplementary financial and other measures such as Bookings , Over Time revenues, AE software maintenance retention rate and cloud adoption rate. Since these measures are not standard measures under GAAP, they may not be comparable to similar measures reported by other entities. Refer to the “ Non-GAAP and Other Measures ” section for more information on each measure.

Q1 2022 Review

On a consolidated basis, revenues were $167.6 million, up 22.2% (23.6% on a constant currency basis) and Adjusted EBITDA was $17.7 million, up 2.9% (4.3% on a constant currency basis). Organic revenue growth was 10.5% (11.3% on a constant currency basis). Adjusted EPS was $0.27, compared to $0.34 in the first quarter of 2021.

Consolidated profit (loss), in accordance with IFRS, was $(11.5) million, down from $2.6 million in the same period in 2021. In addition to the higher Adjusted EBITDA, profit (loss) was impacted by a higher amortization of acquisition-related intangibles related to the acquisitions of Finance Active, StratoDem Analytics, and Reonomy in 2021, restructuring costs related to the 2022 global restructuring program, and losses due to foreign exchange and on equity derivatives. This was partially offset by lower additional acquisition and related transition costs, and profit from the Company’s GeoVerra joint venture.

Altus Analytics revenues increased to $80.3 million, up 48.1% (50.0% on a constant currency basis). Organic revenues were up 18.4% (19.0% on a constant currency basis). The acquisitions of Finance Active, StratoDem Analytics and Reonomy represented 29.7% of the total 48.1% revenue growth. Over Time revenues were $68.0 million, up 59.0% (60.2% on a constant currency basis). Adjusted EBITDA was $11.2 million, up 10.0% (11.2% on a constant currency basis).

• The healthy growth in Over Time revenues benefitted from higher sales across all the key solutions, both organic and from acquisitions, with strong customer expansion as well as new customer additions. On an organic basis, Over Time revenues were up 23.2% (up 24.3% on a constant currency basis). Sequentially, Over Time revenues grew 13.8% (13.9% on a constant currency basis) from $59.8 million in the fourth quarter of 2021.
  
• Bookings in the first quarter increased by 31.7% year-over-year to $28.0 million (32.4% on a constant currency basis). Organic growth in Bookings was 11.8% (12.5% on a constant currency basis).
  
• As at the end of the first quarter, 44% of Company’s total AE user base had been contracted on ARGUS Cloud, compared to 42% at the end of the fourth quarter of 2021, or 22% as at the end of the first quarter of 2021.
  
• Adjusted EBITDA improved on higher revenues, although was impacted by the acquisition of Reonomy, purchase price accounting adjustments totaling $1.0 million to Finance Active’s and Reonomy’s deferred revenues, as well as higher investments related to accelerating the Company’s data strategy. The purchase price accounting adjustments had a 1.2% impact to Adjusted EBITDA margin. Margins were also impacted by the full quarter impact of Reonomy which does not yet reflect the anticipated synergies that are expected to be achieved in the second half of the year.

CRE Consulting revenues increased to $87.4 million, up 5.4% (6.4% on a constant currency basis) and Adjusted EBITDA was $16.2 million, up 8.1% (9.2% on a constant currency basis).

• Property Tax revenues were $58.5 million, up 6.9% (8.0% on a constant currency basis) and Adjusted EBITDA was $13.3 million, up 19.7% (21.1% on a constant currency basis). The growth was a result of a very positive rebound in the U.S. following the impact of COVID-19-related delays experienced last year.
  
• Valuation and Cost Advisory revenues were $29.0 million, up 2.3% (3.5% on a constant currency basis) and Adjusted EBITDA was $2.9 million, down 25.1% (24.8% on a constant currency basis).

Corporate Costs were $9.7 million, compared to $8.0 million in the same period in 2021. Corporate costs increased primarily due to higher expenditures in Information Technology, compensation, travel and initiatives primarily related to the leadership transition.

Beginning in the first quarter of 2022, Altus initiated a global restructuring program which resulted in restructuring costs of $8.4 million for the quarter ended March 31, 2022, of which $3.8 million related to the Company’s ongoing efforts to rationalize its leased office space in certain markets to increase efficiency as the Company offers its employees a flexible hybrid working model and strives to achieve synergies with recent acquisitions. The remainder of the restructuring costs are primarily related to employee severance costs reflecting the synergies Altus Group is realizing from recent acquisitions, efficiencies gained from investments in technology, and the ongoing evolution of the Company’s target operating models in support of its strategic initiatives. The Company expects this program to continue throughout the year.

As at March 31, 2022, bank debt was $306.7 million and cash and cash equivalents were $46.8 million (representing a funded debt to Adjusted EBITDA leverage ratio of 2.60 times, as such ratio is defined in Altus’ credit facility agreement, or a net debt to Adjusted EBITDA leverage ratio of 2.37 times).

About Altus Group

Altus Group provides the global commercial real estate industry with vital actionable intelligence solutions driven by our de facto standard ARGUS technology, unparalleled asset level data, and market leading expertise. A market leader in providing Intelligence as a Service, Altus Group empowers CRE professionals to make well-informed decisions with greater speed and scale to maximize returns and reduce risk. Trusted by most of the world’s largest CRE leaders, our solutions for the valuation, performance, and risk management of CRE assets are integrated into workflows critical to success across the CRE value chain. Founded in 2005, Altus Group is a global company with approximately 2,600 employees across North America, EMEA and Asia Pacific. For more information about Altus (TSX: AIF) please visit altusgroup.com.

Non-GAAP and Other Measures

Non-GAAP Financial Measures

We use certain non-GAAP measures as indicators of financial performance. Readers are cautioned that they are not defined performance measures, are not generally accepted financial measures nor do not have any standardized meaning under IFRS and may differ from similar computations as reported by other similar entities and, accordingly, may not be comparable to financial measures as reported by those entities. We believe that these measures which include non-GAAP financial measures and non-GAAP ratios as defined in National Instrument 52-112 " Non-GAAP and Other Financial Measures Disclosure " (“ NI 52-112 ”), may assist investors in assessing an investment in our shares as they provide additional insight into our performance. These non-GAAP measures should not be considered in isolation or as a substitute for financial measures prepared in accordance with IFRS.

Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) is a non-GAAP financial measure which represents profit (loss) from continuing operations before income taxes, adjusted for the effects of: occupancy costs calculated on a similar basis prior to the adoption of IFRS 16, finance costs (income), net - other, depreciation of property, plant and equipment and amortization of intangibles, depreciation of right-of-use assets, finance costs (income), net - leases, acquisition and related transition costs (income), unrealized foreign exchange (gains) losses, (gains) losses on disposal of right-of-use assets, property, plant and equipment and intangibles, share of (profit) loss of joint venture, impairment charges, non-cash share-based compensation costs, (gains) losses on equity derivatives net of mark-to-market adjustments on related restricted share units (“RSUs”) and deferred share units (“DSUs”) being hedged, (gains) losses on derivatives, restructuring costs (recovery), (gains) losses on investments, (gains) losses on hedging transactions, and other costs or income of a non-operating and/or non-recurring nature. Refer to the below for a reconciliation of Adjusted EBITDA to profit (loss).

Adjusted EBITDA Margin is a non-GAAP financial ratio which represents the percentage factor of Adjusted EBITDA to revenues. We use Adjusted EBITDA and Adjusted EBITDA Margin to evaluate the performance of our business, as well as when making decisions about the ongoing operations of the business and our ability to generate cash flows.

Adjusted Earnings (Loss) is a non-GAAP financial measure which represents profit (loss) from continuing operations adjusted for the effects of: occupancy costs calculated on a similar basis prior to the adoption of IFRS 16, depreciation of right-of-use assets, finance costs (income), net - leases, amortization of intangibles of acquired businesses, unrealized foreign exchange losses (gains), (gains) losses on disposal of right-of-use assets, property, plant and equipment and intangibles, non-cash share-based compensation costs, losses (gains) on equity derivatives net of mark-to-market adjustments on related RSUs and DSUs being hedged, interest accretion on contingent consideration payables, restructuring costs (recovery), losses (gains) on hedging transactions and interest expense (income) on swaps, acquisition and related transition costs (income), losses (gains) on investments, share of (profit) loss of joint venture, impairment charges, (gains) losses on derivatives, other costs or income of a non-operating and/or non-recurring nature, and the tax impact on these items. We use Adjusted Earnings (Loss) to facilitate the calculation of Adjusted Earnings (Loss) per Share (“Adjusted EPS”).

Adjusted EPS is a non-GAAP financial ratio calculated by dividing Adjusted Earnings (Loss) by the basic weighted average number of shares adjusted for the effects of the weighted average number of restricted shares. We use Adjusted EPS to assess the performance of our business before the effects of the noted items, because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Refer to the below for a reconciliation of Adjusted EPS to profit (loss).

Constant currency is a non-GAAP financial measure that presents the financial results and non-GAAP measures within this press release by translating monthly results denominated in local currency (US dollars, British pound, Euro, Australian dollars, and other foreign currencies) at the foreign exchange rates of the comparable month. We adjust for currency so that our financial and operational performance can be viewed without the impact of fluctuations in foreign currency exchange rates against the Canadian dollar, thereby facilitating period-to-period comparisons of the Company's business performance.

Other Measures

We also apply certain other measures to allow us to measure our performance against our operating strategy and against the results of our peers and competitors. Readers are cautioned that they are not standardized financial measurements in accordance with IFRS and may differ from similar computations as reported by other similar entities and, accordingly, may not be comparable to financial measures as reported by those entities. These other measures, which include supplementary financial measures as defined in NI 52-112 should not be considered in isolation or as a substitute for any other measure of performance under IFRS.

Bookings is a supplementary financial measure for the Altus Analytics business segment. We define Bookings as the annual contract value (“ACV”) for new sales of our recurring offerings (software, Appraisal Management solutions and data subscriptions) and the total contract value (“TCV”) for one-time engagements (consulting, training and due diligence). The contract value of renewals is excluded from this metric, with the exception of additional capacity or products purchased at the time of renewal. Organic Bookings is a supplementary financial measure which represents Bookings, excluding Bookings from business acquisitions that are not fully integrated, prior to the first anniversary of the acquisition. We use Bookings and Organic Bookings as measures to track the performance and success of our sales initiatives, and as an indicator of future revenue growth.

Organic Revenue is a supplementary financial measure which represents revenue, consistent with IFRS 15, Revenue from Contracts with Customers , excluding the revenues from business acquisitions that are not fully integrated, prior to the first anniversary of the acquisition. We use Organic Revenue to evaluate to assess revenue trends in our business on a comparable basis versus the prior year, and as an indicator of future revenue growth.

Over Time revenues is a supplementary financial measure consistent with IFRS 15, Revenue from Contracts with Customers , for the Altus Analytics business segment. Our Over Time revenues are comprised of software subscription revenues recognized on an over time basis in accordance with IFRS 15, software maintenance revenues associated with our legacy licenses sold on perpetual terms, Appraisal Management revenues, and data subscription revenues. For greater clarity, this measure does not include revenue from distinct on-premise licenses which is recognized upfront at the point in time when the software is delivered to the customer. Organic Over Time revenues represents Over Time revenues, excluding the Over Time revenues from business acquisitions that are not fully integrated, prior to the first anniversary of the acquisition. We use Over Time revenues and Organic Over Time revenues as measures to assess revenue trends in our business, and as an indicator of future revenue growth.

AE software maintenance retention rate is a supplementary financial measure calculated as a percentage of AE software maintenance revenue retained upon renewal; it represents the percentage of the available renewal opportunity in a fiscal period that renews, calculated on a dollar basis, excluding any growth in user count or product expansion. We use AE software maintenance retention rate as a measure to evaluate our success in retaining our AE software customers.

Cloud adoption rate is another measure that represents the percentage of the total AE user base contracted on the ARGUS Cloud platform. It includes both new AE cloud users as well as those who have migrated from our AE on-premise software. We use Cloud adoption rate as a measure of our progress in transitioning the AE user base to our cloud-based platform, a key component of our overall product strategy .

Forward-Looking Information

Certain information in this press release may constitute “forward-looking information” within the meaning of applicable securities legislation. All information contained in this press release, other than statements of current and historical fact, is forward-looking information. Forward-looking information includes, but is not limited to, the discussion of our business and operating initiatives, focuses and strategies, our expectations of future performance for our various business units and our consolidated financial results. Generally, forward-looking information can be identified by use of words such as “may”, “will”, “expect”, “believe”, “plan”, “would”, “could”, “remain” and other similar terminology. All of the forward-looking information in this press release is qualified by this cautionary statement.

Forward-looking information is not, and cannot be, a guarantee of future results or events. Forward-looking information is based on, among other things, opinions, assumptions, estimates and analyses that, while considered reasonable by us at the date the forward-looking information is provided, inherently are subject to significant risks, uncertainties, contingencies and other factors that may cause actual results, performance or achievements, industry results or events to be materially different from those expressed or implied by the forward-looking information. Projections may also be impacted by macroeconomic factors, in addition to other factors not controllable by the Company. Altus has also made certain macroeconomic and general industry assumptions in the preparation of such forward-looking statements. Not all factors which affect the forward-looking information are known, and actual results may vary from the projected results in a material respect, and may be above or below the forward-looking information presented in a material respect.

The COVID-19 pandemic has cast additional uncertainty on each of these factors and assumptions. There can be no assurance that they will continue to be valid. Given the rapid pace of change with respect to the COVID-19 pandemic, it is difficult to make further assumptions about these matters. The duration, extent and severity of the impact the COVID-19 pandemic, including measures to prevent its spread, will have on our business is uncertain and difficult to predict at this time. As of the date of this press release, many of our offices and clients remain subject to limitations and restrictions set to reduce the spread of COVID-19, and a significant portion of our employees continue to work remotely.

Inherent in the forward-looking information are known and unknown risks, uncertainties and other factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any results, performance or achievements expressed or implied by such forward-looking information. Those risks, uncertainties and other factors that could cause actual results to differ materially from the forward-looking information include, but are not limited to: the general state of the economy; the COVID?19 pandemic; our financial performance; our financial targets; the commercial real estate market; acquisitions; industry competition; business interruption events; third party information; cybersecurity; professional talent; our cloud subscriptions transition; software renewals; our sales pipeline; enterprise transactions; customer concentration and loss of material clients; product enhancements and new product introductions; technological strategy; intellectual property; property tax appeals and seasonality; legislative and regulatory changes; privacy and data protection; our brand and reputation; fixed-price and contingency engagements; the Canadian multi-residential market; currency fluctuations; interest rates; credit; income tax matters; health and safety hazards; our contractual obligations; legal proceedings; our insurance limits; our ability to meet the solvency requirements necessary to make dividend payments; our leverage and financial covenants; our share price; our capital investments; and the issuance of additional common shares and debt, as well as those described in our annual publicly filed documents, including the Annual Information Form for the year ended December 31, 2021 and Management’s Discussion and Analysis for the year ended December 31, 2021 (which are available on SEDAR at www.sedar.com).

Given these risks, uncertainties and other factors, investors should not place undue reliance on forward-looking information as a prediction of actual results. The forward-looking information reflects management’s current expectations and beliefs regarding future events and operating performance and is based on information currently available to management. Although we have attempted to identify important factors that could cause actual results to differ materially from the forward-looking information contained herein, there are other factors that could cause results not to be as anticipated, estimated or intended. The forward-looking information contained herein is current as of the date of this press release and, except as required under applicable law, we do not undertake to update or revise it to reflect new events or circumstances. Additionally, we undertake no obligation to comment on analyses, expectations or statements made by third parties in respect of Altus, our financial or operating results, or our securities.

FOR FURTHER INFORMATION PLEASE CONTACT:

Camilla Bartosiewicz
Chief Communications Officer, Altus Group
(416) 641-9773
camilla.bartosiewicz@altusgroup.com

Interim Condensed Consolidated Statements of Comprehensive Income (Loss)
For the Three Months Ended March 31, 2022 and 2021
(Unaudited)
(Expressed in Thousands of Canadian Dollars, Except for Per Share Amounts)

Interim Condensed Consolidated Balance Sheets
As at March 31, 2022 and December 31, 2021
(Unaudited)
(Expressed in Thousands of Canadian Dollars)

Interim Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2022 and 2021
(Unaudited)
(Expressed in Thousands of Canadian Dollars)

Reconciliation of Adjusted EBITDA to Profit (Loss)

The following table provides a reconciliation between Adjusted EBITDA and profit (loss):

Reconciliation of Adjusted Earnings (Loss) Per Share to Profit (Loss)

The following table provides a reconciliation between Adjusted EPS and profit (loss):