Mr. Paul Vanderberg reports

BADGER DAYLIGHTING LTD. ANNOUNCES RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2017, FIFTEEN PERCENT DIVIDEND INCREASE AND INVESTOR DAY

Badger Daylighting Ltd. has released its results for the six months ended June 30, 2017.

                                           FINANCIAL HIGHLIGHTS
                       (thousands, except revenue per truck per month and per share)
   
                                                  Three months ended June 30  Six months ended June 30
                                                           2017         2016         2017         2016
Revenue
Hydrovac service revenue                               $113,455      $83,739     $205,945     $163,196
Other service revenue                                     9,614        8,019       18,815       16,719
Truck placement revenue                                     282          223          402          223
                                                        -------       ------      -------      -------
Total revenue                                           123,351       91,981      225,162      180,138
                                                        -------       ------      -------      -------
Revenue per truck per month --
quarterly average                                        29,141       23,038          n/a          n/a
Adjusted EBITDA                                          32,104       23,222       51,961       42,814
Adjusted EBITDA margin (%)                                 26.0         25.2         23.1         23.8
Profit before tax                                        21,651        9,778       27,182       14,905
Net profit                                               14,718        5,951       18,416        9,619
Profit per share ($)                                       0.40         0.16         0.50         0.26
Cash flow from operating activities
before working capital adjustments                       31,671       23,136       51,368       42,667
Cash flow from operating activities
before working capital adjustments per share ($)           0.85         0.62         1.38         1.15
Dividends declared                                        3,673        3,562        7,346        6,901

President's message

"We are pleased with our second quarter results. We are executing on a focused strategy of leveraging our core hydrovac business," said Paul Vanderberg, president and chief executive officer. "Great work by our operations and business development teams enabled Badger to capitalize on increased activity across our diversified markets, and we see growth continuing as usage of hydrovacs expands.

"As discussed earlier this year, we exited the first quarter with lower direct operating cost run rates relative to those experienced early in the first quarter, and that trend continued throughout the second quarter. The growth in utilization and revenues per truck also continued during the second quarter. Badger's broad branch network allowed our teams to redeploy units in areas with stronger growth opportunities, supporting revenue growth and putting our new hydrovac truck builds to work.

"Badger has a proven business model which has provided historically attractive adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] and adjusted EBITDA margins throughout numerous economic cycles. The company offers a range of service to attractive end-use markets. Badger will continue to focus on generating profitable long-term growth by executing on its organic growth strategy."

Badger's strategic milestones are as follows:

• Double the U.S. business again over the next three to five years;
• Grow adjusted EBITDA by a minimum of 15 per cent per year;
• Target adjusted EBITDA margins of 28 per cent to 29 per cent;
• Drive fleet utilization and revenue per truck per month (RPT) above $30,000.

Overview

2017 second quarter financial and operational highlights:

• Badger generated second quarter adjusted EBITDA of $32.1-million compared with $23.2-million in the prior year and $19.9-million in the first quarter of 2017. Improvements in adjusted EBITDA were driven by revenue growth and improved cost control:
  • Revenue in the second quarter of 2017 was $123.4-million compared with $92.0-million in the prior-year quarter and $101.8-million in the first quarter of 2017.
  • Revenue growth compared with the prior-year quarter was due to higher activity across Badger's broad range of geographic and end-use markets. Specifically, Badger saw improvements in infrastructure and construction related markets due to increased overall activity levels, in addition to improvements in oil and gas markets. Higher revenues in the second quarter can also be attributed to a strong spring construction season and customer growth due to increased usage of hydrovac as a method of non-destructive excavation in both new and existing markets.
  • Revenue growth was robust in both Canada and the United States. In Canada, revenue was $35.2-million in the second quarter of 2017 compared with $31.2-million in the same period in 2016, representing a 12.7-per-cent increase. In the United States, revenue for the second quarter of 2017 was $65.7-million (U.S.) compared with $47.0-million (U.S.) in the second quarter of 2016, a 39.8-per-cent increase.
• RPT was $29,141 in the second quarter of 2017 compared with $23,038 in the prior-year quarter and $24,747 in the first quarter of 2017. The year-over-year improvement in RPT was consistent with management's expectations. RPT benefited from the revenue growth as noted above, and from Badger's ability to optimize the utilization of its hydrovac fleet. Optimization of the fleet is driven from Badger's broad network of local branches that allow the company to transfer units to locations with stronger activity.
• Adjusted EBITDA margin for the second quarter of 2017 was 26.0 per cent compared with 25.2 per cent in the prior-year quarter and 19.5 per cent in the first quarter of 2017:
  • Adjusted EBITDA margins for the second quarter of 2017 were consistent with improving trends experienced later in the first quarter as discussed in the the first quarter management's discussion and analysis. Higher levels of operating costs early in the first quarter have moderated. Adjusted EBITDA margins for the second quarter were positively impacted by the revenue growth indicated above and by an early start to the construction season in several of the company's northern markets.
  • Adjusted EBITDA and the adjusted EBITDA margin for the second quarter of 2017 include $1.7-million in costs that related to accruals for legal and professional related fees, truck maintenance associated with the installation of cameras in Badger's hydrovac, other revenue vehicles and light truck fleets, and severance costs related to reorganizing several Canadian operating centers.
• Badger had 1,056 hydrovacs at the end of the second quarter of 2017 compared with 1,019 and 1,031 at June 30, 2016, and March 31, 2017, respectively. Badger invested $22.9-million in total capital in the second quarter of 2017. Due to continuing organic growth and market opportunities, Badger anticipates a need to grow the hydrovac fleet throughout the remainder of 2017. See outlook and capital resources for additional details.
• Net profit for the second quarter of 2017 was $14.7-million or 40 cents per share compared with $6-million or 16 cents per share in the prior-year quarter.
• Badger's total debt less cash and cash equivalents was $53.1-million at June 30, 2017, with a corresponding debt less cash and cash equivalents to trailing 12-month adjusted EBITDA ratio of 0.47. Badger continues to maintain a strong balance sheet, providing the necessary resources and financial flexibility to facilitate continuing growth in the business.
• On Aug. 11, 2017, Badger extended its revolving term syndicated credit facility. The updated facility is a four-year term, expiring on Aug. 11, 2021. See separate press release and financing section in management's discussion and analysis for additional details.
• Given Badger's strong cash flow generation, the company's expectation for continued growth and the strength of the balance sheet, Badger's board of directors approved a 15-per-cent increase in the dividend, from 3.3 cents per share per month to 3.8 cents per share per month, beginning with the August, 2017, dividend payable in September, 2017. The last increase in the dividend was in May, 2016.

Outlook

Badger anticipates that this positive momentum from the second quarter will continue into the second half of 2017. The overall macroeconomic environment in both Canada and the United States appears to be supportive of continuing infrastructure, construction, and oil and gas activity levels for the second half of 2017 and into 2018. In addition to increased levels of activity, the company continues to see positive momentum as a result of increased customer usage of hydrovac for non-destructive excavation. Badger expects to see improvements in revenue due to its investments in developing and expanding its geographic footprint and business development network.

Continued growth across the company's end-use markets and geographies throughout the second quarter has resulted in improved hydrovac utilization as evidenced by higher realized revenue per truck. Badger anticipates that the number of new hydrovac builds for 2017 will be at the high end of its previously communicated range of 100 to 160 units. Two thousand seventeen truck retirements are expected to be between 50 and 60 units, up slightly from the previously provided range of 40 to 50 units as the company continues to manage the fleet to balance equipment repair and maintenance expenses versus truck replacements.

2017 investor day

Badger is pleased to announce it is holding an investor day on Thursday, Nov. 16, 2017, at the King Edward Hotel in Toronto. An update on Badger's operations, short- and long-term growth opportunities, and financial position will be presented. Badger's executive and operational leadership teams will be in attendance. The formal presentation will commence at 9 a.m. Eastern Standard Time, a light breakfast and lunch will be served. Attendance in person for this event is by invitation as space is limited. The presentation will be webcast, and available on Badger's website. To request an invitation, please e-mail your contact information.

Conference call for second quarter results

Badger is hosting a conference call for the public at 9 Mountain Standard Time on Monday, Aug. 14, to discuss results for the second quarter ended June 30, 2017. The dial-in number for this call is 1-888-886-7786.

Management's discussion and analysis (MD&A), the unaudited interim consolidated financial statements for the period ended June 30, 2017, along with all previous public filings of Badger Daylighting may be found on SEDAR.

About Badger Daylighting Ltd.

Badger Daylighting is North America's largest provider of non-destructive excavating services. Badger traditionally works for contractors and facility owners in a broad range of infrastructure industries. The company's key technology is the Badger Hydrovac, which is used primarily for safe digging in congested grounds and challenging conditions. The Badger Hydrovac uses a pressurized water stream to liquefy the soil cover, which is then removed with a powerful vacuum system and deposited into a storage tank.

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