connecting the global commerical real estate … · 8/20/2019 · an integrated platform that full...
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CONNECTING THE GLOBAL COMMERICAL REAL ESTATE MARKETPLACE TSX: AIF
AUGUST 2019
Investor Presentation
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Certain information in this presentation may constitute “forward-looking information”
within the meaning of applicable securities legislation. All information contained in this
presentation, other than statements of current and historical fact, is forward-looking
information. Forward-looking information includes information that relates to, among other
things, objectives, strategies and intentions, and future financial and operating performance
and prospects. Generally, forward-looking information can be identified by use of words such
as “may”, “will”, “expect”, “believe”, “plan”, “would”, “could” and other similar terminology. All of
the forward-looking information in this press release is qualified by this cautionary
statement. Forward-looking information is not, and cannot be, a guarantee of future results or
events. Forward-looking information is based on, among other things, opinions, assumptions,
estimates and analyses that, while considered reasonable by Altus Group at the date the
forward-looking information is provided, inherently are subject to significant risks,
uncertainties, contingencies and other factors that may cause actual results, performance or
achievements, industry results or events to be materially different from those expressed or
implied by the forward-looking information. Please consult Altus Group’s most recent
regulatory filings on SEDAR for more information on the Company’s forward-looking
statements.
Certain information in this presentation may be considered as “financial outlook” within the
meaning of applicable securities legislation including revenue guidance and expected
Adjusted EBITDA margin and other targets and goals for Altus Analytics. The purpose of this
financial outlook is to provide readers with disclosure regarding Altus Group’s reasonable
expectations as to the anticipated results of its proposed business activities for the periods
indicated. Readers are cautioned that the financial outlook may not be appropriate for other
purposes.
Altus Group uses certain non-GAAP/non-IFRS measures as indicators of financial and
operational performance. Readers are cautioned that they are not defined performance
measures 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. We believe that these measures are useful supplemental measures that may assist
investors in assessing an investment in our shares and provide more insight into our
performance.
Altus Analytics recurring revenues represent revenues related to software & data
subscriptions, maintenance for perpetual licenses and appraisal management solutions, where
the contract value for software subscriptions recognized ratably over the contract term.
2
Forward Looking Statements & Non-GAAP Disclosures
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3
Investment Highlights
Industry Leadership Market share leader for core CRE practice areas; Altus Analytics solutions have market standard distinction Global Market Opportunity Long growth runway ahead for current offerings & new future vertical opportunities; well positioned to capitalize on increasing need for CRE tech adoption and expert advisory, with solid market fundamentals Sustainable Competitive Advantage Limited competition and wide moats; Altus Analytics has very strong barriers to entry due to industry standard products, scale and global customer adoption Financial Strength Strong balance sheet and cash generation with stable and recurring revenues from global blue chip client base, with long-standing and sustainable dividend policy in place Strong Track Record of Execution Steady revenue growth since IPO (17% CAGR, 2005-2018) & successful business transition into technology driven by financially-invested management team and workforce (approx. 5% employee ownership)
Note: CAGR calculation uses revenue previously reported under IAS 18 and IAS 11 effective for years 2016 and before, and under IFRS 15 for 2017 and 2018 (as restated in the 2018 Annual Report), as the
Company adopted IFRS 15 without restating completed contracts prior to January 1, 2017.
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4
Connecting the Global CRE Marketplace
MAXIMIZE THE VALUE of CRE assets & investments through:
ARGUS Software & data
solutions for CRE investment
management
Independent technology-enabled
CRE professional services
Through our current offerings, large customer base, and leading solutions, we are:
Creating cloud-based solutions that provide complete portfolio transparency and insights across the business
Enabling clients to unlock the potential of underutilized data for better performance management
Providing technology-enabled expert services to drive client value
Combining data, software and expert services to help clients maximize the value of their CRE assets and investments
Altus Group Enables Clients to:
+2,500 employees worldwide 75 offices in major CRE markets ~7% employee ownership
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5
Solutions for All Stages of the CRE Asset Life
ARGUS Software Appraisal Management
(Data Analytics Tools) Data Solutions
Global US, Europe, Asia Pacific Canada
• Software tools for CRE portfolio & investment management
• ARGUS Enterprise (flagship product)
• Valuation management advisory with proprietary data analytics tools for performance benchmarking & attribution analysis
• Canadian market data subscription products covering residential, office, industrial and investment markets
Property Tax Valuations Advisory Cost Advisory
Canada, US, UK Canada Canada / Asia Pacific
• Property tax management & administration services - tax assessment reviews, appeals & negotiations, expert witness services, etc.
• Valuations/appraisals, due diligence, market research, economic consulting, etc.
• Cost consulting and project management services - feasibility studies, budgeting, cost planning, risk management, loan monitoring, etc.
ALT
US
AN
ALY
TIC
S
CR
E C
ON
SU
LT
ING
SOFTWARE – DATA – SERVICES
Serving all CRE participants involved in the value chain of CRE assets
Single provider with end-to-end solutions
Data aggregation across key practice areas
Plan
Raise Capital
Build/ Buy
Operate Value
Report
Dispose
Integrated
CRE
Solutions
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6
A Global CRE Asset & Investment Management Platform
For asset & portfolio management
For fund forecasting
For fund valuation management
For CRE data management
For data insights & collaboration
For development projects
For CRE acquisitions
/
Full stack of integrated end-to-end CRE solutions: An integrated platform that provides complete visibility to enhance performance of CRE investments
• Single point of entry
• Integrated cloud-based applications
• Modular solutions for functional workflows & key business functions
• Seamless data transfer from centralized cloud platform
• 3rd party integrations More to come….
Appraisal Management
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7
Solid Market Fundamentals Support Demand
Increased
Transparency
Accelerated
Transactions Disruptive
Business
Models
Increased
Risk & Regulatory
Pressures Globalization
Tailwinds for CRE Technology Adoption
• CRE industry undergoing digital transformation
• Increasing adoption of technology & data in CRE industry
(but still lags other industries)
• Approx. US$6 billion invested in CRE tech since 2011,
about 70% in last couple of years1
Tailwinds for CRE Services
• Sustained trend for outsourcing by expertise
• Large clients want a single provider
• Low investment in back office
• IT expertise hard to find
Institutionalization of CRE
• Real estate funds AUM expected to double from US$600
billion globally at the end of 2017 to $1.2 trillion by the end
of 20202
• Institutional investment allocation into real estate as an
asset class on the rise (up 10% y/y in 2018, and up 150
bps since 2013)3
• Sustained globalization trend
Pressure Points Affecting CRE Modernization:
Sources: 1) CB Insights 2) Prequin 3) NREI, 2018 Institutional Real Estate Allocations Monitor report
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Diversified Revenue Composition
Canada, 41%
US, 36%
Europe, 17%
Asia Pacific, 6%
$126 $151 $169 $183
$134
$151 $159
$177
$90
$96
$102
$107
$67
$45
$49
$44
$0
$100
$200
$300
$400
$500
$600
2015 2016 2017 2018
Altus Analytics Property Tax Valuations & Cost Geomatics
Property Tax, 35%
Valuations & Cost,
21%
Geomatics, 8%
Altus Analytics,
36%
$416M $442M
$478M
$510M Revenue Split by Segment (2018) Revenue Split by Geography (2018)
3 Yr. Rev. CAGR (2015 -2018)
13% Altus Analytics
10% Property Tax
6%
Valuations & Cost
$M Cdn.
3-Yr adj. EBITDA Margin Avg. 26% Margin 24% Margin 12% Margin
~70% of
revenues
are
recurring
Note: CAGR calculation uses revenue previously reported under IAS 18 and IAS 11 effective for years 2016 and before, and under IFRS 15 for 2017 and 2018 (as restated in the 2018 Annual Report), as the
Company adopted IFRS 15 without restating completed contracts prior to January 1, 2017.
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Recent Financial Performance By Reported Segment
In thousands of Cdn. dollars Q2 2019 Q2 2018 % change H1 2019 H1 2018 % change
Altus Analytics
Revenues $ 50,163 $ 46,972 6.8% $ 96,944 $ 87,508 10.8%
Adjusted EBITDA $ 11,206 $ 12,870 (12.9%) $ 21,027 $ 21,100 (0.3%)
Adjusted EBITDA Margin 22.3% 27.4% 21.7% 24.1%
CRE Consulting
Property Tax $ 65,288 $ 50,059 30.4% $ 109,986 $ 98,678 11.5%
Valuation & Cost Advisory 27,778 27,003 2.9% 53,753 52,252 2.9%
Revenues $ 93,066 $ 77,062 20.8% $ 163,739 $ 150,930 8.5%
Property Tax $ 28,516 $ 15,418 85.0% $ 38,114 $ 28,491 33.8%
Valuation & Cost Advisory 3,485 3,710 (6.1%) 5,985 6,305 (5.1%)
Adjusted EBITDA $ 32,001 $ 19,128 67.3% $ 44,099 $ 34,796 26.7%
Property Tax Adjusted EBITDA Margin 43.6% 30.7% 34.6% 28.9%
Valuation & Cost Adjusted EBITDA Margin 12.6% 13.7% 11.2% 12.0%
CRE Consulting Adjusted EBITDA Margin 34.4% 24.8% 26.9% 23.1%
Geomatics
Revenues $ 10,523 $ 10,367 1.5% $ 21,173 $ 20,813 1.7%
Adjusted EBITDA $ 990 $ 859 15.3% $ 1,451 $ 909 59.6%
Adjusted EBITDA Margin2 9.4% 8.3% 6.9% 4.4%
Consolidated
Revenues $ 153,654 $ 134,218 14.5% $ 281,652 $ 258,908 8.8%
Adjusted EBITDA $ 30,970 $ 23,771 30.3% $ 44,854 $ 39,279 14.2%
Adjusted EBITDA Margin 20.2% 17.7% 15.9% 15.2%
Adjusted EPS $0.52 $0.40 30.0% $0.74 $0.63 17.5%
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10
Altus Group - Strategic Growth Initiatives
“ARGUS Everywhere” 1 • Increased Wallet Share
• Global AE Deployment
• New Markets (Germany,
France, Asia)
• Enterprise Multi-Product
Transactions Focus
• Cloud deployment
Expand “Appraisal
Management” Data
Platform 2
• Same Customer Growth in US
• International Expansion
(Europe, Asia Pacific)
• New Client & New Client Type
Growth
Scale Property Tax 3 • Organic Initatives
• Acquisitions (US focused)
• Tax Analytics Platform
Tech-Enable Services 4 • Improved Data Utilization
• New Platforms
Prepare for Data
Opportunity 5 • Data Collection Infrastructure
Strategy Driving: Altus Analytics:
high recurring revenue growth
Property Tax: market share gains
Profitable growth across the business with
margin improvement
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• Targeting to transition Altus Analytics to +90% recurring revenue model by 2021 by migrating customers to cloud subscriptions
• Starting in Q3 2019, all ARGUS Enterprise (AE) sales to net new customers are expected to be cloud subscriptions & over time migrating on-premise software customers to cloud subscriptions
• Significant customer value proposition to drive cloud adoption throughout 2019 & 2020, with a target to migrate majority of AE users to the cloud by 2023
• Strong recurring revenue base (~70%) sustains y/y Altus Analytics revenue growth during key transition years in 2019 & 2020
• Leveraging past development investments, revenue growth and controlled expenses supports margin expansion, targeting 30+% by 2023
• $197-$205M revenue guidance for 2019 (up 7%-12% y/y), at 17%-20% adjusted EBITDA margin during transition
• Setting 5-year goal to reach $400M in Altus Analytics revenues by 2023
11
Transitioning Altus Analytics to Cloud Subscriptions
ARGUS Cloud:
- Creates value for our
customers and the CRE
industry
- Enables higher economic
value & operating
efficiencies for Altus Group
- Increases long-term growth
potential with high-growth,
high-margin model with
predictable revenues
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Strong Cash Generation
Steady & Profitable Growth
Strong Balance Sheet
Steady Shareholder Returns
$49.5 M in cash from operating activities in 2018
Increasing recurring revenues
at Altus Analytics
• Targeting +90% recurring
revenues by 2021
• Up 20% y/y in H2 2019 to
$74.5 M
9.5% 5-Yr Revenue CAGR
4.3% 5-Yr Adj. EBITDA CAGR (while investing)
CAGR from 2013-2018.
$51.6 M cash position
$150.0 M term debt
1.90x bank funded debt to EBITDA ratio
As at June 30, 2019
12
Financial Strength
5-Year 15.7% TSR average (vs. 1.3% TSX Composite), until 2018
$23.5 M paid in dividends in 2018 (including DRIP)
• $0.15 per share quarterly dividend (~2.3% yield)
Note: CAGR calculation uses revenue previously reported under IAS 18 and IAS 11 effective for years 2016 and before, and under IFRS 15 for 2017 and 2018 (as restated in the 2018 Annual Report), as the
Company adopted IFRS 15 without restating completed contracts prior to January 1, 2017.
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CONNECTING THE GLOBAL REAL ESTATE MARKETPLACE TSX: AIF
Appendix.
SELECT BUSINESS PROFILES
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Powers AE 12, new apps. &
integrates all ARGUS
offerings
For Asset Management
Valuation industry standard For Fund Forecasting For CRE Data For CRE Acquisitions For Development Projects
Store
Access
Integrate
AE Model Benchmarking
Asset & portfolio
performance
Value
Budget
Transact
Operate
Fund performance
Model & optimize
investments
Improve performance
CRE data management
Reporting
Acquisitions pipeline
Track deals
Assess risk
Plan Projects
Raise Capital
Manage Developments
14
ARGUS Software
Key Client Value
• Global software solution that standardizes CRE asset and investment management –
enables clients to maximize value of CRE assets
• ARGUS Enterprise (flagship product) enables customers to forecast asset & portfolio
performance, model scenarios to see the impact of market changes, tenant events,
purchases or sales, and see the impact of key decisions on property or portfolio level returns
Revenue Characteristics
• Software sold as perpetual licenses with ongoing maintenance, or on a subscription basis
and cloud products are sold on a subscription basis (as of July 2019, new customers can
only buy AE cloud subscriptions)
• ~97% renewals* on AE software maintenance
Key Business Characteristics
• ARGUS Enterprise is the industry standard for property valuation in
key CRE markets (taught in over 200 universities & colleges
worldwide)
• Global – used in 70+ countries for over 30 years, 6,500+ software
clients
• Large addressable market opportunity:
• New Customers: +4K AE customers today, ~30K potential
• Current Customers: limited penetration across all offerings
• Future upside from new market verticals & data
Note: ARGUS Enterprise (AE) and ARGUS Developer are also offered via ARGUS on Demand, a hosted solution. As of July 2019, cloud deployment of AE was made available
* Maintenance renewal rate, a non-GAAP measure, represents the percentage of the available renewal opportunity in a fiscal period that renews, calculated on a dollar basis, excluding any growth in
user count or product expansion.
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“ARGUS Everywhere” Strategy
Increasing wallet share & crossing borders with multiple capabilities
ARGUS as a multi-
department standard -
from acquisitions to
finance, broadened use
across organization
Sustained trend in clients
deploying more seats and
adding modules
~4K ARGUS Enterprise
client calling card
Focus on Germany,
France and Asia in 2019,
creating local value
through local functionality
(network effect led by
biggest CRE firms)
Focus on global, multi-
product contracts for
end-to-end client needs
(currently less than 5
clients have bought multi-
products globally)
Driving value through
enhanced functionality via
cloud applications that
enhance workflow, data
aggregation & partner
data flow)
Focus on Top 200 clients
to deploy ARGUS
Enterprise everywhere
globally (currently less
than 10 have deployed
globally)
Cross-Sell / Up-Sell Market Expansion Integrated Offerings New Cloud Products Global Deployment
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The Transition of ARGUS Software
SET THE ARGUS ENTERPRISE (AE) STANDARD GLOBALLY
North America DCF Upgrade
Established AE as the
Market Standard
UK ValCap Upgrade
Driving Continental Europe
Adoption
Go Global
Driving AE as a
Global Solution
CROSS SELL + UPSELL
Growing Wallet Share & Driving Enterprise Agreements with Multi-Product Solutions
MOVE TO CLOUD
Drive Cloud Adoption with AE User Base & Sell New Cloud Applications
INNOVATE
Monetize Data / Pursue Partnerships / Expand Market Verticals / Launch New Data
Applications
2013 -
Curr
ent
2015 -
Cu
rre
nt
Cu
rre
nt
Upgrade/Add-on Sale Multi-Product Sale Global Solution
Move the market to a single
ARGUS Enterprise standard
Establish ARGUS Enterprise
for global adoption
Establish a platform solution
with multiple global asset &
investment management
capabilities
Move to the Cloud
Protected the Business Moat:
1
2
3
4
Move AE Users to Cloud Platform
Leverage Aggregated & 3rd Party Data
Enhance Workflows & Launch New Products
Futu
re
Enhanced the Moat:
Driving Global Growth:
Access Data in the Cloud
5
Unlock Power of Data 5
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Appraisal Management Solutions
Key Client Value
• Outsourced third-party valuation/appraisal management services with
proprietary data analytics tools for performance benchmarking &
attribution analysis
• Helping clients leverage industry and market data to make better
decisions and optimize performance against benchmarks from top
performing investors
Key Business Characteristics
• Market leader in the US, with first-to-market advantage in Europe & Asia
Pacific
• Very high customer renewals
• Steady growth, improving margins with technology & data
• Upside potential from data & geographic expansion
Revenue Characteristics
• 3-5 year contracts; pricing primarily based on # of CRE assets on our
platform, adjusted for frequency of valuations & complexity
• All revenues (except due diligence assignments) are considered
recurring revenues (non-IFRS)
Growth Priorities
• Same customer growth in US – customers adding more assets on
platform & increasing frequency of valuations
• International expansion (Europe, Asia Pacific) – well positioned for
regulatory changes (AIFMD)
• New client & new client “type” growth – growing open-end fund clients &
upside from closed-end funds, pension funds, debt funds, REITS, etc.
Competitive Advantages
• US Fund Valuation Standard: performance attribution standard for most NCREIF (ODCE)
Open End Funds
• Breadth of Data: spans 7,000+ institutional properties and 165+ funds (unique in industry,
covers 400+ individual valuation parameters)
• Proprietary Analytics Tools – benchmarking & attribution analysis for CRE funds & assets
• Peer comparison for value, occupancy, rent & other key performance drivers
• Insights on how portfolio is over/under performing peers
• Ability to drill from fund-level performance to detailed property operating view
• Expertise & Independence: accredited professionals with local market expertise & global
insight
1.
Intake
2.
Administer
Process
3.
Review
Appraisals 2.
Benchmark
Performance
5.
Report
CRE FUND INVESTMENT
PERFORMANCE DATA
Historical
Performance
Benchmarks
Forecasted Value of
Funds (compared to
market)
Data Analytics Tool
for Attribution
Analysis
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Altus Analytics Significant Market Opportunity
Top 200 Global &
Net New Customer
Growth Opportunity
• Geographic Expansion
• AE Global Deployment
• Multi-Product Enterprise Sales
• Leveraging Appraisal Management
Client Growth & Expansion
Future
Opportunities
• Data Monetization
• New CRE Market Verticals
Wallet Share Expansion
Opportunity with +6,500
Software Customer Base
• Add-on Sales
• Monetizing Cloud Migration
• New Solutions & Applications
Wide TAM Multiple Avenues for Growth Supports 2023 $400 M Revenue Goal
03
01
02 <15% global market
penetration leaves plenty
of room for growth
Cloud transition to facilitate
higher wallet share expansion
Upside
*Based on ~4K AE customers and ~30K companies identified worldwide that are engaged in CRE who Altus Group could target as customers for AA solutions – includes Owner Operators, Investors, Lenders and Service
Providers; excludes multifamily and developers, and other financial management client type.
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Property Tax Services
*Guidance based on rebound of activity in Ontario & UK markets following a deferral of revenues in 2018
Key Client Value
• Helping clients reduce their CRE asset tax burden (largest operating expense)
• Specialized tax experts with industry knowledge & data
Key Business Characteristics
• Market leader with national scale in 3 countries (+60% market share in
Canada, ~20% in UK based on volume of appeals filed, and growing in US)
• High customer retention between cycles
• Steady growth, improving margins with technology & data
• Upside potential from data & geographic expansion
Revenue Characteristics
• 36% of consolidated revenues, evenly split between Canada, US, UK (2018)
• Majority derived on a contingency basis (higher margin model), recognized
when appeal settlements are made (with balance on a fixed fee or on time &
materials) – as contingency revenues come in, they flow directly to bottom line
• Significant quarterly fluctuations as a result of uneven timing of contingency
settlements & wide range of cycles
• Key markets & cycles: UK (4 yrs), Texas (1 yr), Ontario (4 yrs), British
Columbia (1 yr), Alberta (1 yr)
0
50
100
150
200
2014 2015 2016 2017 2018 2019F
Revenue & Margin Trends
Revenue Adj. EBITDA Margin
$98.3M
$133.9M
$151.2M $158.7M
$176.7M
22% 21% 27% 26% 20%
Tax Analytics
Platform (TAP) to
drive internal
efficiencies &
client value
Expansion through
financially-
accretive
acquisitions (US
focused)
Organic initiatives
to drive market
share growth (US
& UK)
Growth Initiatives
Guidance* for record
revenue performance
$110M
YTD H1
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20
Property Tax Revenue Historical View
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
Q1
/14
Q2
/14
Q3
/14
Q4
/14
Q1
/15
Q2
/15
Q3
/15
Q4
/15
Q1
/16
Q2
/16
Q3
/16
Q4
/16
Q1
/17
Q2
/17
Q3
/17
Q4
/17
Q1
/18
Q2
/18
Q3
/18
Q4
/18
Q1
/19
Q2
/19
$98.3 M
$133.9 M $151.2 M
$158.7 M
$176.7 M
Variability in quarterly revenue performance but sustained annual growth
Factors Impacting Revenue
Variability:
Mix of Jurisdictions
UK national, Cdn. provincial,
US county and state level
Length of Cycles
Range from 1 – 5 yrs
Contingency Fees
Represent a high portion of
total global Property Tax
revenues
UK Annuity Billings
Q2 cyclicality/seasonality,
excluding first year of new
cycles
2014 adj. EBITDA
margin: 22% 2015 adj. EBITDA
margin: 21%
2016 adj. EBITDA
margin: 27% 2017 adj. EBITDA
margin: 26%
2018 adj. EBITDA
margin: 20% 2019 YTD adj. EBITDA
margin: 35%
Record Revenue
Guidance
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altusgroup.com
For investor inquiries, please contact:
Camilla Bartosiewicz, VP, Investor Relations
416-641-9773
TSX: AIF
MARKET CAPITALIZATION $1.5 Billion
SHARES OUTSTANDING 39.9 M
RECENT SHARE PRICE $37.74 (Aug. 12)
52-WEEK RANGE $38.74 / $21.67
3-MTH AVG. TRADING VOLUME ~61K
QUARTERLY DIVIDEND $0.15 per share (~2.3% yield)
ADJUSTED EPS $1.05 per share (2018)
OWNERSHIP ~90% Institutions & ~5%
Employees
ANALYST COVERAGE
1. BMO, Stephen MacLeod
2. Canaccord, Yuri Lynk
3. Cormark, Maggie MacDougall
4. CIBC, Stephanie Price
5. GMP, Deepak Kaushal
6. National Bank, Richard Tse
7. RBC, Paul Treiber
8. Scotia, Paul Steep
9. TD, Daniel Chan