June 9, 2016 · Optimization Plan, market changes, the Company’sability to deliver services in a...
Transcript of June 9, 2016 · Optimization Plan, market changes, the Company’sability to deliver services in a...
Capital Markets DayJune 9, 2016
Agenda09:20 am – Pure’s leading position in the Water Sector
10:45 am – Break
11:00 am – PureHM – Oil & Gas Pipeline Integrity business
11:20 am – Finance Update – The Bottom Line
11:40 am – Q&A
12:00 pm – Lunch
12:45 pm – Technology Update followed by Facility Tour
Forward-Looking Statements
This presentation, along with its commentary, contains forward-looking statements, including, without limitation, statements containing thewords "should", "believe", "anticipate", "may", "plan", "will", "continue", "intend", "expect", "estimate" and other similar expressions. Thesestatements constitute “forward-looking information” within the meaning of applicable Canadian securities laws. These statements are based onthe Company’s current expectations, estimates, forecasts and assumptions. Forward-looking statements are not guarantees of futureperformance and are subject to risks, uncertainties and other important factors that could cause the Company’s actual performance to bematerially different from that projected. Examples of these statements would include those relating to the benefits expected to be realized fromthe Company’s Growth and Optimization Plan, integration of recent acquisitions, where the Company forecasts the timing of new and existingprojects, the success of the Company’s new technologies and entering new markets, the Company’s ability to generate future cash flows andthe timing and amount of future dividend payments. The assumptions, risks and uncertainties that could cause actual results to differ materiallyfrom the forward-looking information, include, but are not limited to, the Company’s ability to successfully implement its Growth andOptimization Plan, market changes, the Company’s ability to deliver services in a timely and cost effective manner, technological change,changes in general economic conditions and other risks detailed from time to time in our ongoing filings with the Canadian securities regulatoryauthorities, including those in the Company’s Annual Information Form, which filings can be found at www.sedar.com. Given theseassumptions, risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Unless otherwiserequired by applicable securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statementseither as a result of new information, future events or otherwise. Unless otherwise stated, all dollar amounts are expressed as CAD$.
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Today’s Presenters Shamus McDonnell
President, PureHM
Cliff WilsonPresident, Wachs Water Services
Muthu ChandrasekaranSenior Vice President, Energy Pipelines
Jason JohnsonSenior Program Manager
Geoff KrauseCFO
Mark HolleyExecutive Vice President & COO
Peter PaulsonVice Chairman & CTO
Mike HigginsSenior Vice President, North America
Michael WrigglesworthSenior Vice President, International
Jack ElliottPresident and CEO
Susan DonnallySenior Program Manager
Pure Technologies’ Unique Position
Jack Elliott, President and CEO
Pure Technologies and the Water Industry
Mark Holley, Executive Vice President and COO
• Utility’s top priority – maintaining or extending asset life
• Moving beyond age and failure prevention focus
• Pipeline age rarely correlates with condition (Water Research Foundation)
• 70% to 90% of replaced pipelines have remaining life (US EPA)
• Best-in-class renewal programs renew at 1% per year
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Water Industry Challenges
Water Sector – Where Pure fits in
Treatment Storage Pumps Pipelines Collection Wastewater Treatment
Reuse
Risk Prioritization
Treatment Storage Pumps Pipelines Collection Wastewater Treatment
Water Sector – Where Pure fits in
Reuse
Annual Planning
Risk Prioritization
Water Sector – Where Pure fits in
Treatment Storage Pumps Pipelines Collection Wastewater Treatment
Reuse
Assess and Address
Annual Planning
Risk Prioritization
Water Sector – Where Pure fits in
Treatment Storage Pumps Pipelines Collection Wastewater Treatment
Reuse
Renewal & Management Strategies
Assess and Address
Annual Planning
Risk Prioritization
Water Sector – Where Pure fits in
Treatment Storage Pumps Pipelines Collection Wastewater Treatment
Reuse
Renewal & Management Strategies
Assess and Address
Annual Planning
Risk Prioritization
Treatment Storage Pumps Pipelines Collection Reuse Wastewater Treatment
Water Sector – How Pure fits in
Pipelines
represent ~70% of
the value of a
typical utility
• Moving from reactive to proactive pipeline/asset management
• New business momentum with our diversified technology portfolio
• Moving from pipeline to network management
• Extending our value proposition to include pressurized wastewater pipelines
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Core Americas Business
• Targeted international presence with increasing brand awareness
• Asia & Middle East – Non Revenue Water (NRW) continues to drive our overseas markets
• Europe – increasing focus on condition based asset management
• Australia – aging infrastructure leads to strong interest in asset management
• Pure’s diversified offering opens up new opportunities with utility clients
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International Business
Pure’s Water Sector Growth Path
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Focused Americas and International
Strategies
Transforming Data to Information and
Knowledge
Innovative Solutions for our Utility Customers
International Markets and Strategies
Mike Wrigglesworth, Senior VP International
Pure International
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Focus Areas
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Addressable
Market
Available
FundingTransparent
Procurement
Market Drivers
Similar to North AmericaAustralia and Europe
• Risk Management
• CAPEX Deferral
• Condition Assessment
Water LossSE Asia & Middle East
• Non-Revenue Water
• Large Diameter Leak Detection
Extend the Life of Critical MainsMexico & China
• PCCP Management
• PureEM
• AFO
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Specific Opportunities
FOOT GOES HERE 21
Europe & Africa
• Metallic PipeDiver Inspection in Holland
• Multi-year Program in Scotland
• Leak Detection in South Africa
FOOT GOES HERE 22
South America
• Condition Assessment of PCCP in Ecuador
• Multi-year Sahara Program in Brazil
• AFO Monitoring in Mexico
FOOT GOES HERE 23
Middle East
• Multi-year Program in Qatar
• Large SmartBall Projects in Saudi Arabia & India
FOOT GOES HERE 24
Asia-Pacific
• Large Diameter MFL in South Korea
• Non-Revenue Water Reduction in Malaysia
• SmartBall & Sahara Programs in Australia
FOOT GOES HERE 25
Built for Growth
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Growing
Funnel
Expanded
ToolboxReference
Projects
There is a massive international market available for Pure’s solutions and we are expecting continued growth from focused markets
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North America Markets and Strategies
Mike Higgins, Senior VP North America
Americas Overview
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More than 54,000 Utilities
Multiple Project Stakeholders
Investment is Moving to Buried
Infrastructure
Small Utilities – Services Valued
FOOT GOES HERE 30
* Based on internal survey of 129 water utilities
Large Utilities – Services Valued
FOOT GOES HERE 31
* Based on internal survey of 129 water utilities
Pure’s Regional Structure
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Pure’s Evolving Market
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Increase in
Metallic /
Wastewater /
WWS
Project Managers
acting as trusted
advisors
More system sales
and long-term
programs
Eliminate
Guess Work
Development
of regions and
local expertise
– not a vendor!
Increase in BD
team to increase
brand awareness
• Book new business – use regional expertise and expanded BD teams to acquire new clients
• Continue to build up project management for client retention and expansion
• Strategically build different areas – metallic pipe, wastewater, power and industrial
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Growth Strategies
Wachs Water Services
Cliff Wilson, President Wachs Water Services
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“…having an asset management program in place can play a key role in minimizing damage due
to infrastructure failure, particularly if the program had a special focus on the valve management program.
Knowing the exact location of each valve, whether the position of the valve was open or closed
and having performed regular operability maintenance of the valves, made it more likely that
the utility’s crew could quickly isolate the area of the break, and thereby, minimize the amount of water discharged
and damage to surrounding properties.”
-Water Research Foundation (study 4369)
Managing Risks
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• Condition
• Material
• Age
• Economic
• Environmental
• Social
Likelihood of Failure Consequence of Failure
RISK
Pure Technologies & Wachs Water Services
Pure – Pipe Solutions – LOF WWS – Control Solutions – COF
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• It’s cheaper to manage than replace valves
• Ideal Valve Program – Assess, Address, Manage
• Repair large valves at 10% of the cost to replace
• Over $2.6MM of avoided replacements in Houston alone
• AND, increased control… reduces consequences and risk
• Strong ROI
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Value Proposition
What’s Next
• Extending/growing existing WWS client solutions
• New client entry points
• Leveraging relationships and performance
• Vertically serving/growing existing WWS and Pure clients
• Condition data + control data
• Leveraging big data: Data–Information–Knowledge
• Leveraging field services: value & solutions
• Sticky… across solutions and time
FOOT GOES HERE 40
Business Development Strategy
FOOT GOES HERE 41
• Specific solution focus
• Two new experienced team
members onboard!
• Complimentary development
• Combined presence
• Additive to the Pure business
• Fourth largest city in the United States
• 2.2 million people
• Linear (WWS) growth story
• Multi-year program addressing over 90,000 valves
• Leveraging both WWS and Pure solutions, to accelerate vertical growth
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City of Houston
City of Houston Progression
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Large Valve Assessment
Emergency Services
Leak Detection Pilot
Valve Assessment Pilot
City Wide Valve Inventory
• Linear WWS solutions growth
• Sticky control solutions
• Synergy with Pure solution growth
• Small city, serves 16,000 people
• New client
• WWS wastewater services solution entry
• Professional delivery
• Trust
• Relationship
• Opened up large pipe condition assessment opportunity
• Vertical growth story leading to Pure’s inspection services
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Celina, TX
The Path to Growth
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Linear Expansion
through delivering additional control solutions
Vertical Expansion
through delivering additional condition assessment, control
and management solutions
New Entry Points
through a broader solutions portfolio
Regional Spotlight: Southeast (United States)Jason Johnson, Senior Program Manager
Susan Donnally, Senior Program Manager
South Region – Who Are We?
• Mid-Atlantic (Light Blue)
• Mature clients
• Target-rich area
• Current clients value innovation
• Pure takes a program approach with many clients in this region
• Southeast (Dark Blue)
• Project oriented
• Strategic marketing
• Small/Medium sized utilities
• Build reputation off existing client performance
• Room for growth
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The South Region and the Trusted Advisor Approach
Client Focused
Quality Driven
Client Partnerships
and Sustainable,
Annual Programs
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Growth Targets
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Consultant
• 25% of 2016 Revenue
Technology• 10% of
2016 Revenue
Solutions• 65% of
2016 Revenue
Solutions Approach
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• A solutions approach builds strong client relationships and allows for internal succession planning
• Becoming a trusted advisory increases the likelihood of long-term programs or solutions
• Sub-regional management is key
Utility Director
Senior Program Manager
Pure
TechnologiesUtility
Assistant Director
BD Manager
Super-intendent
Program Manager
Crew Chief
Project Manager
Southeast Growth Opportunities
MDWASD TBW ECUA City of Atlanta
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• Large Diameter
PCCP
• Force Mains
• AFO
• Metallic Pipes
• Treatment Plants
• Large Diameter
PCCP
• Metallic Pipes
• Asset Management
• Prioritization
• Small Diameter
Solutions
• Structure program
for growth
Mid-Atlantic Growth Opportunities
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Howard County WSSC DC Water City of Baltimore
• Asset Management
• PureNet
• Force Main
Program
• Force main
Program
• Metallic Pipe
• Asset Management
• Rehabilitation
• Structure program
for growth
Mid-Atlantic Growth Opportunities: New Clients
Northern Virginia
• Loudon Water
• Fairfax Water
• City of Fairfax
• Arlington County
• Prince William County
Anne Arundel County
• Expand on existing projects to develop a program
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Elevating Market Presence – 2014 to 2016
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PureNet Business Intelligence
Travis Wagner, VP Pipeline Management Group and South Region
We Own a Lot of Data…
30+ Years of Experience
14,000+ Miles of W/WW Pipeline Data
900,000+ Valves Mapped & Assessed
500+ Individual Pipe Repairs Managed
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Value of Data (via Forbes)
If you look at the financial valuations of companies that were built on data, like Google or Facebook, there’s a gap between the actual and market valuation.
That’s their goodwill gap, and that gap is what, as Capgemini vice-president Jeff Hunter puts it, “screams to the value of data.”
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Knowledge Economies
Data is a strategic asset providing or maintaining competitive advantages
• For the company, data can be used to optimize the way it does business: acquisition, retention, targeting, pricing, etc.
• For the shareholder, data embodies a financial potential
Raw data has low value. The more it is enriched, analyzed and leveraged for focused uses, the more its value increases
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PureNetBI
PureNetBI Objectives• Deliver a paradigm shift – reactive to proactive
• Drive client’s desire for information, and motivate
data collection through linkage to KPIs
• Grow the core businesses of Pure and Wachs
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PureNetBI Goals
1. Maximize the value of our data for us and clients
2. Deliver a reporting portal for Pure tools and data
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Key Performance Indicators
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A key performance indicator (KPI) is a business metric used to evaluate factors that are crucial to the success of an organization.
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Why Clients need a BI Tool
• Data-Centric
• Interactive
• KPI Metric Tracking
• Powerful Data Visualization
• Clear Linkage from Data to KPI to Decision Making
• Tells a Story with Data
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Failures vs Replacement
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Project Planning
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Supports Pure’s Strategy
• Use our technology and analytical IP to delivery unique value proposition
• Builds out Assess & AddressTM approach
• Using PureNetBI makes services incredibly sticky
15 Minute Break Back at 11am
PureHM – Managing GrowthShamus MacDonnell, President PureHM
Muthu Chandrasekaran, Senior VP Energy Pipelines
• Strong cultural synergies with Pure Technologies
• Growing, but staying true to our roots – customer service, quality and innovation
• Dedicated and quality people
• Acquisition has allowed us to be more focused and detailed in our approach
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PureHM History
Oil & Gas Technology Evolution
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Oil & Gas Technology Evolution
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PureHM’s Services• Pig Tracking
• Since 1995 - More than 1600 pig runs tracked on over 300 pipelines using traditional methods
• Since 2000 – More than 700 runs with Armadillo Live Map
• Since 2014 – More than 160 remote tracking runs
• SmartBall• Since 2008 - more than 23,000 km of SmartBall
completed in over 200 inspections
• Direct Assessment• Since 1996 – More than 16,000 km of direct
assessment inspection
• PipeWISE• Since 1996 – More than 22,000Km of pipeline
inspection data
FOOT GOES HERE 73
• Strong YoY revenue growth expected for 2016
• Represents 15% of Pure’s business (2015)
• Roughly 100 employees
• ~ 100 clients in 2015 and growing
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PureHM Today
Gathering Processing Storage DistributionProductionTransmission
Pipelines
Pipeline Integrity Consulting
Gathering Processing Storage DistributionProductionTransmission
Pipelines
Hydro Testing
Pipeline Integrity Consulting
Gathering Processing Storage DistributionProductionTransmission
Pipelines
Inline Inspection
Hydro Testing
Pipeline Integrity Consulting
Gathering Processing Storage DistributionProductionTransmission
Pipelines
Direct Assessment
Inline Inspection
Hydro Testing
Pipeline Integrity Consulting
Gathering Processing Storage DistributionProductionTransmission
Pipelines
Data Management
Direct Assessment
Inline Inspection
Hydro Testing
Pipeline Integrity Consulting
Gathering Processing Storage DistributionProductionTransmission
Pipelines
Data Management
Direct Assessment
Inline Inspection
Hydro Testing
Pipeline Integrity Consulting
Integrity Dig Management
Gathering Processing Storage DistributionProductionTransmission
Pipelines
~
900,000 miles of
transmission
mains in North
America
Oil and Gas Integrity MarketPipeline Assessment Budget
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0
100
200
300
400
500
600
700
800
Kinder Morgan TransCanada Enbridge Pembina
$M
CA
D
2012
2013
2014
210M
8M
701M
200M
PureHM Office Coverage
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PureHM offices
Pure Technologies offices
Combined offices
New PureHM offices
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• PureHM head office
• Most R&D conducted in this office
• Test pipeline for new technologies
• Production
• Data analysis
Edmonton, AB
• Building leadership and operations at existing Houston office
• Experienced leader with strong industry presence
• Opportunity developed in pipeline company in Southeastern U.S.
• Annual SmartBall inspection and Armadillo Tracking on their mainline (5,500 miles) from Houston to Maryland
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Houston, TX
• Local office to serve Pacific Gas & Electric
• Strong leadership located in San Ramon
• Team of 5 technicians to support work
• MSA with PG&E
• Expanding opportunities within PG&E and beyond
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San Ramon, CA
• Purchased leak detection and mapping company assets
• Strong regional presence for growing Eastern Canadian clients
• Already building team of technicians for ongoing water crossing program with Eastern Canadian pipeline company
• Support R&D efforts in gas leak detection supported by SDTC
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Morden, Manitoba
The Path to Growth
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Digging Deeper with Key Clients
Adding Personnel and Resources
Continuous Innovation
The Bottom Line
Geoff Krause, CFO
2015: Setting the Foundation
Strategic Planning & Implementation
Excellence in Financial Operations through
Business Partnership
Transactional Efficiency &
Effectiveness
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Driving Sustainable Growth & Profitability
Strategic Priorities:
• Revenue and profitability growth through targeted sales, world class execution and disciplined cost control
• Investment in complementary, new, and enhanced technologies and services
• Investment in employee development to enhance service and position Pure Technologies for success
• Selective and accretive acquisitions that enhance Pure Technologies’ technology portfolio and increase market penetration
FOOT GOES HERE 91
Project execution &
risk management
Efficient resource
management
Levering corporate foundation
Targeted capital
deployment
Sales efficiency &
effectiveness
Sustainable Revenue Growth
Achieving 20% Growth Through:
• Reduced reliance on lumpy equipment sales
• Diversified water inspection capabilities on established platforms
• Enhancing complementary field services in water space
• Sector diversification into Oil & Gas
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-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
Q410
Q111
Q211
Q311
Q411
Q112
Q212
Q312
Q412
Q113
Q213
Q313
Q413
Q114
Q214
Q314
Q414
Q115
Q215
Q315
Q415
Q116
$ 0
00
's
Trailing 12 Month Revenue
Americas & International Water WWS PureHM Equipment
Shift to Inspection and Consulting, Programs
• Increased consulting & inspection services reduces one off equipment sales volatility
• Creates quasi-recurring revenue stream through repeat customers and ability to go deeper with existing
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Project Delivery Profitability Levers
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Project planning & execution
Labour resourcing & management
Divisional sales
pipeline & forecasting
Two drivers of profitability: optimizing direct costs and resource utilization
Direct costs40%
Salaries, benefits &
bonus44%
Stock based comp1%
Travel1%Depreciation
10%
Other4%
Breakout of Cost of Delivery (COS & E&O)
Project
Management
Resource
Management
Expected Cost Structure Impacts
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2012 2013 2014 2015 Change 2016
Revenue 100% 100% 100% 100% 100%
Less: Cost
Direct 22% 22% 22% 24% 1% 25% Additional quarter of WWS
E&O 25% 29% 31% 37% -4% 33% Increased utilization, reduced ESPP
G&A 23% 22% 21% 25% -4% 21% Shared service consolidation, effect of leverage
Marketing 14% 17% 15% 13% -1% 12% Increased sales efficiency
R&D 6% 2% 2% 1% 1%
Operating Income 10% 8% 9% 0% 8% 8%
Add back:
Depreciation 10% 10% 9% 10% -1% 9%
SBC 2% 2% 2% 2% 2%
Other 0% 0% 0% 1% 1%
Adjusted EBITDA 22% 20% 20% 13% 7% 20%
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EBITDA
margins at
20% target
Sustaining
capex
$4 – 5 mm
R&D
$3 – 4
mm
Office &
AX
$3 - 3.5
mm
Dividends
$6.5 mm
($0.12/sh)
Net cash
generation
after dividends
$4 - $7 mm
2016 Capex, Dividends and Cash Generation
Targeted Capital Deployment
• AX completed in 2016 on time and on budget
• Research & Development
• Focus on development of new applications & add-ons for existing delivery platforms
• Field equipment demand driven by forecasting and sales processes
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0
500
1000
1500
2000
2500
3000
3500
4000
4500
2012 2013 2014 2015
$ 00
0's
Capital Spending
Field Equipment Office Development AX
Maintaining a Conservative Capital Structure
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Cash on Hand
$9.8mm as of
March 31, 2016
Working Capital
Management
Reducing DSO to
<120 days
Unused Credit
Facilities
$10mm revolver
$10mm letter of
credit
Paul Moon
+1 (403) 537-3244
Director, Investor Relations and Corporate Communications
Questions & AnswersCapital Markets Day – June 9, 2016