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Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49%...

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Stronger as ONE Q3 2015 Financial Highlights NOVEMBER 13 2015
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Page 1: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Stronger as

ONE Q3 2015

Financial Highlights

NOVEMBER 13 2015

Page 2: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

2

Our discussion may include forecasts, projections, estimates or other information that are forward-looking. While these forward-looking statements represent our current judgment on what the future may hold, they are based on material factors and assumptions, and are subject to risks and uncertainties, that could cause actual results to differ materially. Management believes those assumptions are reasonable. You are cautioned not to place undue reliance on these forward-looking statements. These statements are made only as of

the date of this presentation. Please keep in mind that, except as required by applicable securities laws, we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information, future events or otherwise. Throughout today’s discussion, we will attempt to present some material factors relating to our business that may affect our forward-looking statements. Additional information about these (and other) material factors and risks, and our underlying

assumptions, is available in our current AIF and annual and interim MD&A, particularly under the headings “Risk Factors”, all of which are available on SEDAR at www.sedar.com. These forward-looking statements are given as of today’s date. Dollar amounts are expressed in millions of Canadian dollars, except “Per Share” amounts, or unless specified otherwise.

Forward-Looking Statements

Page 3: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

EVELYN SUTHERLAND CFO

Page 4: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

4

Accelerating Growth

Consolidated

Revenues

81%

45% 45% 75%

Consolidated

EBITDA

117%

Home Services

Revenue

25%

Sub-metering

Revenue

Home Services

EBITDA

Sub-metering

EBITDA

Page 5: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

5

Acquisition Represents Majority of 75% Growth in LTM Revenues

Acquisition related revenue represents ~90% of $236 million YoY increase

in total revenues over the last 12 months

Total Revenues

(millions)

$76 $82 $74 $80

$126 $142 $135 $145

Q4 Q4* Q1 Q1 Q2 Q2 Q3 Q3 2013 2014 2014 2015 2014 2015 2014 2015

$312

$548

LTM

$212 Acquisition

Related Revenue

*Acquisition closed October 20, 2014 and therefore Q4 2014 does not reflect a full quarter contribution from the Acquisition.

Page 6: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

Total Revenues Increase by 81% in Q3 2015

6

$80.5

$145.5

$57.6

$7.8

Q3 2014 Total

Revenues

Home Services Sub-metering Investment

Income

Q3 2015 Total

Revenues

$(0.4)

Total Revenues

(millions)

117%

Home Services Revenue

25%

Sub-metering

Revenue

Page 7: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

7

Significant Growth in LTM Acquisition Adjusted EBITDA

Home services segment represents 96% of YoY growth in

Acquisition Adjusted EBITDA over last 12 months

Acquisition Adjusted EBITDA

(millions)

$42 $43 $44 $44 $52 $54

$61 $61

Q4 Q4* Q1 Q1 Q2 Q2 Q3 Q3 2013 2014 2014 2015 2014 2015 2014 2015

$172

$228

LTM

$54 Attributable

to Home Services

*Acquisition closed October 20, 2014 and therefore Q4 2014 does not reflect a full quarter contribution from the Acquisition.

Page 8: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

$43.9

$61.1

$17.6

$1.5

Q3 2014

Acquisition

Adjusted EBITDA

Home Services Sub-metering Corporate Q3 2015

Acquisition

Adjusted EBITDA

$(1.9)

Acquisition Adjusted EBITDA Rises by 39%

8

Acquisition Adjusted EBITDA

(millions)

39%

Home Services

Acquisition Adjusted EBITDA

85%

Sub-metering

Acquisition Adjusted EBITDA

Page 9: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

$31.0

$54.4

Q3 2014 Q3 2015

$23.0

$48.2

Q3 2014 Q3 2015

9

$12.8

$30.8

Q3 2014 Q3 2015

$21.8

$44.8

Q3 2014 Q3 2015

Distributable Cash ($ Millions)

Operating Cash Flow ($ Millions)

Distributable Cash - Maintenance ($ Millions)

Cash Provided by Operating Activities ($ Millions)

Generating Significant Cash

Page 10: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

83%

62%

Q3 2014 Q3 2015

10

$10.6

$19.2

Q3 2014 Q3 2015

$0.181 $0.21

Q3 2014 Q3 2015

49% 43%

Q3 2014 Q3 2015

Total Dividends Declared ($ Millions)

Payout Ratio

Dividends Declared per Share

Payout Ratio - Maintenance

Payout Ratios Improve Despite Dividend Growth

Page 11: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

11

BBB+ S&P (DBRS: BBB High)

BBB+ S&P (DBRS: BBB High)

6.7x* Interest Coverage

8.7x* Interest Coverage

3.2x* Leverage Profile

3.0x* Leverage Profile

4.3% Weighted Average Interest Rate

3.6% Weighted Average Interest Rate

As at December 31, 2013 YTD as at September 30, 2015

Continuing to Strengthen The Balance Sheet

* This metric is calculated using Adjusted EBITDA and excludes the balances associated with pension, OPEB and capital leases.

Page 12: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

Priorities for Capital Allocation

12

Reinvestment in High Return

Growth Initiatives

Returning Capital to Shareholders

Page 13: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

JOHN MACDONALD President and CEO

Page 14: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

14

2015 Strategic Priorities

Grow

Consolidated

EBITDA

→Growth in annuity contracts

→Complete IT integration and rebranding

→Grow unit continuity

→Achieve positive cash flow

→Cost containment initiatives

Home Services

Sub-metering

Corporate

Grow

Consolidated

EBITDA

Page 15: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

Consumer Protection Legislation Bill 55 – The Stronger Protection for Ontario Consumers

Act – came into effect on April 1, 2015

Buyout Contracts Currently cover 30% of water heater rentals, a

percentage that will continue to increase as assets are exchanged and customers added

Consumer Awareness & Education Acquisition of the Home Services business gives us

greater control over the customer experience and education

11 7

Q3 2014 Q3 2015

5

9

Q3 2014 Q3 2015

15

Rental Unit Growth Surpasses Attrition in Q3 2015 Home Services

Water Heater Additions

Water Heater Attrition

Page 16: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

16

Increasing HVAC Transactions

2,493

9,886

12,379

6,195 7,161

13,356

Rental Sale Total

HVAC Transaction Mix

Rental vs Sale

YTD 2015 YTD 2014

Shifting HVAC sales to rentals is a key strategy

1,003

3,372

4,375

2,388 2,170

4,558

Rental Sale Total

Q3 2015 Q3 2014

Home Services

Page 17: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

17

Home Services

Long-Term Benefits of Growing HVAC Rental Base

Rent

Recurring revenue stream, high

IRR, long-term customer

relationships

Sell

Upfront one-time high margin

EBITDA gain, potentially no

ongoing customer relationship

unless protection plan sold

Finance

Upfront one-time high margin

EBITDA gain, with virtually no

ongoing customer relationship

unless protection plan is sold or

financing is provided

by Enercare

2015 2016 2017 2018 2019 2020 2021 2022 2023

Illustrative Example Only* of CAGR of HVAC Revenue

Assuming 8,000 new units per annum at $80 per month

($Millions) 2015 2016 2017 2018 2019 2020 2021 2022 2023 Total

Revenue 8 16 24 34 43 53 64 76 88 405

Capital Outlay 40 40 40 40 40 40 40 40 40 360

A rental HVAC unit is much more valuable over the long-term than a sale

*This is an illustrative example only and not a forecast. The 8,000 units is based on annualization of approximately 2,000 HVAC rental units originated in Q2 2015.

Page 18: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

18

Significantly Growing Revenue per Unit

$14.45 $15.07

$23.38 $23.01 $26.86

$38.65

Q3 2013 Q3 2014 Q3 2015

1.7x 1.4x

A rental product added to the portfolio in Q3 2015

was worth 1.7x that of a unit lost to attrition

Average Monthly Rental Rate Changes

Attrition

Additions

Home Services

Page 19: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

19

Focusing on Protection Plans

On May 1st, launched extended

protection plan product to

augment manufacturer’s normal

warranty on an HVAC unit

Protection plans provide key

opportunities to cross-sell and are

more profitable and sticky than on-

demand services

548,000 Contracts

21,000*

Attrition

17,000*

Additions

Entry level

protection

plans

Upsell

opportunity

Q3 2015 Protection Plan Unit

Continuity

Home Services

Page 20: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

20

Acquisition Integration Milestones Home Services

Completed first stage of IT decoupling –

final stage on track for completion by year end Launched new brand New products

Page 21: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

21

Water heaters

HVAC equipment

Protection plans

Water treatment products

Internal financing

New Recurring Revenue Streams in 2015 & 2016

Water Treatment Products (2016) Leverage 200,000 annual water heater

service call incidents to build product

awareness through technician channel

Internal HVAC Financing (2015) Represents 18%-20% of HVAC sales volume

Increases number of sales that have

ongoing HVAC relationship

part of strategy to grow dealer network

Home Services

Page 22: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

22

Committed to Unit Continuity Growth

93

132

156 166

185 200

77

94

115

136 151

161

50 57

71 82

96 106

2010 2011 2012 2013 2014 YTD 2015

Contracted Installed Billing

(In thousands)

17% CAGR

17% CAGR

17% CAGR

Sub-metering

Page 23: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Annual Meeting

of Shareholders

Cash Flow Positive on a Year-to-Date Basis

23

Scalability

Grew unit continuity

Increased productivity

Achieved

positive free

cash flow YTD

82% YTD

EBITDA Growth

Positive free cash flow driven by significant increase in EBITDA

Grew net revenue

Sub-metering

Page 24: Stronger as ONE...Q3 2014 Q3 2015 10 $10.6 $19.2 Q3 2014 Q3 2015 $0.181 $0.21 Q3 2014 Q3 2015 49% 43% Q3 2014 Q3 2015 Total Dividends Declared Payout Ratio ($ Millions) Payout Ratio

Stronger as

ONE Q3 2015

Financial Highlights

NOVEMBER 13 2015


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