Corporate Presentation September 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 September 2017
Financial Summary – Strong Balance Sheet and Historical Return on Invested Capital Shares outstanding 37.1mm 1 Market capitalization $1.0B 1 Total debt less cash $53mm 2 3 – Trailing Twelve Months (TTM) at June 30, 2017 Adjusted EBITDA $114mm Net Profit (after tax) – TTM at June 30, 2017 $38mm 5-year average return on equity 18% 4 Dividend yield 1.7% 5 1 As at September 14, 2017. 2 As at June 30, 2017. 3 For definition of Adjusted EBITDA see slide titled “Non-IFRS Financial Measures” . 4 Average return on equity for the fiscal years 2012 through 2016. Measure is updated on an annual basis. 5 Dividend yield calculated based on September 14, 2017 share price of $26.87 and September 2017 declared dividend of $0.038 per common share ($0.456 per common share annualized). TSX: BAD Slide 2 September 2017
2017 Second Quarter Highlights Adjusted EBITDA of $32.1 million - $8.9 million or 38% higher than the prior year • quarter Revenue of $123.4 million - $31.4 million or 34% higher than prior year quarter • Adjusted EBITDA margin of 26.0% - 0.8% higher or 3% than the prior year quarter • RPT of $29,141 - $6,103 or 26% higher than the prior year quarter • 15% increase to dividend • $0.038 per share per month or $0.456 per share annualized effective with the August 2017 dividend • Note 1: Refer to Badger’s 2017 second quarter earnings release, financial statements and management’s discussion and analysis for additional details regarding Adjusted EBITDA, Revenue, Adjusted EBITDA margin and Revenue Per Truck (RPT). Note 2: See Non-IFRS measures for definition and additional details on Adjusted EBITDA, Adjusted EBITDA margin and RPT. TSX: BAD Slide 3 September 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 4 September 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 5 September 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 6 September 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 7 September 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) • Flexibility to adjust truck build 300 800 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 ($mm CAD) TSX: BAD Slide 8 September 2017
Proven Business Model and Strong Competitive Position Proven Business Model: Local Branches Part of Large Network • Growing network of locally operated corporate and operating partner branches. • Always say “yes” when a customer calls… find a truck. • Focus on building a diverse, local customer base… don’t rely solely on large projects. • Decentralized model - local Area Managers are entrepreneurs that manage their own P&L’s – bonus based on pre-tax earnings. Operating partners are independent entrepreneurs. • Key performance indicator (KPI) tracking in safety, utilization, margin, operating expenses, customer growth and staff retention. TSX: BAD Slide 9 September 2017
Proven Business Model and Strong Competitive Position Badger leverages significant scale advantages across its branch network Over 100 Branches and over 150 Service • Areas 1 Over 1,000 Badger Hydrovac units; 83% • operated from Corporate locations, and 17% from Operating Partners 2 Provides service in 6 provinces and 41 • states. 1 Service Areas are locations where Badger provides services to local customers regardless of whether there is a physical location where Hydrovacs and staff are located. A Branch has a physical location, staff and Hydrovacs. 2 As at December 31, 2016. TSX: BAD Slide 10 September 2017
Proven Business Model and Strong Competitive Position Hydrovac revenue has shifted to non-oil & gas 450 Badger’s extensive 400 network and market 350 knowledge allowed it 300 Revenue ($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 11 September 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) meet demand 28,000 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 12 September 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 13 September 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 14 September 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 15 September 2017
Offers a Unique Service to Attractive Markets Badger serves infrastructure markets : $4 trillion in estimated US Infrastructure needs over next 10 years* • Hydrovac is a small and growing part of infrastructure construction • Badger has proven that Hydrovac has a wide range of infrastructure applications • Oil & gas industry appears to be bottoming - Badger is well positioned to capitalize on any • recovery *Source: American Society of Civil Engineers TSX: BAD Slide 16 September 2017
Offers a Unique Service to Attractive Markets Badger is the market leader with “first mover” advantage in many markets Revenue Mix Between Canada and the US ($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 17 September 2017
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