Altus Group Limited

Revenue in our appraisals and development advisory segment came in below guidance, reflecting softer market conditions across both businesses. The appraisals business, which operates exclusively in Canada, is particularly impacted by muted transaction activity and ongoing uncertainty related to tariffs. Despite these headwinds, our performance continues to improve, driven by a deliberate focus on higher margin value added engagements. Adjusted EBITDA increased by .6% with a 130 basis point expansion in margins, supported by enhanced delivery efficiency through our offshore global shared services team. The Canadian commercial real estate market remains stable through Q2, but continues to navigate a challenging environment shaped by tariff uncertainty, inflationary pressures, and evolving monetary policy. These factors are contributing to a more cautious lending landscape. While we anticipate stronger momentum in the U.S. market in the second half of the year, Canadian transaction activity is expected to remain subdued until market conditions stabilize. In the meantime, we remain focused on disciplined execution and driving margin improvements across the segment. Turning to the balance sheet. We ended the quarter with $382.7 million in cash and $157.3 million in bank debt, resulting in a funded debt to EBITDA ratio of 1.26x. We returned $101.7 million to shareholders through our share buyback program this quarter, fully utilizing our current NCIB and reducing our outstanding share count to $43.2 million. Year to date, we've repurchased approximately 3.3 million shares, representing $179 million in gross proceeds. We're pleased with the strength of our cash conversion, which continues to be driven by disciplined working capital management and a focused effort on improving operational efficiencies across the business. With profitability and earnings quality continuing to improve, we are well positioned to deliver consistent cash flow generation and support long-term growth. With that, I'll turn it over to Jim.

Thanks, Pavan. As Pavan outlined, the team delivered another strong quarter, both financially and operationally. We made progress against our growth initiatives, and we're positioning ALTAS as the essential intelligence platform for CRE performance. To reiterate and call out some of the highlights from the quarter, recurring revenue growth was fueled by double digit growth in Argus Enterprise, which is now Argus Intelligence. We expect this latest upgrade cycle and new product introductions to drive double digit growth for the next several years. Our transition to Argus Intelligence is proceeding as planned, with clients renewing on the platform and adding new capabilities. We now have 1,900 clients contracted on Argus Intelligence, including a ramp of portfolio manager and benchmark manager products. Our asset-based pricing model continues to be well received, and by design is translated to a growing user base in the Argus ecosystem. As clients migrate to Argus Intelligence, they have the choice to stay on perceived pricing or move to asset-based pricing, which allows clients to add users with no additional costs. New recurring bookings were strong, both for software and VMS. We're now on three consecutive quarters of recurring new bookings above the $20 million mark. We returned capital to shareholders by repurchasing $101.7 million of our shares in Q2, exhausting our 2025 buyback program for the year. We reduced our outstanding shares by .5% year over year. And as Pavan pointed out, our operational improvements and ongoing portfolio simplification translate to higher quality earnings compared to a year ago. This has been and will continue to be the driver of cash flow improvements. Turning to our business outlook, we're refining our guidance here at the mid-year mark. Notably, we're increasing our consolidated margin range while modestly lowering revenue. To be clear, we're calling up the low end of our adjusted EBITDA guidance. Our business unit forecasts are still at the low end of our original revenue range. That said, and in the spirit of being prudent, we're reflecting the continued uncertainty around the macroeconomic environment. This uncertainty has kept some of our VMS clients on the sidelines longer than we anticipated at the beginning of the year. As we've demonstrated over the last several years, we run the company with multiple paths to achieving our EBITDA, and this year's no different. Overall, there's a growing sense of optimism in our client base. Transaction volumes are stabilizing, and transaction dollar volumes are increasing. Capital is available, and valuations are improving across most sectors of CRA. All good signs for the fourth quarter and next year. And with the operating and product enhancements we've been driving, we're strongly positioned for the future. We remain confident in our ability to drive double-digit revenue growth at about 35% adjusted EBITDA margins in fiscal 2026 at the analytics segment. We expect a continual ramp of revenues in Q3 at analytics. Q4 benefits from favorable seasonality, pricing actions, and a large number of Argus renewals. We remain bullish on the long-term prospects for Altus Group driven by strong secular trends in the commercial real estate market, compelling new product innovations, a refined pricing model which drives client adoption, an exceptionally strong balance sheet, and of course, a dedicated team committed to delivering value. So finally, before I open up the line for questions, I just want to share that our next Investor Day will be on November 20th in New York. It's a change from what I said last quarter due to some scheduling conflicts, but stay tuned for more details, and we hope you can join us. Okay, let's open up the line for questions now, Julian.

Thank you. As a reminder to ask a question, please press star followed by the number 1 on your telephone keypad. Our first question comes from Yuri Lake from Canaccord Genuity. Please go ahead, your line is open.

Good evening, guys. Yuri. Hey, Jim. You mentioned in the prepared remarks that the FX pickup in corporate costs in the quarter was included in prior guidance. Yet, you're still increasing the guidance range on a consolidated basis. So is that further cost reductions on the corporate line or how do we get there?

Yuri, I'll answer that. I'll hand it over to Pavan. As I said, we always have multiple paths to make our numbers. We're watching the top line closely at all times. We're always listening to our clients who at the beginning of the year were extremely optimistic. This past quarter, a bunch of them were very optimistic in their comments, and then in their caveats around their ranges, they said assuming, you know, stability, we said let's factor it into our top line. But we do have, we are, as always, we have an operating plan, and then we throttle expenses up or down based on where we're seeing revenue coming in. So we knew that at the last, in May at the last guidance, that we would probably affect this transaction which would drive a benefit. So it was part of our multiple paths to get to the number. Pavan, you want to comment on the transaction? Yes,

it's, so we converted some Canadian dollars to USD. So the 6.2 is just related to the FX trade. It's not a constant currency number in regards to that. So it's really just a function of the fact of being affected in regards to our money management. Again, part of our plan in regards to our opening cash balance at the beginning of the year when we invested the property tax business, and part of the contemplation as we were thinking about full year guidance as well. So it was really just, you know, good timing given the relative weakness of the US dollar in the quarter to pull the trigger on it this quarter.

And that weakness occurred before the May call?

Okay. So you're leaving your, the segment's EBITDA margin guidance is unchanged, but the consolidated is up and that's going to be reflected in the lower corporate costs, right, going forward?

Yes. So that FX hits the corporate line period. So it doesn't impact the segments.

Okay. The bookings number, I mean, strong, but can you just confirm that I'm looking at apples to apples? Did we, did you guys change the definition this year? Maybe just refresh my memory on that. No,

we absolutely stuck to the definition. It's driven by the upgrade cycle to Argus Intelligence. So last year, if there was any, there was some price that in renewals that would not have shown as a booking because that's how we define our bookings. This year though, at the renewal, customers are converting from Argus Enterprise to Argus Intelligence, which gives them new feature functionality, which drives a bigger price up lift. So that is helping the bookings throughout this year, actually for the next couple of years. It'll help the bookings.

Okay. Okay. I'll hop back in the queue, guys. Thank you. Thank you.

Our next question comes from Steven McCloud from BMO. Please go ahead. Your line is open.

Thank you. Good evening, everyone. I just wanted to follow up just quickly with respect to the corporate costs. Is this a one-time FX gain or will you see a step change lower in your corporate costs for the balance of the year?

Yeah, we continue to be focused on driving corporate cost efficiency. That's part of the game. As we talked about it in the past, where some compliance-related spend that we have in corporate debt then changes trajectories. Again, this FX is really just, we knew we had cash at the beginning of the year. So there's not going to be a continuation in regards to this. It's really just a one-time.

Okay. Okay. So this isn't a news level. This is just a one-time benefit from the transaction in this quarter. The one

-time benefit that you saw in this quarter, there's not another benefit for the rest of

the year. Yeah. Okay. Yeah. That's great. And then maybe just looking at the recurring new bookings number, which, you know, Jimmy, you mentioned you said was driven by both Argus and VMS. Is there a way to break down kind of what the drivers were between those two businesses?

There is. They were both very strong for VMS. So Steve, you know, when we do Investor Day, we will roll out the new reporting for 26. And as we've been saying, when we do that, we'll move away from bookings overall as a metric. But until then, we said we would, for transparency, we continue to report it. So VMS funds are, there's new funds popping up, there's debt funds popping up. There's some closed-end funds that we moved into that help drive the growth for VMS. They're about equal in the very, very strong range as far as growth rates go.

Okay. Okay. That's helpful. And then just maybe finally, as it relates to, you talked about the upgrade cycle with respect to Argus Intelligence.

You

know, we're having with that,

is

there a way to kind of get a sense of where you are in that cycle? I mean, I assume you were still at the very, based on the release of the products, you're still on the very front end of that upgrade cycle. Can you just talk about where you sit and how you expect that to drive growth going forward?

Yeah, and again, you know, we've got a pretty significant base of clients that are going through the upgrade cycle from Argus Enterprise to Argus Intelligence. I would say in terms of relative magnitude, there's a large portion that happens in 2025. If you were to break 2025 down even further, a large portion or a large cohort is in Q4 2025, which would provide tailwinds into 2026. But there is a cohort, a significant cohort in 26 and 27 as well too. So, you know, these renewals are, these transitions to Argus Intelligence are happening on a renewal cycle. They had a mix of one-year contracts and some three-year contracts, which gives us more durability in regards to the continued output we're going to get from the transition.

Okay, that's helpful, Kolar. Thanks, Pavan. Okay, thanks guys. I'll get back to you. Thank you. Sorry, yeah. The renewals will

flow, as Pavan said, the majority through 2025. But they do flow into 26 and 27. So we know by client when the renewals aren't. So it flows into each of those years. And we said we were expecting a mid-teens price uplift, which we are achieving on the renewals.

Okay, that's great, Kolar. Thanks, Jim.

Our next question comes from Richard Say from National Bank Financial. Please go ahead. Your line is open.

Yes, thank you. Hey guys, on page seven of your deck, you kind of outline a number of things that contribute to your margin improvement. So as you look ahead to this sort of mid-30s target, can you sort of help us rank how each of those items may contribute to that improvement going forward?

Yeah, sorry. Lave we're calling out revenue growth, portfolio optimization, GSE, beneficial restructuring, expense growth, moderation. So as we highlighted in regards to our 2026 guidance, we are anticipating double-digit growth in regards to analytics revenue. So there's going to be a meaningful revenue growth contribution stuck to it. I would assume that this is probably structured in the order of magnitude here. Portfolio optimization, you saw parts of that in regards to the divestiture of property decks. You saw the divestiture of the fairways guarantees business associated with finance active. We continue to focus on profitable growth for the financials and dev advisory, which continues to drive portfolio optimization for us. GSE is a big component of our operating efficiency strategy. This is really about leveraging our tools and technology and standardizing them in a much more efficient way offshore, leveraging not only great talent that we have in our Hyderabad office, but also just leveraging the arbitrage from a pricing perspective. So that is going to be a meaningful contribution from a margin perspective. Look again, we've mentioned we're very comfortable in the concept of shrinking to grow, restructuring activities just to make sure that we've got the right alignment. We're anchoring around matrix organizations, which gives us abilities to continue to scale without adding significant headcount. So that is an ongoing focus for us. We're good stewards of the business, so we realize that there are market related pressures that potentially gate the timing of revenue. So we continue to be very prudent in regards to our expense management elements. Top line growth, portfolio optimization, global service center efficiencies, kind of in that order are key components of our growth. Ultimately, the operating efficiency that we're gaining across the business is really using our technology internally, driving more data to the platform from a systematic perspective. We're also putting a lot of focus on G&A. Jim and I have talked about in the past, we've had a lot of moving parts in this business, but we're putting very particular focus in regards to driving our G&A lower. It's a high number and we're aware of it. We've been a product of acquisitions over the years, and there's a lot of opportunity for us to continue to go aggressively after G&A as an opportunity for margin expansion. So I would rank that in terms of expense growth moderating as a big focus area for us. So I think you asked for ranking. It sounds like I'm putting all of them as rank one here, but they're all important initiatives for us. Each of them have a very specific execution plan associated with it. We're currently working on our 2026 operating plan efforts and all five of these focus are kind of core to what we're doing. And it just reiterates the fact that we continue to have multiple paths to be able to achieve our margin of growth. And these five, just a great description that I gave you, highlights just a few of that we're looking at.

Okay, I just have one other question. I understand fully that you're getting benefit from price through the cycle from enterprise to intelligence, but are there any metrics that you could share to help us better understand the uptake of your expanding product portfolios? Something like the customer base has an average of X products or modules this year versus the same sort of comparative number in the prior year, just so we can get a sense of how that upsell process is working.

So Richard, when you think about analytics, there's the two main franchises that move the needle. And it's ARTIS Enterprise to ARTIS Intelligence as one and VMS as the other. When you look at the number of attached products after that, it's very different personas across our clients who buy the different solutions. So of course, we know which every client, how many products they have, but it's not a -to-market motion of it's a straight cross-sell to the same buyer. So the main thing to focus on is the core ARTIS Intelligence. On that for the next two years, we've got, we have a pick up on Portfolio Manager and Benchmark Manager, but the key to those products, they're both still in very early stages to generate revenue because the clients need to migrate their models from the cloud, either from On-Prem or from their cloud environment, onto the platform to get the benefit of Portfolio Manager or Benchmark Manager. So they have to be contributing data to get Benchmark Manager. So we're just in the early stages of those clients coming onto the ARTIS Intelligence contract and then migrating their models over, which is to the point of the last question, that's a driver of growth for next year. When we think about our growth algorithm for 26 and 27, we break down our growth as about 40% of it will come from a lift in volumes and wallet share expansion of current product sets at current clients. About 40% of the growth come from uplift in pricing and about 20% will come from new products in the portfolio next year. But it's not from a, the products need to be rolled out, it's a, the models need to be moved to the platform to then drive the cross-sell. So lots of running work.

Okay, that's very helpful.

Our 25% had nominal new product revenue in it because we knew it was about, it was a migration year.

Okay, great. Thank you.

Our next question comes from Paul Traber from RBC Capital Markets. Please go ahead, your line is open.

Yeah, thanks and good afternoon.

Nice recurring bookings

in the quarter. Could you speak to the duration of those bookings, like the new revenue that you're adding, you know, what's the typical duration of it? And then, you know, really what I'm trying to get a sense of is like the annual uplift that you would see or like sort of ballpark ARR growth.

Yeah, so the, when we look at it on an NRR basis, so looking at client cohort year over year, as I said, we were targeting a mid-teens price uplift, we're actually yielding between seat and asset-based pricing into those cohorts. We're, through the first half, we're yielding a 20% increase. So, so that's part of it. And then the ARR piece of it is, it's going to be, obviously going to be the function of new logos and managing churn as clients go through the migration cycle. So, on an ARR basis, we, so back to the two core franchises of software and VMS, on a full year ARR basis last year, both were well north of 100%. And I'm sorry, on an NRR basis, they're both well north of 100%. And then the ARR has been outpacing that because of new logos, new funds coming on, new assets coming up.

Okay, that's helpful. And then just trying to understand that the outlook for the recurring, analytics recurring growth, is that, you mentioned it's because of VMS. I assume, though, that the software bookings are driving growth, but it's just, to clarify, that is masked by slower assumed growth in VMS, correct?

That's exactly right.

Okay. And then, and then just on the non-recurring outlook for the year, it looks like Q4, the guidance implies that Q4 non-recurring analytics revenue jumps sequentially. What is that seasonality or is there another driver in there?

There can be, there's a couple of drivers in there. There's, there's implementation revenues that are associated with some of the migration I was just talking about of models. And there's the 111 business where we can see a pipeline of non-recurring implementation of, it's typically third-party systems. So not business we are actively driving, but an important business for us to support our clients on. So it's, the non-recurring forecast will be a function of the pipeline of the timing of some of those big deals. So those 111 deals can be big and lumpy and skew bookings in any given quarter, which is why we break out the recurring bookings from them.

And then just last with, shifting to M&A, can you speak to the M&A environment at the moment, if you're seeing, you know, valuations become more attractive if there's candidates out there that look strategically attractive to you?

There are valuations. I think for a couple of years they got too lofty, which is why for two reasons you saw it stack off. So in 2021 we went hard and then we focused on the integration and the building out of the platform and wrapping the organic R&D around the integration of those acquisitions. Outside of Fourberry, which was at the end of 23, which is, I think will turn out to be one of our best all-time acquisitions, you see us be very selective. And it was because valuations were way too lofty. And I think if you look at Altus Group as a proxy for the market, you can go, valuations have stayed about flat over the last several years, whereas some of the private targets have these lofty ambitions that you go, it just doesn't match reality, especially when you put up our revenue growth and our earnings growth and our cash flow generation compared to how some of them have performed. So we're keeping a close eye. As we've said in the past, we have a very specific set of filters that we're applying. We have a strong balance sheet. We don't feel, I think I said this last quarter, we don't feel like it's burning a hole in our pockets right now that we're going to overpay or dilute shareholders at the wrong valuation.

All right, thanks for taking the questions.

We have no further questions in queue. I'd like to turn the call back over to Jim Hannon for closing remarks.

Well, as always, everyone, thanks for joining the call. If there's any follow-up questions, you guys know how to get in contact with us, particularly through Camilla and Martin. We always appreciate your time and I hope you all have a great rest of your summer. Talk soon. Thank you.

This concludes today's conference call and webcast. You may now disconnect.