Annual General Meeting. June 14, 2018

Transcription

1 Annual General Meeting June 14, 2018

2 Forward-looking Statements Certain statements in this presentation may constitute "forward-looking" statements within the meaning of applicable securities laws. This forward-looking information includes, but is not limited to, the expectations and/or claims of management of Xebec with respect to information regarding the business, operations and financial condition of Xebec. Forward looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Xebec or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such statements use words like "anticipate", "believe", "plan", "estimate", "expect", "intend", "may", "will" and other similar terminology. This list is not exhaustive of the factors that may affect forward-looking information contained in this presentation. These statements reflect current expectations regarding future events and operating performance and speak only as of the date of this presentation. Forward-looking statements involving significant risks and uncertainties should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements. TSX: XBC - OTC: XEBEF- 2

3 Who We Are Today Xebec designs, engineers and manufactures innovative products and technology solutions that transform raw gases into marketable sources of clean energy for industrial use, transportation, gas utilities and the public sector. Tomorrow With proven proprietary technology, Xebec is well positioned to be a facilitator in the rapidly developing Global Energy Transition space, including the field of renewable gases and methanation technology for energy storage units 50 + years experience customers

4 2018 Awards Canada s Clean50 Awards recognize 50 individuals or teams from 16 different categories who have done the most to advance the cause of sustainability and clean capitalism in Canada over the past 2 years. I had the honour of accepting lead company in the Cleantech space. EDC selected Xebec among a field of over 850 companies as one of three Canadian Cleantech Export Stars that have bridged the gap between domestic and international success in the cleantech industry. The Toronto Stock Exchange (TSX) recognized Xebec as a Venture 50 company for 2018 based on a ranking of top performers on TSX Venture Exchange over the last year. TSX: XBC - OTC: XEBEF - 4

5 Team Xebec!

6 Business Segments and Products Industrial Compressed Air & Gas Treatment Industrial purification equipment, parts & service for applications as diverse as manufacturing, medical and petrochemical industries Clean Technology Renewable Natural Gas, Hydrogen & Renewable Hydrogen systems/plants for the production of fuel for a wide variety of applications, from fuel cells to the replacement of fossil fuels in transportation TSX: XBC - OTC: XEBEF - 6

7 Industrial Compressed Air & Gas

8 Our Bread and Butter TSX: XBC - OTC: XEBEF - 8

9 Industrial Compressed Air and Gas Historically high margin; significant recurring revenue base from sales of parts and service to over 9,000 installations. Looking forward, high 30 s to mid 40's in gross margin. Heavily invested in product development of additional purification products. Roll-up strategy to acquire 3-5 small service businesses ($3-5M revenue) to create the leading Canadian National Compressed Air Treatment business. Xebec is the only Canadian manufacturer of adsorption systems with a full product portfolio and all necessary Canadian Federal & Provincial certifications (CRN, CSA etc.). TSX: XBC - OTC: XEBEF -9

10 Organic revenue growth up to $ 12 million by 2020 Acquisitions in Q3/2018, with total acquisition revenue of C$15 to C$20 million by 2020 Industrial Compressed Air and Gas 5 Acquisitions - 3 to 5 million in revenue each - 3 in Ontario - 1 in Alberta - 1 in British Columbia Total Revenue C$ 25 to 30 million; Gross Margins ~ 40%; EBITDA margins of 17% to 20% M&A 4 40% of privately owned companies in Canada will change ownership within the next 5 years. M&A 5 M&A 3 M&A 2 Xebec Head Office M&A 1 Source: Business Development Bank of Canada, The Coming Wave of Business Transitions in Canada. TSX: XBC - OTC: XEBEF - 10

11 Solution: Industrial Compressed Air and Gas Treatment Client: Hydro Quebec High Pressure Compressed Air Dryers Supporting Hydro Quebec's LG4 Plant TSX: XBC - OTC: XEBEF - 11

12 Solution: Industrial Compressed Air and Gas Treatment Client: Honda Xebec Compressed Air Dryers Supporting the Honda Car Plant in Alabama TSX: XBC - OTC: XEBEF - 12

13 Cleantech - Renewables & Hydrogen

14 CLIMATE CHANGE IS REAL Rising Temperatures

15 A Global Energy Transition Worsening Air Pollution TSX: XBC - OTC: XEBEF

16 A Global Energy Transition Acute health issues TSX: XBC - OTC: XEBEF

17 TSX: XBC - OTC: XEBEF - 17

18 There is good news... A Global Energy Transition today's headlines are tomorrow's solutions TSX: XBC - OTC: XEBEF - 18

19 A Global Energy Transition Governments and agencies at every level are now invested in significant climate change initiatives. Industries in every sector of daily life are actively engaged in reduction of CO2 emissions. Major Gas utilities have committed to aggressive sustainability targets in renewable gas energy. TSX: XBC - OTC: XEBEF - 19

20 Our Cleantech Opportunity Xebec is already involved in the generation of renewable natural gas (RNG), renewable hydrogen (H2) and power-togas(p2g) energy storage play via methanation of hydrogen and renewable carbon dioxide (CO2). Xebec is perfectly positioned to focus on Renewable Gases (not just Renewable Natural Gas) and their significant future contribution to a greenhouse gas neutral energy system. Xebec credentials, experience, products and technology allow us to be a key facilitator in this global energy transition space. TSX: XBC - OTC: XEBEF - 20

21 What Is Renewable Natural Gas? RNG is natural gas (biomethane) produced from existing waste streams and other biomass sources like animal waste. Once processed, it is interchangeable with traditional pipeline quality natural gas. It is carbon neutral, extremely versatile and can be fully compatible with U.S. pipeline infrastructure. This is where Xebec plays. RNG has the potential to add up to 2.5 quadrillion Btu annually enough to meet natural gas needs of half of all American homes. It reduces GHG emissions by up to 95% compared to fossil natural gas. Source: SoCalGas TSX: XBC - OTC: XEBEF - 21

22 Solution: Cleantech Biogas to RNG Purification Bioloie Biogaz Station, France TSX: XBC - OTC: XEBEF - 22

23 Solution: Cleantech Biogas to RNG Purification TSX: XBC - OTC: XEBEF - 23

24 Solution: Cleantech Biogas to RNG Purification Former President Hollande of France Inaugurates a Xebec System TSX: XBC - OTC: XEBEF - 24

25 Play video Xebec Upgrading Plant

26 Recent Wins Xebec recently signed an exclusive market development and commercialization agreement with Sapio Group of Italy. Under this agreement, Sapio is entering into a minimum purchase order commitment for multiple Xebec biogas upgrading plants for a total value of 33 million Euros (C$ 51 million) to be delivered over three years. Xebec s China subsidiary has just received four orders for its hydrogen fast cycle pressure swing adsorption (PSA) gas purification systems totaling CDN$ 3.4 million. Deliveries are scheduled to occur within the next six months. TSX: XBC - OTC: XEBEF - 26

27 Business Drivers Increased demand for renewable natural gas (RNG). Emerging opportunities in renewable hydrogen (RH 2 ) as a transportation fuel for Fuel Cell Electric Vehicles (FCEV). Ongoing development work to convert electrical energy into chemical energy. Through innovative methanation reactions of CO 2 and H 2, syngas can be produced for large scale energy storage. TSX: XBC - OTC: XEBEF - 27

28 Global Oil Demand Up or Down? Electric Vehicles are helping transform energy use for passenger cars, slowing the pace of growth in global oil demand However, trucks, aviation, shipping and petrochemicals keep oil on a rising trend Source: World Energy Outlook 2017 TSX: XBC - OTC: XEBEF - 28

29 RNG and Hydrogen - The Opportunity Source: NREL - Renewable Hydrogen Potential from Biogas in the United States, 2014 Department of Energy - German Energy Agency, TSX: XBC - OTC: XEBEF - 29

30 United States RNG the Cellulosic Fuel Opportunity Since 2014 RNG qualifies as a cellulosic biofuel under the Renewable Fuel Standard. In 2016 it filled 82% of all cellulosic biofuel (D-3) requirements under the RFS. Renewable (D-6) typically refers to corn-based ethanol Source: U.S. EPA - Renewable Fuel Standard TSX: XBC - OTC: XEBEF - 30

31 United States RNG Market Size and Opportunity 11,000 potential biogas sites on farms - Approx. 8,200 dairy & swine farms - Approx. 2,450 waste water treatment plants Short term opportunities tied to landfills - Approx. 630 operating sites - Approx. 400 candidate sites RNG prices have increased from a range of $7 - $15 to a range of $30 - $70 GJ Estimated market size of $2 to $3 billion Source: U.S. EPA, Landfill Methane Outreach Program (LMOP) TSX: XBC - OTC: XEBEF - 31

32 United States RNG Market Size and Opportunity TSX: XBC - OTC: XEBEF - 32

33 Europe RNG Market Size and Opportunity Prices for RNG, Biomethane are in the 30 Euro per GJ range Estimated market size: $2 to $4 billion Growth forecast is strong, particularly countries like France, Ireland, Italy, Spain TSX: XBC - OTC: XEBEF - 33

34 Canada RNG Market Size and Opportunity Introduction of Cap & Trade in 2018, and Canadian Clean Fuel Standard (CFS) in 2019 Market size in Canada ~ 1,000 to 1,500 RNG facilities, requiring investments of between $2 to $3 billion over the next 15 to 20 years Currently RNG trades between $9 to $30 GJ in Canada Source: Canadian Biogas Association TSX: XBC - OTC: XEBEF - 34

35 Operational Review

36 International Presence Headquarters in Montreal, Quebec, Canada Manufacturing, Sales, R&D Sales & Engineering Office in Houston, Texas Manufacturing and Sales in Shanghai Sales & Engineering Office in Milan, Italy Sales Partners in Singapore, France, Austria, South Korea TSX: XBC - OTC: XEBEF - 36

37 Facilities North America & China 41,753 sq ft Blainville manufacturing facility 50 permanent employees 20,541 sq ft Shanghai manufacturing facility 30 permanent employees Electronic Testing Hydrostatic Testing Dryer Assembly Tig welding with ASME-certified welders TSX: XBC - OTC: XEBEF - 37

38 Operational Goals Support growth in both Industrial and Clean Tech Business! Clean Tech rapid, explosive growth in global markets Industrial steady organic growth & acquisitions in NA

39 Operational Strategy People Product Process

40 People Global Team of experienced leaders and specialists - 13 languages - 15 cultures Strong background in sales, product engineering, manufacturing, supply chain management, marketing and HR TSX: XBC - OTC: XEBEF - 40

41 Product Strategy & Placement PSAs Clean Tech Biogas Renewable H2 Gasification Dryers Industrial Solutions Industrial PSA Air and Natural Gas Dryers TSX: XBC - OTC: XEBEF - 41

42 Product Platform Architecture Biogas Plants Industrial PSA NGX Dryers Air Dryers Agri & Farm-based Digesters, Waste Water Treatment & Landfills Make It Standard Hydrogen,Helium & Syngas purification Make It Scalable NGX Stations & Refinery Gas Drying Industrial Applications Make It Modular TSX: XBC - OTC: XEBEF - 42

43 Dryers: Major OEMs Growth Strategy PSAs: Supplier JNK Heaters Co., Ltd TSX: XBC - OTC: XEBEF - 43

44 Process Biogas Supply Chain Strategic partners being established in each region TSX: XBC - OTC: XEBEF - 44

45 Process Biogas Supply Chain PSAs to be made locally and shipped Biogas plants to be assembled regionally TSX: XBC - OTC: XEBEF - 45

46 Financial Review

47 Financial Snapshot Improved 2017 results: revenue growth of 53% and strengthened balance sheet Q significant increase of 660% in order backlog 1 Key Metrics in C$ millions, except share information FY2016 FY2017 Q1/2017 Q1/2018 Gross Revenue $9.6 $14.7 $3.3 $3.2 Gross Margin $2.2 $5.8 $1.4 $0.8 as a percent 22.6% 39.1% 43.3% 24.3% Stock-based Compensation Expense $0.07 $0.4 - $0.09 Net Income (loss) $(2.7) $0.1 $0.6 $(1.4) EBITDA 2 $(2.02) $1.08 $0.7 $(1.0) Earnings (Loss) per Common Share $(0.07) $0.002 $0.01 $(0.03) diluted $(0.07) $0.002 $0.01 $(0.02) # of Shares Outstanding 39,363,867 40,562,060 39,437,200 42,504,367 fully diluted 54,094,064 58,114,139 53,994,064 56,099,139 Backlog $11.5 $13.9 $8.7 $ Includes firm order commitment of $51M to be delivered over 3 years from Sapio Group 2. EBITDA is a non-ifrs financial measure and the Company defines it as earnings from operations excluding financial charges, taxes, foreign exchange gain (loss) and amortization TSX: XBC - OTC: XEBEF - 47

48 Significant tax losses provide potential for a future tax asset Financial Snapshot Strong need to improve working capital in line with growth Key Metrics in C$ millions FY2016 FY2017 Q1/2017 Q1/2018 Accumulated Non-capital Tax Losses Federal $55.3 $54.2 n/a n/a Quebec $57.9 $56.7 n/a n/a Working Capital $(1.2) $1.8 $(0.1) $0.9M ratio 0.8:1 1.3:1 1.0:1 1.1:1 Cash & Cash Equivalents $1.1 $1.3 $0.8 $1.1 TSX: XBC - OTC: XEBEF - 48

49 Outlook 2018 Like Q4/17, both Q1/18 and Q2/18 are influenced by working capital challenges. Currently in final stages of establishing a significant working capital facility which will allow us to meet our 2018 financial targets. Order backlog to be delivered in 2018 supports budgeted revenue numbers: Revenue growth in 2018 of 50% to 70% compared to 2017, leading to revenues in the range of C$ 22.0 to 25.0 million Earnings per share (EPS) are expected in the range of 0.02 to Target year end backlog in excess of C$ 50 million TSX: XBC - OTC: XEBEF - 49

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