Altus Group Reports Fourth Quarter and Full Year 2019 Financial Results

Altus Group Reports Fourth Quarter and Full Year 2019 Financial Results

Delivers 18% Altus Analytics Recurring Revenue Growth & Record Property Tax Results in 2019

TORONTO, Feb. 20, 2020 (GLOBE NEWSWIRE) -- Altus Group Limited (ʺAltus Groupʺ or “the Company”) (TSX: AIF), a leading provider of software, data solutions and independent advisory services to the global commercial real estate industry, announced today its financial and operating results for the fourth quarter and year ended December 31, 2019. 

All amounts are in Canadian dollars and percentages are in comparison to the same period in 2018.

2019 Summary:

• Consolidated revenues were $567.4 million, up 11.2%
• Consolidated profit, in accordance with IFRS, was $18.2 million, up 198.7%
• Consolidated earnings per share, in accordance with IFRS, was $0.46 basic and $0.45 diluted, compared to ($0.48), basic and diluted
• Consolidated adjusted EBITDA¹ was $88.1 million, up 24.3%
• Adjusted earnings per share² (“adjusted EPS”) was $1.47, compared to $1.05
• Altus Analytics revenues grew 10.1% to $202.0 million, and adjusted EBITDA¹ was $36.8 million, down 11.3% reflecting higher mix of subscription revenues and higher development costs
• Altus Analytics recurring revenues³ (as defined below) grew 18.0% to $153.6 million
• Commercial Real Estate (“CRE”) Consulting revenues grew 14.2% to $324.1 million and adjusted EBITDA¹ grew by 55.8% to $76.1 million

Fourth Quarter 2019 Summary:

• Consolidated revenues were $148.8 million, up 13.7%
• Consolidated profit, in accordance with IFRS, was $0.3 million, a $15.0 million improvement
• Consolidated earnings per share, in accordance with IFRS, was $0.01 basic and diluted, compared to ($0.38), basic and diluted
• Consolidated adjusted EBITDA¹ was $23.5 million, up 55.3%
• Adjusted earnings per share² (“adjusted EPS”) was $0.43, compared to $0.20
• Altus Analytics revenues increased 5.3% to $54.6 million (reflecting a tough compare from the previous year), and adjusted EBITDA¹ was down 48.0% to $5.3 million reflecting higher mix of subscription revenues and higher development costs
• Altus Analytics recurring revenues³ (as defined below) grew 21.1%⁴ to $40.9 million
• Commercial Real Estate (“CRE”) Consulting revenues grew 24.0% to $83.9 million and adjusted EBITDA¹ increased by 372.8% to $13.4 million

“2019 was a pivotal year for Altus Group with the launch of ARGUS Enterprise on the cloud,” said Robert Courteau, Chief Executive Officer at Altus Group.  “With ARGUS Enterprise on the cloud, our clients are gaining a lot of value by collaborating and sharing insights like never before. This rollout out gives us the opportunity to capture new clients and new users on a global basis.  Our Property Tax business also had a phenomenal year and remains competitively positioned for sustained growth.  Our leading position and the strength of our model contributed to market share expansion while delivering exceptional value for clients.”   

2019 Review

Altus Analytics revenues increased 10.1% to $202.0 million, and recurring revenues³, as defined below, grew 18.0% to $153.6 million.  The acquisitions of Taliance and One11 represented 5.9% of the 10.1% revenue growth.  Adjusted EBITDA was down 11.3% to $36.8 million, reflecting higher mix of subscription revenues and higher development costs.  Changes in foreign exchange benefitted revenues by 1.3% and Adjusted EBITDA by 2.6%.

• The increase in annual revenues was driven by strong growth from Appraisal Management solutions, increased software services revenues, and higher maintenance revenues, offset by lower perpetual license revenues as the business transitions to a subscription model. Beginning in the third quarter of 2019, all ARGUS Enterprise (“AE”) software license sales to new customers were only sold on subscription terms, which contributed to healthy growth in subscription licenses, however on a year-over-year comparative view subscription revenue growth was impacted by a tough compare in 2018. In 2018, the second quarter had a sizeable new global subscription license contract, and the fourth quarter had a significant subscription contract renewal, both of which were deemed “right-of-use” under IFRS 15.  As a result, a portion of those revenues were recognized upfront at the time of delivery rather than ratably over the term of the subscription contract. 

• Overall, in 2019 a significant portion of AE sales came from add-on sales to existing customers, followed by sales to net new customers. AE license sales saw healthy growth, and consistent with the strategy to move to a subscription model, there was a higher mix of license sales on subscription terms.  Software maintenance revenues continued to grow, supported by 97% software maintenance retention rates⁵ for AE.  During the year great progress was made in selling AE on the cloud to both new customers and to existing customers who converted their maintenance contracts to cloud subscriptions. The strong growth in Appraisal Management solutions was driven by current customers adding more assets on the platform, new customer wins and growing revenues from international markets.

CRE Consulting revenues increased 14.2% to $324.1 million and Adjusted EBITDA¹ increased 55.8% to $76.1 million, driven primarily by strong performance at Property Tax.  Changes in exchange rates impacted CRE Consulting revenues by (0.3%) and there was no impact on Adjusted EBITDA.

• Property Tax revenues increased 20.8% to $213.5 million and Adjusted EBITDA¹ increased 74.2% to $62.7 million.  Property Tax revenues improved primarily due to sustained strong performance in the U.K., double-digit growth in the U.S. and strong organic growth in Canada.  In the U.K., operations benefitted from continuing settlement of 2017 list cases from a healthy backlog as well as higher annuity billings in the second quarter. In the U.S., growth came from core regional markets, as well as building a healthy pipeline of work in emerging regions such as California. In Canada, the growth in revenues was driven by a rebound of case settlements in Ontario towards the second half of the year, as well as robust performance in Alberta and Manitoba in the first half of the year. 

• Valuation and Cost Advisory revenues increased by 3.2% to $110.6 million, primarily due to improved performance from the Canadian Cost practice.  Adjusted EBITDA grew by 4.3% to $13.3 million.

Geomatics’ revenues were down 4.4% year-over-year to $41.7 million and Adjusted EBITDA¹ was down 4.5% to $3.4 million as the business continued to be impacted by reduced activity levels in the oil and gas sector. 

Corporate Costs were $28.2 million, compared to $23.0 million in the same period in 2018, reflecting higher accrual of variable compensation costs and various corporate initiatives to scale the business for growth. Corporate costs as a percentage of revenues were 5.0%, compared to 4.5% in 2018.

Balance Sheet & 2019 Outlook Summary

At the end of 2019, Altus Group’s balance sheet remained strong, reinforcing the Company’s financial flexibility to pursue its growth strategy.  As at December 31, 2019, bank debt stood at $138.0 million, representing a funded debt to EBITDA leverage ratio of 1.49 times (compared to 1.79 times at the end of 2018).  As at December 31, 2019, cash and cash equivalents was $60.3 million (compared to $48.7 million as at December 31, 2019).  The Company’s credit facilities mature on April 28, 2020, and hence have been presented as current liabilities.  The Company has negotiated a draft term sheet with its lenders which is in the process of being approved.

Through Altus Group’s industry leading capabilities, the Company remains competitively positioned to capitalize on the growing demand for a wide range of client needs in CRE technology, data and advisory solutions with a stable revenue base across economic cycles. 

Altus Analytics continues to represent an attractive growth area for Altus Group supported by favourable market trends of growing global demand for CRE-related technology and data solutions.  Consistent with its long-term outlook, Management expects year-over-year revenue growth for full year 2020 from both its ARGUS Software business as well as the Data and Appraisal Management solutions.  Financial performance expectations for 2020 are consistent with Management’s aspirational long-term goal to achieve Altus Analytics revenues of $400 million for full year 2023, with an associated Adjusted EBITDA margin at over 30%.

The CRE Consulting segments continue to represent an attractive growth area for Altus Group driven by a steady demand for specialized services.  Growth is expected to be driven primarily by the Property Tax business which is poised for another record revenue year, supported by healthy organic full year revenue growth from all three national markets, the U.K., U.S., and Canada.  The Valuation and Cost Advisory practices enjoy significant market share and, as a result, are expected to continue growing modestly. Growth is expected to be driven by operating leverage, enhanced efficiency and productivity from technology, and improved cross-selling across the organization. 

As previously announced, subject to definitive documentation, the Company’s Geomatics business unit will be spun off into a separate company, in combination with WSP Global Inc.’s geomatics focused business unit.  The transaction, which is subject to finalization of definitive documentation, is expected to close in the second quarter of 2020 and will be reflected as discontinued operations starting in the first quarter of 2020.

About Altus Group Limited

Altus Group Limited is a leading provider of software, data solutions and independent advisory services to the global commercial real estate industry. Our businesses, Altus Analytics and Altus Expert Services, reflect decades of experience, a range of expertise, and technology-enabled capabilities. Our solutions empower clients to analyze, gain insight and recognize value on their real estate investments. Headquartered in Canada, we have approximately 2,500 employees around the world, with operations in North America, Europe and Asia Pacific. Our clients include many of the world’s largest commercial real estate industry participants. Altus Group pays a quarterly dividend of $0.15 per share and our shares are traded on the TSX under the symbol AIF.