Altus Group Limited

Good day, everyone, and welcome to the Altus Group's second quarter 2023 results conference call and webcast. Today's call is being recorded, and all lines have been placed on mute for any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question on the phone lines, you can press star 1 on your telephone keypad. If you would like to remove yourself from the queue, you can press star 1 again. I will now turn the call over to Camilla. Please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to Altus Group's second quarter conference call and webcast for the period ended June 30th, 2023. The news release announcing our results was issued after market closed this afternoon, and it's posted on our website and CEEDAR profile along with our MD&A and interim financial statements. A presentation to accompany our prepared remarks has also been posted to our website under the investor relations section. Joining us today are CEO Jim Hannon and our CFO, Pavan 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. Those assumptions, risks, and uncertainties are detailed in our forward-looking statements disclaimer in today's materials. Please be reminded that Altus Group 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 52-112. We believe that these measures may assist investors in assessing an investment in our shares as they provide additional insight into our performance. Readers and listeners 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 entities. These measures should not be considered in isolation or as substitutes 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 in our other filings with the Canadian securities regulators. I would also like to point out that unless otherwise specified, all the growth rates we refer to on this call will be on constant currency basis over the same period in 2022. Okay, over to you, Kevin.

Thank you, Camilla, and good afternoon to everyone on the call. I'm pleased with the steady progress we are making in executing our strategy. The team continues to deliver on our plans. Our results demonstrate solid sales execution and healthy demand for our offers. Our intelligence offers help our clients manage performance and risk, which is especially relevant in today's dynamic CRA markets. From a year-over-year comparable, the bar was set high for us this quarter. Q2 2022 was the highest quarterly revenue in adjusted EBITDA performance in the company's history. As you know, Q2 2023 reflects the reset of the UK property tax annuity billing revenue stream that peaked at 33.2 million last year. We are really pleased with the robust performance this quarter. Property tax successfully managed through the UK annuity reset, with a strong performance across the portfolio. Analytics didn't skip a beat, delivering consistently strong double-digit revenue growth and significant margin expansion. Beginning with our consolidated second quarter results, as Camilla pointed out and Les specified, the growth rates I will be referencing are on a constant currency basis. Our consolidated revenue came in just shy of the historic quarterly record revenue achieved last year. Excluding the impact of the UK annuity reset, top line growth was 14.3%. Adjusted EBITDA was down 15.3%, inclusive of the 33.2 million annuity reset, most of which drops to the bottom line. Profit was 11.9 million, slightly down from the prior year. This reflects the savings from the completion of the 2022 Global Restructuring Program offset by the higher income tax expenses this quarter. Adjusted EPS came in at 53 cents. Free cash flow is 19.1 million, a strong sequential improvement over Q1. This metric continues to reflect temporarily higher working capital balances following our transition to our new ERP system at the beginning of the year. Operationally, we're seeing improvements in both billing and collections. We remain on track to meet our original working capital targets by the end of the year. Turning to our business segment performance, starting with analytics, we continue to consistently put up double digit top and bottom line growth with significant margin expansion. This puts us on a nine consecutive quarters of double digit top line growth and five consecutive quarters of margin expansion. Revenue was up 15.5% and notably recurring revenue was up 19%. All analytics revenue was organic. We are benefiting from our ongoing transition to cloud subscriptions new sales, valuation management solutions asset expansion supported by steady new customer additions. Adjusted EBITDA continues to grow with the higher revenues and improved operating leverage. Overall, we are really pleased with the sustained momentum and recurring revenue growth. At $89 million in the quarter, recurring revenues were up 19% and represent 89% of total revenues. We continue to focus on go-to-market efforts and investments to make consistent recurring revenue growth. This provides us with a resilient revenue base. 700 basis point margin expansion in the quarter captures improvements in sales productivity, cross-quarter salary leverage, more streamlined processes, better resource management, and overall prudent expense management. We remain confident in our plans to continue expanding margins in the second half of 2023. Turning to property tax. As mentioned, there's an annuity element to this segment that is prevalent in the second quarter. Last year, we benefited from the UK annuity revenue that dropped off this year with the jurisdictional reset of the tax rating list. Revenue was down 18.4 million or 22.4%, net of the 33.2 million drop. Packing out the impact of the UK annuity revenue, growth would have been 20.4%. Our Canadian and US operations had a great quarter with double-digit growth. We also had strong performance in the UK against the new 2023 rating list as we begin to build our new annuity revenue stream. The solid results achieved this quarter are a testament to the team's perseverance in managing effectively through the UK annuity reset. And finally, appraisals and development advisory revenue was steady in the quarter, driven primarily by the development advisory team. Development advisory provides us with a predictable revenue stream associated with complex long-term projects. We have rebalanced some of the resources from our appraisals group to support our higher margin value management solutions engagement as we continue to pursue operating efficiencies. Lastly, turning to our balance sheet, we finished the quarter with a cash position of 43.1 million and with 335.8 million in bank debt. The funded debt to EBITDA leverage ratio as defined in our credit agreement was 2.19 times, well below our limit of 4.5 times. Applying cash to the net debt adjusted EBITDA leverage ratio was 2.10 times, representing a very healthy balance sheet. Regarding our capital allocation priorities, we continue to reinvest in the business to scale, opportunistically pay down debt, and maintain financial flexibility for M&A and stock repurchases. With that, I'll turn it over to Jim.