Altus Analytics Investor Update - June 26, 2019
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Altus Analytics Investor Update
June 26, 2019
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1. Altus Analytics Growth Strategy
Robert Courteau, Chief Executive Officer
2. Altus Analytics Cloud Transition
Carl Farrell, President Presentation Agenda
3. Altus Analytics Financial Outlook
Angelo Bartolini, Chief Financial Officer June 26, 2019
4. Summary and Q&A
Q&A open to analysts & institutional investors
All other inquiries please contact Investor Relations:
Camilla.Bartosiewicz@altusgroup.com
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Caution Regarding Forward-Looking Statements
This presentation contains certain statements that constitute forward-looking information within the meaning of applicable securities laws (“forward-looking statements”), including without limitations, the
statements contained in section entitled "Altus Analytics Financial Outlook”. Statements concerning Altus Group Limited’s (“Altus” or the “Company”) objectives, goals, strategies, priorities, intentions,
plans, beliefs, expectations and estimates, and the business, operations, financial performance and condition of Altus are forward-looking statements. The words “believe”, “expect”, “anticipate”, “estimate”,
“intend”, “may”, “will”, “would”, “could”, “should”, “continue”, “plan”, “goal”, “objective”, and similar expressions and the negative of such expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain these identifying words.
Certain material factors and assumptions were applied in providing these forward-looking statements. Forward-looking information involves numerous assumptions including the following specific
assumptions: the ability of Altus to meet its “Revenue”, “Recurring Revenue” and “Adjusted EBITDA Margins” targets, assumptions on Altus Analytics bookings growth, retention rates, growth in its Data
Solutions and Appraisal Management businesses, assumptions on the Argus Software revenue model, license sales, subscription renewal rates, cloud conversion (including timing and rate), assumptions
on other Altus Analytics contributors, expenses, operating leverage, and foreign exchange. Projections may be impacted by macroeconomic factors, in addition to other factors not controllable by the
Company. Altus has also made certain macroeconomic and general industry assumptions in the preparation of such forward-looking statements. Management believes that the expectations reflected in
forward-looking statements are based upon reasonable assumptions; however, Management can give no assurance that actual results will be consistent with these forward-looking statements. Not all
factors which affect the forward-looking information are known, and actual results may vary from the projected results in a material respect, and may be above or below the forward-looking information
presented in a material respect.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Altus’ actual results, performance or achievements, or developments in its industry, to differ
materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Risks related to forward-looking statements include, among
other things, risks relating to cloud adoption and conversion, pricing pressure, risks relating to Altus’ Appraisal Management business and demand for implementation services; as well as general market
conditions, including economic and exchange rate dynamics. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company's most
recently filed Annual Information Form and the most recently filed annual MD&A for the year ended December 31, 2018, available on SEDAR at www.sedar.com, also identify additional factors that could
affect the operating results and performance of the business. Forward-looking statements are based on management’s current plans, estimates, projections, beliefs and opinions, and Altus does not
undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change except as required by applicable securities
laws. All of the forward-looking statements made in this presentation are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no
assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Altus.
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altusgroup.comNon-IFRS Measures
This presentation makes reference to certain non-IFRS financial measures. These non-IFRS financial measures are not recognized measures under IFRS, do not have a standardized meaning prescribed
by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement IFRS measures by
providing further understanding of operations from Management’s perspective. Accordingly, non-IFRS measures should never be considered in isolation nor as a substitute to using net income as a
measure of profitability or as an alternative to the IFRS consolidated statements of revenues, net income, cash flows or other IFRS statements. Management presents non-IFRS measures, specifically
“Recurring Revenue”, “Adjusted EBITDA” and "Adjusted EBITDA Margin” as it believes these supplementary disclosures provide useful additional information related to the operating results of Altus
Analytics and uses these measures of financial performance as a supplement to the consolidated statements of income of this business.
See "Non-IFRS measures" in Altus Group‘s MD&A for the three month ended March 31, 2019 for a more complete description of “Adjusted EBITDA Margin”, for a reconciliation of Adjusted EBITDA to its
most directly comparable IFRS measure and for a discussion of Altus Analytics “Recurring Revenue”, including its definition.
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altusgroup.comExecutive Summary
Robert Courteau, Chief Executive Officer
5• Targeting to transition Altus Analytics to +90%
recurring revenue model by 2021
• In Q3, all ARGUS Enterprise (AE) sales to net
new customers are expected to be cloud
subscriptions & over time migrating on- Executive Summary
premise ARGUS software customers to cloud
subscriptions
• Strong recurring revenue base sustains y/y Creating value for our customers and
Altus Analytics revenue growth during key the CRE industry
transition years in 2019 & 2020
Increasing long-term growth potential
• Leveraging past development investments, with high-growth, high-margin model
revenue growth and controlled expenses with predictable revenues
supports margin expansion, targeting 30+%
by 2023
• Setting 5-year goal to double revenues by
2023Executing on our Plan: Increasing long-term growth
potential with high-growth,
Client & industry demand
high-margin model with
Product readiness predictable revenues
Compelling economic benefits
Established recurring revenue base eases Targeting transition of Altus Analytics
transition to 90+% recurring revenue model by
2021
Confidence in transition
Migrating on-premise ARGUS
Mitigates competitive threats software customers to cloud
subscriptions
Furthers data strategyAltus Analytics Growth Strategy
Robert Courteau, Chief Executive Officer
Cloud transition supports higher wallet share expansion, new customer
growth & geographic expansion
8Evolution of ARGUS Software Strategy
Strategic objectives driving strategy:
SET THE ARGUS ENTERPRISE (AE) STANDARD GLOBALLY Move the market to a single
1 ARGUS Enterprise standard
2013 - Current
Wave 1 Wave 2 Wave 3
Go Global
North America DCF Upgrade UK ValCap Upgrade
Multi-Product, Integrated 2 Establish ARGUS Enterprise
AE N.A. Market Standard Continental Europe Adoption Solutions, Enterprise for global adoption
Agreements
CROSS SELL + UPSELL
2015 - Current
Same Client Application Sale & SME 3 Establish a platform solution
with multiple global asset &
Strong re-purchase rates from current AE customers (adding more seats and/or functionality)
investment management
Upgrade Sale Multi-Product Sale Global Solution
capabilities
INNOVATE
2018 - Current
New Applications & Partnerships ARGUS in the Cloud Data Monetization
4 Move to the Cloud
New Markets & Applications 5 Unlock power of data
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altusgroup.com“ARGUS Everywhere” Go To Market Plan
Increasing wallet share & crossing borders with multiple capabilities
Cross-Sell / Up-Sell Market Expansion Integrated Offerings New Cloud Products Global Deployment
ARGUS as a multi- Focus on Germany, Focus on global, multi- Driving value through Focus on Top 200 clients
department standard - France and Asia in 2019, product contracts for enhanced functionality via to deploy ARGUS
from acquisitions to creating local value end-to-end client needs cloud applications that Enterprise everywhere
finance, broadened use through local functionality (currently less than 5 enhance workflow, data globally (currently less
across organization (network effect led by clients have bought multi- aggregation & partner than 10 have deployed
biggest CRE firms) products globally) data flow) globally)
Sustained trend in clients
deploying more seats and
adding modules
~4K ARGUS Enterprise
client calling card
Leveraging Appraisal Management
Client Growth & Expansion
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altusgroup.comSignificant Market Opportunity
Wide TAM Multiple Avenues for Growth Supports 2023 Goal
Future
Opportunities 03
• Data Monetization
Upside
• New CRE Market Verticals
Top 200 Global &Strong Foundation for Next Phase of Growth
Exceptional Customer & Industry Validation
6,500+ software clients (~4K on AE) – GLOBAL
Unmatched Altus
100+ data benchmarking & attribution clients (Appraisal Management) – US, EUROPE, ASIA
Analytics Client Base
500+ Canadian market data customers
Trusted by the World’s Relationships with 225/350 top global asset managers
Largest CRE Firms Serving 10 of the world’s largest service providers
ARGUS Enterprise property & portfolio valuation analysis market standard – US, CANADA & UK
Prevailing Industry (taught in over 200 universities worldwide)
Standards Appraisal Management benchmarking standard for open-end funds – US
Largest national CRE market data provider – CANADA
Strong Recurring 70+% of total Altus Analytics revenues are recurring & shifting to subscription contracts
Revenues with Superior
~95% renewal rates for software maintenance (~97% on AE)
Retention Rates
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altusgroup.com All data presented on this slide is based on internal data and/or management estimatesAltus Analytics Cloud Transition
Carl Farrell, President
Significant customer value proposition to drive cloud adoption
throughout 2019 & 2020, with a target to migrate majority of ARGUS
Enterprise users to the cloud by 2023
13Extending ARGUS Enterprise to ARGUS Cloud
No migration
Supports existing
implementations
Preserves investment
and value
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altusgroup.comExtending ARGUS Enterprise to ARGUS Cloud
Continuous development of
NEW CLOUD APPS
cloud functionality
Enhanced additional
functionality for new and
seasoned AE users
Enhance and deliver new
cloud applications to address
key business areas
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altusgroup.comContinue to Extend ARGUS Cloud Eco-structure
Enhance and deliver new cloud
NEW CLOUD APPS 3rd PARTY APPS
applications to address key
business areas
Connect all ARGUS solutions
Building a global asset and
investment management
solution connecting all software
applications & data on one
single cloud-based platform
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altusgroup.comCloud Benefits for Customers
Front End
Compelling economic & operating Data Input Collaboration
Reporting &
Workflows
Analytics
benefits for customers
Simple migration, no new implementation Calc Engine Integrations
Storage
Transparent internal business
Back End
collaboration
Extensive reporting and benchmarking
capabilities NEW CLOUD APPS 3rd PARTY APPS
Access to new cloud functionality and
new apps
The potential to utilize future data
aggregation to gain market insight
Reduced IT infrastructure/hosting costs
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altusgroup.comCustomer Adoption Example
Based on current prospects:
What’s the industry trend?
CUSTOMER PROFILE - Large global customers want a global data standard across their
Large, global service provider organizations to better utilize their internal data
What ARGUS Cloud solves for:
- Going to ARGUS Cloud provides customers with a single data instance
and the ability to drive global business consistency
CURRENT USE OF ARGUS ENTERPRISE
- Drives cost reduction, consistent business processes, more business
North America & Asia, not EMEA insights, supports business agility
- Will provide customers with global reporting and benchmarking
functionality, plus future industry data aggregation
CUSTOMER DESIRE Upside for Altus Group:
Global data standards across their
organization to drive improved performance - To drive new license sales of AE in EMEA and on a global ARGUS Cloud
contract, while providing a global platform to sell additional ARGUS
products
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altusgroup.comAE Transition to Cloud and Subscription
Cloud Deployment
On Premise Deployment
As of July 2019 Mid-Term Long-Term
• ADD-ON : Buy additional users as • ADD-ON : Buy additional users as
Cloud licenses, upgrade existing users Cloud licenses, upgrade existing users
to Cloud to Cloud
• RENEWAL : Upgrade existing users to • RENEWAL : Upgrade existing users to
• ADD-ON : Buy additional users as
Cloud Cloud
EXISTING Cloud licenses, upgrade existing users
to Cloud.
CUSTOMER
• ADD-ON : Buy additional AE licenses • ADD-ON : Buy additional AE licenses • RENEWAL : Upgrade existing users to
as perpetual as on premise subscription Cloud
• RENEWAL : Retain maintenance • RENEWAL : Retain maintenance
contract contract
NEW • NEW : Buy new users as Cloud • NEW : Buy new users as Cloud • NEW : Buy new users as Cloud
CUSTOMER licenses licenses licenses
altusgroup.comNew Market Opportunity: Data Driven Insights
AE Data
1 • Brings high value data that can be
Published to reported, benchmarked,
the Cloud Aggregated
from Multiple
aggregated and used to drive high
Organizations
value analytics for customers
5 • Utilizes the cleanest CRE industry
data in an automated environment
2 on a single platform
AE Data
Integration • Potential to become the data
Platform integration and data standard
Combined
with 3rd platform for the global CRE
Party Data industry
4 3
Brought Back Into
ARGUS Workflow
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altusgroup.comCloud Enables Higher Operating Efficiencies
Compelling economic & operating benefits for both Altus Group and our Shareholders
Speed of development and innovation
An environment that is flexible, scalable and has strong integration capability
One product platform
Lower cost of customer support
Simplified 3rd party integration
Reduced internal infrastructure costs over time
Access to AE data for potential new products & capabilities
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altusgroup.comAltus Analytics Financial Outlook
Angelo Bartolini, Chief Financial Officer
Strong recurring revenue base sustains y/y Altus Analytics revenue growth
during key transition years in 2019 & 2020
22Solid Track Record of Execution
From 2015 – 2018:
16+% CAGR in recurring
~4K AE customers, including
46+% revenue growth revenues*, which represent
~ 1k AOD customers
70+% of total AA revenues
37+% adj. EBITDA* growth,
~97% retention rates 95+% growth in EMEA &
with an avg. 3 yr. adj.
for AE software APAC revenues; 22% of
EBITDA margin of 26%
total in 2018
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altusgroup.com *Non-IFRS measure, see Slide 4 for more information.Lower Risk Transition
Full Subscription Model
Transition to Subscription 70% recurring revenue
in 2017 targeting growth
Point in Time License Model to 90% by 2021
100%
$15 M $16 M Perpetual license sales
currently represent only
Percent to Total AA Revenues
80% $36 M $41 M
15% of total AA
AA Revenue Evolution
revenues
60%
$45 M $49 M
RECURRING
40% Data & Appraisal Management
Over Time Subscription &
$73 M $78 M Maintenance
20%
NON-RECURRING
0% Perpetual & Point in Time
2017 2018 2019 2020 2021 2022 2023 Subscription
ACTUAL Services
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altusgroup.comAltus Analytics Long Term Financial Potential
$450 KEY ASSUMPTIONS:
•
•
~15% bookings growth
Mid 90% retention
No dip in 2020 during
• Mid-teen growth in Data & Appraisal
Management 2023 transition due to high
$400
TARGET
REVENUE
existing over time revenue
KEY ASSUMPTIONS:
• ~5% bookings growth $400M base
C$M
$350 • Mid 90% retention
• Mid-single digit growth in Data
& Appraisal Management
Margin expansion,
Total AA Revenues
$300
targeting 30+% adj.
EBITDA margins* by 2023
$250
NATURAL ECONOMIC BENEFIT
Stacking effect of switch to
subscriptions (assumes flat growth
in all other AA revenue streams)
$200
Adj. EBTIDA
23% 17- 20% 17- 21% 24 - 26% 26-30% >30% Margin* Targets
$150
2017 2018 2019 2020 2021 2022 2023
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altusgroup.com *Non-IFRS measures, see Slide 4 for more information.Improving Visibility During the Transition
Key Metric for Tracking Growth
2019
• Includes revenues related to software & data subscriptions, maintenance for
perpetual licenses and appraisal management solutions, where the contract value
Recurring Revenues for software subscriptions is recognized ratably over the contract term
• Excludes perpetual license sales, software services, and due diligence from
appraisal management
New Metrics Currently Planned
• Includes software subscription revenue (excluding any up front Right of Use
Over Time Revenues revenue), maintenance, data subscription and appraisal management
2020
(consistent with IFRS 15) • Excludes perpetual license sales, software services, due diligence from appraisal
management, and any upfront Right of Use revenues even if sold on subscription
Cloud Adoption Rates • % of base on cloud
Software Retention Rates • % of customer base and revenue retained upon renewal
Geographic Revenues • Total revenue by major region – Americas, EMEA and APAC
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altusgroup.com2019 Key Transition Year
ALTUS ANALYTICS 2019 FINANCIAL PERFORMANCE GUIDANCE GUIDANCE:
$197 - $205 FY 2019 Revenue Range ($M)
7% - 12% Year-over-Year Revenue Growth Range
16% - 19% Year-over-Year Recurring Revenue* Growth Range
17% - 20% Adjusted EBITDA Margin* Range
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altusgroup.com *Non-IFRS measures, see Slide 4 for more information.Summary
Robert Courteau, Chief Executive Officer
Transition to cloud subscriptions enhances economic value and
increases the long-term growth potential with a high-growth, high-
margin model with predictable revenues
28Altus Analytics 5-Year Growth Ambitions
Reach $400M Total Revenues
~$200M Revenues
by end of 2023
8,000+ Software Customers & Platform
6,500 Software Customers
for the Industry
On-Premise Software Complete Cloud Solution Portfolio
Standalone Solutions and Integrated Software, Data and Service
Services Delivery
70+% Recurring Revenues* 90+% Recurring Revenues*
7% - 12% Revenue Growth; Double-Digit Revenue Growth;
sub 20% adj. EBITDA Margins* 30+% EBITDA Margins*
2019 2023
altusgroup.com *Non-IFRS measures, see Slide 4 for more information.Q&A
All other inquiries please contact Investor Relations:
Camilla.Bartosiewicz@altusgroup.com
30Disclaimer
This documentation is a presentation of general background information about Altus Group’s activities current as the date of the presentation. It is information in a summary form and does not purport to
be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular
investor. These should be considered, with or without professional advice, when deciding if an investment is appropriate.
The information contained in this presentation does not purport to be all-inclusive or to contain all the information that an investor may desire to have in evaluating whether or not to make an investment
in Altus Group. The information has not been independently verified and is subject to material updating, revision and further amendment, and is qualified entirely by reference to Altus Group’s publicly
disclosed information. Without limiting the generality of the foregoing, the selected financial information included in this presentation is qualified in its entirety by, and should be read together with Altus
Group’s Consolidated Audited Financial Statements for the year ended December 31, 2018, Altus’ unaudited interim condensed consolidated financial statements for the three months ended March 31,
2019 and the accompanying MD&A, all of which are available on SEDAR at www.sedar.com.
No representation or warranty, express or implied, is made or given by or on behalf of Altus Group or any of its affiliates or subsidiary undertakings or any of the directors, officers or employees of any
such entities as to the accuracy, completeness or fairness of the information or opinions contained in this presentation and no responsibility or liability is accepted by any person for such information or
opinions. In furnishing this presentation, Altus Group does not undertake or agree to any obligation to provide the participants with access to any additional information or to update this presentation or
to correct any inaccuracies in, or omissions from, this presentation that may become apparent. No person has been authorised to give any information or make any representations other than those
contained in this presentation and, if given and/or made, such information or representations must not be relied upon as having been so authorised. The information and opinions contained in this
presentation are provided as at the date of this presentation. The contents of this presentation are not to be construed as legal, financial or tax advice. Each prospective investor should contact his, her
or its own legal adviser, independent financial adviser or tax adviser for legal, financial or tax advice.
This presentation does not constitute or form part of any offer or invitation for the sale or purchase of securities or any of the assets, business or undertaking described herein nor shall it or any part of it
form the basis of or be relied on in connection with, or act as any inducement to enter into, any contract or commitment whatsoever. Recipients of this presentation who are considering acquiring
securities of Altus are reminded that any such purchase or subscription must not be made on the basis of the information contained in this presentation but are referred to the entire body of publicly
disclosed information regarding Altus.
All currency throughout this presentation are in Canadian dollars unless otherwise expressly stated.
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