INVESTOR DAY November 15, 2018 www.badgerinc.com | TSX:BAD
TODAY’S PRESENTERS Paul John Kelly Tracey Wallace Tim Reiber Wade Wilson Liz Peterson Jerry Vanderberg Schiefelbein Management in attendance but not presenting: Mike Tunney, VP North American Operations - Central Kevin Carnahan, VP North American Operations - West Jay Bachman, VP Financial Operations and Investor Relations Alan Richter, Director Financial Planning, Analysis & Tax 2
FORWARD LOOKING STATEMENTS This presentation contains forward-looking statements reflecting certain current forecasts of certain disasters, global events, legislation changes, technological advances, economic disruption or aspects of the company’s future. These statements are based on current information other factors beyond Badger’s control; that management has assessed, but which by its nature is dynamic and subject to rapid and • Badger will execute its growth strategy including attracting and retaining key personnel; even abrupt changes. Forward-looking statements in the presentation include but are not • The recent changes to U.S. federal income tax legislation will be maintained; and limited to statements regarding: • Badger will obtain all labour, parts and supplies necessary to complete the planned hydrovac build at the costs expected; and • Badger anticipates continued growth in its Canadian and U.S. markets and that the overall macro- • Badger will be able to complete and implement the Common Business Platform project within the economic environment in both Canada and the U.S. is anticipated to be supportive of this growth; expected time frame and in accordance with the expected budget. • Badger continues to see customer demand as a result of increased usage of hydrovac for non- With respect to dividends, investors are cautioned that monthly dividends are always subject to destructive excavation; approval from the board of directors of Badger, and may be increased, decreased or suspended • Badger expects to see improvements in revenue as a result of investments in developing its by the board at any time. branch network and business development function; • The benefits, if any, that Badger’s operational scale creates related to financial and operating Badger Daylighting Ltd.’s actual results could differ materially from those stated or implied by the performance; forward-looking statements within this presentation. The forward-looking statement with this • The timing and achievement of Badger’s strategic milestones; presentation should be considered in the context of forward-looking statements in the company’s most • Badger anticipates that its Adjusted EBITDA for 2018 will be in the range of $150 to $160 million recent filings included with the Canadian Securities Administrators, which are available on the SEDAR and for 2019 will be in the range of $170 to $190 million; disclosure system (www.sedar.com). • Badger anticipates that the number of new hydrovac builds for 2018 will be approximately 160 to 200 units and for 2019 will be approximately 190 to 220 units, and that hydrovac retirements for Risk factors and other uncertainties that could cause actual results to differ materially from those 2018 will be in the range of 60 to 80 units and for 2019 will be in the range of 40 to 60 units; anticipated in such forward-looking statements include, but are not limited to: price fluctuations for oil • Badger anticipates that gross profit margin and RPT for 2019 will be similar to 2018; and natural gas and related products and services; political and economic conditions; industry • The ability and benefits of Badger to purchase and subsequently cancel up to 2,000,000 of its competition; Badger’s ability to attract and retain key personnel; Badger’s ability to complete and common shares under its NCIB; implement the Common Business Platform project, the availability of future debt and equity financing; • Badger’s estimate of general and administrative expenses for 2018 and that the long-term target changes in laws or regulations, including taxation and environmental regulations; extreme or unsettled for general and administrative expenses remains at 4% of revenue on an annualized basis. weather patterns; and fluctuations in foreign exchange or interest rates. The forward-looking statements made in this presentation rely on certain expected economic Readers are cautioned that the foregoing factors are not exhaustive. Additional information on these conditions and overall demand for Badger’s services and are based on certain assumptions. The and other factors that could affect the Company’s operations and financial results is included in reports assumptions used to generate these forward-looking statements are, among other things, that: on file with securities regulatory authorities in Canada and may be accessed through the SEDAR • There will be customer demand for hydrovac services from infrastructure, construction, and oil and website (www.sedar.com) or at the Company’s website. The forward-looking statements and gas activity in North America; information contained in this press release are expressly qualified by this cautionary statement. The • Badger will maintain relationships with current customers and develop successful relationships Company does not undertake any obligation to publicly update or revise any forward-looking with new customers; statements or information, whether as a result of new information, future events or otherwise, except • Badger will collect customer payments in a timely manner; as may be required by applicable securities laws. • Badger will be able to compete effectively for the demand for its services; • There will not be significant changes in profit margins due to pricing changes driven by market conditions, competition, regulatory factors or other unforeseen factors; • The overall market for Badger’s services will not be adversely affected by weather, natural 3
OPENING REMARKS • 2018 -2019 Outlook and Strategic Milestones 4
2018 - 2019 OUTLOOK AND STRATEGIC MILESTONES Badger has made significant progress towards meeting its long-term strategic financial targets. 2017 – 2018 Milestones (1)(2)(3) Double the U.S. business again within 3 to 5 years 32% U.S. revenue growth in 2017 and 28% growth in Q3 2018 YTD Grow Adjusted EBITDA by a minimum of 15% per year 20% Adjusted EBITDA growth in 2017 and 25% growth in Q3 2018 YTD Target Adjusted EBITDA margins of 28% to 29% Q3 2018 YTD Adjusted EBITDA margins up 120 bps (5%) Drive fleet utilization and RPT above $30,000/month 2017 RPT Of $30,075, 2018 RPT tracking to target 2018 – 2019 Outlook Adjusted EBITDA 2018: $150 to $160 million; 2019: $170 to $190 million Hydrovac builds 2018: 160 to 200 units; 2019: 190 to 220 units Hydrovac retirements 2018: 60 to 80 units; 2019: 40 to 60 units (1) See Badger’s 2018 third quarter, 2017 fourth quarter earnings release, and the 2017 annual MD&A for additional details regarding Adjusted EBITDA, Compliance EBITDA Revenue, Adjusted EBITDA margin and RPT. (2) See slide “Non-IFRS Measures and Key Financial Metrics” for definition and additional details on Adjusted EBITDA, Adjusted EBITDA margin and RPT. (3) Starting point is Badger’s financial results for the year ended December 31, 2016. 5
SCALE = COMPETITIVE DIFFERENTIATION • Unparalleled Scale • A Proven Track Record 6
UNPARALLELED OPERATING SCALE • Badger’s large operating scale differentiates it from its competitors. • Scale facilitates customer service, organic growth, fleet utilization rates, and operating cost management. • Opportunity to further develop operating scale with increased growth. Hydrovac design and build Operational Scale Broad operating network Diversification: geographic and end use market Organic growth opportunities Strategic business initiatives 7
A PROVEN TRACK RECORD Badger’s hydrovac focused model has generated strong financial performance across a variety of business cycles. Badger 10 Year Annual Consolidated Revenue (1) 600 CAGR: 17% 500 $CAD mm’s 400 Organically Funded Growth 300 200 100 10 year revenue CAGR of 17% - 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 TTM Return on Invested Capital (2) 10 year average return on invested capital of 16% 20% 15% 10% Flexible capital expenditures 5% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 TTM 2018 (1) Source: Badger historical MD&A and /or Financial Statements. (2) Return on invested capital calculated as follows: Net operating profit after taxes divided by invested capital. Net operating profit after taxes calculated as net profit adjusted for the after tax impact of interest, share-based compensation and other one-time items. One-time items applicable to 2014 as disclosed in Badger’s 2014 MD&A. Invested capital is calculated as total assets less cash and cash equivalent less non-interest bearing current liabilities. Note 1: Throughout this presentation trailing twelve months (“TTM”) includes the period October 1, 2017 though September 30, 2018. Note 2: Throughout this presentation Adjusted EBITDA as defined by Badger for the years 2013 through 2018, prior to 2013 was defined as EBITDA. See Badger historical MD&A for additional details. 8
HYDRO EXCAVATION • Hydro Excavation Overview • Benefits of Hydro Excavation 9
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