Corporate Presentation June 2017
Badger Daylighting: Proven Business Model with Organic Growth • Proven business model and strong competitive position • Excellent organic growth potential in existing and new markets • Track record of creating value through economic cycles • Balance sheet prudently managed to withstand cyclicality • Hydrovac focused strategy • Executing profitable long-term growth TSX: BAD Slide 1 June 2017
Financial Summary – Strong Balance Sheet and Historical Return on Invested Capital Shares outstanding – at May 31, 2017 37.1mm Market capitalization – at May 31, 2017 $0.9B Total debt less cash – at March 31, 2017 $41mm 1 – Trailing Twelve Months (TTM) at March 31, 2017 Adjusted EBITDA $105mm Net Earnings – TTM at March 31, 2017 $31mm Average return on equity (Last 5 Years) 18% Dividend yield – at May 31, 2017 1.7% 1 For definition of Adjusted EBITDA see slide titled Non-IFRS Financial Measures. TSX: BAD Slide 2 June 2017
The Badger Daylighting Process The Badger Daylighting process involves exposing underground infrastructure to daylight: Purpose-built Badger units with well trained • professional operators. Pressurized water stream excavation. Nozzle • design, pressure and volume are critical to prevent damage to underground infrastructure. Powerful vacuum system removes soil and debris. • Non-destructive excavation. • Safety – It’s What We Do. It’s What We Deliver. TSX: BAD Slide 3 June 2017
The Badger Daylighting Process Badger has developed a wide range of applications for its Badger units* *See Appendix for additional uses TSX: BAD Slide 4 June 2017
The Badger Process Advantage • Safe → helps prevent damage to underground infrastructure • Time is Money → keeps projects on schedule/improves returns for infrastructure owners • Locating underground conflicts makes traditional excavation equipment more productive • Precise excavation → can reduce the size and amount of excavating required • Excavate through frozen ground • Excavate in hard-to- reach areas → under infrastructure, in confined spaces. Badger’s Culture: Serve our customers with the Best Trained Operators and the Best Trucks in the business. TSX: BAD Slide 5 June 2017
Badger Daylighting Badger has an excellent business with a great track record Offers a unique service to Proven business model Executing on a focused attractive markets and strong competitive strategy position TSX: BAD Slide 6 June 2017
Proven Business Model and Strong Competitive Position Badger Hydrovac Units and Revenue Last 10 Years • Organic growth model: build 450 1,200 one truck at a time and put it 400 to work which lowers 1,000 350 operating risk Annual Revenue ($mm CAD) Fleet (# of Hydrovac Units) 300 800 • Flexibility to adjust truck build rate and to manage fleet 250 600 utilization over business cycle 200 • Managed successfully through 150 400 the 2014-2016 oil & gas 100 downturn by repositioning 200 50 fleet - - • Well positioned for growth 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Number of Badger Units Revenue ($mm CAD) TSX: BAD Slide 7 June 2017
Proven Business Model and Strong Competitive Position Proven Business Model: Local Branches Part of Large Network • Growing network of locally operated corporate and operating partner branches. • Always say “yes” when a customer calls… find a truck. • Focus on building a diverse, local customer base… don’t rely solely on large projects. • Decentralized model - local Area Managers are entrepreneurs that manage their own P&L’s – bonus based on pre-tax earnings. Operating partners are independent entrepreneurs. • Key performance indicator (KPI) tracking in safety, utilization, margin, operating expenses, customer growth and staff retention. TSX: BAD Slide 8 June 2017
Proven Business Model and Strong Competitive Position Badger leverages significant scale advantages across its branch network Over 100 Branches and over 150 Service • Areas 1 Over 1,000 Badger Hydrovac units; 83% • operated from Corporate locations, and 17% from Operating Partners 2 Provides service in 6 provinces and 41 • states. 1 Service Areas are locations where Badger provides services to local customers regardless of whether there is a physical location where Hydrovacs and staff are located. A Branch has a physical location, staff and Hydrovacs. 2 As at December 31, 2016. TSX: BAD Slide 9 June 2017
Proven Business Model and Strong Competitive Position Hydrovac revenue has shifted to non-oil & gas 450 Badger’s extensive 400 network and market 350 knowledge allowed it 300 Revenue ($mm CAD) to aggressively 250 reposition the 200 business to offset the 150 steep decline in oil & 100 gas related markets 50 - 2012 2013 2014 2015 2016 Hydrovac Service Revenue - Non-Oil and Gas Hydrovac Service Revenue - Oil and Gas Other Revenue Proven Business Model: Flexibility over Business Cycles TSX: BAD Slide 10 June 2017
Proven Business Model and Strong Competitive Position Very Attractive Economics: Building our own trucks provides a number of operating advantages: Pre-Tax IRR at Different Revenue Per Truck (RPT) Levels* • Best in class design for greater 36,000 efficiency (we operate more 34,000 Hydrovacs than anyone) Revenue Per Truck/month 32,000 • Lower life cycle operating costs 30,000 • Flexibility to adjust build rate to (RPT) 28,000 meet demand 26,000 *Assumes production cost of $400,000, 10 year 24,000 economic life, $0 terminal value, 25% EBITDA 22,000 margin. 20,000 12% 14% 17% 19% 21% 24% For definition of revenue per truck see slide IRR titled Non-IFRS Financial Measures. Source: Management Analysis TSX: BAD Slide 11 June 2017
Proven Business Model and Strong Competitive Position Badger Engineering and Truck Build Vertical integration in truck design and build • Badger units designed to optimize life cycle costs, at a lower initial capital cost versus • purchasing from third party manufacturers Design input from over 1,000 operators • Badger’s Red Deer, Alberta manufacturing facility TSX: BAD Slide 12 June 2017
Offers a Unique Service to Attractive Markets • Badger is the leader in introducing Hydrovac technology to new customers and geographic markets • Growth driven via penetration in existing markets and entering new markets • Of 347 US Metropolitan Statistical Areas (MSAs)* in the lower 48 states, Badger currently provides service to only 73 – significant untapped market potential *US Census Bureau, 2010 Census – an MSA is a geographic region with a population of over 100,000 people. TSX: BAD Slide 13 June 2017
Offers a Unique Service to Attractive Markets Current Badger service area MSAs per 2010 Census data; lower 48 states Significant geographic growth opportunities to pursue with Badger’s proven business model TSX: BAD Slide 14 June 2017
Offers a Unique Service to Attractive Markets Badger serves infrastructure markets : $4 trillion in estimated US Infrastructure needs over next 10 years* • Hydrovac is a small and growing part of infrastructure construction • Badger has proven that Hydrovac has a wide range of infrastructure applications • Oil & gas industry appears to be bottoming - Badger is well positioned to capitalize on any • recovery *Source: American Society of Civil Engineers TSX: BAD Slide 15 June 2017
Offers a Unique Service to Attractive Markets Badger is the market l eader with “first m over” advantage in many markets Revenue Mix Between Canada and the US ($mm CAD) 450 400 350 Revenue ($mm CAD) 300 250 200 150 100 50 - 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 US Canada Badger has pioneered Hydrovac use across a wide range of sectors and geographies. Badger is the industry leader in driving Hydrovac acceptance and market penetration. TSX: BAD Slide 16 June 2017
Offers a Unique Service to Attractive Markets Badger Business Development Focus Local branch managers are main customer contact • Business development efforts at local, regional, • national levels Focus on geographic and customer segments (local • and head office contacts) Over 70 business development staff across North • America Sales management tools and processes • Training • Customer tracking • Expand relationships with existing customers and • target new customers to broaden revenue base TSX: BAD Slide 17 June 2017
Executing on a Focused Strategy “Build a service business from the inside-out ” – Badger’s organic • growth Add a Badger unit train operators sell the service o Leverage core Hydrovac expertise (~90% of our business) • Best Trucks, Operators, Training, Value o Safety and reliability is our priority o Strong local operations and broad customer base • Local focus with national scale o Incentivized management o Leverage our opportunities • Drive Hydrovac penetration in existing markets o Develop new applications for Hydrovac o Significant untapped market potential o Badger’s proven business model provides an advantage in keeping utilization rates high and operating costs low TSX: BAD Slide 18 June 2017
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