Corporate Presentation

Transcription

1 Corporate Presentation Frédéric Dugré, President & CEO March

2 Our Business Model Relies on Three Pillars We promote customer retention through every steps of our business offering Water, Water Reuse & Wastewater Projects Specialty Products & Services (SP&S) Operation & Maintenance 3 Flagship Differentiator Convergence

3 Serving the Water Utility Maple Equipment UF, RO, MBR, IFAS, Systems Assembly O&M services Engineering Water Utility Software, Data Acquisition & Monitoring Components for Water Plants (couplings, cartridge filter housings) Specialty chemicals 4

4 Continuous growth Close to our clients Headquarters : Quebec City, QC Manufacturing plants: Ham-Nord (QC) : 60,000 ft 2 Minneapolis (MN): 30,000 ft 2 Vista (CA) : 20,000 ft 2 Engineering & sales offices: Burlington (ON) Calgary (AB) Bilbao (Spain) O&M contracts (USA): 36 municipalities (Water & WW plants) Franchise H 2 O Innovacion de Mexico 550 employees 5 5 TSXV:HE O

5 1 st Business Pillar Projects and Engineering Solutions 100% North America industrial and municipal; Differentiator : open-source platforms for membrane (FiberFlex TM, flexmbr TM ); Current backlog: $54.3 M (as of Dec. 31, 2016), up 25.8%; Main challenge : volatility in project schedules; projects commissioned / year (average value of $1.5 M); Conversion rate of 80% of our clients (specialty products) 2.5-5% of project value is spent annually in consumables (chemicals, filters, membranes) Well positioned for Design-Build-Operate opportunities emerging from our new business model. 6

6 Project Business Evolution 60,0 $ Backlog $ % 50,0 $ Revenues 40,0 $ 3-year moving avg. $38.3 $ year moving avg. 30,0 $ 20,0 $ $20.0 $ 14.7 $ ,0 $ $ $ Q (LTM)

7 Market Drivers for New Projects Increased infrastructure spending PM Trudeau s 10-year infrastructure plan of $120 billion Wastewater treatment 25% of the existing WWTPs will require replacement or rebuilt ($20 billion by 2040) Unconventional water resourcing Desalination (RO): 215% of growth, from $150 M in 2016 to $475 M in 2020 Wastewater and Water Reuse (MBR & UF): 25% of increase, from $8 billion in 2016 to $10 billion in 2020 Aging infrastructure EPA estimates to $660 billion the required investments for drinking water, wastewater and storm water infrastructures over the next 20 years. President Trump s $1 trillion infrastructure plan - financed through both public and private capital 8 Source : GWI, Annual Report 2016 and EPA

8 Chemicals Green antiscalants (phosphate-free and super-concentrated); Speciality membrane cleaners (liquid or powder); Filter aids and coagulants; Manufactured in-house in Vista, California; 2 nd Business Pillar Specialty Products Softwares SCADA TM, SPMC TM, ClearlogX (patented technology); Products Flexible couplings (plastics, stainless steel, Duplex and SuperDuplex); Development of a new product line : FRP cartridge filter housings. 9 Maple farming equipment Specialty products for maple production

9 2 nd Business Pillar Specialty Products Product business with multiple brands and sales channels ; Export in 40 countries through distributors and agents ; 30% North America & 70% worldwide ; Sales are recurrent in nature. 10

10 3 rd Business Pillar Operation & Maintenance (O&M) Acquisition of Utility Partners completed in July 2016 (Impact 100% of FY2017); Operation contracts with 36 municipal water and wastewater plants in 6 states (VT, NH, MA, GA, MS, and CA); Backlog (signed contracts) of $58.2 M (as of Feb. 13, 2017); Update on integration: Change in UP s leadership was completed as planned; Secured 100% of the contracts that were up for renewal; Finance (payables, receivables, invoicing and budgeting) and HR (payroll & benefits) functions have been integrated; 11 Opportunities (short and mid-term): Develop O&M business in Canada; Expand scope of work within existing projects (36); Create value for customers by leveraging procurements; Look for cross-sales opportunities (consumables, project expansion); Hire (next fiscal year) a dedicated Business Development resource.

11 3 rd Business Pillar Operation & Maintenance (O&M) Operating Expenditure by Sector in North America Opportunities: Utility water $38.3 B $38.5 B $38.7 B $38.9 B Only 8% of water & wastewater plants are operated by the private sector in North America Utility wastewater $39.1 B $41 B $43.1 B $45.3 B Industrial $45.7 B $46.6 B $49 B $52.1 B Source: GWI forecast

12 Water Projects Specialty products Our Strategy Operation & Maintenance 13

13 Typical Water Spending on Utility Engineering Filter housings Couplings Process Equipment 2-5% 0.5-1% 10-15% New Water Utility Nonrecurrent revenues 0.5-2% 1-2% 4-8% Recurrent revenues Services Softwares Consumables O&M

14 Focus on Conversion Rate From Projects to Recurrent Revenues Promote customers' retention Projects & Systems 4/5 projects (80%) 15 Chemicals Membranes & Filters Softwares Services Operation & Maintenance

15 Recurrent Revenues Year 1 $25 M 20 projets $600 k Consumables 2% Year 5 $125 M 100 projects $9 M Consumables 6% 16 *Assuming stable revenues from projects

16 Financial Performance Review & Update on Business 17

17 a Growth Story 2000 Foundation of H 2 O Innovation 2001 Development of Maple business unit 2002 to 2009 Growth of the project business (in USA since 2006) 2009 to 2013 Development of SP&S pillar (PWT:2009, Piedmont:2013) 2015 Launch of softwares & acquisition of Clearlogx 2016 Development of O&M pillar $2 M $15 M $50 M Average Growth of 32% (since 2006) Organic Growth of 18% /year 18 External Growth of 31% /year

18 Business Mix : A Well Thought Strategy In US$ millions Revenue Breakdown Q2 - FY2017 Revenues 70,0 $ O&M 17% 60,0 $ 50,0 $ 40,0 $ SP&S Projects 44% 39% Projects SP&S O&M 30,0 $ 20,0 $ 10,0 $ - $ Q (LTM) Growth vehicle : Gain predictability in our business model; Secure long-term relationship with customers. 19

19 Financial Highlights FY2017 Six-month period ended December 31 Last twelve months ended December 31 Revenues $39.8 M $65.1 M Gross profit margin Adjusted EBITDA 23.3% 26.9% $1.4 M $2.8 M Key highlights for Q1 & Q2 (6 months): 78% of revenues are recurrent in nature $17.3 M from O&M $13.6 M from SP&S $8.8 M from Projects Gross profit margin impacted by the acquisition & integration of UP; Adjusted EBITDA impacted by: Lower volume of projects Shift in product mix Addition of Utility Partners 20

20 Financial Position 2017-Q2 Review (in Canadian dollars, except for ratios) Period ended Dec. 31, 2016 Period ended June 30, 2016 Working capital $12.9 M $8.3 M Working capital ratio Net debt $11.5 M $6.3 M Equity $47.6 M $26.6 M Net debt to equity ratio Working capital ratio improved to 1.65; Inventories increased by $1.0 M to $5.4 M due to maple equipment and speciality chemicals manufacturing in order to face growing demand from customers and expedite deliveries; Net debt increased by $5.2M, following the acquisition of UP; Monthly capital reimbursement of $180 k. (in Canadian dollars) Period ended Dec. 31, 2016 Period ended Dec 31, 2015 Cash flows from operating activities $1.1 M $0.1 M 21

21 Shareholders Value Shares outstanding : 40,144, M of stock options Top management (Officers): 10% Directors: 15% Institutional: 50% (IQ: 19% / CDPQ: 15%) Market Capitalization March 2016: $23.9 M March 2017: $72.3 M 22

22 Highly Scalable Platform systems installed

23 Robust Business Model $111.3 M of combined backlog (projects and O&M) as of February 13, % of the revenues are recurrent by nature Growth platform based on 3 pillars Projects SP&S O&M Project sales backlog: $54.3 M; Growing pipeline driven by large infrastructure investments. Expanding sales network with new distributors and agents; Sales (or customers) are recurrent by nature; Mergers & acquisitions opportunities. Backlog of $58.2 M for operating and maintenance contracts (as of Feb. 13, 2017); Multiple cross selling opportunities between the three pillars; O&M is fragmented, thus ideal for mergers & acquisitions. 25

24 H 2 O Innovation Unique smart water player Headquarters 330 rue St-Vallier Est, suite 340 Quebec City, QC G1K 9C5 Canada info@h2oinnovation.com