INVESTOR UPDATE August - 2019 www.badgerinc.com | TSX:BAD
FORWARD LOOKING STATEMENTS • This presentation contains forward-looking statements reflecting certain current forecasts of certain • Badger will be able to complete and implement the Common Business Platform project within the aspects of the company’s future. These statements are based on current information expected time frame and in accordance with the expected budget. that management has assessed, but which by its nature is dynamic and subject to rapid and even abrupt changes. Forward-looking statements in the presentation include but are not With respect to dividends, investors are cautioned that monthly dividends are always subject to limited to statements regarding: approval from the board of directors of Badger, and may be increased, decreased or suspended by the board at any time. • Badger anticipates continued growth in its Canadian and U.S. markets and that the overall macro- economic environment in both Canada and the U.S. is anticipated to be supportive of this growth; Badger Daylighting Ltd.’s actual results could differ materially from those stated or implied by the forward- • Badger continues to see customer demand as a result of increased usage of hydrovac for non- looking statements within this presentation. The forward-looking statement with this presentation should be destructive excavation; considered in the context of forward-looking statements in the company’s most recent filings included with the • Badger expects to see improvements in revenue as a result of investments in developing its branch Canadian Securities Administrators, which are available on the SEDAR disclosure system (www.sedar.com). network and business development function; Risk factors and other uncertainties that could cause actual results to differ materially from those anticipated • The benefits, if any, that Badger’s operational scale creates related to financial and operating in such forward-looking statements include, but are not limited to: price fluctuations for oil and natural gas and performance; related products and services; political and economic conditions; industry competition; Badger’s ability to • Badger anticipates that its Adjusted EBITDA for 2019 will be in the range of $170 to $190 million; attract and retain key personnel; Badger’s ability to complete and implement the Common Business Platform • Badger anticipates that the number of new hydrovac builds for 2019 will be approximately 190 to 220 project, the availability of future debt and equity financing; changes in laws or regulations, including taxation units and that hydrovac retirements for 2019 will be in the range of 40 to 60 units; and environmental regulations; extreme or unsettled weather patterns; and fluctuations in foreign exchange or • Badger anticipates that gross profit margin for 2019 will be similar to 2018 and that RPT will be modestly interest rates. lower in 2019 than 2018; and • The timing, benefits and costs associated with Badger’s Common Business Platform project. Any future orientated financial information and financial outlook information (collectively, “FOFI”) contained in this press release, as such terms are defined by applicable securities laws, is provided for the purpose of The forward-looking statements made in this presentation rely on certain expected economic conditions and providing information about management’s current expectations and plans relating to the future and is subject overall demand for Badger’s services and are based on certain assumptions. The assumptions used to to the same assumptions, risk factors, limitations and qualifications as set forth in the above paragraphs. generate these forward-looking statements are, among other things, that: Management believes that the FOFI has been prepared on a reasonable basis, reflecting best estimates and judgments; however, actual results of the Company’s operations and financial outcomes may vary from the • There will be customer demand for hydrovac services from infrastructure, construction, and oil and gas amounts set forth herein. FOFI contained in this press release was made as of the date of this press release activity in North America; and the Company does not undertake any obligation to publicly update or revise any FOFI contained in this • Badger will maintain relationships with current customers and develop successful relationships with new press release, whether as a result of new information, future events or otherwise, except as may be required customers; by applicable securities laws. Readers are cautioned that any FOFI contained herein should not be used for • Badger will collect customer payments in a timely manner; purposes other than those for which it has been disclosed herein. • 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, Readers are cautioned that the foregoing factors are not exhaustive. Additional information on these and competition, regulatory factors or other unforeseen factors; other factors that could affect the Company’s operations and financial results is included in reports on file with • The overall market for Badger’s services will not be adversely affected by weather, natural disasters, securities regulatory authorities in Canada and may be accessed through the SEDAR website global events, legislation changes, technological advances, economic disruption or other factors beyond (www.sedar.com) or at the Company’s website. The forward-looking statements and information contained in Badger’s control; this press release are expressly qualified by this cautionary statement. The Company does not undertake any • Badger will execute its growth strategy including attracting and retaining key personnel; obligation to publicly update or revise any forward-looking statements or information, whether as a result of • Badger will obtain all labour, parts and supplies necessary to complete the planned hydrovac build at the new information, future events or otherwise, except as may be required by applicable securities laws. costs expected; and 2
HYDRO EXCAVATION OVERVIEW The Badger Daylighting hydrovac utilizes pressurized water and vacuum to safely excavate underground infrastructure. Safe and efficient Non-destructive Call out service: first call and emergency response Excavated soil/water remains on site or Badger arranges for disposition based on customer requirements - customer maintains ownership 3
BENEFITS OF HYDRO EXCAVATION Hydrovac: non-destructive excavation in sensitive or confined spaces. SAFETY REGULATORY ENVIRONMENT • Badger is a safety first organization • Infrastructure spending driving increased hydrovac • Mentor training processes usage • Compensation tied to safety • Increased regulation related to safety and excavation is a positive for hydro excavation Complementary excavation PRODUCTIVITY PARTNER • Hydro excavation complements traditional excavation methods • 24 hour on call and emergency service “In the United States, on average, a ‘critical strike’ of utility infrastructure occurs every 6 minutes from conventional excavation tools” - Pipeline Emergency Response and Damage Prevention training materials. 4
UNPARALLELED OPERATING SCALE Badger’s operating scale differentiates it from its competitors. • Scale facilitates customer service, organic growth, fleet utilization, and operating cost management. Hydrovac design and build Operational Scale Broad operating network Diversification: geographic and end use market Organic growth opportunities Strategic business initiatives 5
A PROVEN TRACK RECORD Badger’s hydrovac focused model has generated Badger 10 Year Annual Consolidated Revenue (1) strong financial performance across a variety of 700 business cycles. CAGR: 18% 600 500 $CAD mm’s 400 Organically Funded Growth 300 200 100 - 10 year revenue CAGR of 18% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Return on Invested Capital (2) 10 year average return on invested capital of 16% 20% 15% 10% Flexible capital expenditures 5% 0% (3) 2009 2010 2011 2012 2013 2014 2015 2016 2017 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. (3) Return on invested capital in 2017 was positively impacted by a $17.2 million one-time deferred income tax recovery recognized in 2017 due to changes in U.S. income tax legislation enacted in 2017. See Badger historical MD&A for additional details Note 1: 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. 6
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