Technology Enhancing Profitability - IBI Group Inc. · 3/3/2019 · Investor Presentation - March...

TSX: IBG

Investor Presentation - March 2019

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

Technology Enhancing Profitability

March 2019

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

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

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

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

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

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

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

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

made as of the date of this presentation.

Advisories

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IBI GROUP• IBI Group is a globally integrated design and technology firm founded in 1974

• We design every aspect of a truly integrated city for people to live, work, and play with expertiseorganized into three sectors:

Software Systems Design Systems Integration

Operations End-user Services

NTELLIGENCE

Architecture Interior Design Mechanical Engineering

Structural Engineering Electrical Engineering

UILDINGS

NFRASTRUCTURECivil Engineering Landscape Architecture Planning

Transportation Urban Design

18%2018 Revenue Contribution

52%

30%

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Corporate Snapshot

IBI GROUP – TSX: IBG

Shares Outstanding (FD) 38.0MM

Insider Ownership 36.5%

Market Capitalization (@$4.20/sh) ~$140MM

2018 Key Financial Highlights:

Ending Net Debt $107.3MM

Net Revenue $368.3MM

Earnings per Share (FD) $0.54

Adjusted EBITDA $36.5MM

As a % of net revenue 9.9%

Net Debt / EBITDA Ratio 2.94x

Market Performance 2016 - Present

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200

300

400

500

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S&P/TSX Index

IBG

STN

WSP

9.9%2018 Adjusted EBITDA Margin

36.5%Insider Ownership

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Investment ThesisPOISED FOR GROWTH DRIVEN BY TECHNOLOGY

Disrupting Traditional A&E Business Model

Targeting Revenue Growth & Margin Expansion

Capturing Market Share Through Innovation

Delivering Consistent Returns

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2018 RESULTS OVERVIEW

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2018 Year in Review CRITICAL YEAR DEFINED BY IBI’S PIVOT TO TECHNOLOGY

Smart Cities Platform Launch (March)Combining big data and analytics to support improved efficiency and decision-

making for cities

A Smarter Urban Future (May) IBI Strategic Plan rollout for Technology Pivot

GreenOwl Mobile Acquisition (May) Accelerator for mobile applications

Smart Cities Sandbox Launch (May) Engage tech ecosystem to source new technologies, products & partnerships

InForm by IBI Group Launch (June) Asset management solution for transportation & buildings

BlueIQ Launch (Oct) Real-time software solution for urban water utilities

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Strong Performance Track Record

19%

39%

30%

7%

9%

CanadaWest

CanadaEast

USA UK &Ireland

International30%

52%

18%

Infrastructure

Buildings

Intelligence

2018 REGION & BUSINESS OVERVIEW

10.1%

12.9%

16.3%

Infrastructure

Buildings

Intelligence

2018 Revenue Contribution(%)2

2018 Operating Profit (%)1

Intelligence:

20% Adjusted EBITDA

Target by 2020

U.S. improving profitability &

EBITDA margins thru ‘18;

IBI targeting ~10% US

EBITDA margins by end of ‘19

2018 Revenue by Region

1Operating profit by division excludes allocation of corporate costs2Intelligence practice contribution to net revenue increased 13% from 2017 to 2018

Intelligence:

20% Revenue Contribution

Target by 2020

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Robust Q4 2018 GrowthSTRONGER Q4 NET REVENUE & ADJUSTED EBITDA

1Adjusted EBITDA as a percent of revenue

$86.9

$92.4

$0

$20

$40

$60

$80

$100

Q4/2017 Q4/2018

Net Revenue in Millions

$7.6$8.2

$0

$2

$4

$6

$8

$10

Q4/2017 Q4/2018

Adjusted EBITDA in Millions

8.8%1 8.8%1

• Quarterly results reflect continued strength in the Canadian operating segment

• IBI’s transformational pivot to a technology driven design firm will continue to improve margins and provide a

platform for growth

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Intelligence Practice Drives 2018 SuccessIMPROVING REVENUE WITH HEALTHY EBITDA MARGINS

354.1

361.4

368.3

$345

$350

$355

$360

$365

$370

2016 2017 2018

FY Revenue in Millions

For the year ended December 31, 2018:

• Continued strong performance from IBI’s global Intelligence practice

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

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

2016 2017 2018

FY EBITDA in Millions

11.1%1 11.2%1

9.9%1

(1Adjusted EBITDA as a percent of revenue)

8 – 12% Adjusted EBITDA

Target Guidance

U.S. business

improvements through ‘18

expected to boost ‘19

EBITDA margins

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

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

with Canadian operations

• Impact of efforts demonstrated in Q4 ’18 - expect U.S. performance

will continue to improve through 2019

• Strategy to follow Canadian Buildings / Infrastructure clients seeking

opportunities in major U.S. cities, particularly high-rise mixed use

market along West Coast, Salt Lake City and the Carolinas

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

integrated operations further strengthens capabilities in various

offices-$1,938

-$929

-$1,984

$270

$2,004

Steady Improvements in U.S. Adjusted

EBITDA Q4 ‘17 to Q4 ’18 ($MM)

Q4 2018

Q3 2018

Q2 2018

Q1 2018

Q4 2017

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MARKET TRENDS & GROWTH DRIVERS

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IBI Outlook + Growth Drivers

• ~$374MM total annual revenue forecast

• ~$385MM of work committed and under

contract for the next five years

• 12 months of backlog

• New product launches in 2019, including

applications & services in traveler

information space

MACRO TRENDS SUPPORT IBI’S POSITIVE OUTLOOK

2019 Outlook Trends Supporting Future Growth

Urbanization

Infrastructure

Technology

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Urbanization TrendsGLOBAL URBANIZATION MEANS INCREASED DEMAND FOR IBI’S BUILDING AND INFRASTRUCTURE SERVICES

Cre

dit: S

ourc

e: U

nite

d N

atio

ns W

orld

Urb

aniz

atio

n P

rospects

(2014)

1,000

3,000

1950 1990 2020 2030 2040 2050

5,000

1970 1980 2000 20101960

6,000

4,000

2,000

7,000

World p

opula

tion (

mill

ions)

Rural

Urban2008

~1MM new Canadian immigrants

expected (2019 – 2021)

• Need ~330,000 housing units, schools,

healthcare, transportation & other

infrastructure areas

IBI leading ~55 major urban planning

projects

• ~5,000 acres of redevelopment across

Canada

Steady work for Buildings &

Infrastructure expected

• With smart solutions platform for smart

buildings, infrastructure and mobility

>80% of global GDP

generated in cities

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Adding Revenue Streams with TechnologyCORE BUSINESS LINES PRESENT NEW OPPORTUNITIES FOR INTELLIGENCE

• Suite of Smart products (Smart City / Smart Community / Smart Building) add revenue streams and

opportunity to capture more of the lifecycle costs of assets designed by IBI

• Building and Infrastructure clients provide excellent gateways to market for Intelligence practice

• Add further value to existing clients through new technology-based products or services and drive

Intelligence growth

• Additional technology products for Buildings and Infrastructure clients represent new recurring revenue

streams for Intelligence practice

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Capitalizing on the Growth DriversFOCUSING ON FOUR STREAMS TO ENHANCE TECHNOLOGY USE AND DRIVE PROFIT MARGINS

S T R E A M 1

PROTOTYPING

THE FUTURE

TRANSFORMING

BUSINESS

MODELS

CATALYZING

CORE GROWTH

ACTIVATING

URBAN

INNOVATION

S T R E A M 2 S T R E A M 3 S T R E A M 4

Smart City SandboxIncorporating Emerging

Technologies into the

Business, Including:

5G, Big Data, Autonomous

Vehicles, AI, Blockchain

VR/AR

Business and Market

Plan Strategies for:

Smart City Platform

Asset Management

Water/Energy Optimizer

Robotic Software/Bots

(internal and client-facing)

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AutomationCATALYZING CORE GROWTH

• Digitalization strategy to apply technology and improved processes to core professional business to

increase efficiency, enhance creative quality and drive operating profit

• Automation of Building Information Modeling (BIM) and Intelligence

• Custom-designed BIMbot / ChatBots to improve quality and increase efficiency throughout the design process

• Robotic process adoption

• Implementing suite of automation tools to enhance corporate operations and improve staff productivity and

engagement

Corporate

Operations

Design

Practice

Consulting

Services

Bots for Business

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BlueIQ by IBI Group

• Intelligent, real-time software solution

• Uses predictive analytics to determine

cost-effective and energy efficient ways

for urban water utilities to operate water

distribution systems

• Facilitates energy conservation and

reduced operating costs

TRANSFORMING BUSINESS MODELS

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

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InForm by IBI GroupTRANSFORMING BUSINESS MODELS

• Cloud-based asset management tool serving building owners,

corporate facilities managers & transportation agencies

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

operate more efficiently

InForm Buildings: lower costs and streamline operations by

creating digital twins of assets that incorporate BIM and

maintenance data

InForm Transportation: manage linear infrastructure assets,

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

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

building data and ease of use unique to asset management market

InForm Buildings

InForm Transportation

InForm Office

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Smart City PlatformTRANSFORMING BUSINESS MODELS

• Equip city staff and residents with the necessary

tools to make rapid and informed decisions

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

and dashboards, combining predictive analytics gleaned

from IoT sensors, control devices and existing city networks

• Public engagement module allows connection with

city residents through apps, email and social media,

fostering a two-way dialogue between residents and

service operators

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

the Platform is designed to connect stakeholders with needed

services, information and insights

• Applicable to Smart Communities and Smart Buildings

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Incorporating Emerging TechnologiesPROTOTYPING THE FUTURE

SAMSUNG SOLUIONS CENTER, WASHINGTON, DC

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

pool of data and algorithms to solve complex problems

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

between terminals

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

stations for a future electric bus fleet

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

installation in building design to generate the greatest cost savings

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

and cost savings

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A Network of CollaborationACTIVATING URBAN INNOVATION

Smart City Sandbox

• Smart city-themed accelerator, bringing innovative

new products and systems to urban environments to

improve residents’ quality of life through smart

mobility, smart buildings and civic engagement

• Establishes a unique industry innovation ecosystem

with partners joining professional domain knowledge,

business acumen and the latest in technology

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

Collaborators:

A Network

of Partners

Curated Programming

& Services

Space

Data & Technology

Sandbox

Accelerator

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IBI Strategic Pivot to TechnologyNEW STRATEGIC PLAN UNVEILED SPRING 2018

Bold, four-stream plan to transform the firm, infusing technology deeper in our design practice, launching new

products with new business models, and working with partners to activate urban innovation

Mission: To assist cities to make better informed decisions in the increasingly densified and

monitored urban environments

Positive impact demonstrated in 2018 with increased contribution from Intelligence and strong operating profit

margins of 16.3%. Continue building on existing strengths through 2019 by:

1. Leveraging technology to increase efficiency & productivity

2. Establishing new services and business relationships

3. Establishing teams focused on emerging technologies

4. Continuing to engage with the tech ecosystem

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Investment ThesisPOISED FOR GROWTH DRIVEN BY TECHNOLOGY

Disrupting Traditional A&E Business ModelThrough the application of technology

Targeting Revenue Growth & Margin ExpansionIntelligence practice 20% of overall revenue & 20% EBITDA margin in the sector by 2020

Capturing Market Share Through InnovationAdding value for existing clients through new technology-based products/services

Delivering Consistent Returns40+ year track record of success in core business

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contacts

INVESTORS

Stephen Taylor, CFO

IBI Group Inc.

55 St. Clair Avenue West

Toronto, ON M4V 2V7

Tel: 416 596-1930

Technology

Enhancing

Profitability

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Management TeamEXPERIENCE MEETS VISION

Scott Stewart

Chief Executive Officer

Stephen Taylor Chief Financial Officer

Mansoor

KazerouniGlobal Director,

Buildings

David ThomPresident

Derek Sims

Global Director,

Intelligence

Carl ClaytonGlobal Director,

Infrastructure

OPTION 03

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Board of DirectorsSTRONG STEWARDS OF CAPITAL & A VOICE FOR SHAREHOLDERS

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Dale RichmondIndependent Director,

Chair of the Board

Lorraine BellIndependent Director ,

Chair of the Audit Committee

Claudia KrywiakIndependent Director

Michael NobregaIndependent Director

John O. ReidIndependent Director

Scott StewartCEO, IBI Group

David ThomPresident, IBI Group

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