Altus Group Limited

Welcome to the Altus Group First Quarter 2022 Financial Results Conference Call and Webcast. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Camilla Bartosiewicz. Please go ahead.

Thank you, Saki. Good afternoon, everyone, and welcome to Altus Group's first quarter results conference call and webcast for the period ended March 31, 2022. The news release announcing our results was issued after a market close this afternoon, and it's also posted on our website along with our MD&A and financial statements. Joining us today are CEO Jim Hannon and CFO Angelo Bartolini. 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. Angela will begin by covering up our financial performance, and then Jim will provide an operational update. Before we get started, please be advised that some of our remarks on the call today may contain forward-looking information. Also, please be reminded that Altus Group uses CERN's non-GAAP and other financial measures as indicators of financial and operational performance. Forward-looking information and an explanation of these measures are detailed in today's news release and in our related MD&A reports on CEDAR. All of the forward-looking information discussed today is qualified by the cautionary statements and included in these reports. Okay, over to you, Angelo.

Thanks, Camilla. As you'll hear today, the year is off to a productive start, as demonstrated by our financial performance in Q1. the positive growth indicators in our bookings, and the operational momentum across the company. This is a key execution year, and we're really pleased with the progress against our strategic initiatives during the first quarter. Please note that unless otherwise specified, all figures that I will be discussing today are as reported, and all growth rates are on a constant currency basis. On a consolidated basis, revenues were $167.6 million an increase of 24% of which 11% of the growth was organic. And adjusted EBITDA continues to steadily improve at 17.7 million or up 4% as we capture synergies from last year's acquisitions and continue to adjust our cost structure in line with our new operating model. Looking out with the analytics firing on all cylinders and our property tax business set to deliver another record year We feel confident in our plans to deliver strong top line and adjusted EBITDA growth this year at expanded margins. Analytics delivered another strong quarter. Revenues were 80.3 million, up 50%. Especially noteworthy, organic revenue growth was 19%. This marks a third consecutive quarter of organic revenue growth in the mid-teen to 20% range, that the evolution of our operating model implemented at the start of the year and the revamped go-to-market plans are increasingly effective. We saw solid growth across our key solutions, with strong customer expansion and new customer additions to our platform as we saw 250 new logos for Argus in the quarter. We're proving that once we win over clients, we not only keep them, but grow them. Our customer success teams are a great driver of our retention rates, which are industry-leading across all our software, data, and analytics solutions. I have to say that I am really excited about the growth in our overtime revenues. At $68 million, overtime revenues grew 60% year-over-year and 24% on an organic basis. Building off of a strong Q4, overtime revenues were up 14% sequentially. and up 9% on an organic basis. This is a significant increase and really speaks to the durability of our revenue streams. Regarding our cloud migration progress, we are tracking on plan as we close the quarter with a little more than 44% of AE users on the cloud. Following the large increase in adoption in Q4, the current quarter's increase was on pace with our expectations. With visibility into our pipeline, we expect closing on some sizable deals, and by the end of 2023, we expect to have converted the large majority of our users onto the cloud. The recent enhancements to cloud-enabled AE14 launched in late 2021, in addition to our plans to end support for AE12.1 or older by June 30, 2022, will be significant drivers in helping us achieve our targets. Adjusted EBITDA showed positive improvement in the quarter as well at 11.2 million, up 11%. This is significant when you recall we purchased Reonomy late in 2021, an early stage business with an adjusted EBITDA run rate loss of approximately 20 million. Although we have begun to achieve synergies in Q1, we still have more to go. Also bear in mind that as part of the purchase price adjustment for Reonomy, we incurred a discount on deferred revenues of approximately $1 million in Q1, which also impacted adjusted EBITDA. This $1 million adjustment alone had a 1.2% impact to margins. Notwithstanding Reonomy's impact to adjusted EBITDA, going forward, we expect quarterly improvements in margin and expect margin to be higher on a year-over-year basis for full year 2022. I'm also excited about our bookings and bookings growth. Bookings came in at $28 million, up 32%. Bookings are increasingly skewing more towards recurring in nature, reflected in overtime revenues, and pleased to add that organic overtime bookings in Q1 were especially strong. Looking out, we're very well positioned for the year to deliver positive performance across our key metrics, overtime revenues, bookings, AD cloud users, and margins. As I said, the business is firing on all cylinders. Turning to the CRE consulting segment. At property tax, Q1 revenues were $58.5 million of 8%, and adjusted EBITDA was $13.3 million of 21%. triggered by strong performance in the U.S., where we saw a rebound from previous COVID-related delays. In Canada, we held steady, while the U.K. continues to experience lower settlement volumes caused by resource constraints at the valuation office. We do expect resumption to normalized levels later this year. Overall, we're very positive on the year for tax, as we have a healthy backlog of tax appeal cases to be settled, significant bookings in our pipeline, and a robust level of annuity billings in the UK scheduled for Q2. As a result of these factors, we expect another record revenue year. As we've discussed before, we are driving more technology into this business. The results of our investments are greater operating efficiencies, enhanced business development, and market intelligence, and greater savings for our clients. As you'll hear from Jim in a minute, we're also excited about the acquisition of Rethink Solutions, which will begin to provide us with not only an overtime revenue base, but with our first software revenue streams within global tax business. Although our valuation and cost advisory revenues were up modestly over last year at $29 million, we see underlying strength in the business that will translate into stronger performance throughout the year. Finally, in Q1, we initiated a global restructuring program for the year. It resulted in one-time restructuring costs of $8.4 million in the quarter. This program was initiated as we drive toward greater efficiencies in our operating model. Approximately $3.8 million of these costs relate to our efforts to rationalize our office space in certain markets. These reductions in office space is a result of both the synergies that we planned under the acquisitions of Finance Active and Reonomy, and as a result of our deliberate approach toward a hybrid office working model. As detailed in our recent sustainability report, we believe that by moving to a hybrid model, we can reduce our square footage of our leased space by up to 15% in 2022. The environmental benefit of this approach is that it significantly reduces our scope two and three emissions. We expect this program to continue throughout the year and expect further reductions in office space and greater efficiencies resulting from ongoing integration work. Turning to our financial position, we finished the year with a cash position of $46.8 million and with $306.7 million in the bank. The funded debt to adjusted EBITDA leverage ratio, as defined in our credit agreement, was 2.6 times, well below our maximum limit of four times. Applying our cash and net debt to adjusted EBITDA leverage ratio was 2.37 times, representing a very healthy balance sheet. Given our ability to generate strong cash flows and growing adjusted EBITDA levels, we're able to deleverage quickly and reapply available capital towards growth initiatives. With that, I'll now turn it over to Jim to take us through some of the operational progress. All right.