Altus Group Limited

Thank you, Carl. Good afternoon, everyone, and welcome to Altus Group's fourth quarter and full year results conference call and webcast for the period ended December 31st, 2022. The news release announcing our results was issued after market close this afternoon and is posted on our website and CEDAR profile, along with our MD&A and financial statements. A presentation to accompany our prepared remarks, as well as a field letter to shareholders, has also been posted to our website under the investor relations section. Joining us today are CEO Jim Hannon and our new CFO, Parin Chhabra. We'll start with some prepared remarks and then we'll move right into the Q&A session. If we miss any questions, please contact me directly by email. Some of our remarks on this call may contain forward-looking information. Forward-looking information is based on assumptions and therefore subject to risks and uncertainties that could cause actual results to differ materially from those projected. Forward-looking information is further detailed in today's news release and in our related MD&A on CEDAR. All of the forward-looking information discussed today is qualified by the cautionary statement included in those materials and in this accompanying presentation. Please be reminded that Altus uses certain non-GAAP financial measures, non-GAAP ratios, total of segments measures, capital management measures, and supplementary and other financial measures as defined in National Instrument 5212. We believe that these measures may assist investors in assessing an investment in our shares as they provide additional insight into our performance. Readers are cautioned that they are not defined performance measures and 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 companies. These measures should not be considered in isolation or as a substitute for financial measures prepared in accordance with IFRS. An explanation of these measures is detailed in today's IR materials, including the news release, presentation, MD&A, and with our findings with the Canadian securities regulators. I would also like to point out that unless otherwise specified, all the growth rates we'll be referring to on the call today are on a constant currency basis over the same period in 2021. Before I turn the call over to Jim, I would just point out some changes in our MD&A. Mainly, this captures business nomenclature that we feel reflects more conventional labels and more accurately describes the metric in line with our existing definitions. For example, overtime revenues have now been renamed recurring revenues, and bookings was renamed new bookings, to be clear that this metric includes, particularly since we exclude the contract value of renewals. We're also now providing a split between recurring and non-recurring bookings. To be clear, we are not making any changes to how we account for these metrics. Both will reconcile with our legacy reporting. Other changes include Branding-related tweaks to certain business labels, such as valuation of costs now being referred to as appraisals and development advisory, the addition of free cash flow as a new capital management metric, and a refresh of some of our MD&A disclosures to help new investors better understand our business. In the spirit of continuous disclosure improvements, we have more changes planned for 2023 P&L reporting. Okay, over to you, Jim.

Thanks, Camilla. Pavan, welcome to your first earnings call at Altus. We're really excited to have Pavan join the executive team. Given his impressive track record at high growth tech companies, Pavan is a great addition to the crew. It's only been, not even been a couple of months, and Pavan's already making significant contributions with his fresh perspective on the business. I'll kick off with a brief review of our 22 highlights and then turn it over to Pavan to review our fourth quarter results. I'll come back at the end to discuss our business outlook and priorities for 2023. 2022 was a period of business transformation and growth for the company. We made significant progress against our long-term strategy while improving our business operations. This included optimizing our operating model, our go-to-market approach, platform architecture, as well as our front and back office infrastructure. quite a lot to accomplish in a 12-month period. I'm incredibly proud of the team for the hard work that went into it. Guided by our management philosophy of simplification, focus, and execution, we built a solid foundation to drive operational excellence, platform economics, and to maximize our operating leverage so that we can scale even more effectively. And more importantly, clients continue to engage with us on their most strategic efforts. reinforcing our role as their trusted source for asset and fund-level intelligence. We're quite pleased with our financial performance in 2022. We finished the year with $735 million in revenues, up 18%, and $135 million in adjusted EBITDA, up 23%, with a 90 basis point improvement in our margins. This translated to $53 million in free cash flow, up 15% over 2021 on an as-reported basis, and $1.89 in adjusted earnings per share, down a penny from 2021. That's primarily due to our restructuring program. We improved top-line growth across all of our business segments, and we grew adjusted EBITDA at the group level, driven by the standout performance at Analytics. Our property tax revenue, while at record levels, was moderated by the ongoing slowdown in appeal settlements in the UK. Our improved operating posture in 2022, demonstrated by our recurring revenue growth, new bookings growth, and cash flow improvements, sets us up for sustained growth in 2023. More on that after Pavan covers off Q4 results. So, Pavan, over to you.

Thank you, Jim, and the entire Altus team for the warm welcome, and good evening to everyone on the call. I'm looking forward to meeting many of you in the coming weeks and months. I'm excited to be joining Altus Group at a critical inflection point of our transformation. To the credit of my predecessor and the rest of the executive management committee, the team has done an outstanding job positioning Altus for success. I look forward to building on this foundation and the ongoing execution of our strategy. In fact, to Jim's opening comment on optimizing our front and back office systems, I am pleased to share that we have started the year with a new finance ERP system. This single source of truth will be the backbone for driving productivity, efficiency, and increased collaboration across our operations. Beginning with our consolidated fourth quarter results, revenues were up 10%. This represents the seventh consecutive quarter of double-digit top-line growth, of which 6% was organic. Profit was negative this quarter, primarily due to the restructuring program that Jim just mentioned. Adjusted EBITDA was up 31%, driving a nice 310 basis point improvement in margin, which stood at 19%. Adjusted EPS came in at 44 cents, up 5%. And free cash flow was 19.2 million, a substantial improvement over the prior period. In Q4, we completed our 2022 restructuring program. This resulted in a $17 million restructuring charge in the quarter, of which the bulk was related to employee severance. The full year restructuring program charge was $38.9 million. We expect cost savings related to this program to flow through into 2023. Turning to our business segment performance, starting with analytics, We have proven that we can drive high growth and expand margins at the same time. That's the path we're on at Analytics. Revenue was up 27%, and notably recurring revenue was up 38%, most of the growth being organic. We're seeing improved sales productivity and continue to benefit from healthy demand for our offers. A high percentage of our revenue growth continues to come from our existing customer base, where we have significant runway for wallet share expansion. We're also growing internationally while accelerating growth in North America, validating the sizable opportunity we still have in our core markets. Adjusted EBITDA continues to grow with the higher revenues and improved operating leverage. The adjusted EBITDA margin in the quarter reflects revenue growth and improvements in our operating model. These improvements include focused go-to-market activities, cross-border salary leverage, streamlined processes, and better resource management. Our full-year margin of 20.7, a 410 basis point improvement, demonstrates our strong operating leverage. This reinforces our confidence of continuing to expand margins into 2023. Recurring revenue growth is an important KPI for us. It's where our investments have been focused. We're really pleased with the 38% growth in the quarter and 44% for the full year. At $302 million for the year, recurring revenues represents approximately 87% of total revenues. This provides us with a resilient revenue base. Turning to new bookings, as Camilla pointed out, this metric only captures new business, not renewals. Our new bookings continue to be strong at 34.2 million, growth over an exceptional Q4 the prior year. This is a solid leading indicator of future growth. Most noteworthy, recurring new bookings were 20.8 million, up 15% year-over-year. We expect continued absolute recurring bookings growth. Turning to a quick update on Argus cloud adoption, we ended the quarter with 64% of our Argus Enterprise users contracted on the cloud, right on plan. We expect to have a large majority of our Argus Enterprise users contracted on the cloud by the end of the year. Turning to the reportable segments under the CRE Consulting Business Unit. Property tax was down in the quarter, consistent with our expectations. The growth in the U.S. and Canada was offset by a decline in the U.K. As covered on the last earnings call, the U.K. continues to be impacted by the slowed cadence of settlement volumes due to the Valuation Office's resource constraints. This leaves us with a higher backlog of opportunities as the volume throughput at the agency ramps up. Appraisals and development advisory performed steadily in the quarter. This reflects continued healthy market demand and effective sales execution. And finally, turning to our balance sheet, we finished the quarter with a cash position of $55 million and with $320 million in bank debt. The funded debt to EBITDA leverage ratio is defined in our credit agreement steadily improved to 2.13 times below what it was in Q3 and well below our limit of 4.5 times. Applying our cash, the net debt to adjusted EBITDA leverage ratio was 1.96 times. Regarding our capital allocation priorities, we'll continue to reinvest in the business to scale effectively, opportunistically pay down debt, and maintain financial flexibility should attractive acquisition opportunities materialize. With that, I'll now turn it back to Jim.