Badger Daylighting Ltd Corporate Analyst Meeting

BAD.TO - Badger Daylighting Ltd
Badger Daylighting Ltd Corporate Analyst Meeting
Nov 16, 2017 / 02:00PM GMT 

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Corporate Participants
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   *  Elizabeth Peterson
      Badger Daylighting Ltd. - VP of US Operations - East
   *  Gerald D. Schiefelbein
      Badger Daylighting Ltd. - CFO and VP of Finance
   *  John G. Kelly
      Badger Daylighting Ltd. - COO
   *  Paul J. Vanderberg
      Badger Daylighting Ltd. - CEO, President and Director
   *  Timothy Hammond Reiber
      Badger Daylighting Ltd. - VP of US Operations - West

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Conference Call Participants
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   *  A. Scott Taylor
      Pembroke Management Ltd. - Vice Chairman, Partner & Portfolio Manager
   *  Dimitry Khmelnitsky
      Veritas Investment Research Corporation - VP, Head of Accounting & Special Situations, and Head of Training
   *  Fatoumata Binta Barry
   *  Gavin Fairweather
      Cormark Securities Inc., Research Division - Analyst of Institutional Equity Research
   *  Jeff Fetterly
      Peters & Co. Limited, Research Division - Principal and Oilfield Services Analyst
   *  John Sartz
   *  John Segrich
   *  Matt Doelman
   *  Roland Keiper
      Clearwater Capital Management Inc. - President
   *  Sarah Jane Hughes
      Norrep Capital Management Ltd. - Portfolio Manager
   *  Yuri Lynk
      Canaccord Genuity Limited, Research Division - Director and Senior Engineering and Construction Equity Analyst
   *  Greg Potter

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Presentation
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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [1]
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 Well good morning, everyone, and welcome to Badger Daylighting's 2017 Investor Day. I am Paul Vanderberg, President and CEO of Badger. The team of Badger is very pleased to be here with you today, and we welcome everyone here with us in person and also those who are on the website. Our format today will be to do a presentation in 2 different sections. We'll have a break in between, and then we'll have the Q&A at the end. So with us today are members of the management team and the board, and we'll start by introducing those who are presenting first. First is John Kelly, our Chief Operating Officer, John raise your hand.

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 John G. Kelly,  Badger Daylighting Ltd. - COO   [2]
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 Good morning.

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [3]
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 Next up is Tim Reiber, our VP of Business Development. It's easy, they're all up at the front here. Next would be Liz Peterson, our VP of the U.S. East, and following Liz will be Jerry Schiefelbein, our CFO. Other of our Badger team members here today I'd like to introduce, and maybe you could raise your hand so folks can see who you are: Glen Roane, our Chairman of the Board, Glen's in the front row, he is easy to find; Tracey Wallace, our VP of Human Resources, thanks, Tracey; wade Wilson, our VP of our Canadian Operations, over on the side over here; George Chung, our VP for Eastern Canada; Jay Bachman, our Director of Financial Operations, Jay is in the far back; and Alan Richter, our Director of Planning and Development, next to Jay in the back there. I think we may have -- I saw Greg Potter come in earlier. Greg, are you here?

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 Greg Potter,    [4]
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 I'm here.

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [5]
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 Okay. Greg is our operating partner in Sarnia, and there might have been a rumor that Frank was here today. Is Frank here, Greg?

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 Greg Potter,    [6]
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 Not yet.

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [7]
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 Okay, all right. If Frank Ertl comes in, we'll introduce him also. So welcome, Greg. And also I'd like to introduce Rachel Dawes, Rachel's in the front here next to George. Rachel is our Operation Supervisor in our Vaughan branch and she very kindly got up at 3 in the morning, as we do at Badger, and she -- we're in the service business, guys. And she brought a Badger down for your inspection, and it's parked just out the east side of the building here, and Rachel will be available to take you through a tour of that unit and explain how it works to you at the conclusion of today's presentation and luncheon. So Rachel, thanks for coming down. She'll have her PPE on later though, right? Okay, good.

 So before we begin, we'd like to remind everyone that the statements made today in the presentation regarding management's expectations or predictions for the future are forward-looking statements.

 In fact, all statements made today which are not statements of historical fact are considered to be forward-looking statements. We make these forward-looking statements based on certain assumptions that we consider to be reasonable. However, forward-looking statements are always subject to certain risks and uncertainties, and undue reliance should not be placed on them, as actual results may differ materially from those expressed or implied. For more information about material assumptions, risks and uncertainties that we believe relevant to such forward-looking statements, please refer to our MD&A for the period ended September 30, 2017, which is available on the Internet at both our website and on SEDAR. Further, such statements speak only to today's date, and the company does not undertake to update any forward-looking statements.

 So just maybe a few initial comments before we get into the formal presentation. Why invest in Badger? I personally have come to know Badger very well over these last 16 months. The business has been built up over 25 years, one truck at a time, by reinvesting earnings very profitably over a very long period of time. I know very few businesses with this kind of successful reinvestment at such consistent returns over such long periods. If the market growth opportunities are there, the model can scale up to add more trucks and capture opportunity. If markets slow down, the model can reduce the truck build and cash flow goes to strengthen the balance sheet and maintaining the fleet. Shareholder cash is basically used for 2 things, to build trucks and to support working capital growth as the business grows. From the market perspective, Badger has certainly proven that it can capture market opportunity. The market for hydrovac is growing, and your company is the leader in marketing hydrovac to expand that market. We are getting even better at this. You'll hear more about business development a little later from Tim Reiber, who has recently stepped up to take on the lead in our sales and marketing activities.

 On longer-term margins and profitability, Badger sells value. Our services bring value to our customers, and they pay for that value. This is one part of the Badger margin equation. The second part of the margin equation is our business model. Based on our size, our geographic scope, the operating flexibility that comes from that and especially the commitment and experience of the management team. John Kelly will take us through the key parts of our proven business model and why Badger is different in a number of key ways from our smaller competitors. John and the operating team's intense focus on driving the business is a big part of Badger's success. Are there lower-priced competitors? Their sure are, always have been. Companies have tried the low-price cheap Charlie approach over the years, sometimes to the extent that our field people they say, "How can they do this? How can they work at these kind of rates?" Well, we've seen a number of these test cases with this approach over the years and in almost every instance, the shareholders of these companies have not done very well. There are several examples of this playing out right now, and I expect there probably always will be in this business.

 So today, we will also talk about our focused strategy. With Badger, we are executing on a focused Hydrovac strategy. I'm looking forward to hearing more about it today and hearing about our key strategic initiatives from Liz Peterson, whose enthusiasm about this business we find to be infectious. So this unique service business, our strong network, our large and expanding markets, where Badger is leading and driving further market utilization of our unique hydrovac service, is what it's all about. You're going to hear about this today, but most importantly, you're going to hear about it from the operations team that's making it happen.

 To me, the secret Badger sauce is our people. We're in the service business, and our people provide that service. Those are our Badger operators. Rachel is a great example of that today. But the rest of us are really here to support our operators like Rachel. That's what it's all about. And you'll also hear today about our commitment. You'll hear it from the team that's leading the charge and that commitment to providing service to our customers is what Badger is all about. And I can tell you, it's very exciting to be part of it and I can tell you, it's also very exciting to be invested in it.

 So let's proceed with the formal part of today's review. The Badger Daylighting process is called hydro excavation. Daylighting is a simple term that describes the process of exposing underground infrastructure to daylight. Hydro excavation, or what's commonly called hydrovac, is a unique form of excavation. It is nondestructive. The process is designed to avoid damage to a sensitive underground infrastructure while the excavation is underway. The reduction in potential for damage, the improvement in safety and the efficiencies that go along with the process are valuable attributes of hydrovac. Our hydrovacs use a combination of pressurized water and a powerful vacuum system to expose underground infrastructure. We purpose-build our hydrovacs and for 25 years, have designed and built them in Red Deer, Alberta. We are very proud of our Red Deer team and the talent and effort they bring into the business and building our hydrovacs that we call Badgers. So you'll hear us talking about badgers today, those are our hydrovacs. We lead the industry in building and operating these units by far. Our focus in supporting our operators in training and lift training to assume they're safe, that they are professional, along with our design and manufacturing, is an important factor that sets Badger apart. Our motto is Best Operator, Best Truck. And everything else we do is in support of that. In the Hydrovac business, and in the process, our excavated soils are mixed with water and the slurry either remains on site or Badger will arrange for disposition based on customer requirements and environmental regulations. The customers are considered to be the generators of excavated materials and main ownership -- maintain ownership of the materials.

 Hydrovacs provide benefits to our customers, who are the owners of infrastructure and also the contractors who do work for those owners. Reduction in damage, as I mentioned, and improved safety is the major benefit. You're going to hear a lot about safety today. It's an important part of our process, and it's also an important part of our operations. Conventional excavation does the vast majority of digging in U.S. and Canada. This will always be the case. The efficiency per cubic yard exposed and material moved is always going to be higher with the heavy mechanical excavators, the Yellow Iron. However, this process is performed by a large range of different equipment types, are responsible for a significant amount of damage as they're in operation. We hear about unfortunate incidents almost every day. Even hand-dig techniques, with things as simple as shovels, do a lot of damage to underground infrastructure. The Pipeline Emergency Response and Damage Prevention Organization in the U.S. estimates that there is a critical strike or infrastructure damage that occurs every 6 minutes in the U.S. alone. Now we're not suggesting to replace traditional excavation with hydrovacs. Mechanical excavators, I mentioned Yellow Iron, are going to move a lot more material per hour than we will. However, hydrovac often helps to make traditional excavation more efficient and safer by locating, we call it daylighting, the underground conflicts. And then the Yellow Iron can go to work safer and quicker. So in that sense, we're a productivity partner to traditional excavation. As you all know, time is money in construction, and reducing project times and getting the money turn faster is a huge benefit to the owners of infrastructure. With our fleet of over 1,000 units operating in the U.S. and Canada, we continually see opportunities to improve our badgers. They perform a wide range of very useful chores, and we find new uses for them each and every day. And Tim will talk a little bit more about this in a minute.

 The value of Badger strategy and the attention to customer service has created a lot of value over the last 25 years. Our successful business model has performed well across a number of business cycles. The company has expanded by executing on our long-term organic growth strategy. This growth largely is supported by capital reinvested from earnings and use of debt. In good times, cash goes into expanding the fleet and putting more Badgers to work for you. In downtimes, we've historically slowed down the build rate and the cash goes towards strengthening the balance sheet and maintaining the fleet. This cycle is reflected several times over the past decade, with significant cash inflows when the build rate slows down. Jerry's going to discuss capital allocation and returns a little bit later in the presentation. But it suffices to say that Badger's strong business model provides real benefits to shareholders across all stages of the business cycle. And this is reflected in our history of revenue and profitability.

 Just one more important point before we proceed with the rest of the agenda. I've already mentioned several times, you're going to hear a lot about safety today. So you're getting a pretty good sense for the culture of Badger. If we turn over our business cards, they say on the back, "Safety, it's what we do, it's what we deliver." And this is a key part of our DNA. In all of our operating processes, from initial hiring to training to our motto, Best Operator, Best Truck, to our compensation practices, safety is the center of Badger's culture.

 So the next section of today's review is a short video. We ideally would have liked to get you all out to a jobsite, but when you go through the safety requirements, the personal protective equipment and this thing called traffic in Toronto, we thought a couple of buses might be very difficult today. So Rachel is here, and we have a Badger next door. But we thought lacking that, perhaps a good idea here would be to put together a video. So let's turn it over to the video right now.

 (presentation)

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [8]
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 My favorite part of that video is when Cary Johnson, our area manager in Indianapolis, comes home to his family. That's what it's all about.

 So as we proceed with the rest of the review, our format today is going to follow our strategic framework. I just talked about it in the video. And it supports the success of our proven business model. So the 3 factors in our strategic framework are: our proven business model and strong competitive position; the unique service we offer to a wide range of very attractive end-use markets; and the fact that badger is executing on a focused strategy.

 So that's our format for the rest of the day, and now you can hear from the rest of the team. So let's turn it over to John Kelly. John?

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 John G. Kelly,  Badger Daylighting Ltd. - COO   [9]
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 Thank you, Paul. And just to let you know, Paul, it's not a clip on. Good morning, everyone. A little joke, I don't usually wear ties, and I'm usually in shirts and jeans and boots in the field, and if you're a shareholder, that's where you want us. So good morning. Let me get started.

 Okay, I'm going to talk about the proven business model and the strong competitive position that we have in the market. I will lead us through the factors that drive our proven business model, one that differentiates Badger from the competition in many different ways. The slides provide a quick glance at the major factors behind our business model, that very few, if any, competitors have the ability to establish of any significant scale. I will provide more detail on each as we proceed, but to summarize, number one, our extensive and growing branch network is a differentiator versus small competitors. It's key to customer service, managing fleet utilization and managing operating cost. People who look at this industry through the lenses of a small competitor miss the benefits of our strong branch network. Number two, the broad range of end-use markets, geography that we service. This is all about diversification of demand of Badger's service. This part of Badger works together with the branch network to make our model flexible given changes in market and regional demand. The severe oil and gas downturn in 2015 and '16 provided a severe stress test for Badger. We successfully managed through this test because we were focused and because we -- our branch network and our diversification. Throughout the oil and gas downturn, we continued to grow in both our non-oil and gas markets, and in the U.S. This growth offset the decline in the oil and gas business. People who view our industry through the lens of a small operator with just a few customers miss the benefits of diversification. Number three, we are focused on the Badger Hydrovac business. We have proven that we can grow and that the business can be scaled. People who view the industry through the lenses of small competitors miss the benefits of scale and the fact that Badger has been able to successfully grow in both Canada and in the U.S. Paul mentioned our cash generation a few minutes ago, Badger generates cash that supports long-term organic growth in the fleet and working capital. And number 4, our Badger design and manufacturing. We have over 25 years of experience, with highly skilled and knowledgeable staff who leads our efforts. I can tell you, and I've been there many a times, it's a pleasure to work with our Red Deer team. And if you noticed on the picture the suburban that had the actual badger on the back of it, that was a suburban, that was built by a gentleman who's still with us today. So a tremendous amount of knowledge at the Red Deer facility. With our branch network, we have established market geographic diversification. It is also -- it also provides us with service advantage. As you can see, service customers across regions with more equipment to service large jobs. We all love large jobs, but they all come to an end. We worked very hard to build our broad customer base in each local branch, but sometimes we need to bring equipment to scale up for large projects, and then scale back down when the project ends. This allows us to manage our fleet utilization and has driven 2017 RPT much higher.

 We also have an emergency response program, where we pull hydrovacs from multiple areas to service big cleanup requirements. The hurricanes from this year and last year are great examples. For Hurricane Matthew, last year, we pulled hydrovacs from 16 different branches to take care of customers after the storm. And for Irma, we pulled 86 units together and still serviced our local customers. Badger is real unique in being able to reposition equipment like this. We always want to say yes when a customer calls. And this is also a big part of our culture and our operating success. Badger operates a mix of corporate and franchise units. Badger was initially started 100% as a franchise operation. To that end, 2016, the transition has moved to 83% corporate and 17% franchise ownership, for a number of reasons. A lot of large markets, especially in very large markets in the U.S., the management, admin, financial resources required to build out the business are very significant. And it has been a challenge to find franchisees with those management and financial resources, so we had -- we have had to build our -- out as a corporate operation. Another factor is when some franchisees in the oil and gas market ceased operations in the downturn. We have also had several franchisees who wanted to retire, but had no succession plan. We converted those corporate -- to corporate operations in some cases and in other cases, we transitioned them to a new franchisee. Our franchisees are some of our best-managed operations. And I can tell you, I've been to almost every location in both Canada and United States, and that's a fact. We see franchisees approach being part of our mix going forward. We can actually see a number of markets where franchisees approach -- where franchisee-ed approach may actually be preferred way to service the market. As I've already mentioned, our diversification sets us apart from small competitors. Diversification is also a key part of our growth, as we continue to achieve success.

 As you know, we service infrastructure businesses in a number of key end markets. Those being utilities, industrial, oil and gas, telecom, transportation, general construction and engineering. These markets are very significant, with trillions of dollars in estimated new construction and repair and maintenance expected over the next decade. While hydrovac is a very small part of the projects, the customer benefits of safety, project productivity have supported the Badger sales efforts to drive more hydrovac use across a wide range of markets. We believe that this still -- we're still in the early days of the Hydrovac business in North America.

 I mentioned our repositioning into the non-oil and gas markets when oil and gas declined. I can tell you, we worked very hard to manage utilization during those difficult times. Very hard. But it was the strength and flexibility of our business model that allowed us to come through successfully. We focused on sales, business development. We focused on fleet repositioning utilization, and this success kept our expenses low, supporting our margin versus competitors who did not have the business model we have. The difference is real. And you all see examples of competitors who did not make it through the downturn, because they did not have the strong business model. They did not have the scale, flexibility, diversification or the market knowledge to make the transition, nor did they have the Badger team. This chart shows the ratio of Badger non-oil and gas revenue to oil and gas revenue, with the bottom section of the bar showing the non-oil and gas. In 2013, 45% of Badger's Hydrovac business was non-oil and gas. In 2016, 75% of our Badger business was non-oil and gas. From 2014 to 2016, our oil and gas business fell by $94 million, our non-oil and gas business grew by $97 million. The strength of our business model pays off for shareholders in tough times as well in good times.

 So how do we drive organic growth? If you remember the math, with our branch locations, Badger has historically grown adjacent to existing locations. We have taken the hydrovac technology into new markets where hydrovac technologies are often relatively unknown. I'll tell you a little story about that and how unknown it is. In the States, we've had hydrovacs pulled over by the state police in 3 different states, not because we were violating any laws, speeding or anything. They merely didn't know what that unit was. And that's the truth I can tell you the states, but I won't. But they've actually been pulled over because of that. They were that unknown of a type of vehicle. We educate customers as to the features and benefits. But most importantly, our adjacent market growth ensures neighboring branches have equipment available to service demand. Very important, because we always want to say yes when the customer calls for service.

 When we talk about Badger's operations being scalable, we have an advantage with our significant branch infrastructure across North America. A new satellite location that starts off with one truck can call on nearby branches when the new area manager hits a home run and lands that job that requires multiple Badgers.

 We want to focus on historical U.S. revenue growth on this next slide. Badger has grown steadily in the U.S. over the past 5 years. The oil and gas downturn has marked this growth as a consolidated -- masked this growth at the consolidated level, but the success is there. We have also seen bottoming and a modest recovery in the oil and gas market during 2017 in this segment, which was 25% of our sales last year, could provide revenue upside over the next few years. Badger is well positioned in our operations fleet cost structure in our oil and gas markets. And we have significant operating leverage for higher volumes.

 Business development is a major differentiator for Badger. We have been the marketing pioneers in hydrovac industry over the last 25 years. Our business development efforts are key in establishing new markets and driving penetration in existing markets. It is amazing the type of opportunities that are out there when we focus on markets that might look like they are mature but have tremendous upside. We leverage our customer relationship across our broad branch network. We take opportunities to work with customers across a number of different states and across regions in North America, and are able to make new connections when they travel to new projects. In other words, we make connections from a branch where we have established a relationship, to a new market where they might be moving to. This process is ongoing and is unique to Badger compared to our small competitors. And as Tim Reiber says, we finish more jobs than we start.

 Badger's margins have historically been stable across business cycles. We target an adjustable (sic) [adjusted] EBITDA margin of 28% to 29%. Margins are supported by a number of factors. One, our diversification and business mix across markets. Two, we always sell on value that our service provides a safe excavating solution and security for our customers. Three, we are the pioneer in marketing hydrovac. It is hard work, trust me, to market hydrovac. But established first-mover advantage is a prize. Badger has proven that we have been successful in these markets.

 I have spoken already about our advantage of our branch network, unique to Badger and only Badger. Our scale of operations and operating flexibility support cost efficiencies. And we are just starting on supply chain initiatives with an objective to grind away at our consumable operating costs, picking up pennies that add up big. Since 2014, Badger's margins have been impacted by the downturn in oil and gas. We all have heard a lot over the last several years about excess equipment from failed competitors and the impact it has had on hydrovac rates in certain regions. With oil and gas bottoming, it looks like this trend may start to reverse.

 We believe that Badger's design, engineering and in-house manufacturing is a very significant differentiator. It is really what put Badger on the map. The success and the safety and efficiency of Badgers has proven itself over time.

 We spend a lot of effort on design and manufacturing. It's all about optimizing life cycle cost and reducing initial capital cost. Both of these factors drive higher return on investment. It's important to note that we design units to meet government compliance requirements and transportation department requirements across the entire branch network. Our equipment is not made just for oilfields. For example, where the work is on pipelines or in the industry plants does not require travel on public roadways, a number of competitor hydrovacs designed for traditional oilfield work are big, and big also comes heavy. A lot of those units that were excess from the oil and gas crash came here to Ontario via the auction block. The Ontario Ministry of Transportation has put new regulations in place, licensing hydrovacs as a commercial vehicle, effective July 1, 2017. Licensing means that hydrovacs are now subject to standard commercial vehicle regulations, including weight restrictions. Previous to this, hydrovacs were considered road-building equipment and were not subject to regs. This heavy equipment will be less economic to operate, because of the trucks are so heavy. They will not be able to haul full loads and remain compliant with weight limits. The ministry has announced that the full enforcement of the regs will begin year-end 2017. Our view is that the competitors operating these heavy units will have a significant reduction in operating efficiency and higher cost per yard of material if they are to operate legally. I encourage everyone to watch equipment auctions to see what Ontario equipment is being put on for auction over the next 6 to 12 months. A significant amount of these big heavy units came down here when the oil and gas crashed and people got them cheap at auction. They will now need to move somewhere else in order to go to work. The competitors who run them will be faced with serious capital investment in order to replace with equipment that will operate economically under new regulations.

 For Hydrovac production cost in 2017, we estimate that a Badger will cost between CAD 390,000 and CAD 410,000 to build. In order to put it into service, there will be transportation, local tax, licensing, which will be another 10% of cost. The primary cost components of our manufacturing cost, on average, would be about 1/3 chassis and 2/3 in other components in fabrication and labor.

 In our overall fleet management, we planned on a 10-year average life cycle for the hydrovacs. We end 2016 with an average fleet age of 4.5 years, which is where we would like to maintain the average age over time to optimize repair and maintenance costs. From a broad-brush fleet replacement planning, we figure a 10-year life, and we would then add any growth units required to get our build rate for any particular year. Badger built 220 units in 2014, and we put them all to work. We estimate that we will build 155 units in 2017, with an estimated retirement full year of between 70 and 75 units. We estimate that the Red Deer facility can accommodate a much higher build than 2014, as an expansion has been added to the plant. A consideration used in determining the ultimate build rate is our revenue per truck metric, which is made up of two components, price and utilization.

 I appreciate the opportunity to share my views with you today. And I thank you.

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [10]
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 Thanks, John. So at this point in the agenda, why don't we take a short break, say, 15 minutes, so back at 10:00. Everyone can get coffee and make their calls. And we'll fire up again with Tim Reiber, who will take us through our end use markets discussion. So let's take a break.

 (Break)

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 Timothy Hammond Reiber,  Badger Daylighting Ltd. - VP of US Operations - West   [11]
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 Maybe get started again. All right, thank you everybody, for coming today. Hope you enjoyed the break. And as Paul and John mentioned, my name is Tim Reiber, and I oversee our business development for North America. And I'm going to talk about Badger's unique service offering.

 So Badger offers a unique service. This is due to several factors, including how our business is operated. As John mentioned earlier, Badger operates a local branch-based model and this is important, as our targeted approach to build our branches is to build out a broad customer base in each of our markets. The branches are led by area managers, who are key in our service model. Area managers run their businesses. They are responsible for recruiting, training and safety, with the help of our regional safety advisers. They are the main customer contact point for service and they schedule our trucks. They drive pricing, billing and will be involved in collections. They are responsible for fleet management, repairs and maintenance, again, with the help of our regional fleet advisors. And they are also responsible for meeting regulatory requirements, including drivers' hours of service and state and provincial transportation department regulations on the trucks. And finally, our area managers are entrepreneurs, who manage their P&Ls. Of course, they review them with their regional managers each month, but they get a P&L scorecard every month. In Badger, all the managers have bonuses tied to profitability, with the pool based on pretax earnings, which are after a charge for capital employed. The area bonus is made up of 50% for the local branch performance, 25% for regional pretax net income, and 25% for operational excellence, which includes safety, customer growth and operator retention. Badger's unique service model is also due to the fact that our local branches are supported by a strong national network. While we operate in local communities, all operations are part of a strong regional and also national network. The model flexibility that John discussed a little while ago, also comes to bear on our service capabilities. Scaling local operations to manage large jobs, without having equipment there if no longer needed once the large job is completed, positively impacts our cost structure.

 The cost structure flexibility that comes from this network is significant. I lived it personally when I was running the U.S. west region when the oil and gas downturn hit. And I can tell you, we really scrambled to move equipment around to find the work. Without the network and markets outside of our oil and gas, we would have been in real trouble like many of our smaller competitors. It made all the difference in the world to Badger's financials in 2015 and 2016, especially the maintenance of our margins versus smaller competitors, who did not have the ability and flexibility to respond to the market changes. Even with today's business environment, we are constantly shifting operators and trucks across the network to handle workload and ensure that we meet the callout response that our customers need. And this is not just a macro trend type of flexibility. Meeting customer needs is key to maintaining first call status. You heard Frank Ertl describe, in the video, how his team achieves first call status. Either Frank or one of his two managers are always on call, 24 hours a day, 365 days a year, to respond to customer service needs. This is hard work. It's extreme service, and it's difficult to match Badger's service response, based on the size and scale of our operating network. It is a real differentiator for sure. And Frank is a great person to describe Badger's service, as his commitments to customers has driven his business growth for nearly 18 years.

 And John touched on earlier, our wide range of infrastructure end use markets. We target each segment as part of our business development strategy. There are individual infrastructure owners and contractors who work for those owners, who work in specifically, in certain end use market segments. Badger focuses on servicing their needs for each specific application. Our segmented marketing focus has potential to support future growth, as we target additional penetration within individual segments, and where sharing success stories is often the best marketing of all. I will not take the time to review each of these, but these are an example of the hundreds of hydrovac applications that Badger had developed with its customers over the years. Not a week goes by without learning about a new way to meet a customer service need in a new way, or yet, in a new customer segment.

 For geographic growth, Badger is really just scratching the surface in the large U.S. market. The dark pins on the map are where Badger has existing service areas. The red pins represent Metropolitan Statistical Areas, or MSAs, based on U.S. Census Bureau data. These would be a population center of over 100,000 people. And we have found, over the years, that an MSA would support a successful branch, with larger metros supporting much larger operations. And there are opportunities in just about every MSA. Even the dark pins are where we continue to have success in penetrating the market even further, with the red pins potential new territory for us. What you've seen us doing is expanding in the neighboring markets, where we start up an operation. But more importantly, we leverage our broad network to always be able to say yes to our customers. Geographic expansion is a significant opportunity when we are presently in 77 of the 347 MSAs in the lower 48 states. When you add Canada, there is additional opportunity for penetration and geographic growth.

 Badger's business development approach supports our strategy in driving growth in our core Hydrovac business. Our organic growth model, that John discusses earlier, is all about putting the service in place and getting out and selling it one Badger, one customer at a time. We are proud of our organization, our operators and equipment, and we train the organization to sell value. We promote the key customer benefits of safety and reliable service. Hydrovac growth is our key corporate strategy, as Hydrovac accounts for 90% of Badger's revenue. With Badger, you own a company that is focused at driving Hydrovac growth and building upon the big advantage our size and scale of operations have versus smaller competitors. Our branch network, with local focus backed by national scale, is valued by customers who seek a national partner. And all of us are incentivized based on profit, which means we need to deliver value to our customers and shareholders day in and day out. Our market development focus is simple. We drive increased penetration in existing markets. We continue to see penetration-driven growth, as we market the benefits of Badger. We continue to see new applications for Badgers across a range of markets and customers. And we love nothing more than to arrange a demonstration for a potential customer on what these Badger units are capable of doing. And finally, we don't know how big the market for Badgers can become. But we know from our successful market development and geographic expansion to date that there is significant untapped potential.

 Our business development approach is focused. We focus at the local, regional and national levels. This focus is on our infrastructure verticals and also on specific customer relationships, with both local contacts and head office contacts. Our ability to connect with customers at all levels sets us apart. We now have over 80 business development staff across North America. Most of them report and work right in the local areas and regions. My group works with the regions to set the overall strategy and build programs for the field. Specific initiatives underway include sales force management processes, ways to manage our sales force and measure our sales force effectiveness; training for a business development organization across North America; and developing new processes such as customer relation management tools, including customer activity tracking. We focus both on expanding relationships with existing customers, and an important way we work on that is to leverage these relationships across our branch network.

 The fact that we have significant scale helps us leverage relationships, as customers take on work in regions where they have not worked locally with Badger before. We also target new customers to broaden our customer base and our revenue base.

 With 2017, we added a component to the area manager bonus that is tied to growing the customer base. As we have learned and known for years, a broad and diversified customer base is key to long-term success. Those big multiunit projects are great when you're working them, but those projects always come to an end.

 I think the whole industry learned in the oil and gas downturn that you can be very successful financially working for a narrow customer base, but your entire business can evaporate if those customers go away. Badger has always managed for the long-term, and our business development strategy is also long-term focused, long-term profitable growth. And with that, I'll turn the agenda over to Liz Peterson, our Vice President for the Eastern region in the U.S, who will review Badger's strategy and key areas of focus. Liz?

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 Elizabeth Peterson,  Badger Daylighting Ltd. - VP of US Operations - East   [12]
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 Thanks, Tim. We are very excited that Tim is leading our business development effort. Many of us came from large organizations, and we understand the power of a strong and focused business development organization, and we are extremely excited about what Tim has already been able to do so far this year. So I am Liz Peterson, and I support our operators and our operations in the eastern part of the United States. I want to thank Glen and Paul for setting this up and for all of you for coming. It is a treat to be able to take off our safety boots and coveralls for a day and get to meet you all. As John said, we are in the field, we are operators, and that's where we spend most of our time. So this has been a lovely treat to be able to come here and meet all of you. So I'm going to talk about our 4 strategic initiatives. Business development being one of them, so I won't reiterate a lot of what Tim said. So I'm going to walk you through our 4 strategic initiatives. Badger is a focused hydrovac company, with strong growth opportunities throughout our businesses and our various geographic markets. As John has talked about, as did Tim, we have a strong branch network, where we have the ability to consistently leverage and keep our utilization rates high and our costs low to support our margins. This is a critical part of what we do and a key part of our mission statement, which is to maximize the utilization of the Badger hydrovacs fleet by safely solving our North American customers' infrastructure needs. We've heard a lot about safety from Paul and John and Tim, both from the perspective of providing safe, nondestructive services for our customers, but also on focusing on operating safely in the field on a daily basis. Our infrastructure end use markets are large and provide significant runway for growth. Badger has proven that we can grow the business by marketing hydrovac technology to new users, while at the same time penetrating our existing markets in all of our geographic locations. We leverage our collective know-how, experience and skills from the staff who design and build our Badger's, all the way to our operators who service our customers every day. Our motto of Best Operator, Best Truck has stood the test of time and defines our service. And finally, Badger's focus is to ensure we provide value to our customers' infrastructure projects. Ultimately, at the end of the day, that's what matters. So there's four major areas that we're concentrating and focusing on this year. These are our key strategic initiatives that we put together early in 2017, and you will be hearing more about these initiatives over the next several years, as we're really just getting started.

 We've already been successful in many of these areas, but it is important that we vet these, agree upon them as a leadership team, formalize them. And I'm excited to give you guys an update on them today. In January, we assembled a team of over 2 dozen senior managers and went through a rigorous process of thinking through our markets, industry, opportunities for the future, risks and resources required to reach our growth objectives. The process was very positive, and we plan to update our strategy again in early 2018.

 So a quick overview. The first initiative is to strengthen our human resources organization, because we are a people business, we are a service business. Badger has grown significantly over the past 10 years. And going into 2017, the company is over $400 million in revenue, operating in 2 countries, with over 150 service locations and 1,800 employees. We have certainly become a more complex organization, and augmenting our human resources skills is paramount. Our local managers and staff need the support of human resources to improve all aspects of our organization, from hiring throughout the ongoing operations. They need resources they can counsel with to help them make good decisions on the frontline. I'll talk about that in a little bit -- a little bit more in detail. The second initiative is to drive business development. Tim gave you a great rundown of what he and his team are doing and the strategy that he has. Just in 2017, through 9 months, we have added 57 units to the fleet, with the year-to-date revenue up by 25% over last year. The third initiative is -- of our strategy is to improve our common operating platform across our -- the Badger organization in North America. What's really driving the common practices and procedures is our need to do things the same everywhere. That's where efficiencies will come from, and that's where improvement in our customers' overall Badger experience will be enhanced. We're in the early stages of assessing our processes and our IT systems. And I'm very pleased to be one of the coleads of this team, along with Wade Wilson, who oversees our Canadian operations. And finally, our fourth key initiative is the leveraging of our technology. John walked us through what we do in our Red Deer facility in our hydrovac development. But we leverage technology also in designing other things, such as logistics, in ways that we can maximize our utilization. I'll have more detail on that in a little bit, but I can't tell you too much about that because some of them are proprietary and still yet to be evolved.

 So let's talk about human resources. So human resources, as I said, is a significant area of opportunity for Badger. They're a range of process improvements and related resource requirements in our human resources department. We took the first step in adding Tracey Wallace to our team in June, and we are super excited about what she's brought to us in the strategy that she has to lead us through this important initiative. Key focus areas include modernizing recruiting, onboarding, with the recruitment process being upgraded and targeted to be built out through 2018. Improving retention is a focus, not only at the operator level but also at the area manager level. Retention starts with recruiting and continues over time. And retention improvement is a process of working away at a lot of little things, all of which add up and make a big difference. We just completed Badger's 2017 succession planning. It's a key to identifying key candidates to take on more responsibility as the company grows, but even more importantly, to identify development opportunities and cross-trainings to help grow our operators. Standardization of our human resource processes across the organization is another focus and clear opportunities and consistent approaches to all administrative aspects and time-savings.

 Paul mentioned that Rachel is here with us today. So Rachel has been with Badger for 7 years. She started as an operator in Western Canada. She has had the distinct experience of spending time in Fort McMurray, so if any of you have ever been there, it's not always the easiest place to work.

 Rachel is now an operation supervisor for us here in Toronto, and she has recently joined our Badger management training program. And my prediction is, in 10 or 12 years, she's going to be standing here and giving you all this message, not me. Okay. So Slide 33. Okay, you all heard from Tim about the business development, so I'm not going to reiterate this. But there is a trend that our customers are going through significant consolidation, and our ability to leverage our business development organization across all of our regions give us a distinct advantage to be able to take advantage of the growing market opportunities, as these customers consolidate.

 The next, common platform. This is related to augmenting our operating practices and building a common operating platform. This is the initiative that Wade and I are leading, and the objective is to ensure that consistent common practices and procedures are in place at Badger to support the growth, not only over the last 10 years, but to support our strategic milestone of doubling the U.S. business again in the next 3 to 5 years.

 We're in the early stages of an initial assessment of various processes and systems and what we expect to have is in early 2018, a definition of scope and work, time lines and budgets, expected expenses and capital to put these processes in place.

 It's important that these processes were in place to support growth strategy. A number of us joined Badger from other large companies that have such process in place and are some significant efficiencies and improvements in having operational effectiveness that is supported by having a common platform. Another area that we're taking a look at is supply chain. The first focus area is on our consumable expense items and the supply chain approach to procurement to consolidate our vendors and leverage our spend, on categories such as fuel, safety equipment, travel, office supplies. That is an ongoing process. We kicked it off this year and are starting to see some benefits.

 And the fourth, technology. Badger has led in the hydrovac technology for many years, and technology is a key initiative in our strategy. The company has added to our engineering staff in 2017, and we are pleased with the results. Hydrovac design is always a focus. We operate over 1,000 units each day and receive invaluable information from our operators, that help us improve our design. The feedback is a great ongoing source of information. Badgers are designed and built to maximize safety and optimize life cycle costs. Excavation technology is also a focus. Digging is both an art and a science, and improvements in how our hydrovac digs equals improved efficiencies, increased safety and lower costs.

 Technology has continued to bring ways to improve logistics, scheduling, and maximizing our utilization can improve -- reduce cost and emissions and our carbon footprint. Those aren't only good business things, but they are the right things. Material processing is another area of opportunity. When you think about transportation and congestion in larger metropolitan area, material disposition adds time to the job. There could be significant opportunity to reuse materials, improve productivity and cut costs for customers. As we've learned and known for -- sorry, that's the end of mine. So material disposition can be a continued revenue source for Badger as well. It's difficult to provide too much detail due to the sensitivity for competitive reasons, but these categories provide some color on areas of opportunity that arise from new technologies and Badger's ongoing focus to customer service. With that, I turn it over to finance, to Jerry.

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 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [13]
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 Thank you, Liz. So before we start with the formal presentation, I thought we'd take a minute to address some of the most recent speculation around the effects of excess soil disposition on our financial results.

 As Liz just pointed out, soil's disposition is a part of Badger's forward plans, and particularly, with the changing customer mix. However, today, the financial impact is small. Both for full year 2016 and year-to-date 2017, the impact on revenue is about 1%. As a percent of EBITDA, the total less than 5% both for full year 2016 and for year-to-date 2017.

 Going forward, Badger does not intend to continually disclose its data, we think it's a competitive pricing issue. Now back to our prepared presentations.

 Badger invests to manage itself for the long term. Today we're $1 billion company. 10 years ago, at year-end 2007, we were much smaller with 334 Hydrovacs, revenue and EBITDA of $118 million and $32 million, respectively. Those who invested with us at that time and stuck us did very well indeed, as indicated by the graph on the right.

 I have a quarterly call with one investor, who says that, Badger, his first and only 100 bagger. He bought us at $0.35. A long-term investment in Badger beginning at year-end 2007 is 6 to 7x as large as the original investment, swamping the return of over the same period for the S&P/TSX Composite Index.

 Over the period of January 2008 through September 2017, Badger has generated over $2.8 billion in revenue, from what was a relatively unknown technology in service.

 Over that same period, Badger produced just over $740 million in adjusted EBITDA, that's an average 26.7% return over almost a decade. Badger used that margin to build $450-plus million of property, plant and equipment, while returning over $129 million to its investors through dividends. That building program has resulted in a company with just under 1,100 Hydrovacs, and the ability to generate revenue 400% higher than when that decade-long building program began.

 Throughout 2015 and 2016, Badger grew its nonpetroleum business substantially, but that growth was masked by a dramatic falloff in the petroleum market demand. With some stability in the oil and gas sector in 2017, Badger's underlying non-oil and gas growth is showing up both on the revenue and EBITDA lines.

 Revenues are up almost 25% for both the quarter and the year-to-date. Adjusted EBITDA is also up 16% for the quarter and 19% for the year-to-date. The third quarter adjusted EBITDA margin of 27.5% is just shy of our long-term target of 28% to 29%, and demonstrates the cost control issues that we had in Q1, have been addressed as the year went on. However, we have more to do as our year-to-date EBITDA margin is just under 3% below our long-term targets.

 Revenue for truck is $6,000 higher than last year's third quarter. Remember that one of our core competitive planks in the Badger offer to the market is to never say no when a customer calls. At over 34,000 of RPT, the fleet utilization is approaching a point where we need to be looking at the build rate again. Badger's rule of thumb, not a hard and fast rule, but a rule of thumb, is that an RPT of 25,000 who will manufacture Hydrovacs to replace retirements, at 30,000 we'll be manufacturing enough to grow and at 35,000, we'll be manufacturing even more to grow.

 With our business development efforts now being ramped up, we will be looking for ways to effectively increase the build rate and to add to the fleet where it makes sense.

 Now this is a good time to address another recent market question concerning Badger's receivables. If you cast your mind back just a few months, the complaint in the market was that our receivables were too old. Now it seems to be they're too young. Let me assure you that while monthly revenues do vary, there was nothing unusual with respect to September's revenues, nor was there anything unusual in the amount of receivables billed in September and reflected in our 0- to 30-day aging category as at September 30.

 Those of you on the investor call after the Q3 release, we explained that there are factors that make direct comparison of the 30-day aging category impossible to reconcile using publicly-disclosed information.

 I'm just going to do a quick reminder on those 3 factors. The 0- to 30-day aging category contains 31 days. That means at the end of the third quarter, the 0- to 30-day aging category contained invoices from August. This prior month effect will happen in every second and third quarter, which end in 30-day months. But it will not happen in the first and fourth quarters, which end in 31-day months.

 We have added a footnote to our third quarter financial disclosure, footnote number 4 to explicitly to define the date range for this 30 -- 0- to 30-day category. Please note, this effect makes a direct comparison of year-end data to second and third quarter data difficult.

 Another permanent difference, as we mentioned, third-party charges also cause a difference between prior-month revenue in the 0- to 30-day category. This is true for all quarters, and is driven by the fact that Badger records third-party revenue net and the aged invoices include them as gross. This results in a higher receivables balance than the amount recognized in revenue.

 The third major difference is taxes. Invoices include sales and local taxes, which Badger collects and remits to governments. Although the taxes are included in the trade receivable balance, there is no corresponding revenue.

 We chose to provide additional detail on our receivables, aging in our quarterly disclosure starting in Q2 2017, in an effort to provide even more financial transparency, and as part of a general effort to improve our financial disclosure.

 You should note that it's unusual for Canadian public companies to make this detailed disclosure in their quarterly statements, and normally this is only provided in its annual information. We are confident that our revenue recognition and receivables policies are correct and are diligently applied.

 Outlook. As we look forward toward the end of 2017, we anticipate a fourth quarter that will continue to benefit in the higher year-over-year activity realized in the second and third quarters this year. Badger continues to open new markets and further penetrate existing markets, converting traditional excavation methods to Hydrovac.

 Our 2017 Hydrovac reduction will be approximately 155 for the year. Now many of you may be trying to estimate how many Hydrovacs Badger will retire from service in coming years, remembering that we have indicated we expect to retire 70, 75 trucks in 2017. Badger typically assumes its Hydrovacs will have an average life of approximately 10 years, but they can fluctuate with some retiring at less than 10, some lasting 15 or more, depending on a wide variety of factors, including operating conditions, the hours used and specific mechanical failures of key components, such as engines and frames.

 We still have model year 2001 units in service. When we estimate future retirements, we start by using the historic build and assume that trucks brought into service will be retired approximately 10 years later. However, the actual determination of what trucks will be retied in any given period is based on a detailed analysis, a truck by truck, that Johnny is in charge of and Paul approves. And the detailed consideration of the mechanical conditions in individual truck as well as an estimate of currently required repairs.

 Nothing in our anticipated 2017 truck retirements has caused Badger to change its assumption that its Hydrovacs will have a typical life of approximately 10 years or that the level of repair and maintenance expense will change materially from historic levels.

 Capital allocation. Badger approaches the capital allocation with the same long-term mindset that drives our management philosophies. The company has been built with cash flow and the judicious use of debt with the objective of avoiding shareholder dilution and only rarely dips into the equity markets. Badger sees no reason to change this philosophy today. The 2 largest capital uses in operations are building Hydrovacs and working capital for our increasing sales.

 Badger's return on invested capital is shown in the graph at the right. The excellent returns of 2013 and '14 eroded as we managed our way through the oil and gas downturn in '15 and '16. However, 2017 9-month data shows an encouraging recovery with Badger's firm intent to regain historic performance levels. With a recovering invested capital experience in 2017, and the historic performance as a guide, Badger continues to stay focused on the Hydrovac business and use its capital to continue to grow fleet.

 Badger's working capital needs are driven by our accounts receivable balances with some accounts payable offset. Average receivables, daily sales outstanding balances typically run under 80 days, although they vary with revenue seasonality. Our collection cycle is influenced by our role as a subcontractor, and the need at times to wait for our prime contractors to get paid before Badger is paid. However, we do get paid. With bad debt expenses hovering around the 0.5% level over a number of years. It's worth observing that the company's receivables balances have recently been decreasing in age.

 Now I'd like to review some key accounting policies, and as those who follow us will know our accounting is very conservative.

 Let's start with our capitalization policy. When we buy a new pickup, we capitalize it. When we repair it, we expense those moneys. When we build a new Hydrovac, we capitalize it. When we repair that Hydrovac, we expense it. Badger capitalizes newbuild, new-purchased assets. The Red Deer plant costs associated with new-build trucks are capitalized to the new trucks we build. This is standard manufacturing accounting. In considering revenue recognition, one of the criterion specified under IAS 18 is that revenue can only be recognized when it's probable that the economic benefits associated with the transaction will flow to the entity.

 This language is consistent with our revenue recognition policy disclosed in our audited financial statements that begins, "Revenue is recognized to the extent that it is probable that the economic benefit will flow to the corporation." So let me just repeat those two.

 Standard says, "Recognize revenue when it's probable that the economic benefits associated with the transaction will flow to the entity." Badger's statement is, "Recognize revenue to the extent that it's probable that the economic benefits will flow to the corporation." IFRS 15 replaces the current revenue recognition guidance under IAS 18, and is effective on January 1, 2018. Badger has a project plan to adopt this standard and we'll update the market on its applicability and effect, if any, on Badger's accounts concurrent with our end of year disclosure.

 And lastly, Badger has no off-balance sheet liabilities that requires disclosure under the current regulation. In particular, the recent accusation of USD 75 million off-balance sheet loan described in a recent conference does not exist, but sounds eerily similar to the on-balance sheet USD 75 million prudential loan that has been appropriately disclosed since its inception in early 2014.

 Badger's long-term target for general and administrative expenses is 4% of revenue or less. It may pop-up above that rate on occasion as we invest in our resources, systems and processes, but the long-term target is 4%. The graph at the right shows the last few years of these expenses as a percent of revenue.

 As Badger has grown, the need for enhanced administrative processes and financial systems has grown in lockstep. Historically, Badger's systems were targeted at fulfilling regulatory reporting obligations and providing the minimum of operating information. Badger is reviewing and improving these processes and investigating systems to provide better operational decision making and enhanced efficiency for administration.

 As Badger's business becomes more heavily weighted to the United States, tax rates will be influenced increasingly by U.S. Tax Policy and Regulation. In the recent past and still today, Badger was -- has benefited from extreme accelerated deductions in the U.S. That accelerated program provided 50% deductions in the year an investment was made with no half-year convention. This program is phasing out over 2018 and '19.

 Accelerated deduction programs are 2-edged sword and Badger will face increasing cash taxes when the accelerated deductions are phased out. The company will still benefit from ongoing U.S. investments with under the less aggressive U.S. makers' deduction tables. Current U.S. proposals to remake their tax regulations are still too early to definitively assess, but we are watching them closely.

 There are 2 upcoming accounting pronouncements that we will update the market on, on our year-end disclosures: IFRS 9 Financial Instruments and IFRS 15 revenue contracts with customers.

 With that, I'll turn the agenda back to Paul for the summary.

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [14]
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 Jerry has a lot of sheets up here on all this accounting talk.

 So thank you, Jerry. And you heard it from the team here today, the Badger team is very excited about the business and the opportunities ahead of us for the company and for our shareholders. It's our objective to give our shareholders a bigger and more profitable Badger.

 So our proven business model, you've heard about it today, it was a big part of what John talked about with our strong and growing branch network is a big differentiator. Our strategy of organic growth, one truck, one operator at a time. Because our scale, our operations are flexible and they can be sized up and down based on economics, and all of us in the room have benefited from that, certainly the last several years. Tim talked about first mover advantage. It's been earned over time, and Badger earns it again and again each and every day. With additional emphasis on business development the company is putting in place, we're taking our leadership in this industry and sales and marketing even further into the next level.

 We talked about strong cash flow, consistent margins across the business cycle, the numbers speak for themselves. Our financial flexibility supports our ability and underpins our ability to execute on our strategy. And very importantly, as you've seen here today, the Badger team, those that are here today and all of our fellow employees that the team that's here today supports are a differentiator. And I can tell you that from my perspective being involved with this team the last 16 months, this group is a differentiator.

 Our attractive markets, Tim led us through that. We continue to drive increased penetration of the Hydrovac technology. Badger is the pioneer and the leader in this, we continue to do so. There are significant opportunities to grow in the U.S., and we know we can capitalize them because the team has proven we can do it over the last 5 years. And lastly, what you see with Badger, is a team with a focused strategy. We are focused on the Hydrovac business and driving growth.

 So to summarize our strategic milestones, they are: to double the U.S. business again over the next 3 to 5 years, and I say again, because we've done it before from a base in 2016; to grow our adjusted EBITDA by an annual rate of 15%. We're also targeting, as Jerry said, EBITDA margin in a 28% to 29% range. You've heard about the scope -- the scale of our operations, and how we're different from smaller competitors. This is our target. And finally, our objective is to drive utilization as measured by revenue per truck to above the $30,000 sales per truck per month range.

 So in closing, why don't we stop with the formal part of the presentation and now open it up for questions. And I think there are several microphones available here in the room.

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Questions and Answers
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 John Segrich,    [1]
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 Great. John Segrich from Luminus. Paul, if I could just ask you kind of 4 simple questions maybe just to kind of put all of these issues to bed. And I know Jerry kind of touched on it, but if you could just reconfirm for us the 4 things. Can you just confirm you do not have off-balance-sheet items?

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [2]
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 We do not have off-balance-sheet items.

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 John Segrich,    [3]
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 Great. And can you confirm you don't factor receivables?

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [4]
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 We do not factor receivables.

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 John Segrich,    [5]
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 And can you confirm there's no undisclosed litigation involved in the company?

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [6]
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 There is no undisclosed litigation involved in the company of any materiality. Yes.

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 John G. Kelly,  Badger Daylighting Ltd. - COO   [7]
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 Of any materiality. Okay.

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [8]
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 And it would be under all of our existing disclosure requirements.

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 John Segrich,    [9]
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 Okay. And then the last one, and I apologize for the bluntness, but can you confirm you're not being investigated by the Alberta Securities Commission?

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [10]
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 We would not comment on any regulatory discussions whether we had it or whether we didn't have it. It's just the standard policy.

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [11]
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 Can't confirm or deny?

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [12]
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 I would not say either.

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 Yuri Lynk,  Canaccord Genuity Limited, Research Division - Director and Senior Engineering and Construction Equity Analyst   [13]
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 Yuri Lynk with Canaccord Genuity. When we think about your branch network of 120-odd locations, can you just kind of break down broadly what branch-level EBITDA looks like between your oil and gas focused offices, which I would suspect would be maybe breakeven on EBITDA and your non-oil and gas EBITDA regions? And what a little bit of incremental oil and gas revenue might mean to the margins on those offices?

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [14]
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 Okay. That's a great question. And as you know, our overall financial results reflect the mix of our business. It's a geographic mix and it's an end use market mix. And as you heard here today that, that distribution and the ability to have the mix is really what's supports Badger's overall results and is a differentiator. I hesitate to give too much detail of differentials because there is a range of margins within the business that's part and parcel with our strategy. But I can say that we have very good results in a number of markets, in general, we have better margins in our newer markets and we would have lower margins in our older more mature markets with more competitors. I think that's pretty standard, I think, understanding out there in the industry. I can say that there is an awful lot of operating leverage that's built into the business, especially to your question, in our oil and gas markets where people like Tim Reiber and our team in Canada have been very aggressive in squeezing our costs base down over the last several years. So we're rightsized in our oil and gas focused areas and there is a lot of operating leverage when you add additional volumes to a system that's been rightsized. And our 2017 results, year-to-date, have reflected the modest recovery and the operating leverage that falls to the bottom line from that additional volume in our oil and gas focused areas. So I'll maybe leave the color at that without disclosing too much more, but it's certainly been a benefit this year.

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 Yuri Lynk,  Canaccord Genuity Limited, Research Division - Director and Senior Engineering and Construction Equity Analyst   [15]
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 Okay. That's helpful. And just a follow-up. Can you talk about on the HR side, you've obviously bulked up there. What's the -- what's the labor market like for attracting area managers and operators across the U.S. and Canada?

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [16]
------------------------------
 Okay. Thanks Yuri. We have really bulked up on the HR side. 18 months ago we would've have one recruiter in the company and Tracey's group is up to 5 recruiters now. We're trying to make sure that the candidate funnel is full, and we're trying to be more proactive. So we have KPIs we developed over the last 6 to 12 months, to actually measure ratios of operators per trucks and in those areas where we start to get a little tight on that ratio, Tracey and her group would be out proactively looking to have candidates for the sales funnel, perhaps even before the area manager calls and says, "Help, I need operators." So we're trying to be much more proactive in that regard. And that helps us because time is money in this business. On the area manager side, we've focused quite extensively on this very important position. Tim talked about how important the area manager role is in Badger and that's where it all comes together and that's where the full P&L is managed. And we put some programs in place on recruiting, but also, very importantly, on development. And we've instituted a program called the Badger Management Training Program, we call it internally BMT. Our first 4 candidates, we call them our first 4 guinea pigs in this program, actually have graduated and they're out either running areas, key corporate roles for us or in the supervisory side on the of ops side of the business. And we have now, as we speak, 11 candidates in the U.S. and Canada going into that program, and we talked about Rachel earlier, who is here with the truck today. She is one of our current 5 Canadian candidates in the Badger Management Training Program. So this is pretty exciting because these are things we weren't doing 12 months ago. And if you think about retention, you think about knowledge, you think about the people that are stepping into this very important area manager role to have an experienced Badger candidate from the inside, who has even started on the trucks and worked his or her way up through the organization. That person, starting in a new area, because a lot of our area manages are starting up new branches, can really hit the ground running and really accelerate the market development for the company. So this is something we're very excited about. It's early days, yet it's having a big impact. And I would encourage all of you to catch up with Rachel when she's outside down on the east end of the hotel here with the Badger, and she can tell you for herself. So it's an exciting time for us. And we're doing a lot of these things and it takes resources to do it, but the price is very big because it's all about supporting growth. And those opportunities are right in front of us to go after, so.

------------------------------
 A. Scott Taylor,  Pembroke Management Ltd. - Vice Chairman, Partner & Portfolio Manager   [17]
------------------------------
 Scott Taylor from Pembroke Management. Could you discuss some of the elements behind your pricing policy whether it's so much per hour, per day or per week or the size of the customer, et cetera, et cetera?

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [18]
------------------------------
 Okay. Thanks, Scott. Great to see you here from Montreal. But our pricing is really value-based, Tim talked about it. You would see different pricing in different regions, and that's basic supply and demand and it's also based on the how soon -- how long we've been in the market or maybe in newer markets, we have different approach. But we have a wide range of services that we offer to customers. We do provide Hydrovac services by the hour and we also have our suite of services on other associated services we provide, burners in the wintertime, extension hoses for remote jobs, disposal fees, these are all part of the suite of services we provide to our customers and they're priced accordingly based on the market demand.

------------------------------
 John Sartz,    [19]
------------------------------
 John Sartz, Viking Capital. Mr. Kelly mentioned that you had -- somehow had 87 trucks to spare for the hurricane effort and I was wondering do you -- which strikes me as about 10% of U.S. capacity. I'm curious, do you need that much slack in the system?

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [20]
------------------------------
 Okay, yes. Thanks, John. We have established an emergency response program where the whole team pulls together on a temporary basis to help these customers, and these are very large important customers that provide essential services like electrical utilities, where the services need to get back up quickly. So you know we recognize that Badger is totally unique in its ability to put programs like this together. There's no one else in the industry who can stand on their head for a week or 2, pull this together, pull the equipment together, pull the people together. I mean you saw a picture in the video, that was hurricane Irma, just recently. And these customers have come to know we can do this. It's a totally unique capability, and we do stand our heads -- on our heads for a couple of weeks. But it makes a heck of a difference because those customers now put Badger here in our ability to meet their needs. And these are essential services. We've heard some of the horror stories of restoration of essential services in Puerto Rico and other places. This is really important for everyone, but it's very, very important for our customers. So we can do it. It's not easy, but it is a huge, huge differentiator and very important part of our service offering. So great question. We're pretty proud of what the team's put together there.

------------------------------
 Gavin Fairweather,  Cormark Securities Inc., Research Division - Analyst of Institutional Equity Research   [21]
------------------------------
 Gavin from Cormark Securities. Maybe one for John, if I may. Given how the mix of the business has changed, Q1 is clearly the low point on seasonality in the year now. But coming into the year there was some slippage on direct cost. Maybe you could just speak to some of the lessons learned as we approach this Q1 period?

------------------------------
 John G. Kelly,  Badger Daylighting Ltd. - COO   [22]
------------------------------
 Yes. It -- historically, in the past, the Q1 was a little differentiator in -- because we were more in oil and gas, now we've transitioned more into the no-noil and gas, but really there was no 1 key component that drove that. I mean, we just had to tighten things down as we do as operators, and we will. And I mean that's really -- I mean it's just we came out of 2016 with a lot of things going on. We had some headwinds coming to add us and we just have to manage our labor, we have to manage those essential costs. And as Paul indicated, the every area manager gets a P&L monthly, okay? And there's levers in the direct cost area that they can push and pull, not many of them, that we indicate and we work with them on that they drive. So that's -- we're very focused on that and have been since the end of the first quarter. We're always focused on it, but we'll drive it and we'll improve them, trust me.

------------------------------
 Gavin Fairweather,  Cormark Securities Inc., Research Division - Analyst of Institutional Equity Research   [23]
------------------------------
 Okay. That's great. And then maybe one for Liz, if I may. The U.S. East has been growing pretty amazingly. What do you view as kind of the key challenges in terms of from an organizational standpoint, keeping that growth going and making sure that you're able to execute on the opportunity there?

------------------------------
 Elizabeth Peterson,  Badger Daylighting Ltd. - VP of US Operations - East   [24]
------------------------------
 I think, one of the -- the key focus that I have I think I was really making sure that our regional managers and area managers have those kind of corporate center of excellence support that they need so they can remain focused on their business every day. So they have someone helping them on their fleet and someone helping them on their safety. These areas managers have very, very big jobs. They start at 4 in the morning and sometimes we're talking at 10 or 11 at night. And so I think the key to being able to keep that momentum up in these areas that do have some -- that were growing extremely fast, is to make sure that we keep adding the support and giving them the tools that they need so they can remain focused with that entrepreneurial spirit and out there and driving their business. We can't allow them to get sidetracked from going out and servicing the customers and taking care of their operators and driving safety. We have to be able to leverage our strength internally and be able to give them the support they need. That's what I focus my time on.

------------------------------
 Matt Doelman,    [25]
------------------------------
 Question from Matt Doelman with Canaccord. This is probably a question for you, Jerry, and for Liz too. Just with regards to the trajectory of growth in the underlying G&A infrastructure, obviously we're seeing the growth, but I suspect from a margin perspective this will be sort of step change and not perpetually up on the stick. So maybe you can comment in the last quarter, obviously, G&A trended a little bit above your long-term target and EBITDA margins were a little bit less, maybe a message around operational leverage and what we can expect just from a growth perspective and how that might look?

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [26]
------------------------------
 Yes. Okay. First -- good. Thank you for the question, Matt. In our past quarter, the G&A was a little high, but I'll point out that it was influenced by an accrued bonus number. If you remember back to Q1 this year, our RPT was below our minimum, we didn't grow EBITDA except fractions of a percent. And in Q1 we took no accrual for bonuses because that was beneath our bonus performance. Q2, we looked at and said, well it's a good quarter, but we just came out of a bad quarter so we had a little bit of an accrual. Q3, we're feeling better about that trajectory for the year and so we had a bit of a catch-up there. So what you saw in Q3 was not a normal run rate. There was a substantial catch-up in some accrued numbers there. Going forward, the G&A is really going to be -- it will grow with the company, 4% is our long-term, we think that some quarters will be up and down, setting aside these accrual catch-up pieces, but 4% is -- should be plenty for us to run the organization on. We may have some system implementations where -- Liz and Wade out there are working on evaluation program for us right now, what are the system we need, what do they look that? We should have a better view on that Q1 next year. Part of that would be capital and part of that would be expense, and we'll see how that works out. But that would go in and then be capitalized and used over years. So again, we feel pretty comfortable with 4% as a long-term run rate, and we'll fluctuate around that. Long answer, sorry.

------------------------------
 A. Scott Taylor,  Pembroke Management Ltd. - Vice Chairman, Partner & Portfolio Manager   [27]
------------------------------
 Jerry, it's Scott Taylor, again. You mentioned that the criteria for the life of a truck has not really changed, and yet in the third quarter, you've announced quite an increase from the second quarter in number of retirements. Can you just put that in context, please?

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [28]
------------------------------
 Yes. So we originally had 50, I believe, as what we thought would happen this year and that went up to 65 and then, as you say, went up between 70 and 75. But if we go back to our long-term kind of forecast, in 2007, we built 64 trucks, we'd expect 64 trucks to retire this year, going to be 70 to 75, so it's an extra 10 trucks on 1,100. It's a normal variation in the experience of the truck, and John's assessment of the trucks and these things happen. So we look at that as pretty small. It's big in terms of what we announced, but if you look at again 64 trucks built in 2007 you'd expect 64 to be retired maybe at 74. That's 10 trucks out of 1,100, not a very big variation.

------------------------------
 A. Scott Taylor,  Pembroke Management Ltd. - Vice Chairman, Partner & Portfolio Manager   [29]
------------------------------
 But why the lower number in Q2? I guess what you're saying now?

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [30]
------------------------------
 Because that was our opinion in Q2 that we would -- we had trucks working and we had run into problems with them and so we ran into problems later in the year, and said well we'll probably retire a few more.

------------------------------
 Jeff Fetterly,  Peters & Co. Limited, Research Division - Principal and Oilfield Services Analyst   [31]
------------------------------
 Jeff Fetterly, Peters & Co. Two random questions. I guess, first for Liz, on the retention side. You mentioned about improving your retention, where do you sit today on retention? What do you target? And what key measures are you implementing there?

------------------------------
 Elizabeth Peterson,  Badger Daylighting Ltd. - VP of US Operations - East   [32]
------------------------------
 I'm sorry, where?

------------------------------
 Jeff Fetterly,  Peters & Co. Limited, Research Division - Principal and Oilfield Services Analyst   [33]
------------------------------
 Here.

------------------------------
 Elizabeth Peterson,  Badger Daylighting Ltd. - VP of US Operations - East   [34]
------------------------------
 Okay. I'm sorry. Can you repeat that?

------------------------------
 Jeff Fetterly,  Peters & Co. Limited, Research Division - Principal and Oilfield Services Analyst   [35]
------------------------------
 Retention. Where is your turnover today? Where do you target to get it to? And what measures or key measures are you trying to implement to get it there?

------------------------------
 Elizabeth Peterson,  Badger Daylighting Ltd. - VP of US Operations - East   [36]
------------------------------
 So with specific retention numbers, those aren't -- those again are wide ranges depending upon the regions, so. But generally speaking, we see a lot of our turnover at our operator level. I mean the construction business is a very transient business, especially in the U.S.

 And typical turnover in the construction business being in the double digits is not unusual. We focus on lowering our turnover at the operator level by really kind of focusing on the career development opportunities. So when we bring an operator into the company, we want to pay a little bit above market because we want them to stay. We treat them right. We give them good benefits. We try to keep them local so they don't have to travel. We try to make it a job that they can have a balance of life and family. With respect to our area managers, where we had in the past struggled with a lot of turnover, a lot of that related to maybe changing our profile a little bit in the types of area managers that we're looking at now. We talked about sort of the skill sets that an area manager needs to run a business. And so we kind of look for area managers with a bit of a different profile right now that have a lot of runway, and they have a lot of opportunities to continue to grow. So by doing those things and really kind of have Ms. Tracy add some of her training programs and those kinds of things, we're starting to see a slight decline in turnover and we're really hoping to be able to get that down to a manageable -- a manageable number.

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [37]
------------------------------
 Before we leave that Jeff, give you some color in directionality. Year-to-date, on operators, we're running 8% to 10% higher in retention. And area managers are running 13% to 15% higher in retention versus last year. So just to give you some directionality on that.

------------------------------
 Roland Keiper,  Clearwater Capital Management Inc. - President   [38]
------------------------------
 All right. Roland Keiper, Clearwater. I don't know who's best to answer this question, whether it's Paul or Jerry. Just thinking down the road, let's say 5 years down the road, you've got this USD 75 million piece of debt out, it matures in '22. EBITDA, if I look at the analysts estimates, they're sort of around $125 million this year. They don't go out to 2022. But let's call it CAD 250 million, given your targets of revenue and margins and assume those are realized. And you have a change of mix going on in your business, you're having less cyclical due to change of mix. Let's say that continues. What sort of turns of leverage might we expect? We've got sort of CAD 95 million equivalent in term debt on $125 million run-rate EBITDA. Let's say we get to CAD 250 million, less cyclical business more mature. Could we as shareholders expect 1.5 turns of debt and form of effectively recapitalization of this company, however, you're going to lever the -- this company can afford to run with more debt 5 years down the road. Can someone give some thought to that? How this could play out?

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [39]
------------------------------
 Yes, that's a great question, Roland. To me looking forward, we do have that tranche that comes up over those 3 years for refinancing. And we certainly, as a management, as a board, we've have taken a look at our longer-term modeling and taken a look at debt levels. We are conservatively financed, but at the same time, we look forward and we see an extraordinary amount of growth opportunity, especially in the U.S., as you very correctly say. And that requires trucks. And that requires working capital. So we think the biggest driver potentially evolving leverage over time is going to be just that, which is going to be growth. And we have a lot of flexibility today to deal with that, not only with our current financial position but also we have our syndicated line in place. And we think we have lots of flexibility to dealing with that prudential tranche coming up in a few years. So but to me, it's all about financing growth and we have a lot of flexibility to go after that.

------------------------------
 Roland Keiper,  Clearwater Capital Management Inc. - President   [40]
------------------------------
 Okay, if I might ask a question related to long-term cash flow generation and it's related to taxes. Jerry, you've got -- I know you've gone back and adjusted your transfer pricing to get some cash back from the U.S. tax authorities. When might we expect that to be resolved? And two, have you -- there's a mechanism, I guess, you can get advance ruling on transfer pricing by tax authorities so you have some tax planning certainty. Is that something that you've got in place as well?

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [41]
------------------------------
 Yes. We don't have the advanced -- we ended up putting the new process in place at the end of '15. We didn't have the time to get the advanced ruling. There's a 5-year window of kind of going back and wanting to keep captured the big ramp-up we had in truck build in the '12, '13, '14. So we were in a hurry to get that in. We're happy to say that both the CRA and the IRS have accepted the case and it will go to the competent authority and be negotiated. We're thinking it's -- there's never any guarantee. We think it's 18 to 24 months before it's settled.

------------------------------
 Roland Keiper,  Clearwater Capital Management Inc. - President   [42]
------------------------------
 From your filing or from now?

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [43]
------------------------------
 From now.

------------------------------
 Roland Keiper,  Clearwater Capital Management Inc. - President   [44]
------------------------------
 Okay, can you just speak to what your cash tax position is in Canada and in the U.S.? What it is now compared to the IFRS tax expense? How taxable you are? And on a pro forma basis, if you were to back off these -- this 50%, how much more cash taxes you might be paying -- I know we're looking at the prospects of some sort of a combinations in the U.S. before there'll be an offset, but it...

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [45]
------------------------------
 .

 Yes, I've never recalculated the taxes on the old method so I would hate to say.

------------------------------
 Roland Keiper,  Clearwater Capital Management Inc. - President   [46]
------------------------------
 Okay, and cash taxes in Canada and U.S., how taxable are you -- are you into...

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [47]
------------------------------
 Yes, we're more taxable in Canada than we are in the U.S., because we continue to add more capital in the U.S., and we're getting 50% deduction on our...

------------------------------
 Roland Keiper,  Clearwater Capital Management Inc. - President   [48]
------------------------------
 So you're not taxable in the U.S. at all?

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [49]
------------------------------
 Well, we are taxable, but not as taxable as we are in Canada. We have a bigger shield in the U.S.

------------------------------
 Roland Keiper,  Clearwater Capital Management Inc. - President   [50]
------------------------------
 What type of spending you need to be nontaxable? What type of spending would you have to have?

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [51]
------------------------------
 I don't know. I haven't -- I would not want to guess at that.

------------------------------
 Roland Keiper,  Clearwater Capital Management Inc. - President   [52]
------------------------------
 All right.

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [53]
------------------------------
 We didn't look at that.

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [54]
------------------------------
 Yes, exactly. I can tell you that we have taken a look at what we know about the U.S. current proposal. And it would be very beneficial to Badger, perhaps, there is a -- an excise tax kind of rate -- base broadening move that we have to keep our eye on. We think that the GMs of the world will kind of go into bat against that. That could make it kind of a balance for us, but if that excise tax issue gets taken away, we think Badger will be well positioned in the new tax regime as it's described today.

------------------------------
 Unidentified Analyst,    [55]
------------------------------
 Jerry, if I could just follow-up on one more on the tax side? Sorry, over here.

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [56]
------------------------------
 Yes, right there.

------------------------------
 Unidentified Analyst,    [57]
------------------------------
 How much of your deferred tax is due to like-for-like exchange on the U.S.?

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [58]
------------------------------
 I'm sorry, what?

------------------------------
 Unidentified Analyst,    [59]
------------------------------
 How much of the deferred tax is due to like-for-like exchange in the U.S.?

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [60]
------------------------------
 Like-for-like exchange?

------------------------------
 Unidentified Analyst,    [61]
------------------------------
 Don't know?

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [62]
------------------------------
 I am not familiar with that term.

------------------------------
 Unidentified Analyst,    [63]
------------------------------
 Okay, Let's say, I mean, it's basically when you sell something and you buy another piece of equipment, you can roll the deferred tax. So you don't do that?

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [64]
------------------------------
 No.

------------------------------
 Unidentified Analyst,    [65]
------------------------------
 Okay, and then can I just ask one more kind of on the costs. So when I look at your direct costs and the disclosure that you guys give. There's always been a really good tie out up to about 2014, you explained almost all of your costs. 2014, there's sort of this $10 million gap. 2015, it's now a $25 million gap. And there's sort of a cumulative $70 million gap that's kind of unexplained between the 4 buckets you give in your total direct costs. And I know it's an issue that's actually been highlighted to the board. So can you talk about what those unexplained direct costs are?

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [66]
------------------------------
 Sure. So what -- just so everybody knows, you're asking about the annual...

------------------------------
 Unidentified Analyst,    [67]
------------------------------
 Correct. In the annual filing, yes.

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [68]
------------------------------
 So we disclose our costs on an operational basis, direct cost and SG&A. And when you do that, IFRS requires you to once a year give cost by nature. So what are salaries? What are the different types of things? What they're saying is that those categories don't add up to the total, which they don't. What we'd say is the stuff you've seen circulated is comparing the total of those to direct operating cost, not to total costs. So if you go back and look at what we've disclosed and compare it to total cost, 5 years ago it was 88% of them. Today, it's 86% of them. So there is no widening gap. It's just a slight of hand on what they can...

------------------------------
 Unidentified Analyst,    [69]
------------------------------
 Yes, but you can explain the G&A so you can kind of get to it. So I mean, even that 4% of widening gap, which is...

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [70]
------------------------------
 What gap?

------------------------------
 Unidentified Analyst,    [71]
------------------------------
 There's still a widening gap?

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [72]
------------------------------
 We'll bring the numbers up there, so we can really compare it to the right thing.

------------------------------
 Dimitry Khmelnitsky,  Veritas Investment Research Corporation - VP, Head of Accounting & Special Situations, and Head of Training   [73]
------------------------------
 Dimitry Khmelnitsky from Veritas. And I apologize that some of the questions will be in Russian, so yes, my apologies there. Just if you can talk a little bit more about the turnover percentage at the area of managers level. So over the past few years, what has been the percentage of turnover on the area managers level? And what is the -- and what was the average tenure of those area managers?

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [74]
------------------------------
 Okay, I'm not in a position to share that information today. But I can say from an operational perspective, we've viewed it as being too high and turnover is not good in the business, that's why we're actually looking to drive retention. It helps to sign our customer service and our productivity and the cost associated with turnover. So we're not going to start disclosing retention KPIs, Dimitry, but the directionality I gave to answer Jeff's question earlier and year-over-year and the progress we've made year-over-year in '17 over '16 is valid.

------------------------------
 Dimitry Khmelnitsky,  Veritas Investment Research Corporation - VP, Head of Accounting & Special Situations, and Head of Training   [75]
------------------------------
 And just to understand, area managers are the ones that are responsible for clients' relationships, to a large degree?

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [76]
------------------------------
 They would be running our local branches and they are the ones that are belly-to-belly with the customers, taking the phone calls. Frank Ertl is not here today, okay? He's our franchisee in Kitchener-Waterloo, he was planning to be here with Greg. I heard Frank's on a truck today. So Frank is taking care of customer business today. And that's how intense the service demands are in our business.

------------------------------
 Dimitry Khmelnitsky,  Veritas Investment Research Corporation - VP, Head of Accounting & Special Situations, and Head of Training   [77]
------------------------------
 And the other question has to do with the disposal operations. If you can just explain to us, if possible, the dynamics of disposal operations? What's included in there? What's not included in there so that we are clear on definition. And also how the actual process works from operating perspective?

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [78]
------------------------------
 Okay, well for the first question. We don't breakout details on how we account for disposal. Disposal would be included in our overall range of services called third-party services. We don't break out detail on that. And it would certainly be part of our overall revenue and we would have costs associated with that. But we're not going to start disclosing the cost and revenues associated with that. As we've gotten into more and more non-oil and gas markets, especially over the last 5 years, customer requests for us to provide service on disposition have increased. 5 years ago, with a heavier oil and gas product mix, a lot of that material will be left on site. So just by the nature of the development of the business and our success with growing non-oil and gas, disposition is a larger demand from our customers and we service that. We provide the services our customers are looking for.

------------------------------
 Dimitry Khmelnitsky,  Veritas Investment Research Corporation - VP, Head of Accounting & Special Situations, and Head of Training   [79]
------------------------------
 And you're saying it accounts for 1% of revenue -- of the reported revenue?

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [80]
------------------------------
 Jerry showed those numbers today in response to some questions from the market earlier this week. That's correct.

------------------------------
 Dimitry Khmelnitsky,  Veritas Investment Research Corporation - VP, Head of Accounting & Special Situations, and Head of Training   [81]
------------------------------
 And what else is included in the third-party services?

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [82]
------------------------------
 It would have other things like burner charges, remote hose charges, backfill, other services that our customers would ask us to provide as part of our suite of service offerings.

------------------------------
 Dimitry Khmelnitsky,  Veritas Investment Research Corporation - VP, Head of Accounting & Special Situations, and Head of Training   [83]
------------------------------
 Is that in Hydrovac? Does that include in Hydrovac revenues, all of those third-party services?

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [84]
------------------------------
 It will be mostly related to Hydrovac. Yes.

------------------------------
 Dimitry Khmelnitsky,  Veritas Investment Research Corporation - VP, Head of Accounting & Special Situations, and Head of Training   [85]
------------------------------
 And are they included was in that 1% impact on revenue? Or is it all third-party services account for 1% of a reported revenue? Or just the dumping or disposal?

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [86]
------------------------------
 (inaudible)

------------------------------
 Dimitry Khmelnitsky,  Veritas Investment Research Corporation - VP, Head of Accounting & Special Situations, and Head of Training   [87]
------------------------------
 Just the disposal. And what about the other stuff that's in there in the third-party services? How much is that?

------------------------------
 Gerald D. Schiefelbein,  Badger Daylighting Ltd. - CFO and VP of Finance   [88]
------------------------------
 It might approach the same number altogether.

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [89]
------------------------------
 Yes. All in total, that's not material to the overall revenue of the company.

------------------------------
 Dimitry Khmelnitsky,  Veritas Investment Research Corporation - VP, Head of Accounting & Special Situations, and Head of Training   [90]
------------------------------
 And in terms of the dynamical factual disposal operations. Can you walk us through the process? Just walk through the business process of how that works?

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [91]
------------------------------
 So how it's done operationally?

------------------------------
 Dimitry Khmelnitsky,  Veritas Investment Research Corporation - VP, Head of Accounting & Special Situations, and Head of Training   [92]
------------------------------
 Yes, operationally.

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [93]
------------------------------
 Okay, well, we excavate, we use potable water either from drinking quality water or hydrant water that we source and pay for from suppliers, mostly municipalities. We use that to dig and we vacuum up the mix, which is typically a clean soil slurry. And that material is either deposited on site based on what we agree with the customers when we actually do the bid and arrange for the work to be done or the customer asks us to arrange with third-party disposition. And we arrange for disposition. We would dispose of that product, again, with a third-party supplier, and they're generally operations that would arrange for either clean soil slurry fill in -- just like other fill that's used throughout many, many uses or as a processing facility, typically in larger cities where it's separated and reused in ready-mix concrete and things like that. But there's a wide range of suppliers we deal with when we dispose the clean soil slurry.

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 Dimitry Khmelnitsky,  Veritas Investment Research Corporation - VP, Head of Accounting & Special Situations, and Head of Training   [94]
------------------------------
 And you carry the actual slurry to the disposal site?

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [95]
------------------------------
 Yes, right.

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 Dimitry Khmelnitsky,  Veritas Investment Research Corporation - VP, Head of Accounting & Special Situations, and Head of Training   [96]
------------------------------
 You don't subcontract that, so that is done by Badger?

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [97]
------------------------------
 We don't what?

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 Dimitry Khmelnitsky,  Veritas Investment Research Corporation - VP, Head of Accounting & Special Situations, and Head of Training   [98]
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 The actual physical disposal or transportation of the slurry to the disposal site, that is being performed by Badger? And the actual disposal itself?

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [99]
------------------------------
 It would be in our tank on the trucks. Yes. We vacuum all the slurry into the tank and then we would transport it. We would either empty the tank on site or it would be transported to a disposition facility.

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 Dimitry Khmelnitsky,  Veritas Investment Research Corporation - VP, Head of Accounting & Special Situations, and Head of Training   [100]
------------------------------
 Do you own any of the disposition facilities? Or if you can walk us through the -- maybe high-level contractual arrangements that you have for the disposal of waste? What percentage of that is regulated licensed disposal sites as percentage of compared to farmer fields compared to anything else?

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [101]
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 Yes, there would be a fairly small percentage of regulated facilities in any materials that we were to take to a regulated facility would be identified with our customer, agreed to ahead of time, and the customer would certainly approve of any transportation of any regulated materials. But it's a very small percentage, probably less than 10%. It would vary by region. And that's been pretty standard practice for a long time.

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 Dimitry Khmelnitsky,  Veritas Investment Research Corporation - VP, Head of Accounting & Special Situations, and Head of Training   [102]
------------------------------
 Sorry and the rest goes where? So 10% goes to those specified...?

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [103]
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 The less than 10% on average would be on the regulated side versus unregulated, which would be considered a clean soil slurry.

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 Dimitry Khmelnitsky,  Veritas Investment Research Corporation - VP, Head of Accounting & Special Situations, and Head of Training   [104]
------------------------------
 So that's 90%? And that goes where?

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [105]
------------------------------
 It would go to third parties. Some could be soil farms, as you say. Some could be reclamation and things like reclamation of mining and gravel pits. And typically, then in almost cases, those are third parties that we have business relationships established with. We do not own currently any of our own disposition facilities.

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 Fatoumata Binta Barry,    [106]
------------------------------
 Fatoumata Barry from bcIMC. I realized it's hard to get us an exact quantified addressable market. But when you think about doubling the revenue over the next 3 to 5 years in the U.S., can you give us a sense for how that breaks down in terms of the new markets versus the existing markets where you're just increasing penetration with maybe different end markets within the same market you're already in?

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [107]
------------------------------
 Yes, this is one area we'd like to have a lot more information to share. And if you go back to the slide that Tim had with all the different Badger uses. I think, someone could find, maybe the number to refer you to. But there are number of categories on that. And so what we're in the process of doing, and we just started partway through 2017, is to actually begin to track those categories and those are the exact categories we used within our electronic ticketing system. So when you start a ticket for a customer, is it oil and gas, is it utility, is it municipality, so we're starting to click, click those on as we set up a ticket and start to develop a database going forward, because just like you, we would like better visibility as to what our end market verticals are. And when we get to the point where we have information we think has enough statistical significance, and of course, because we're public, you always need last year versus this year. We will start to supply that in our AIF. And that's something I personally would like to have available. But as you probably know, a lot of us study the industry, it's very difficult to find good information about our end-use verticals. It's different in Canada, different in the U.S. and there are a number of agencies where we subscribe to their statistics. But it is very difficult to match it up. So we decided because of that to start tracking our own. And probably for 2019, knock on wood, we hope to have information for shareholders in our annual filings.

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 Fatoumata Binta Barry,    [108]
------------------------------
 Okay.

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 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [109]
------------------------------
 Slide 25. Thanks, John.

------------------------------
 Fatoumata Binta Barry,    [110]
------------------------------
 The other question I have is you mentioned that Badger ends more work than they start? If I, sort of, kind of, paraphrasing there. Are the margins higher just because it's kind of an emergency situation and you can pretty much charge what you want? Is that the case when you have to do this?

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [111]
------------------------------
 That can be the case sometimes. Yes. And Tim Reiber is the famous Badger manager, who was quoted that Badger finishes more work than we start. I heard that when I first started with Badger. And I can tell you that we hear about instances each and every week. A competitor had equipment issues, a competitor had safety issues, and they may have been a little cheaper in the first bid, so they got to try, but we -- that is very much the case. We do get the call when other people fall down and it's a very important part of our market offering.

------------------------------
 Fatoumata Binta Barry,    [112]
------------------------------
 Okay. And finally, kind of high-level strategic question. When you think about -- you've hired a lot of people, beefed up kind of the senior management team, if I were to ask you what's your next most significant hire? What would it be?

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [113]
------------------------------
 Well, we've done very well in building out the team in 2017. You look at John Kelly's organization. He's added several regional VPs and it's been a huge help to John's productivity. We've targeted human resources. We've made a great stride in having Tracy come on board, and she's building out her organization. Tim is just getting started in business development. And I think the next area is you'll see us looking at will be related to our overall standardization of our business processes and system. Jerry's beefed up his organization on the finance side. Alan taking on a new role. Jay Bachman joining us. So we've certainly beefed that up. And we're in the process of further beefing up our finance organization and our IT capabilities to support our strategic initiative of driving toward an improved overall business and operating platform. So we'll be talking to you more about that in the coming quarters. Yes. Great, great question.

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 Sarah Jane Hughes,  Norrep Capital Management Ltd. - Portfolio Manager   [114]
------------------------------
 Sarah Hughes from Norrep. I had a question for Tim. Just wondering when you and your business development team are out there talking to customers, what percentage of the time you're talking to them about what Hydrovac is? And explaining to them that they're new to Hydrovac, and therefore, explaining the process versus just existing customers or people know it and trying to get more business from them?

------------------------------
 Timothy Hammond Reiber,  Badger Daylighting Ltd. - VP of US Operations - West   [115]
------------------------------
 And that varies by markets and regions. Canada markets are much more mature and the industry is much more familiar with Hydrovac. In the oil field locations, Hydrovac was the first mover there, so it's talking about the value and benefit of Badger. In some of our newer markets where we've entered, whether it's Florida, the Northeast U.S., we're explaining to a good portion of our customers what the technology does and how it can be beneficial to their projects. So it's market specific and region specific based on how long the technology and the services have been in the area.

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 Jeff Fetterly,  Peters & Co. Limited, Research Division - Principal and Oilfield Services Analyst   [116]
------------------------------
 Question on the cost side. Just curious, I guess, it's in Liz's presentation. When you look at procurements and reducing your cost structure, how much of your cost structure to date do you think is available to have better procurement? And do you have any stretch targets that you speak to at this point?

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [117]
------------------------------
 Yes, Jeff, great question. This is early days. What we've done in 2017, and as part of our overall business platform approaches, we're driving a supply chain mentality through the organization. And Badger has been developed very locally and very entrepreneurial for very many years. And so now we're looking to, as Liz says, basically, you have to consolidate the spend. And then you leverage the spend. So we're starting with our consumables. So the categories are fuel, safety equipment, other things like travel, things like that are really our first low-hanging fruit. And we're beginning to see benefits on that right now. So we've brought in a contract resource that John brought in. And very experience individual for leading that. And we're just starting to drive that through the organization. So -- but we're not putting out targets. But from my past life in building products, you find the dollars and those are great, but you also have lots of pennies and nickels to make sure you stop and pick up. And that's what we're talking about here. Every little bit makes a big difference. And so it's a little change in philosophy, but it's very, very important that we do that. So we're really just getting started and it's really early days.

------------------------------
 Roland Keiper,  Clearwater Capital Management Inc. - President   [118]
------------------------------
 Paul, what portion of your -- give a sense of your revenue or your business that's next day service calls versus biddable work, biddable work meaning 1 or more trucks on a site for several days. As I've seen on Eglinton Avenue, at 6.45 a.m., a Badger truck for the last few months. That type of work versus next day call-outs for emergency service or immediate service. And then I'm going to ask on the biddable work. When you miss out on it and a competitor has it, you'd be aware of presumably who the competitor is, but what sense you have that you're guided well. If you just sharpened your pencils and we're here, we'd have loved to do the business with you, John, but you're not there. So -- but maybe next time you want to do a better job on price.

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [119]
------------------------------
 Yes. Well, there's a whole lot of thoughts in that question. We worked very hard, and Tim and John both touched on it, to drive and develop a broader customer base in each and every local market we are in. And it's because of the exactly what you're saying Roland, it's the emergency call-out nature of the business. You always have to have equipment available if a customer calls, because if you're first call and you satisfy service when the customer calls the first time, the customer doesn't need to make the second call. And that's very, very important. So that's a part of our mix. We also -- we do a lot of large work, but large work comes and goes. So if you don't have that broader base of customers when the large job ends, you have equipment, you have fixed costs, you have men and operators, what you do with them? And we've seen that with a lot of our smaller competitors that don't have the broad base. They have the business model based on large jobs. When they come to an end and they're in the local market, what do you do? So we focused and we actually put incentives in place for our area managers as part of the annual bonus plan to actually drive broadening of the customer base. And we have KPIs we've introduced in 2017 to drive broader customer base, because we recognize how important that is. We'll still play in the big jobs. The biddable work is out there. Badger gets more than our fair share of that. When we lose out, we generally know why and there's reasons for it. Sometimes we get another chance. If some other customer, competitor falls down, but we're pretty well tuned in to the large jobs. But large jobs aren't good enough to build a Hydrovac business around. You have to have a wide customer base and you have to build that broad customer base in each and every local branch, because it’s not -- the business is not profitable and the business is not sustainable over the long-term, just based on large jobs, just because it comes and goes.

------------------------------
 Roland Keiper,  Clearwater Capital Management Inc. - President   [120]
------------------------------
 And large jobs would be what of revenue? I have no sense as to what proportion of your revenue would be?

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [121]
------------------------------
 Yes, we're not in a position to start to track that or report it, because it changes so dramatically. When you could have a branch where in a particular year, a large job could be the 2/3 of the revenue in one particular branch, but that job's not repeatable. And if you look at our top customers, the top customers at Badger change year-over-year. And those change year-over-year because of large jobs. So the repeatability of the large jobs really isn't the part of the business. And it never has been. And that's why we've worked so hard to develop the broad customer base and you see us putting so much emphasis on business development.

------------------------------
 Unidentified Participant,    [122]
------------------------------
 [Charlie Koppel,] long-time shareholder. Wondering if you could talk about the change in cyclicality versus non-cyclicality that you have. It seems that with oil being deemphasized, there's a move towards more non-cyclicality in your revenue percentages without necessarily naming them to a specific number. So wondering if you could comment on that please, sir?

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [123]
------------------------------
 Yes. I think John really shared some very good information statistics with us today on that, Charlie. Back pre-2014, Badger was more than half tied into oil and gas. And 2016, we were 25% tied in oil and gas. And over that period, as John said, our oil and gas revenues fell by 94% over that 2-year period ended in '16. And our non-oil and gas revenues grew by $97 million. So we've had a huge repositioning of this business. And it's one that has changed our cyclicality and has also changed our seasonality. Because if you think about oil and gas, that was always heavy in Q4, Q1 and the winter work, especially in Western Canada. And as we've developed more business in the U.S., and especially in Southern parts of the U.S., we've seen our seasonality start to evolve over time. And we're living that right now. We're still continuing to evolve and because we're growing so much faster in the U.S. than we are in Canada, we're going to see that both the cyclicality and the seasonality continue to evolve over the next few years.

------------------------------
 Unidentified Participant,    [124]
------------------------------
 I take it by your response too, that what you're replacing it with in the U.S. is very much more percentage of non-cyclical?

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [125]
------------------------------
 Well, I mean a lot of industries are still cyclical on a long-term basis. Government spending, for example, can fluctuate up and down on infrastructure over the long term. But what we've seen is the trends in the U.S. and the market growth opportunities in the U.S., especially the growth that Badger's been able to capture, as we develop the market and introduce Hydrovac and drive adoption to Hydrovac, has far outweighed any cyclical impacts. So our growth is really overwhelmed any cyclical impacts of our end-use markets over the last 5 years in the U.S. And we see those trends continuing. We see great growth opportunities in the U.S.

------------------------------
 Gavin Fairweather,  Cormark Securities Inc., Research Division - Analyst of Institutional Equity Research   [126]
------------------------------
 You spoke to the changing regulatory environment in Ontario. Curious if there's any other movement on that front in other areas? Or whether you would note any other changes on the regulatory front elsewhere?

------------------------------
 Paul J. Vanderberg,  Badger Daylighting Ltd. - CEO, President and Director   [127]
------------------------------
 Yes, Gavin, Ontario was really a one-off, almost a dinosaur. And Hydrovacs, for some reason, were licensed as road building equipment like bulldozers. And so they weren't subject to the regulations, so with this move, Ontario is really on a par with where we are everywhere else now. So yes, it was a one-off. Any other questions?

 Well the team is certainly here. We're -- I think, we're going to be around for a bite of lunch. I think you've had a chance to see the team, and I would encourage everyone to make sure you get to meet the Badger folks that are here today. That's really what this is all about, is you see Jerry and I all the time, but you get to see the folks that really make things happen at Badger today. So hopefully you take advantage of that. We very much appreciate your interest in Badger. This is our first ever Investor Day. And the participation and the questions, especially, were great. So we very much appreciate it. And we thank you for your support of Badger. So appreciate it.




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