Badger Daylighting Ltd. Announces Strong First Quarter 2019 Results
May 13, 2019, 5:01 pm
Badger’s first quarter 2019 financial and operational results delivered strong growth in revenues, Adjusted EBITDA and margins.
First Quarter Highlights
- Badger generated record first quarter 2019 Adjusted EBITDA of
$33.3 million, up 36% from the prior year comparative quarter on record first quarter revenues of $146.6 millionwhich were up 22% from the prior year comparative quarter.
- Revenue per truck per month (“RPT”) for the first quarter was
$30,832up 8%, due to improved asset utilization and modest improvements in hydrovac rates.
- Gross profit margin for the first quarter of 29.0% was 350 basis points or 14% higher than the prior year comparative quarter with Adjusted EBITDA margin of 22.7%, 240 basis points or 12% higher.
- Badger prospectively adopted IFRS 16 – Leases effective
January 1, 2019. See “IFRS 16 – Leases” for details.
- Net profit for the first quarter of
$6.0 millioncompared to $8.1 millionin the prior year comparative quarter.
- During the first quarter, pursuant to its NCIB, Badger purchased and cancelled 633,454 common shares at a weighted average price per share of
- Badger intends to proceed with an updated NCIB program to purchase and cancel up to 2,000,000 common shares upon on the expiration of its existing NCIB program on
May 14, 2019.
“Throughout the first quarter of 2019, Badger remained focused on growing its customer base, implementing strategic pricing initiatives and driving operational efficiencies to manage direct operating costs, all of which contributed to a solid 36% increase in Adjusted EBITDA and a 22% increase in revenues, while simultaneously increasing gross profit margin by 350 basis points to 29.0% for the quarter. The increase in Adjusted EBITDA, revenues, gross profit margin, and RPT realized by Badger in the first quarter was impressive in light of the difficult operating conditions in a number of our markets as a result of harsh winter weather conditions. Our record first quarter results are a testament to the benefits of Badger’s operational internal business improvement initiatives and the importance of Badger’s extensive branch network,” said
“Badger continues to realize strong growth across the majority of our end use and geographic markets, as customers continue to adopt hydrovac excavation as a method of non-destructive and safe excavation. We continue to expect ongoing customer adoption and growth opportunities as the macro-economic environment, particularly in the
|($ thousands, except revenue per truck per month (“RPT”),||Three months ended
|per share and share information)||2019||2018(2)(4)|
|Hydrovac service revenue||141,214||115,004|
|RPT - Consolidated (mixed currency)(1)||30,832||28,608|
|Adjusted EBITDA per share, basic and diluted(1)(3)||$0.91|
|Adjusted EBITDA margin(1)||22.7%||20.3%|
|Profit before income tax||8,370||11,082|
|Net profit per share, basic and diluted(3)||$0.16|
|Cash flow from operating activities before working capital adjustments||32,632||24,679|
|Cash flow from operating activities before working capital adjustments per share, basic and diluted(3)||$0.89|
|Weighted average common shares outstanding(3)(5)||36,592,791||37,100,681|
(1) See “Non-IFRS Financial Measures” and “Key Financial Metrics and Other Operational Metrics” for additional detail on the definition and calculation of Adjusted EBITDA, Adjusted EBITDA margin, and RPT.
(2) Certain of the comparative period revenue groupings and RPT comparatives have been reclassified to conform to the current period presentation and calculation. Refer to the Company’s 2018 annual MD&A for additional details.
(3) Per share, basic and diluted measures calculated by dividing the respective financial measure with the weighted average common shares outstanding for the respective period.
(4) IFRS 16 – Leases has been adopted on a prospective basis therefore prior year comparatives have not been restated. See “IFRS 16 – Leases” in this press release and “Changes in Accounting Policies” in the Company’s first quarter 2019 MD&A for additional details.
(5) See “Share Capital” in the Company’s first quarter 2019 MD&A for additional details.
Comparable IFRS Financial Information (1)
|($ thousands, except per share information)||Three months ended
|Cash flow from operating activities||36,189||32,318|
|Cash flow from operating activities per share, basic and diluted(2)||$0.99|
(1) Cash flow from operating activities is provided as a comparable measure to cash flow from operating activities before working capital adjustments.
(2) Per share, basic and diluted measures calculated by dividing the respective financial measure with the weighted average common shares outstanding for the respective period.
First Quarter Financial and Operational Overview
Adjusted EBITDA for the first quarter of 2019 was
Badger realized record first quarter revenues for the first quarter of 2019 of
RPT for the first quarter was
During the first quarter of 2019, 20 net hydrovacs were placed into service consisting of 37 new and 17 retired units. The timing of new hydrovac builds in the first quarter was impacted by the changeover to chassis with automatic transmissions, which was completed in late
Badger continues to actively manage direct operating costs, in particular, direct labour, resulting in an improvement in Badger’s gross profit margin to 29.0% in the first quarter of 2019 compared to 25.5% in the prior year comparative quarter. Direct operating costs as a percentage of revenue for the first quarter were 71.0% compared to 74.5% in the prior year quarter. Gross profit margins benefited from improved labour efficiency, reduced operating costs due to the adoption of IFRS 16 (as detailed below), modestly higher average hydrovac rates due to regional sales mix and the ongoing implementation of strategic pricing initiatives, the impacts of which more than offset higher bad debts. Badger continues to focus on ensuring services rates are reflective of the total value proposition Badger’s services provide and local market conditions. The improvement in gross profit margin is a testament to the focus of Badger’s operations team on managing direct operating costs and pricing initiatives.
As initially announced in the second quarter of 2018, Badger has initiated a process to upgrade and standardize its legacy information technology systems into a single enterprise resource planning (“ERP”) system, (the “Common Business Platform”). During the first quarter, activities related to the Common Business Platform were primarily focused on business process redesign and the related configuration and integration into the ERP platform. The Common Business Platform is currently on budget and on time.
Net profit for the first quarter of 2019 was
IFRS 16 - Leases
See Badger’s first quarter 2019 MD&A for additional details on financial results, including the adoption of IFRS 16.
Driving Long-term Shareholder Returns: Normal Course Issuer Bid
During the first quarter of 2019, pursuant to Badger’s NCIB, Badger purchased and cancelled 633,454 common shares at a weighted average price per share of
Badger continues to maintain a strong balance sheet. As at
2019 Financial Outlook
Based on existing and forecasted activity levels, Badger anticipates that its 2019 Adjusted EBITDA will be in the range of
Continued growth in Badger’s end use markets and geographic areas has resulted in an increase in revenue and improved fleet utilization as evidenced by improved financial results and a higher realized RPT in the first quarter of 2019 and throughout 2018. Badger anticipates continued growth in revenues in 2019 with a gross profit margin for 2019 to be similar to modestly higher than in 2018. RPT for 2019 is anticipated to be modestly lower than in 2018, particularly in the
Badger’s 2019 financial outlook assumes that Badger will continue to realize ongoing growth in the use of hydrovac for non-destructive excavation as a result of continued customer adoption, particularly in its
Badger remains focused on generating profitable long-term sustainable growth to drive total shareholder returns. In that light, during fiscal 2017, 2018 and the first quarter of 2019, substantial progress has been made towards meeting the strategic milestones that were established in late 2016. Significant progress has been made in meeting the objectives to: (i) double the
2019 First Quarter Conference Call
A conference call and webcast for investors, analysts, brokers and media representatives to discuss the 2019 first quarter results is scheduled for
Annual General Meeting
Badger will be holding its Annual General Meeting of shareholders on May 14, 2019 at 1:30 p.m. MT at the office of Norton Rose Fulbright Canada LLP: Suite 3700, 400 3rd Avenue SW, Calgary, Alberta T2P 4H2. A copy of the presentation to be reviewed at the Annual General Meeting will be available on Badger’s website at www.badgerinc.com under the “Events, Webcasts & Presentation” section.
2019 First Quarter Disclosure Documents
Badger’s 2019 first quarter Management’s Discussion and Analysis and unaudited interim condensed consolidated financial statements for the three months ended
Non-IFRS Financial Measures
This press release 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 other companies or entities. These financial measures are identified and defined below. See Badger’s first quarter 2019 MD&A for detailed reconciliations of Non-IFRS financial measures.
“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 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 of 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 the Company’s control and it excludes share-based compensation as these expenses can vary significantly with changes in the price of the Company’s common shares.
“Adjusted EBITDA margin” is Adjusted EBITDA as defined above, 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 and Other Operational Metrics
“Revenue per truck per month” (RPT) is a measure of hydrovac fleet utilization. It is calculated using hydrovac and hydrovac related revenue only. RPT is calculated on both a consolidated basis and for each geographic segment by dividing hydrovac and hydrovac related revenue for each segment, in the respective local currency, by the average number of hydrovacs in the segment during the period.
See “Key Financial Metrics and Other Operational Metrics” in the Company’s first quarter 2019 MD&A for additional details on RPT.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION AND STATEMENTS
Certain statements and information contained in this press release and other continuous disclosure documents of the Company referenced herein, including statements related to the Company’s outlook, capital expenditures, projected growth, view and outlook toward margins, cash dividends, customer demand and pricing, future market opportunities, the timing, benefits and costs associated with the Common Business Platform project, and statements, and information that contain words such as “could”, “should”, “can”, “anticipate”, “expect”, “believe”, “will”, “may” and similar expressions relating to matters that are not historical facts, constitute “forward-looking information” within the meaning of applicable Canadian securities legislation. These statements and information involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements and information. The Company believes the expectations reflected in such forward-looking statements and information are reasonable, but no assurance can be given that these expectations will prove to be correct. Such forward-looking statements and information included in this press release should not be unduly relied upon. These forward-looking statements and information speak only as of the date of this press release.
In particular, forward looking information and statements in this press release include, but are not limited to the following:
- Badger anticipates continued overall growth in its business, particularly in its
- Badger anticipates that the overall macro-economic environment in the
U.S.is anticipated to be supportive of ongoing infrastructure and construction activity levels for the remainder of 2019, with a softer overall macro-economic environment anticipated in Canada, particularly in Western Canada;
- Badger anticipates that oil and gas activity levels for 2019 will be consistent with 2018 levels within its
U.S.operations but weaker in Canadain 2019 compared to 2018;
- Badger continues to see customer demand as a result of 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;
- The benefits, if any, that Badger’s operational scale creates related to financial and operating performance;
- Badger anticipates that its Adjusted EBITDA for 2019 will be in the range of
$170to $190 million;
- Badger anticipates that the number of new hydrovac builds for 2019 will be approximately 190 to 220 units and that hydrovac retirements for 2019 will be in the range of 40 to 60 units;
- Badger anticipates that gross profit margin for 2019 will be similar to modestly higher than in 2018 and that RPT will be modestly lower in 2019 than 2018;
- The timing, benefits and costs associated with Badger’s Common Business Platform project; and
- The ability and benefits of Badger to purchase and subsequently cancel up to 2,000,000 of its common shares under its existing NCIB and its intention to pursue a new NCIB to purchase and subsequently cancel up to 2,000,000 common shares.
The forward-looking information and statements made in this press release rely on certain expected economic conditions and overall demand for Badger’s services and are based on certain assumptions. The assumptions used to generate this forward-looking information and statements are, among other things, that:
- There will be customer demand for hydrovac services from infrastructure, construction, and oil and gas activity in
- 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;
- Badger will obtain all labour, parts and supplies necessary to complete the planned hydrovac build at the costs expected; and
- Badger will be able to complete and implement the Common Business Platform project within the expected time frame and in accordance with the expected budget.
Risk factors and other uncertainties that could cause actual results to differ materially from those anticipated in such forward-looking statements include, but are not limited to: political and economic conditions; industry competition; price fluctuations for oil and natural gas and related products and services; Badger’s ability to attract and retain key personnel; Badger’s ability to complete and implement the Common Business Platform project, the availability of future debt and equity financing; changes in laws or regulations, including taxation and environmental regulations; extreme or unsettled weather patterns; and fluctuations in foreign exchange or interest rates.
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 providing information about management’s current expectations and plans relating to the future and is subject to the same assumptions, risk factors, limitations and qualifications as set forth in the above paragraphs. 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 amounts set forth herein. FOFI contained in this press release was made as of the date of this press release and the Company does not undertake any obligation to publicly update or revise any FOFI contained in this press release, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws. Readers are cautioned that any FOFI contained herein should not be used for purposes other than those for which it has been disclosed herein.
Readers are cautioned that the foregoing factors are not exhaustive. Additional information on these and other factors that could affect the Company’s operations and financial results is included in reports on file with securities regulatory authorities in
Badger Corporate Office
ATCO Building II
4th Floor, 919 11th Avenue, SW
Telephone (403) 264-8500
Fax (403) 228-9773
Source: Badger Daylighting Ltd