annual and special meeting of shareholders · 2016 to account for timing differences in taxes paid...
TRANSCRIPT
Annual Meeting
of Shareholders
1
Annual and Special Meeting of Shareholders
May 1, 2017
Annual Meeting
of Shareholders
JIM PANTELIDIS CHAIRMAN
Annual Meeting
of Shareholders
Business of the Meeting
3
Receive 2016 Audited Financial Statements
Re-Appointment of Auditors
Rights Plan Resolution
Election of Directors
3
3
3
3
Annual Meeting
of Shareholders
JOHN MACDONALD President & CEO
Annual Meeting
of Shareholders
Forward-Looking Statements
Our discussion may include forecasts, projections, estimates or other information that are forward-looking statements within the meaning of
applicable securities laws.
While these forward-looking statements represent our current judgment on what the future may hold, they are based on material factors and
assumptions that could cause actual results to differ materially. These factors and assumptions include, but are not limited to:
• the view of management regarding current and anticipated market conditions;
• the financial and operating attributes of Enercare and Service Experts as at the date hereof and the anticipated future performance of Enercare
and Service Experts;
• assumptions regarding the volume and mix of business activities remaining consistent with current trends;
• the extent to which the Service Experts acquisition is accretive, which may be impacted by the realization and timing of synergies and the
operating performance of Enercare and Service Experts;
• assumptions regarding future selling, general and administration costs estimated to be incurred by Enercare, including in connection with the
running of the Service Experts segment; and
• the number of common shares outstanding remaining constant.
These forward-looking statements are also subject to risks and uncertainties, including, but not limited to:
• actual future market conditions being different than anticipated by management;
• the failure to realize the anticipated benefits of the Service Experts acquisition, strategic initiatives and tax efficiencies; and
• the risk that the pilot of rental HVAC offerings in 4 states in the United States does not realize anticipated results as the rental model is a new
concept in this industry in the United States.
There can be no assurance that the anticipated strategic benefits and operational, competitive and cost synergies from the Service Experts
acquisition will be realized. There can be no assurance that recent results from the introduction of the rental model to Service Experts in Canada are
indicative of future results.
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
MD&A, particularly under the headings “Forward-Looking Statements”, “Forward-Looking Information” and “Risk Factors”, all of which are available
on SEDAR at www.sedar.com. Dollar amounts are expressed in millions of Canadian dollars, except “Per Share” amounts, or unless specified
otherwise. 5
Annual Meeting
of Shareholders
VISION To be the premier provider of essential
home and commercial services and energy
solutions in North America
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Annual Meeting
of Shareholders
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Outstanding 2016 Results & Performance
Increase in
revenue to
$996M (compared to
$564M 2015)
+77% 8,000 Units
30%
+20%
(1)
Increase in
Enercare Home
Services net rental
unit growth (compared to
-2,000 units in 2015)
Increase in
EBITDA1 to
$266M (compared to
$222M in 2015)
Accretion
exceeded for
2017 Normalized
Pro Forma
Distributable
Cash per Share(2)
(1) See “Non-IFRS Financial and Performance Measures” found in Enercare’s MD&A dated March 6, 2017.
(2) Normalized Pro Forma Distributable Cash per common share excludes transaction costs and synergies and has been normalized by $19 million in 2015 and
2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial services business. Gives
effect to the 2016 bought deal offering, excluding the over-allotment option.
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of Shareholders
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Successful execution
of post-merger
integration
Achieve targeted
accretion
Successfully Delivered Our 2016 Strategic Priorities
Achieve net rental
unit growth
Grow HVAC rentals
Re-energize and
grow protection plan
portfolio
Unit growth
Enhance customer
service
Add new products
and services
Enercare
Home Services Sub-metering Service Experts
Increased consolidated EBITDA by 20%
Annual Meeting
of Shareholders
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10 11
Q4 2015 Q4 2016
8.8 8.3
Q4 2015 Q4 2016
5.6%
Reduction
Six Consecutive Quarters of Net Rental Unit Growth
Additions (thousands)
Attrition (thousands)
Bill 59 – Putting Consumers First Act – to completely ban door-to-door sales in
Ontario of certain household appliances, including water heaters and HVAC
33 38
2015 2016
Attrition (thousands)
35 30
2015 2016
Additions (thousands)
Annual Meeting
of Shareholders
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Protecting Our Rental Business
2002-Present
1 million customers billed by Enbridge Gas
Distribution Inc. (“Enbridge”), which mitigates
credit risk – Enercare is entitled to receive
payment in 21 days of 99.5% of billed revenue
2009-Present
Customer education programs
2010-Present
The Buyout Contract: Approximately 68% of net
book value is protected by a buyout contract,
growing as new equipment is installed
01-Jan-2014
Enhancements to the billing program with
Enbridge
01-Apr-2015
Bill 55 – The Stronger Protection for Ontario
Consumers Act
01-Jan-2017
Door-to-door Energy Sales Ban (AB)
April-2017
Bill 59 – Putting Consumers First Act (ON)
Annual Meeting
of Shareholders
Delivering Excellent Customer Service:
A Cornerstone of Customer Loyalty
Delivering Excellent Service
• Focusing on the metrics that matter
• Requesting immediate customer feedback
• Investing in technology for customers, technicians and agents
• Measuring every front line customer facing employee
2014 2015 2016
Source: Enercare Net Promoter Score Database, December 2016.
Improvements in
Net Promoter
Scores
11
Ratings by BBB and Google
Home
Services A to A+ 4.3
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of Shareholders
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Increased HVAC Rental Additions by 31%
10,309 9,027
19,336
13,489
7,079
20,568
Rental Sale Total
HVAC Transaction Mix
Rental vs Sale
2016 2015
$17.20
$24.03 $26.15
$30.99
$40.83 $43.01
2014 2015 2016
Average Monthly Rental
Rate Changes
Additions Attrition
31%
6%
Difference
$13.79
Difference
$16.80
Difference
$16.86
HVAC rental is worth 2.5x that of an outright sale
Annual Meeting
of Shareholders
2015 2016
545,000 -3,000 542,000
66,000 +8% 71,000
74,000 - 74,000
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Focused on Growing Protection Plans
Approximately two thirds of Enercare’s HVAC originations come from a protection plan relationship
Protection
Plan Contracts
(year end)
Additions
Attrition
9,300 Attrition from
HVAC
Rental
Additions
Annual Meeting
of Shareholders
Geographic &
Product Growth
Whole Home Innovation
Continue growth across Ontario,
launch new products that
complement existing services and
build on our strengths in heating, cooling and plumbing
Become trusted service adviser, deliver
multi-product value offering and increase
our share of the household
Lead in Connected Home; leverage
strengths in service delivery to build
customer value
What’s Next for Enercare Home Services?
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Electrical Services
Connected Home Hub (coming soon)
Air Conditioning
Duct Cleaning
Air Quality
Plumbing
Furnace or Boiler
Water Heater
Water Treatment
More to come in 2017
Connected
Home Pilot
Scheduled
Enhancements
to
Mobile App
Annual Meeting
of Shareholders
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235
165
116
Contracted Installed Billable
Achieving Scale in Sub-metering
Q4 2015 Unit Continuity (In thousands)
205
155
103
Contracted Installed Billable
Q4 2016 Unit Continuity (In thousands)
Contract to bill backlog: 119,000 units Contract to bill backlog: 102,000 units
50% improvement in sales in 2016 compared to the prior year
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of Shareholders
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Contracted
services
growth
Billable
unit
conversion
New
products
New
markets
Economies
of scale
Growth Drivers
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of Shareholders
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Service
Experts
Service Experts Exceeds our Accretion Target
(1) See “Non-IFRS Financial and Performance Measures” found in Enercare’s MD&A dated March 6, 2017.
(2) Normalized Pro Forma Distributable Cash per common share excludes transaction costs and synergies and have been normalized by $19 million in 2015 and
2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial services business. Gives
effect to the 2016 bought deal offering, excluding the over-allotment option.
(3) Reflecting results from May 11, 2016 to December 31, 2016.
Enercare Customer Locations Service Experts Locations EENA Commercial National Accounts
YTD 2016 Acquisition
Adjusted EBITDA:
$50.5M(3)
Achieved
30%
Accretion in
Distributable
Cash(1)(2)
5 percentage points in
excess of target
Rating
4.5 – 4.6
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Advancing the Integration of Service Experts
Reiterating cost synergies in the range of $0.05 to $0.08
per common share on an annualized basis by the end of 2017
2017 2016 2017
Q2 Closed Service
Experts transaction
Q3 Commenced negotiations
with large suppliers as part of synergy
initiative
Complete and realize cost synergies
Execute on procurement
savings
Continued focus on accretive acquisitions
Commence roll-out of HVAC rentals in U.S. in select states
Q4 Launched HVAC
rentals program in Canada
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Expanding Rentals to Service Experts
Water heater and HVAC rental products available
Roll out complete in Ontario, Manitoba and Alberta
Useful life contract with customers
Preliminary rental mix of total water heater and
HVAC originations:
~20% in ON, and
~10% in MB & AB
Only HVAC rental products currently
available
Launched HVAC rental program in 4
states
Defined term contract with customers
Rollout expected to be completed by
end of 2018
2016 2017 2018
COMMENCES COMPLETE COMPLETE
U.S. Rental Rollout Canada Rental Rollout
CANADA USA
Annual Meeting
of Shareholders
EVELYN SUTHERLAND CFO
Annual Meeting
of Shareholders
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Total Revenue(2)
($ millions)
426.7 439.0
137.2 146.0
410.7
2015 2016
Enercare Home Services Sub-metering
76.6%
Service Experts
Enercare Home Services
Sub-metering
Service Experts
6th consecutive
quarter of
net rental
unit growth
Achieved
30%
Accretion(1)
13%
increase
in billable
units
Successfully Growing Long-Term Recurring Revenues
(1) Normalized Pro Forma Distributable Cash per common share excludes transaction costs and synergies and have been normalized by $19 million in 2015 and
2016 to account for timing differences in taxes paid related to the acquisition of Direct Energy’s Ontario home and small commercial services business. Gives
effect to the 2016 bought deal offering, excluding the over-allotment option.
(2) Excludes corporate investment income of $192,000 and $0, respectively.
Annual Meeting
of Shareholders
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$563.8
$995.9
2015 2016
$12M in additional EBITDA would have been recorded in 2016
had there been no rental HVAC originations
Revenue ($ millions)
~$33.8
+97%
+100%
$33.8
million
deferral of
revenue in
2016 due
to success
of HVAC
rental
initiative
11%
25%
53%
66%
89%
75%
47%
34%
2013 2014 2015 2016
Split Between HVAC Rentals & Sales
Rentals Sales
Successful HVAC Rental Initiative Has
Short-term Impact and Long-Term Benefits
Annual Meeting
of Shareholders
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Double-Digit EBITDA Growth
Enercare Home Services Sub-metering Service Experts
(1) See “Non-IFRS Financial and Performance Measures” in Enercare’s MD&A dated March 6, 2017.
Acquisition Adjusted EBITDA(1) (excluding corporate)
($ millions)
244.2 253.0
50.5 13.0
13.4
2015 2016
23%
EBITDA(1) (excluding corporate)
($ millions)
229.7 245.1
39.0 15.1
13.5
2015 2016
22%
Annual Meeting
of Shareholders
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Q4 2016
10%
60%
39%
Q4 2015 Q4 2016
Sub-metering
EBITDA Margin
as % of Net Revenue
Focused on EBITDA(1)
Margin Expansion
54% 55%
Q4 2015 Q4 2016
Enercare Home Services EBITDA Margin
as % of Revenue
Service Experts EBITDA Margin
as % of Revenue
Range: 50%-55% EBITDA Margin
Roll-out of HVAC rental strategy in the U.S. provides opportunity
to expand Service Experts’ margins over the long-term
(1) See “Non-IFRS Financial and Performance Measures” in Enercare’s MD&A dated March 6, 2017.
(2) EBITDA included a one-time buy-out for a terminated contract.
Range: 40%-50% EBITDA Margin Range: 8%-10% EBITDA Margin
(2)
Annual Meeting
of Shareholders
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66% 94%
2015 2016
46% 51%
2015 2016
Payout Ratio(1)
Payout Ratio – Maintenance(1)
Improving Tax Normalized Payout Ratios
80% 77%
2015 2016
51% 45%
2015 2016
Tax Normalized Payout Ratio(2)
Tax Normalized Payout Ratio
– Maintenance(2)
(1) Payout Ratio – Maintenance and Payout Ratio are Non-IFRS financial measures. Refer to the “Non-IFRS Financial and Performance Measures” section in
Enercare’s MD&A dated March 6, 2017.
(2) Tax Normalized Payout Ratio – Maintenance and Tax Normalized Payout Ratio are Non-IFRS financial measures which have been calculated by normalizing
the distributable cash in both the Payout Ratio – Maintenance and Payout Ratio for the impact of the one year tax deferral in 2015, arising from the DE
Acquisition, of approximately $4,750 during the fourth quarter. On a full year basis, total tax expense was approximately $19,001 lower, during 2015, as a
result of this one year deferral which will reverse in 2016.
Normalized
for tax
deferral
Normalized
for tax
deferral
Annual Meeting
of Shareholders
4.9% 4.3% 3.9% 3.5% 3.3%
2012 2013 2014 2015 2016
9%
Weighted Average Interest Rate
3.2x 3.0x 3.4x
3.0x 3.3x
2012 2013 2014 2015 2016
9%
Improving Credit Metrics
26
Net Debt / Acquisition Adjusted EBITDA(1)
Key Statistics
BBB (Stable) – S&P
BBB (Stable) – DBRS
3.3%
Weighted Average
Interest Rate
3.3x(1)
Net Leverage Ratio
9.4x(1)
Interest Coverage Ratio
(1) Calculated using debt less cash dividend by Acquisition Adjusted EBITDA (for a definition, please refer to the Non-IFRS Financial and Performance Measures
section in Enercare Inc.’s MD&A dated March 6, 2017. Debt excludes the balances associated with pension, other post-employment benefit liabilities and
capital lease obligations. The interest expense excludes interest paid on subscription receipts and bridge financing.
Annual Meeting
of Shareholders
Optimize mix of USD/CAD debt
Reduce exposure to floating rate debt
Extend debt maturities
Ladder debt maturities
Maintain debt rating
27
Considerations for Our Debt Refinancing
Annual Meeting
of Shareholders 225
200
170
30 275
225
2017 2018 2019 2020 2021 2022 2023 2024
New Bonds
Drawn Revolver
Revolver
USD Term Debt
Existing Bonds
3.99%
Pro Forma Maturity Schedule (2)
Capital Structure After our Successful Debt Refinancing
(1) Excludes pension and post-employment benefit liabilities and capital leases.
(2) As at March 6, 2017. Excludes pension and other post-employment benefit liabilities and capital lease obligations and the Notes (2012) that were paid down
on March 23, 2017. 28
Maturity Schedule at December 31, 2016 (1)
250 225 210
200
185
15
2017 2018 2019 2020 2021 2022 2023 2024
Drawn Revolver
Revolver
USD Term Debt
Term Debt
Existing Bonds
In February 2017, Enercare Solutions refinanced its $210M term debt and its Notes (2012) $250M + upsized the offering for total proceeds of $500M
3.38%
Annual Meeting
of Shareholders
Q&A
Annual Meeting
of Shareholders
JOHN MACDONALD President & CEO
Annual Meeting
of Shareholders
31
Dec-14 Jun-15 Dec-15 Jun-16 Dec-16R
ela
tive P
erf
orm
ance (
%)
Composite Index Small Cap Index Enercare
$2.9B enterprise value
$0.96 annual dividend (paid monthly)
48% increase since 2011
S&P/TSX indices:
(i) Composite Index
(ii) Small Cap Index
(iii) Low Volatility Index
(iv) Dividend Aristocrats Index
(v) High Dividend Growth Index
Superior 2-Year Total Shareholder Return
2-Year Total Shareholder Return December 31, 2014 – December 30, 2016
Successful execution of strategies over the last two years
led to outperformance of indices
37%
11%
20%
Annual Meeting
of Shareholders
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Another 4% increase in dividends to $0.96 per share on an annualized basis
Returning Significant Capital to Shareholders
0.65 0.66 0.67 0.68 0.70 0.73 0.84 0.92 0.96
Jan 2011 Dec 2011 Mar 2012 Mar 2013 Sept 2013 Mar 2014 Mar 2015 Mar 2016 Apr 2017
+2%
48% since 2011
Enercare’s Annualized Dividend Per Common Share
+2% +2%
+4%
+16%
+10%
+4%
+2%
Annual Meeting
of Shareholders
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Annual and Special Meeting of Shareholders
May 1, 2017