Investor Update May 2018 www.badgerinc.com | TSX:BAD Forward - - PowerPoint PPT Presentation

www.badgerinc.com | TSX:BAD

Investor Update

May 2018

Forward Looking Statements

This presentation contains forward-looking statements reflecting certain current forecasts of certain aspects

• f the company’s future. These statements are based on current information 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 limited to statements regarding:

• Badger’s strategic milestones which are to: 1) double the U.S. business from fiscal 2016 levels over the

next 3 to 5 years 2) grow Adjusted EBITDA by a minimum of 15% per year, 3) target annualized Adjusted EBITDA margins of 28% to 29%; and 4) drive fleet utilization and revenue per truck per month above $30,000;

• Badger anticipates continued growth it 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 continues to see growth from increased usage of hydrovac for non-destructive excavation;
• Badger expects to see improvements in revenue as a result of investments in developing its branch

network and business development function;

• Badger anticipates that changes to U.S. income tax legislation will positively impact current income

taxes;

• The implementation of a NCIB for up to 2,000,000 common shares, other related regulatory

requirements and the potential benefits of implementing the NCIB; and

• Badger’s anticipation that the number of new hydrovac builds for 2018 will be between 160 to 200 units

with retirements of 60 to 80 units. The forward-looking statements made in this presentation rely on certain expected economic conditions and

• verall 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;
• 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 disasters,

global events, legislation changes, technological advances, economic disruption or other factors beyond Badger’s control;

• Badger will execute its growth strategy including attracting and retaining key personnel;
• The recent changes to U.S. federal income tax legislation will be maintained; and
• Badger will obtain all labour, parts and supplies necessary to complete the planned hydrovac build at

the costs expected. 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 time. Badger Daylighting Ltd.’s actual results could differ materially from those stated or implied by the forward- looking statements within this presentation. The forward-looking statement with this presentation should be considered in the context of these and other risk factors disclosed in our most recent filings included with the Canadian Securities Administrators, which are available on the SEDAR disclosure system (www.sedar.com). All 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

a result of new information, future events or otherwise, except as required by law. 2

Badger – A Proven Business Model

Badger’s organic growth model has historically delivered strong financial performance

Badger has a proven business model and maintains a strong competitive position Badger offers a unique service to attractive end – use markets Badger is executing on a focused hydrovac strategy

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2018 First Quarter, Outlook and 2017 Annual Highlights

(1)(2)(3)

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Q1 – 2018 Q1 – 2017 2017 Annual 2016 Annual

Adjusted EBITDA $24.4 million $19.9 million $125.4 million $104.8 million Revenue $120.6 million $100.1 million $499.2 million $404.2 million Adjusted EBITDA margin 20.3% 19.8% 25.1% 25.9% 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.

2017 Key Financial Highlights

Record revenue and Adjusted EBITDA; RPT of $30,075 36% increase in dividend; NCIB being implemented Balance sheet flexibility; net leverage of 0.4X’s (Mar. 31/18)

(4)

U.S. tax changes positively impacting 2018 results

2017: Significant Progress Towards Achieving Strategic Milestones

(1) Starting point is Badger’s financial results for the year ended December 31, 2016.

Strategic Milestones Progress

• Double the U.S. business again within 3 to 5 years

(1)

• 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

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“The improvements Badger realized throughout 2017 and the 1st Quarter of 2018 are a testament to the strength of Badger’s unique business model”

U.S. Market Opportunity to Drive Growth

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“Badger’s proven business model, attractive end-use markets and hydrovac focused strategy differentiate Badger from competitors”

Current Badger service area MSAs per 2010 Census data; lower 48 states 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.

Near Term Growth Opportunities

Leverage existing footprint Significant opportunity to increase Badger’s U.S.

• perations

$110 $150 $187 $196 $202 $268 – $50 $100 $150 $200 $250 $300 2012 2013 2014 2015 2016 2017 37% 24% 5% 3% 32% US$mm U.S. Revenue

U.S. Revenue Growth(2)

Key Operational Initiatives

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Initiative 2017 Activities & Accomplishments 2018 Focus

Human resources Upgraded recruitment and onboarding processes, developing succession and leadership programs Continued focus on operator recruitment and retention Business development Organize and implement Badger’s business development function Ongoing development of the business development function to drive new customer growth Common platform Initial stages of developing and enhancing consistent corporate wide operational and administrative practices Continued development of corporate wide common

• perating practices in conjunction with update of

information systems Technology Continue to assess the implementation of new technologies across all aspects of Badger (Fleet, Operations and Administration) Implement new software to assist with common platform initiative; continue to refine technology in hydrovacs

“Badger made significant investments in all aspects of its business throughout 2017 with continued focus in 2018”

Summary

(1) Starting point is Badger’s financial results for the year ended December 31, 2016.

Proven Business Model Attractive Markets Focused Strategy

Strong and expanding branch network Increasing market adoption of hydrovac Executing on a focused hydrovac strategy Organic growth Broad range of Infrastructure end use segments First mover advantage Expanding U.S. footprint Strong historical cash flow and consistent margins Low leverage = financial flexibility

Strategic Milestones (3-5 years):

• Double the U.S. business again within 3 to 5 years(1)
• Grow Adjusted EBITDA by a minimum of 15% per year
• Target annualized Adjusted EBITDA margins of 28% to 29%
• Drive fleet utilization and RPT above $30,000/month

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Appendix – Supplemental Information

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Badger’s Business Model Supports Consistent Margins

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Badger Targets an Annualized Adjusted EBITDA Margin of 28% to 29%

First mover advantage historically results in strong margins – significant runway to access new markets – ongoing hydrovac growth will drive results in the U.S. Badger’s 2015/2016 margins negatively impacted by impact of oil and gas downturn – market appears to have bottomed – improved revenues in 2017 2017 margins impacted by reinvestment in business to facilitate future growth – scalable and profitable growth

Historical Adjusted EBITDA Margins(1)

25.7% 29.0% 28.4% 26.6% 25.9% 25.1%

• 20

40 60 80 100 120 140 160 180 200 – 10.0% 20.0% 30.0% 2012 2013 2014 2015 2016 2017 $mm Adjusted EBITDA Margin (%) Oil and Gas Revenue

(1) Source: Badger historical MD&A and /or Financial Statements. (2) Oil and Gas revenue disclosed an annual basis. (3) Change in total units year-over-year represents the net of additions and retirements. (4) Badger average fleet age was approximately four and a half years as of December 31, 2017. (2)

334 413 407 412 504 630 791 998 1,018 1,024 1,109 – 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 – 200 400 600 800 1,000 1,200 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Revenue per Truck ($) Hydrovac Count Hydrovac Count (Canada) Hydrovac Count (U.S.) Revenue Per Truck (RPT)

Hydrovac Count and Revenue Per Truck(3)(4)

Broad End-Use Markets and Flexible Operations Drive Results

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Increased Revenues Across a Broad Range of Infrastructure and Regional End-Use Markets Focus on sales and business development Extensive repositioning of fleet Shift to non-oil and gas has driven revenue, utilization and improvements in expenses

U.S. Revenue Growth(1)

$110 $150 $187 $196 $202 $268 – $50 $100 $150 $200 $250 $300 2012 2013 2014 2015 2016 2017 37% 24% 5% 3% 32% US$mm U.S. Revenue $118 $148 $135 $140 $194 $239 $325 $422 $405 $404 $499 – $100 $200 $300 $400 $500 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $mm Revenue

Revenue Growth(1)

(1) Source: Badger historical MD&A and /or Financial Statements. (2) Source: Management.

• 100

200 300 400 500 2012 2013 2014 2015 2016 2017

Revenue ($mm CAD)

Revenue By Type(2)

Hydrovac Service Revenue - Non-Oil and Gas Hydrovac Service Revenue - Oil and Gas Other Revenue

Quarterly Revenue Summary

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(1) Source: Badger historical MD&A and /or Financial Statements.

10 30 50 70 90 110 130 150 170 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

($mm CAD) Axis Title

Consolidated Quarterly Revenue by Year (1)

Revenue

2013 2014 2015 2016 2017 2018

“The seasonality of Badger’s business continues to evolve with increased exposure to U.S. markets”

Non-IFRS Financial Measures and Key Financial Metrics

(1)

This presentation contains references to certain financial measures, including some that do not have any standardized meaning prescribed by IFRS and that may not be comparable to similar measures presented by

• ther corporations or entities. These financial measures are identified and

defined below: “Adjusted EBITDA” is earnings before interest, taxes, depreciation and amortization, share-based compensation, gains and losses on sale of property, plant and equipment, and gains and losses on foreign exchange. Adjusted EBITDA is a measure of the Company’s operating profitability and is therefore useful to management and investors as it provides improved continuity with respect to the comparison of our operating results over

• time. Adjusted EBITDA provides an indication of the results generated by

the Company’s principal business activities prior to how these activities are financed, the results are taxed in various jurisdictions, and assets are

• amortized. In addition, Adjusted EBITDA excludes gains and losses on sale
• f property, plant and equipment as these gains and losses are considered

incidental and secondary to the principal business activities, it excludes gains and losses on foreign exchange as such gains and losses can vary significantly based on factors beyond our control and it excludes share- based compensation as these expenses can vary significantly with changes in the price of our common shares. “Adjusted EBITDA Margin” is Adjusted EBITDA margin as defined earlier, expressed as a percentage of revenues. “Compliance EBITDA” is earnings before interest, taxes, depreciation, amortization, calculated on a 12-month trailing basis, and is used by Badger to calculate compliance with its debt covenants and other credit information. Key Financial Metrics “Revenue per truck per month” (RPT) is a measure of hydrovac fleet

• utilization. It is a measure of hydrovac revenue only. RPT is calculated by

combining monthly Canadian and U.S. dollar hydrovac revenue for a respective period, without converting foreign currency revenues into a Canadian dollar equivalent, dividing the total mixed currency hydrovac revenue for the period by the cumulative number of hydrovacs at the end

• f each month, calculated cumulatively, for the same period.

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(1) For further details and related reconciliations refer to Badger’s 2018 first quarter MD&A and the 2017 annual MD&A.

Celebrating 25 Years of Safety

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