Technology Enhancing Profitability - IBI Group · 2020. 2. 2. · TSX: IBG Investor Presentation -...

TSX: IBG

Investor Presentation - February 2020

A S M A R T E R U R B A N F U T U R E

Technology Enhancing Profitability

February 2020

TSX: IBG


A S M A R T E R U R B A N F U T U R ET S X : I B G

2

This presentation includes certain statements, estimates and projections with respect to anticipated future

performance that may constitute "forward-looking" statements. Such forward-looking statements reflect

current expectations and assumptions by the Company concerning anticipated results that may or may not

prove to be correct. Forward-looking statements are not guarantees of future performance, and actual results

may differ materially from those in the forward-looking statements. Forward-looking statements involve a

number of risks and uncertainties, including those discussed under "Risk Factors" in the Company's Annual

Information Form filed with the Canadian securities regulatory authorities. Investors should not place undue

reliance on forward-looking statements as a prediction of actual results. These forward-looking statements are

made as of the date of this presentation.

Advisories

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3

2,600+ Difference-

makers

60+ Offices

6Continents

7,000Active Projects

3 Core Sectors

of Expertise

Intelligence

Buildings

Infrastructure

• Globally-integrated design and

technology firm founded in 1974

• Architecture, engineering and design

- no construction risk

• Technology-driven design firm -

Intelligence practice continues to grow and

expand margins

• A world leader in creating advanced urban

environments, with intelligent systems,

sustainable buildings and efficient infrastructure

ABOUT IBI GROUP

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CORE BUSINESS• Design, plan and develop advanced urban systems in which people can live, work and play

• Leadership team comprised of select professional practice experts

• Diverse revenue streams derived from three integrated segments

INTELLIGENCE

INFRASTRUCTURE

BUILDINGS

Software • Systems Design • Systems

Integration • Operations • End-user Services

Architecture • Interior Design • Mechanical Engineering

Structural Engineering • Electrical Engineering

Civil Engineering • Landscape Architecture

Planning • Transportation • Urban Design

Suite of Smart Products

Solutions to capture lifecycle costs

of IBI designed assets

• Smart City

• Smart Community

• Smart Building

Building and Infrastructure clients

provide route to market

Additional products represent new

recurring revenue streams

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CORPORATE SNAPSHOT

IBI GROUP – TSX: IBG

Shares Outstanding (FD) 37.8MM

Insider Ownership 36.5%

Market Capitalization (@$5.56/sh) ~$210MM

Q3 2019 Key Financial Highlights:

Net Debt $103.9MM

Net Revenue $94.6MM

Earnings per Share (FD) $0.23

Adjusted EBITDA $12.3MM

As a % of net revenue 13.0%

Net Debt / EBITDA Ratio 2.1x

Market Performance 2016 - Present

13.0%Q3 2019 Adjusted EBITDA Margin

36.5%Insider Ownership

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IBG

STN

WSP

AIF

SNC

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Strategic Advantage Through TechnologyUNLOCKING NEW POTENTIAL IN DATA-DRIVEN ENVIRONMENTS

Productivity Through Automation: Enhance efficiency with Software/Bots (internal and client-facing)

New Business Models: Smart City platforms, asset management software for buildings, optimization solutions

for water & energy (Software-as-a-Service, Saas)

Use Technology to Inform Design: Incorporate emerging technologies into the business (5G, Big Data,

Autonomous Vehicles, AI, Blockchain, VR/AR)

Leveraging the Technology EcoSystem: Smart City Sandbox offers tech incubator for future growth ideas

• Little to no technological improvement within the construction business in last 50 years

• Opportunity for industry disruption by bridging the gap between design and technology

• Capitalize on urbanization and demand for cities built with intelligent systems, sustainable buildings and

efficient infrastructure

• Four core business drivers to incorporate technology use across the organization

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Investment ThesisPOISED FOR GROWTH DRIVEN BY TECHNOLOGY

Disrupting A&E Business Model

Revenue Growth & Margin Expansion

Growth Through Innovation

Delivering Consistent Returns

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Q3 2019 PERFORMANCE DASHBOARD

$94.6 MNet Revenue

$8.7 MNet Income

8%

3%

$0.23Basic EPS

10%

13.0%Adjusted EBITDA

Margin

18%

$12.3 MAdjusted EBITDA

21%

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Strong Performance Track Record

19%

39%

30%

7%5%

CanadaWest

CanadaEast

USA UK &Ireland

International

29.4%

53.0%

17.4%

Infrastructure

Buildings

Intelligence

Q3 2019 REGION & BUSINESS OVERVIEW

11.8%

19.1%

11.4%

Infrastructure

Buildings

Intelligence

Q3 2019 Revenue Contribution (%)

Q3 2019 Operating Profit (%)1

Intelligence:

20% Adjusted EBITDA

Target by 2020

Q3 2019 Revenue by Region

1Operating profit by division excludes allocation of corporate costs

Intelligence:

20% Revenue Contribution

Target by 2020

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Robust Q3 2019 GrowthSTRONGER Q3 NET REVENUE & ADJUSTED EBITDA

1Adjusted EBITDA as a percent of revenue

$92.0$94.6

$60

$70

$80

$90

$100

Q3/2018 Q3/2019

Net Revenue in Millions

$10.2

$12.3

$0

$2

$4

$6

$8

$10

$12

$14

Q3/2018 Q3/2019

Adjusted EBITDA in Millions

11.0%1

13.0%1

• Quarterly results reflect continued strength in the U.S. operating segment, supported by stable contributions

from the Canadian operating segment

• Position as a technology-driven design firm expected to improve margins and provide a platform for growth

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Intelligence Practice Drives GrowthIMPROVING REVENUE WITH HEALTHY EBITDA MARGINS

354.1

361.4

368.3

$345

$350

$355

$360

$365

$370

2016 2017 2018

FY Revenue in Millions

For the year ended December 31, 2018:

• Continued strong performance through 2018 and YTD 2019 from IBI’s global Intelligence practice

• IBI reinvested ~1% of revenue in technology initiatives which are expected to contribute to future margin growth

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

2016 2017 2018

FY EBITDA in Millions

11.1%1 11.2%1

9.9%1

(1Adjusted EBITDA as a percent of revenue)

8 – 12% Adjusted EBITDA

Target Guidance

U.S. business

improvements expected to

boost ‘19 EBITDA

margins

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($929)

($2,051)

$60

$2,004

$1,785

$1,459

$3,473

Evolution of the U.S. Business STABILIZATION AND REFOCUSING OF U.S. OPERATIONS YIELDS POSITIVE RESULTS

• 2018 transition to new leadership in the U.S. and closer collaboration

with Canadian operations

• Impact of efforts demonstrated in Q4/18 and YTD/19 - expect U.S.

performance will continue to improve through Q4/19 and into 2020

• Strategy to follow Canadian private sector clients into major U.S.

cities

• Transitioning U.S. operations from standalone businesses to fully-

integrated operations further strengthens capabilities in various

offices

Positive Trend in

U.S. Adjusted EBITDA ($MM)

Q4 2018

Q3 2018

Q2 2018

Q1 2018

Q1 2019

Q2 2019

Q3 2019

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Capital Allocation StrategyFINANCIAL FLEXIBILITY WITH CONTINUED DEBT REPAYMENT

Expand Margins

& Grow Recurring

Revenue

Growth /

Accretive

Acquisitions

Continued

Balance Sheet

Strengthening

Potential for

Returning Capital

to Shareholders

• Anticipate total debt reduction of $10M

by year-end 2019 vs year-end 2018

• Target go forward net debt to EBITDA ratio

of 2.0 to 2.5 times

• Achieved 2.1 times at Sept 30, 20191

• Enhanced flexibility supports reallocating free

cash flow to other areas, such as:

o Accretive acquisitions

o Growth initiatives

o Potential dividend

1Based on net debt at Q3 2019 divided by annualized Q3 adjusted EBITDA

Commitment to

Long-Term

Sustainability

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MARKET TRENDS & GROWTH DRIVERS

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IBI Outlook + Growth Drivers

• ~$374MM total annual revenue forecast

• ~$411MM of work committed and under

contract for the next five years1

• 12 months of backlog

• New product launches in 2019

MACRO TRENDS SUPPORT IBI’S POSITIVE OUTLOOK

2019 Outlook Trends Supporting Future Growth

Urbanization

Infrastructure

Technology

1As at September 30, 2019

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Growing Cities and Tech HubsGLOBAL URBANIZATION MEANS INCREASED DEMAND FOR IBI’S BUILDING AND INFRASTRUCTURE SERVICES

GLOBAL CITIES

NEED NEW

BUILDINGS &

INFRASTRUCTURE

$69.1Tneeded in

infrastructure

spend

(2017-2035)

GROWTH

IS URBAN

2.5B people will move into global cities

over the next 30 years

>80% of global GDP

generated in cities

NEW

ECONOMY IS

URBAN

800Mmore houses

needed by end

of 21st century

$200Bgrowth in

healthcare

infrastructure

(2019-2024)

216-594Mglobal students in

higher education

projected to

double by 2040

*Software developers, programmers, computer support, database and systems, technology and engineering related, computer and information system managers. See Index on page 30 for sources.

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IBI’s Technology CollaboratorENHANCING QUALITY AND EFFICIENCY OF CORE PROFESSIONAL SERVICES

• Office 365 adopted globally

• Azure by Microsoft

• Cognitive Services: Chatbot and machine learning

• Data Analytics: PowerBI, SQL database/data warehouse, IoT analytics

• Azure to support SaaS offerings

• SaaS products hosting

• Disaster recover hosting

• Azure DevOps and dev/test environments

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TECHNOLOGY ENHANCING PROFITABILITY

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AutomationFOCUS ON PRODUCTIVITY ENHANCMENTS

• Apply technology and improved processes: faster, better, cheaper

• Launched in April 2019, Chatbot assists in labour-intensive, monotonous activities, allowing employees

to focus on creative quality of work

Bots for Business

• 19 bots deployed,16 under design and development

• Supporting audit requirements: updating contract values daily, or bank reconciliation monthly

• Associated value over $1M

Bots for Design

• 31 design bots

• More time for staff to engage in creative and strategic work

• Suite of tools with analytics/metrics

• Ability to track how it impacts business operations

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TravelIQ LaunchSOFTWARE-AS-A-SERVICE DRIVES RECURRING REVENUE

• Cloud-based, white-label web and mobile traveller

information solution designed for public and private-

sector clients to provide informed, real-time trip

planning to the public

• For transportation authorities, TravelIQ helps to

improve travel efficiency by encouraging travellers to

avoid problem areas, and informing necessary road

repairs.

• IBI’s traveller information technology a significant

contributor to Intelligence practice for more than 10

years – software currently serving one in four

Americans and nearly half of the Canadian

population

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Smart City PlatformAPPLY TECHNOLOGY TO OPEN NEW MARKETS

• Equip city staff and residents with the necessary

tools to make rapid and informed decisions

• Software-as-a-Service solution, hosting a suite of tools

and dashboards, combining predictive analytics gleaned

from IoT sensors, control devices and existing city networks

• Public engagement module allows connection with

city residents through apps, email and social media,

fostering a two-way dialogue between residents and

service operators

• Built on the fundamental principles of open data and sharing,

the Platform is designed to connect stakeholders with needed

services, information and insights

• Applicable to Smart Communities and Smart Buildings

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InForm by IBI GroupAPPLY TECHNOLOGY TO OPEN NEW MARKETS

• Cloud-based asset management tool serving building owners,

corporate facilities managers & transportation agencies

• Saves money by providing the tools needed to manage costs &

operate more efficiently

InForm Buildings: lower costs and streamline operations by

creating digital twins of assets that incorporate BIM and

maintenance data

InForm Transportation: manage linear infrastructure assets,

(cameras, signs, signals & sensors) for highway operations

InForm Office: interact with 3-D office models, providing depth of

building data and ease of use unique to asset management market

InForm Buildings

InForm Transportation

InForm Office

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BlueIQ by IBI Group

• Intelligent, real-time software solution

• Uses predictive analytics to determine

cost-effective and energy efficient ways

for urban water utilities to operate water

distribution systems

• Facilitates energy conservation and

reduced operating costs

APPLY TECHNOLOGY TO OPEN NEW MARKETS

BlueIQ is currently saving the City of Toronto >$1MM a year

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Incorporating Emerging TechnologiesUSE TECHNOLOGY TO INFORM DESIGN

SAMSUNG SOLUTIONS CENTER, WASHINGTON, DC

Parametric Design• Computational analytics applied to specific buildings and the city itself, creating a

pool of data and algorithms to solve complex problems

Accessibility and Efficiency for Airport Connections• Parametric design used at major airport to optimize routing of a pedestrian tunnel

between terminals

Charge Stations for Electric Fleets• Computational analytics used to determine the optimal location of charging

stations for a future electric bus fleet

Designing for Solar• Parametric model applied to determine the optimal location for solar panel

installation in building design to generate the greatest cost savings

Machine Learning for Automated Highway Tolls• Increased accuracy of vehicle identification leads to increased revenue streams

and cost savings

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A Network of CollaborationLEVERAGING OUR TECHNOLOGY ECOSYSTEM

Smart City Sandbox

Smart city-themed accelerator:

• Innovative new products and systems

• Improve safety, efficiency, environment and citizen

engagement

• Industry-based ecosystem with business partners

providing:

o Domain knowledge

o Route to market

T E C H N O L O G Y P R O V I D E R

Collaborators:

A Network

of Partners

Curated Programming

& Services

Space

Data & Technology

Sandbox

Accelerator

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Investment ThesisPOISED FOR GROWTH DRIVEN BY TECHNOLOGY

Disrupting A&E Business ModelThrough new business models and services

Revenue Growth & Margin ExpansionFocus on urbanization and productivity enhancement

Capturing Market Share Through InnovationApplying technology to open new markets

Delivering Consistent ReturnsA long history of proven performance

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contacts

Technology

Enhancing

Profitability

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Management TeamEXPERIENCE MEETS VISION

Scott Stewart

Chief Executive Officer

Stephen Taylor Chief Financial Officer

Mansoor

KazerouniGlobal Director,

Buildings

David ThomPresident

Derek Sims

Global Director,

Intelligence

Carl ClaytonGlobal Director,

Infrastructure

OPTION 03

Deepak DardaGlobal Director,

Innovation

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Board of DirectorsSTRONG STEWARDS OF CAPITAL & A VOICE FOR SHAREHOLDERS

29

Dale RichmondIndependent Director,

Chair of the Board

Lorraine BellIndependent Director ,

Chair of the Audit Committee

Claudia KrywiakIndependent Director

Michael NobregaIndependent Director

John O. ReidIndependent Director

Scott StewartCEO, IBI Group

David ThomPresident, IBI Group

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Growth is Urban: “68% of the world population projected to live in urban areas by 2050, says UN” (United Nations: May 16,

2018) https://www.un.org/development/desa/en/news/population/2018-revision-of-world-urbanizationprospects.html

Global Cities Need New Buildings and Infrastructure // Infrastructure: O’Sullivan, Mike, “Experts: Urbanization Will Worsen Housing Crisis” (VOA: October 11,

2018) https://www.voanews.com/a/experts-urbanization-will-worsenhousing-crisis/4608846.html

Global Cities Need New Buildings and Infrastructure // Housing: Badger, Emily, “Why We Should be Worried About the Rapid Growth in Global Households” (City

Lab: February 14, 2014): https://www.citylab.com/equity/2014/02/ worlds-ticking-household-bomb/8389/

Global Cities Need New Buildings and Infrastructure // Healthcare: “Healthcare infrastructure market set to grow to $200billion in five years” (Building Better

Healthcare: December 11, 2018) https://www.buildingbetterhealthcare.

co.uk/news/articlepage/Healthcare_infrastructure_market_set_to_grow_to_200billion_in_five_years/149796

Global Cities Need New Buildings and Infrastructure // Education: “Study projects dramatic growth for global higher education through 2040” (ICEF Monitor: October

3, 2018) http://monitor.icef.com/2018/10/study-projects-dramaticgrowth-global-higher-education-2040/ The New Economy is Urban: “Urban Development” (The

World Bank: October 5, 2018) https://www.worldbank.org/ en/topic/urbandevelopment/overview#1

We Are Where the Growth Is: Global Tech Hubs Report (CB Insights: May 20, 2018) https://www.cbinsights.com/ research/report/global-tech-hubs/

Index

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