Altus Group Limited

and welcome to Altus Group's Q1 2024 Financial Results Conference call and webcast. This call is being recorded. At this time, I would like to hand the call over to Ms. Camila Bartosiewicz. Please go ahead, ma'am.

Thank you, Lisa. Good afternoon, everyone, and welcome to the conference call and webcast discussing Altus Group's first quarter results for the period ended March 31st, 2024. Our disclosure materials, notably the press release, MD&A, and financial statements, and the slides accompanying our prepared remarks are all available on our website, and as required, have been filed to CEEDAR Plus after market close this afternoon. I'm joined today by our CEO, Jim Hannon, and our CFO, Pavan Chhabra. Some of our remarks on this call and in our disclosure may contain forward-looking information that is based on some assumptions, and therefore, subject to risks and uncertainties that could cause actual results to differ materially from those projected. Please refer to our forward-looking information disclaimer in today's materials. Please be reminded that Altus Group uses certain non-GAAP financial measures, 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 and listeners are cautioned that they are not defined performance measures and do not have standardized meaning under IFRS and may differ from similar computations as reported by other entities and accordingly may not be comparable to financial measures as reported by those entities. Those 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. I would also like to point out that unless otherwise specified, all the percentage and basis point growth rates we refer to on today's call will be on a constant currency basis over the same period in 2022. Okay, over to you, Kevin.

Thanks, Camilla, and thank you, everyone, for joining us today. Alters delivered solid results in the first quarter, with improvements across our key financial metrics. Our team stayed on task, growing revenue and expanding margins. Our results at both analytics and property tax came in ahead of our expectations. Recapping our consolidated metrics, revenue was up 4.3%, profit improved by 93.7% on an as-reported basis. Adjusted EBITDA was up 12.9%, driving 100 basis point margin expansion on an as-reported basis. And notably, free cash flow was up 83.5% on an as-reported basis over last year, which included the impact of our ERP chain transition. We're up 41.4% if we compare it to Q1 of 2022. As you're likely aware, There is some seasonality to this metric, primarily relating to the benefits of compensation with our employee bonus payout, which occurs in Q1. Additionally, I'd like to highlight that in Q1, we recorded $5.4 million of restructuring costs, primarily impacting our analytics business segment, as well as some of our corporate functions. This reflects our ongoing efforts to operate more efficiently and rebalance investments towards future growth initiatives. Turning to our business segment performance, analytics continues to drive top-line growth and margin expansion. Revenue growth is driven by our ongoing transition to the cloud subscriptions, new sales, a higher number of assets on our valuation management solutions platform, and contribution from the ForBury acquisition. The combination of ForBury's innovative culture and Altus' global go-to-market reach provides us with growth opportunities with a fit-for-purpose software offering in APAC and UK markets, and with emerging opportunities in the U.S. banking sector. Adjusted EBITDA benefited from higher revenues, operating efficiencies, and our ongoing cost optimization efforts. Recurring revenue represents 93% of our analytics revenues in the quarter, compared to 90% in the prior year. These revenues comprised of solutions embedded in our customers' most critical processes, therefore represent resilient revenue streams with low churn. As a reminder, in Q4, PMS recurring revenue is seasonally our high point to the high volumes of annual valuations. Our Q1 recurring revenue came slightly ahead of our expectations. The market environment remains consistent to Q4 of FY23 and expect it to continue through the first half of the year. There are several encouraging signs emerging for a second half recovery. Relatively stabilized interest rates, a growing economy, increased activity resulting from distressed sellers and lenders. Many of our clients have expressed their belief that markets have bottomed and volumes will begin to recover in the second half of the year. Our margins continue to expand up 210 basis points in a quarter. We initiated our cost automation efforts midway through the first quarter, and with recurring revenue growth expected to pick up in the second half of the year, we expect margins to ramp in subsequent quarters this year. We remain confident in our ability to drive 400 to 500 basis points of margin expansion for the full year, which we expect we can do even on the low end of our guidance revenue range. We are increasingly benefiting from higher efficiencies from our global service center in India. And as you saw through our restructuring activities in the first quarter, we have taken action to further refine our operating model. We ended the quarter with 75% of our AE users contracted on the cloud. Our transition to Argus Cloud continues, creating more revenue growth opportunities in 2024. Now with 75% of our AE users on the cloud, our churn from on-prem maintenance represents 0.15% of our annual revenue. Our maintenance gross retention rate of 89% is no longer a relevant metric, and we plan to retire that going forward. Our new bookings performance was steady and continues to be impacted by current macroeconomic conditions. So the timing of bookings tends to fluctuate. We're encouraged by the healthy recurring new bookings performance in the quarter, which was up 14.2%. As the market stabilizes, we are well positioned to capitalize on the recovery and convert our growing backlog into revenue. Turning to property tax, had a very strong start to the year. Revenue was up 10.2% and adjusted EBITDA was up 24.9% with margins up 300 basis points. The growth is driven by a strong performance in the US offset by a decline in Canada and the UK. In the US, several of our large settlements were pulled forward from Q2 to Q1. In Canada, the cycle timelines in Western Canada and the impact of the ongoing Ontario cycle extension have impacted our growth. The UK continues to be constrained with slower than anticipated VOA throughput, but the backlog of opportunities is growing. The increase in adjusted EBITDA reflects higher revenues offset by higher compensation costs as well as geographic variances of our revenue and related cost base on a year-over-year view. Going forward with the Ontario cycle extension and the VOA constraints, this year's geographic mix is expected to be weighted towards the U.S., which runs at a lower margin profile. Our outlook, however, for the year remains unchanged. I would also point out that the Ontario government's latest budget release, which was released in late March, indicates that the province-wide reassessment will continue to be deferred until the province completes its review of the property assessment and taxation system. We continue to constructively engage with the government, so it's becoming unlikely that we'll have a reassessment in 2025. Finally, appraisals and development advisory revenue and adjusted EBITDA were down in a quarter. The performance reflects needed market activity in the current economic environment as the business segment has some exposure to reduced transaction volumes and higher interest rates, which results in fewer appraisals and fewer new project starts. Turning to our balance sheet, with a cash position of $44.3 million and with $328.6 million in bank debt. The funded debt to EBITDA leverage ratio is defined in our credit agreement as 2.15 times. Applying our cash, the net debt to adjusted EBITDA leverage ratio was 2.06 times. Our total liquidity stands at $265.7 million. We have healthy balance sheets that are able to continue investment in growth and opportunistically re-purchase shares. With respect to the planned REVS acquisition, the regulatory review continues, so we're limited in what we can share at this time. With that, Jim, I'll turn it over to you.