Investor Update May 2018 www.badgerinc.com | TSX:BAD
Forward Looking Statements This presentation contains forward-looking statements reflecting certain current forecasts of certain aspects There will not be significant changes in profit margins due to pricing changes driven by market • of the company’s future. These statements are based on current information that management has assessed, conditions, competition, regulatory factors or other unforeseen factors; but which by its nature is dynamic and subject to rapid and even abrupt changes. Forward-looking The overall market for Badger’s services will not be adversely affected by weather, natural disasters, • statements in the presentation include but are not limited to statements regarding: global events, legislation changes, technological advances, economic disruption or other factors beyond Badger’s strategic milestones which are to: 1) double the U.S. business from fiscal 2016 levels over the Badger’s control; • next 3 to 5 years 2) grow Adjusted EBITDA by a minimum of 15% per year, 3) target annualized Adjusted Badger will execute its growth strategy including attracting and retaining key personnel; • EBITDA margins of 28% to 29%; and 4) drive fleet utilization and revenue per truck per month above $30,000; The recent changes to U.S. federal income tax legislation will be maintained; and • Badger anticipates continued growth it its Canadian and U.S. markets and that the overall macro- • Badger will obtain all labour, parts and supplies necessary to complete the planned hydrovac build at • economic environment in both Canada and the U.S. is anticipated to be supportive of this growth; the costs expected. Badger continues to see growth from increased usage of hydrovac for non-destructive excavation; With respect to dividends, investors are cautioned that monthly dividends are always subject to approval • from the board of directors of Badger, and may be increased, decreased or suspended by the board at any Badger expects to see improvements in revenue as a result of investments in developing its branch • time. network and business development function; Badger Daylighting Ltd.’s actual results could differ materially from those stated or implied by the forward- Badger anticipates that changes to U.S. income tax legislation will positively impact current income • looking statements within this presentation. The forward-looking statement with this presentation should be taxes; considered in the context of these and other risk factors disclosed in our most recent filings included with the The implementation of a NCIB for up to 2,000,000 common shares, other related regulatory Canadian Securities Administrators, which are available on the SEDAR disclosure system (www.sedar.com). All • requirements and the potential benefits of implementing the NCIB; and future written and oral forward-looking statements made by us or on our behalf are also subject to these factors. We undertake no obligation to publicly update or revise any forward-looking statements, whether as Badger’s anticipation that the number of new hydrovac builds for 2018 will be between 160 to 200 units • a result of new information, future events or otherwise, except as required by law. with retirements of 60 to 80 units. The forward-looking statements made in this presentation rely on certain expected economic conditions and overall demand for Badger’s services and are based on certain assumptions. The assumptions used to generate these forward-looking statements are, among other things, that: There will be customer demand for hydrovac services from infrastructure, construction, and oil and gas • activity in North America; Badger will maintain relationships with current customers and develop successful relationships with new • customers; Badger will collect customer payments in a timely manner; • Badger will be able to compete effectively for the demand for its services; • 2
Badger – A Proven Business Model Badger’s organic growth model has historically delivered strong financial performance Badger has a proven Badger offers a Badger is business model and unique service executing on maintains a strong to attractive end a focused competitive position – use markets hydrovac strategy 3
2018 First Quarter, Outlook and 2017 Annual Highlights (1)(2)(3) 2017 Key Financial Highlights Q1 – 2018 Q1 – 2017 2017 Annual 2016 Annual Record revenue and Adjusted EBITDA; RPT of $30,075 Adjusted EBITDA $24.4 million $19.9 million $125.4 million $104.8 million 36% increase in dividend; NCIB being implemented Revenue $120.6 million $100.1 million $499.2 million $404.2 million Balance sheet flexibility; net leverage of 0.4X’s (Mar. 31/18) (4) Adjusted EBITDA margin 20.3% 19.8% 25.1% 25.9% U.S. tax changes positively impacting 2018 results Revenue per truck $27,300 $24,896 $30,075 $24,815 Badger Outlook – Key Themes Macro-economic environment in Canada and U.S. to be supportive of ongoing infrastructure, construction and oil and gas levels for 2018 Improvements in revenue anticipated as a result of investment in branch network and business development function Increased usage of hydrovac for non-destructive excavation Hydrovac build anticipated to be between 160 to 200 new units with anticipated retirements of 60 to 80 units (1) See Badger’s 2018 first quarter and 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) 2017 and 2016 annual revenue as detailed are as disclosed in Badger’s 2017 annual financial statements; amounts reported above do not reflect adjustments related to the adoption of IFRS 15 in 2018. (4) Net leverage as at March 31, 2018 calculated as total debt less cash on hand divided by Compliance EBITDA. 4
2017: Significant Progress Towards Achieving Strategic Milestones “The improvements Badger realized throughout 2017 and the 1 st Quarter of 2018 are a testament to the strength of Badger’s unique business model” Strategic Milestones Progress (1) Double the U.S. business again within 3 to 5 years 2017 U.S. revenues (U.S. dollars) increased by 32%; Q1 2018 29% • • increase Grow Adjusted EBITDA by a minimum of 15% per year 2017 Adjusted EBITDA of $125.4 million - 20% increase over • • 2016; Q1 2018 Adjusted EBITDA 23% increase over Q1 2017 Target Adjusted EBITDA margins of 28% to 29% 2017 Adjusted EBITDA margin of 25.1%; 2017 margin impacted • • by ongoing investment in business and weaker than expected Q1 2017; Q1 2018 Adjusted EBITDA margin up 0.5% vs Q1 2017 Drive fleet utilization and RPT above $30,000/month 2017 RPT $30,075 a 21% increase over 2016; RPT increased • • while increasing the fleet by net 85 hydrovacs (8% increase); Q1 2018 RPT up 10% from Q1 2017 with a net increase of 45 hydrovacs (1) Starting point is Badger’s financial results for the year ended December 31, 2016. 5
U.S. Market Opportunity to Drive Growth “Badger’s proven business model, attractive end-use markets and hydrovac focused strategy differentiate Badger from competitors” Near Term Growth Opportunities U.S. Revenue Growth (2) Leverage existing footprint $268 $300 $250 Significant opportunity to increase Badger’s U.S. $202 $196 $187 $200 $150 US$mm operations $150 $110 $100 $50 – 2012 2013 2014 2015 2016 2017 37% 24% 5% 3% 32% U.S. Revenue Note 1: Service Areas are locations where Badger provides services to local customers. A service area may not have a physical location where hydrovacs and staff are located. Note 2: Service Areas as at October 17, 2017. Note 3: U.S. Census Bureau, 2010 Census – a metropolitan statistical area (“MSA”) is a geographic region with a population of over 100,000 people. Management estimates used for purposes of comparing Badger service areas to MSA’s. Current Badger service area MSAs per 2010 Census data; lower 48 states 6
Key Operational Initiatives “Badger made significant investments in all aspects of its business throughout 2017 with continued focus in 2018” Initiative 2017 Activities & Accomplishments 2018 Focus Human resources Upgraded recruitment and onboarding processes, Continued focus on operator recruitment and developing succession and leadership programs retention Business development Organize and implement Badger’s business development Ongoing development of the business development function function to drive new customer growth Common platform Initial stages of developing and enhancing consistent Continued development of corporate wide common corporate wide operational and administrative practices operating practices in conjunction with update of information systems Technology Continue to assess the implementation of new Implement new software to assist with common technologies across all aspects of Badger (Fleet, platform initiative; continue to refine technology in Operations and Administration) hydrovacs 7
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