Investor Presentation Winter 2019 1 DE:TSX.V Forward Looking - - PowerPoint PPT Presentation

investor presentation
SMART_READER_LITE
LIVE PREVIEW

Investor Presentation Winter 2019 1 DE:TSX.V Forward Looking - - PowerPoint PPT Presentation

DE:TSX.V DE:TSX.V DE listed on Investor Presentation Winter 2019 1 DE:TSX.V Forward Looking Information Certain information in this presentation is forward-looking and related to anticipated financial performance, events and strategies of


slide-1
SLIDE 1

1

DE:TSX.V

DE listed on

Investor Presentation

Winter 2019

DE:TSX.V

slide-2
SLIDE 2

2

DE:TSX.V

Forward Looking Information

Certain information in this presentation is forward-looking and related to anticipated financial performance, events and strategies of Decisive Dividend Corporation (and, where the context requires, its subsidiaries) (collective, “Decisive”). When used in this context, words such as “will”, “anticipate”, “believe”, “plan”, “intend”, “target” and “expect” or similar words suggest future outcomes. Forward-looking statements relate to, among other things, Decisive’s

  • bjectives and strategy; future cash flows, financial condition, operating performance, financial ratios, projected

asset base and capital expenditures; Decisive’s dividend policy; cash needs, capital requirements and need for and cost of additional financing; future assets; demand for services; Decisive’s competitive position; and anticipated trends and challenges in Decisive’s business and the markets in which it operates. The forward-looking information and statements contained in this presentation reflect several material factors, expectations and assumptions of Decisive including, without limitation: that Decisive will conduct its operations in a manner consistent with its expectations and, where applicable, consistent with past practice; the general continuance of current or, where applicable, assumed industry conditions; the continuance of existing (and in certain circumstances, the implementation of proposed) tax and regulatory regimes; certain cost assumptions; the continued availability of adequate debt and/or equity financing and cash flow to fund its capital and operating requirements as needed; and the extent of its liabilities. Decisive believes the material factors, expectations and assumptions reflected in the forward-looking information and statements are reasonable but no assurance can be given that these factors, expectations and assumptions will prove to be correct. By their nature, such forward-looking information and statements are subject to significant risks and uncertainties, which could cause the actual results and experience to be materially different than the anticipated results. Such risks and uncertainties include, but are not limited to the completion of additional acquisitions, operating performance, regulatory and government decisions, competitive pressures and the ability to retain major customers, suppliers and contractors, rapid technological changes, availability and cost of financing, key management personnel, availability of labour and management resources and the performance of partners, contractors and suppliers. For a more detailed summary of risk factors which may impact actual results of the Corporation, see “Risk Factors” in Decisive’s most recent Annual Information Form and Management Discussion and Analysis, copies of which are available on Decisive’s profile on the System for Electronic Document Analysis and Retrieval at www.sedar.com. Readers are cautioned not to place undue reliance on forward-looking statements as actual results could differ materially from the plans, expectations, estimates or intentions expressed in the forward-looking statements. Except as required by law, Decisive disclaims any intention and assumes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

slide-3
SLIDE 3

3

DE:TSX.V

Non-GAAP Financial Measures

In this presentation, in discussing the financial performance of the Corporation, reference is made to the measure “EBITDA” and “Adjusted EBITDA” which management of the Corporation believes are meaningful in the assessment of financial performance. “EBITDA” is defined as earnings before interest, income taxes, depreciation and amortization. “Adjusted EBITDA” is defined as earnings before interest, income taxes, depreciation, amortization, other non-cash items such as gains or losses recognized on the fair value of contingent consideration items, asset impairment and restructuring costs, and any unusual non-operating one-time items such as acquisition costs. These non-GAAP financial metrics are non-standard measures under GAAP (including IFRS in the case of the Corporation), and may not be identical to similarly titled measures reported by other companies. Readers are cautioned that the disclosure of these items is meant to add to, and not replace, the discussion of financial results as determined in accordance with GAAP. The primary purpose of non-GAAP financial measures is to provide supplemental information that may prove useful to investors who wish to consider the impact of certain non-cash or uncontrollable items on the Corporation’s operating performance and who wish to separate costs associated with business acquisitions that do not relate to the

  • ngoing performance of

the Corporation’s existing business. Readers are cautioned that the disclosure of these items is meant to add to, and not replace, the discussion of financial results as determined in accordance with GAAP. The primary purpose of non-GAAP measures is to provide supplemental information that may prove useful to investors who wish to consider the impact of certain non-cash or uncontrollable items on the Corporation’s operating performance and who wish to separate costs associated with business acquisitions that do not relate to the ongoing performance of the Corporation’s existing business. In calculating Adjusted EBITDA, certain items are excluded from net income or loss including interest, taxes, amortization and non-cash share-based

  • compensation. Set forth below are descriptions of the financial items that have been excluded from net income or loss to calculate Adjusted EBITDA of the Corporation and the material limitations

associated with using this non-GAAP financial measure as compared to profit or loss:

  • Amortization expense may be useful for investors to consider because they generally represent the wear and tear on property and equipment used in the operations of the Corporation and its
  • Subsidiaries. However, management of the Corporation does not believe these charges necessarily reflect the current and ongoing cash charges related to the Corporation’s operating costs.
  • The amount of interest expense incurred or interest income generated may be useful for investors to consider and may result in current cash inflows or outflows. However, management of the
  • Corporation does not consider the amount of interest expense or interest income to be a representative component of the day-to-day operating performance of the Corporation’s business.
  • Income tax expense may be useful for investors to consider because it generally represents the taxes which may be payable for the period and the change in deferred income taxes and may reduce

the amount of funds otherwise available for use. However, management of the Corporation does not consider the amount of income tax expense to be a representative component of the day-to- day operating performance of the businesses of its Subsidiaries.

  • The Corporation does not consider one-time or non-recurring costs incurred to be a representative component of day-to-day operating financial performance of the business. Acquisition costs are

a necessary expense as part of closing of acquisitions, however, management of the Corporation does not consider the amount of acquisition costs incurred in a particular financial period to be a representative component of the day-to-day operating performance of the business or of its Subsidiaries’ but part of the net investment in the acquired company.

  • Cost of manufacturing includes non-cash charges to expense the fair value increment of acquired inventories sold in the period that were originally valued as part of the initial purchase in a

business acquisition.

  • Share-based compensation may be useful for investors to consider because it is an estimate of the non-cash component of compensation received by the Corporation’s directors, officers,

employees and consultants. However, share-based compensation is excluded from the Corporation’s operating expenses because the decisions which gave rise to these expenses were not made to increase revenue in a particular period, but were made for the Corporation’s long-term benefit over multiple periods. While strategic decisions, such as those to issue share-based awards are made to further the Corporation’s long-term strategic objectives and do impact the Corporation’s earnings under IFRS, these items affect multiple periods and management is not able to change or affect these items within any particular period. While EBITDA and Adjusted EBITDA are used by management of the Corporation to assess the historical financial performance of Corporation, readers are cautioned that:

  • Non-GAAP financial measures, such as EBITDA and Adjusted EBITDA, are not recognized financial measures under GAAP
  • the Corporation’s method of calculating Non-GAAP financial measures, such as EBITDA and Adjusted EBITDA, does not have any standardized meaning under GAAP, may differ from that of other

corporations or entities and therefore may not be directly comparable to measures utilized by them;

  • Non-GAAP financial measures, such EBITDA and Adjusted EBITDA, should not be viewed as an alternative to measures that are recognized under GAAP such as profit or loss or cash
  • from operating activities; and
  • the reader should not place undue reliance on any Non-GAAP financial measures.
slide-4
SLIDE 4

4

DE:TSX.V

Decisive Dividend (TSX.V:DE)

What We Do

We raise capital from investors to buy companies that create value for our shareholders. We look for established manufacturing companies with strong predictable cash flow to provide

  • ur shareholders with stable and

growing monthly dividends.

Where We Invest

We are interested in North American based companies that have an enterprise value

  • f up to $25 M.

Who We Are

Decisive was established to acquire a growing stable of successful companies for the long term that will provide steady and growing dividend payments to our shareholders.

slide-5
SLIDE 5

5

DE:TSX.V

Corporate Profile

Share price $4.20 52-week range $3.28 - $4.49 Total shares outstanding 11.03M basic 0.24M warrants (weighted average exercise price - $4.00) 0.79M options (weighted average exercise price - $3.60) 12.06M fully diluted Market capitalization $46.9M Debt $13.2M Monthly dividend per share $0.03 Annualized dividends per share $0.36 Annualized yield 8.6% Ownership 18% Directors and/or Insiders

Decisive Dividend DE:TSX.V Listing

February 4, 2019

20000 40000 60000 80000 100000 120000 140000 3.2 3.4 3.6 3.8 4 4.2 4.4 4.6

Auditors PricewaterhouseCoopers LLP Legal Counsel MLT Aikins LLP Transfer Agent Computershare Banker Scotiabank

slide-6
SLIDE 6

6

DE:TSX.V

Management Team

James Paterson

Chief Executive Officer

  • Director, Chairman of the

Board and CEO since 2012

  • Partner, Barrister and

Solicitor with Pushor Mitchell LLP , the largest law firm outside the lower mainland in BC, since 2003

  • Focus on M&A,

restructurings and corporate finance

Dave Redekop

Chief Corporate Development Officer

  • CPA, CA
  • Director and CFO since 2012
  • Over 20 years of financial

leadership experience with public companies, including high-tech, transportation and mining

Terry Edwards

Chief Operating Officer

  • Director and COO since 2012
  • Over 30 years of experience

in senior leadership roles

  • COO, Pushor Mitchell LLP

(2005 – 2017)

  • CIBC executive roles

included VP , Southern Ontario and VP , Surrey / Fraser Valley, BC

Rick Torriero

Chief Financial Officer

  • CPA, CA
  • Joined Decisive in fall 2018
  • Over 17 years of experience

in finance, accounting and taxation

  • Held several senior finance

positions at Savanna Energy Services Corp. TSX- SVY (2004 – 2018)

slide-7
SLIDE 7

7

DE:TSX.V

Board of Directors

Board of Directors Principal Occupation Committees James Paterson (Chair) See Management Team bio David Redekop See Management Team bio Terry Edwards See Management Team bio Risk Bruce Campbell President and Portfolio Manager of StoneCastle Investment Management, an investment fund manager Audit, Governance & Compensation Michael Conway President & Co-Founder, SightQuest Technology Inc., and formerly the President & CEO, Finance Executives International, a senior financial executives association Audit (Chair) Peter Jeffrey President of PD&J Associates, a consulting business, since February 2013 and previously President of Whitewater Composites Ltd./Formashape and President and CEO of Avcorp Industries Inc. Risk (Chair) Robert Louie Proprietor of Indigenous World Winery since 2016 and Chief of the Westbank First Nation, a self-governing First Nation, from 2002 to 2016. Audit Warren Matheos Senior Business Development Manager – Western Canada at Temple Lifestyle Ltd., a brand developing company Governance & Compensation Tim Pirie President of Prospect Energy Services Ltd. Tim is also the Founder and Director of a privately held engineering / construction company currently working on E&P projects in the Middle East and a Founder of Petro Toro Inc., a Peruvian focused Oil & Gas Exploration Company Governance & Compensation (Chair), Risk, Lead Director

slide-8
SLIDE 8

8

DE:TSX.V

Why Decisive?

Vendors

  • Exit opportunity
  • Business legacy continues
  • Opportunity to cash out

(max. 90% of the purchase price is paid in cash)

  • Participate in future Decisive growth

(min. 10% of the purchase price is paid in Decisive shares)

Employees

  • Business as usual
  • Opportunity for equity ownership

(Employee Share Purchase Plan)

  • Capital to grow the business
  • Stability of long-term ownership

Shareholders

Growing diversified portfolio of companies Monthly dividend policy

Growth opportunities

  • Strong deal flow
  • Goal to acquire one company annually
  • Organic growth of existing companies
  • Synergistic opportunities in existing and

future acquisitions – strategic fit DE:TSX.V

slide-9
SLIDE 9

9

DE:TSX.V

Acquisition Philosophy

Buy / Build / Hold

  • Long term ownership
  • Partner with existing management
  • Disciplined purchase price based on

sustained EBITDA

►Minimum 10 years profitable operations, with an enterprise value of up to $25M ►Specialty manufacturing (sustainable competitive advantage) ►Focus on non-discretionary products ►Cash flow positive with growth potential Portfolio Company Qualities

Strong Partnerships

  • Strong strategic planning
  • Access to resources and talent
  • Strategic investment in growth opportunities

►Acquire 100% ownership ►Purchase consideration includes min. 10% Decisive shares, remainder cash ►Long-term leverage target of 50% debt / 50% equity ►Operations based in North America Portfolio Company Criteria

slide-10
SLIDE 10

10

DE:TSX.V

0.0x 1.0x 2.0x 3.0x 4.0x 5.0x 6.0x

Blaze King Unicast Slimline Hawk Machine

Attractive Acquisition Multiple

EV/EBITDA Multiple

Acquired Company Industry Acquisition Price Acquisition EV/EBITDA Multiple Full Time Employees Blaze King manufactures a variety of wood burning hearth products 6.9M 5.1x 81 Unicast designs and distributes quality cast replacement wear parts 9.7M 4.9x 18 Slimline designs, manufactures and markets agricultural sprayers and evaporation systems 7.0M 3.5x 33 Hawk Machine third-party producer of downhole tools for the oil and gas industry, and ground rod products for the power utility industry 12.3M 2.5x 92

slide-11
SLIDE 11

11

DE:TSX.V

Sound Financial Track Record

Dividend policy:

  • Monthly dividends paid to Shareholders based on funds generated and received from the subsidiaries
  • Cumulative payout since June 2015 - $7.6 M
  • DRIP instituted commencing January 2019 for regular monthly dividend
  • Dividend yield of ~8.6%

FY Cumulative Annual Yield FY15 $0.18 $0.18 4.9% FY16 $0.30 $0.48 9.4% FY17 $0.35 $0.83 8.3% FY18 $0.36 $1.19 9.3%

Dividends Paid Per Share Monthly Dividend

$0.020 $0.025 $0.030

$0.010 $0.015 $0.020 $0.025 $0.030 $0.035

6-2015 8-2015 10-2015 12-2015 2-2016 4-2016 6-2016 8-2016 10-2016 12-2016 2-2017 4-2017 6-2017 8-2017 10-2017 12-2017 2-2018 4-2018 6-2018 8-2018 10-2018 12-2018 2-2019

slide-12
SLIDE 12

12

DE:TSX.V

Milestones

Decisive shares commence trading on TSX Venture Exchange as a Capital Pool Company Blaze King Acquired Monthly Dividend Policy implemented - $0.02 per share $0.24 per share annualized 2013 September 2015 February 2015 June Monthly dividend increased 25% - $0.025 per share $0.30 per share annualized Unicast Inc. acquired Monthly dividend increased 20% - $0.03 per share $0.36 per share annualized 2015 September 2016 June 2017 March Slimline Manufacturing acquired Hawk Machine Works acquired Raised $14.95M raised at $4 per share 2018 May 2018 June 2018 July

slide-13
SLIDE 13

13

DE:TSX.V

Acquired Companies Well on Track

  • Attractive acquisition multiple; acquired in 2015 for $6.9M at 5.1x EBITDA
  • EBITDA 55% higher on average post acquisition
  • EVA positive (ROE > WACC)
  • Business in solid position to capitalize on 2020 EPA emissions standards
  • Attractive acquisition multiple; acquired in 2016 for $9.7M at 4.9x EBITDA
  • EBITDA had trended higher and EVA positive in first two years post acquisition
  • Recent headwinds in terms of China supply issues and tariffs on Chinese steel sold into

the U.S., however business remains intact and working to mitigate

  • Attractive acquisition multiple; acquired in 2018 for $7.0M at 3.5x EBITDA
  • Business integration well underway and on-track
  • Business purchased ahead of seasonal low period
  • Business poised to capitalize on changes in sales mix and geographic expansion
  • Attractive acquisition multiple; acquired in 2018 for $12.3 M at 2.5x EBITDA
  • Business integration well underway and on-track
  • Recent headwinds in terms of O&G production caps in Alberta, however business sized

for the current market and minimal EBITDA contraction expected

slide-14
SLIDE 14

14

DE:TSX.V

Acquisition 1: Blaze King

Blaze King manufactures a variety of wood burning hearth products. As listed by the EPA, Blaze King has four of the top ten most efficient and cleanest wood stoves in North America

  • Established in 1977
  • Facilities in Penticton, BC & Walla Walla,

Washington

  • 81 employees (64 in Canada, 17 in USA)

Profile

  • Alan Murphy, President
  • Sheila Hawthorne, Operations Manager
  • Louise Lalor, Controller

Key employees

  • Acquired: February 2015 for $6.9M
  • Priced at 5.1x EBITDA

Transaction

  • Issued 330,000 shares at $2 to the

vendors

  • $2.0M in a private placement by issuing

1,004,250 shares at $2

  • $3.5M bank debt
  • And the remainder paid in cash on hand

Financing:

slide-15
SLIDE 15

15

DE:TSX.V

Acquisition 2: Unicast Inc.

Unicast designs and distributes quality cast replacement wear parts for the cement, mining, aggregate, and coal industries worldwide

  • Acquired: June 2016 for $9.7M;
  • Priced at 4.9x EBITDA

Transaction

  • Issued 516,996 shares at $3 to the

vendors

  • $5.0M in a private placement by issuing

1,659,114 shares at $3

  • And the remainder from $5.5M bank

debt issue

Financing:

Convertible Modular Valve Titanium Carbide Hammers Ceramic lined pipe Blow Bar

  • Established in 1994
  • Facilities in Kelowna, BC
  • 18 Employees

Profile

  • Devin Mintz, President
  • Ron Birnie- Brown, VP of Sales and

Engineering

Key employees

slide-16
SLIDE 16

16

DE:TSX.V

Acquisition 3: Slimline Manufacturing

Slimline designs, manufactures and markets agricultural sprayers and evaporation systems for sale and distribution in North America and worldwide

  • May 2018 for $7.0M
  • Priced at 3.5x TTM Adjusted EBITDA

Transaction

  • Issued approximately 258,000 shares at

$3.88 to the vendors

  • $6.0M bank debt

Financing:

SL130 Land-based Evaporator Sprayer with grape attachment Heavy Duty Sprayer

  • Established in 1948
  • Facilities in Penticton, BC
  • 33 Employees

Profile

  • John McMillan, President
  • Kevin Klettke, Production Manager
  • Wayne Riddle, Sales Manager
  • Ron Wirth, Controller

Key employees

slide-17
SLIDE 17

17

DE:TSX.V

Acquisition 4: Hawk Machine Works

Hawk Machine is a third-party producer of downhole tools for the oil and gas industry, and ground rod products for the power utility industry.

  • June 2018, for $12.3
  • Priced at 2.5x Adjusted EBITDA

Transaction

  • Issued 678,392 shares at $3.98 to the

vendors;

  • And remainder from $14.95M equity

raise 3,737,500 shares at $4

Financing:

Ground rod Downhole tool threading Ground rod threading Downhole tool

  • Established in 1998
  • Facilities in Linden, Alberta
  • 92 Employees

Profile

  • Duane Klassen, President
  • Shawn Ramnarine, General Manager
  • David Clyde, Controller

Key employees

slide-18
SLIDE 18

18

DE:TSX.V

Financial Performance

The table below sets forth the financial results for Decisive for the periods as described below:

Nine months Year ended Year ended Year ended Period ended: ended 2018 2017 2016 2015 Revenue (1) $ 24,379,272 $ 23,450,824 $ 17,512,709 $ 13,301,335 Gross margin 9,442,715 10,164,269 7,657,298 5,571,375 Expenses (8,376,659) (9,590,432) (8,123,511) (4,593,760) Profit before taxes 1,066,056 573,837 (466,213) 977,615 Add (deduct): Interest expense/financing costs (1,108) 1,029,450 401,786 197,592 Amortization 1,033,534 975,700 790,595 245,723 EBITDA 2,098,482 2,578,987 726,168 1,420,930 EBITDA % Add (deduct): Acquisition costs 8.6% 470,866 11.0%

  • 4.0%

381,296 10.7% 176,527 Fair value inventory adjustment 336,000 835,486 460,082

  • Share-based compensation

458,810 412,334 1,146,967 265,694 Gain on sale ofequipment

  • (2,141)
  • (21,848)

Adjusted EBITDA (2) $ 3,364,158 $ 3,824,666 $ 2,714,513 $ 1,841,303

1) Revenue for the year ended 2015 includes 10 months of operations

  • f Blaze King. Revenue for the year ended 2016 includes a full year
  • f operations of Blaze King and six months of Unicast. Revenue for

the year ended 2017 includes a full year of operations for both Unicast and Blaze King. Revenue for the nine months ended September 30, 2018 includes a full nine months of Unicast and Blaze King, four months of Slimline, and three months of Hawk Machine Works. 2) Adjusted EBITDA is used as a profitability measure in this document. Please refer to the “Non-GAAP Financial Measures” section of this document for further discussion on these measures.

slide-19
SLIDE 19

19

DE:TSX.V

Investment Highlights

Attractive Dividend

Growing monthly dividend backed by solid free cash flow

Diversification

Diversification among portfolio companies, with attractive purchase multiples (average EV/EBITDA purchase multiple 3.6x) due to fragmented market ripe for consolidation

Proven Leadership Team

  • Proven leadership team with a + 15

years of leadership experience

  • Management remains in control of

the day to day operations

slide-20
SLIDE 20

20

DE:TSX.V DE listed on

#201-1674 Bertram Street Kelowna, BC V1Y 9G4 Canada

Contact:

250-870-9146 dave@decisivedividend.com David Redekop, CCDO