June 9, 2016 - Xylem · Optimization Plan, market changes, the Company’sability to deliver services in a timely and cost effective manner, technological change, ... Risk Prioritization

Capital Markets DayJune 9, 2016

Agenda09:20 am – Pure’s leading position in the Water Sector

10:45 am – Break

11:00 am – PureHM – Oil & Gas Pipeline Integrity business

11:20 am – Finance Update – The Bottom Line

11:40 am – Q&A

12:00 pm – Lunch

12:45 pm – Technology Update followed by Facility Tour

Forward-Looking Statements

This presentation, along with its commentary, contains forward-looking statements, including, without limitation, statements containing thewords "should", "believe", "anticipate", "may", "plan", "will", "continue", "intend", "expect", "estimate" and other similar expressions. Thesestatements constitute “forward-looking information” within the meaning of applicable Canadian securities laws. These statements are based onthe Company’s current expectations, estimates, forecasts and assumptions. Forward-looking statements are not guarantees of futureperformance and are subject to risks, uncertainties and other important factors that could cause the Company’s actual performance to bematerially different from that projected. Examples of these statements would include those relating to the benefits expected to be realized fromthe Company’s Growth and Optimization Plan, integration of recent acquisitions, where the Company forecasts the timing of new and existingprojects, the success of the Company’s new technologies and entering new markets, the Company’s ability to generate future cash flows andthe timing and amount of future dividend payments. The assumptions, risks and uncertainties that could cause actual results to differ materiallyfrom the forward-looking information, include, but are not limited to, the Company’s ability to successfully implement its Growth andOptimization Plan, market changes, the Company’s ability to deliver services in a timely and cost effective manner, technological change,changes in general economic conditions and other risks detailed from time to time in our ongoing filings with the Canadian securities regulatoryauthorities, including those in the Company’s Annual Information Form, which filings can be found at www.sedar.com. Given theseassumptions, risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Unless otherwiserequired by applicable securities laws, the Company undertakes no obligation to publicly update or revise any forward-looking statementseither as a result of new information, future events or otherwise. Unless otherwise stated, all dollar amounts are expressed as CAD$.

3

Today’s Presenters Shamus McDonnell

President, PureHM

Cliff WilsonPresident, Wachs Water Services

Muthu ChandrasekaranSenior Vice President, Energy Pipelines

Jason JohnsonSenior Program Manager

Geoff KrauseCFO

Mark HolleyExecutive Vice President & COO

Peter PaulsonVice Chairman & CTO

Mike HigginsSenior Vice President, North America

Michael WrigglesworthSenior Vice President, International

Jack ElliottPresident and CEO

Susan DonnallySenior Program Manager

Pure Technologies’ Unique Position

Jack Elliott, President and CEO

Pure Technologies and the Water Industry

Mark Holley, Executive Vice President and COO

• Utility’s top priority – maintaining or extending asset life

• Moving beyond age and failure prevention focus

• Pipeline age rarely correlates with condition (Water Research Foundation)

• 70% to 90% of replaced pipelines have remaining life (US EPA)

• Best-in-class renewal programs renew at 1% per year

7

Water Industry Challenges

Water Sector – Where Pure fits in

Treatment Storage Pumps Pipelines Collection Wastewater Treatment

Reuse

Risk Prioritization



Reuse

Annual Planning

Risk Prioritization



Reuse

Assess and Address

Annual Planning

Risk Prioritization



Reuse

Renewal & Management Strategies

Assess and Address

Annual Planning

Risk Prioritization



Reuse

Renewal & Management Strategies

Assess and Address

Annual Planning

Risk Prioritization

Treatment Storage Pumps Pipelines Collection Reuse Wastewater Treatment

Water Sector – How Pure fits in

Pipelines

represent ~70% of

the value of a

typical utility

• Moving from reactive to proactive pipeline/asset management

• New business momentum with our diversified technology portfolio

• Moving from pipeline to network management

• Extending our value proposition to include pressurized wastewater pipelines

14

Core Americas Business

• Targeted international presence with increasing brand awareness

• Asia & Middle East – Non Revenue Water (NRW) continues to drive our overseas markets

• Europe – increasing focus on condition based asset management

• Australia – aging infrastructure leads to strong interest in asset management

• Pure’s diversified offering opens up new opportunities with utility clients

15

International Business

Pure’s Water Sector Growth Path

16

Focused Americas and International

Strategies

Transforming Data to Information and

Knowledge

Innovative Solutions for our Utility Customers

International Markets and Strategies

Mike Wrigglesworth, Senior VP International

Pure International

12

Focus Areas

19

Addressable

Market

Available

FundingTransparent

Procurement

Market Drivers

Similar to North AmericaAustralia and Europe

• Risk Management

• CAPEX Deferral

• Condition Assessment

Water LossSE Asia & Middle East

• Non-Revenue Water

• Large Diameter Leak Detection

Extend the Life of Critical MainsMexico & China

• PCCP Management

• PureEM

• AFO

20

Specific Opportunities

FOOT GOES HERE 21

Europe & Africa

• Metallic PipeDiver Inspection in Holland

• Multi-year Program in Scotland

• Leak Detection in South Africa

FOOT GOES HERE 22

South America

• Condition Assessment of PCCP in Ecuador

• Multi-year Sahara Program in Brazil

• AFO Monitoring in Mexico

FOOT GOES HERE 23

Middle East

• Multi-year Program in Qatar

• Large SmartBall Projects in Saudi Arabia & India

FOOT GOES HERE 24

Asia-Pacific

• Large Diameter MFL in South Korea

• Non-Revenue Water Reduction in Malaysia

• SmartBall & Sahara Programs in Australia

FOOT GOES HERE 25

Built for Growth

26

Growing

Funnel

Expanded

ToolboxReference

Projects

There is a massive international market available for Pure’s solutions and we are expecting continued growth from focused markets

27

North America Markets and Strategies

Mike Higgins, Senior VP North America

Americas Overview

29

More than 54,000 Utilities

Multiple Project Stakeholders

Investment is Moving to Buried

Infrastructure

Small Utilities – Services Valued

FOOT GOES HERE 30

* Based on internal survey of 129 water utilities

Large Utilities – Services Valued

FOOT GOES HERE 31

* Based on internal survey of 129 water utilities

Pure’s Regional Structure

32

Pure’s Evolving Market

33

Increase in

Metallic /

Wastewater /

WWS

Project Managers

acting as trusted

advisors

More system sales

and long-term

programs

Eliminate

Guess Work

Development

of regions and

local expertise

– not a vendor!

Increase in BD

team to increase

brand awareness

• Book new business – use regional expertise and expanded BD teams to acquire new clients

• Continue to build up project management for client retention and expansion

• Strategically build different areas – metallic pipe, wastewater, power and industrial

34

Growth Strategies

Wachs Water Services

Cliff Wilson, President Wachs Water Services

36

“…having an asset management program in place can play a key role in minimizing damage due

to infrastructure failure, particularly if the program had a special focus on the valve management program.

Knowing the exact location of each valve, whether the position of the valve was open or closed

and having performed regular operability maintenance of the valves, made it more likely that

the utility’s crew could quickly isolate the area of the break, and thereby, minimize the amount of water discharged

and damage to surrounding properties.”

-Water Research Foundation (study 4369)

Managing Risks

37

• Condition

• Material

• Age

• Economic

• Environmental

• Social

Likelihood of Failure Consequence of Failure

RISK

Pure Technologies & Wachs Water Services

Pure – Pipe Solutions – LOF WWS – Control Solutions – COF

38

• It’s cheaper to manage than replace valves

• Ideal Valve Program – Assess, Address, Manage

• Repair large valves at 10% of the cost to replace

• Over $2.6MM of avoided replacements in Houston alone

• AND, increased control… reduces consequences and risk

• Strong ROI

39

Value Proposition

What’s Next

• Extending/growing existing WWS client solutions

• New client entry points

• Leveraging relationships and performance

• Vertically serving/growing existing WWS and Pure clients

• Condition data + control data

• Leveraging big data: Data–Information–Knowledge

• Leveraging field services: value & solutions

• Sticky… across solutions and time

FOOT GOES HERE 40

Business Development Strategy

FOOT GOES HERE 41

• Specific solution focus

• Two new experienced team

members onboard!

• Complimentary development

• Combined presence

• Additive to the Pure business

• Fourth largest city in the United States

• 2.2 million people

• Linear (WWS) growth story

• Multi-year program addressing over 90,000 valves

• Leveraging both WWS and Pure solutions, to accelerate vertical growth

42

City of Houston

City of Houston Progression

43

Large Valve Assessment

Emergency Services

Leak Detection Pilot

Valve Assessment Pilot

City Wide Valve Inventory

• Linear WWS solutions growth

• Sticky control solutions

• Synergy with Pure solution growth

• Small city, serves 16,000 people

• New client

• WWS wastewater services solution entry

• Professional delivery

• Trust

• Relationship

• Opened up large pipe condition assessment opportunity

• Vertical growth story leading to Pure’s inspection services

44

Celina, TX

The Path to Growth

45

Linear Expansion

through delivering additional control solutions

Vertical Expansion

through delivering additional condition assessment, control

and management solutions

New Entry Points

through a broader solutions portfolio

Regional Spotlight: Southeast (United States)Jason Johnson, Senior Program Manager

Susan Donnally, Senior Program Manager

South Region – Who Are We?

• Mid-Atlantic (Light Blue)

• Mature clients

• Target-rich area

• Current clients value innovation

• Pure takes a program approach with many clients in this region

• Southeast (Dark Blue)

• Project oriented

• Strategic marketing

• Small/Medium sized utilities

• Build reputation off existing client performance

• Room for growth

41

The South Region and the Trusted Advisor Approach

Client Focused

Quality Driven

Client Partnerships

and Sustainable,

Annual Programs

48

Growth Targets

49

Consultant

• 25% of 2016 Revenue

Technology• 10% of

2016 Revenue

Solutions• 65% of

2016 Revenue

Solutions Approach

50

• A solutions approach builds strong client relationships and allows for internal succession planning

• Becoming a trusted advisory increases the likelihood of long-term programs or solutions

• Sub-regional management is key

Utility Director

Senior Program Manager

Pure

TechnologiesUtility

Assistant Director

BD Manager

Super-intendent

Program Manager

Crew Chief

Project Manager

Southeast Growth Opportunities

MDWASD TBW ECUA City of Atlanta

51

• Large Diameter

PCCP

• Force Mains

• AFO

• Metallic Pipes

• Treatment Plants

• Large Diameter

PCCP

• Metallic Pipes

• Asset Management

• Prioritization

• Small Diameter

Solutions

• Structure program

for growth

Mid-Atlantic Growth Opportunities

52

Howard County WSSC DC Water City of Baltimore


• PureNet

• Force Main

Program

• Force main

Program

• Metallic Pipe


• Rehabilitation

• Structure program

for growth

Mid-Atlantic Growth Opportunities: New Clients

Northern Virginia

• Loudon Water

• Fairfax Water

• City of Fairfax

• Arlington County

• Prince William County

Anne Arundel County

• Expand on existing projects to develop a program

53

Elevating Market Presence – 2014 to 2016

54

PureNet Business Intelligence

Travis Wagner, VP Pipeline Management Group and South Region

We Own a Lot of Data…

30+ Years of Experience

14,000+ Miles of W/WW Pipeline Data

900,000+ Valves Mapped & Assessed

500+ Individual Pipe Repairs Managed

56

Value of Data (via Forbes)

If you look at the financial valuations of companies that were built on data, like Google or Facebook, there’s a gap between the actual and market valuation.

That’s their goodwill gap, and that gap is what, as Capgemini vice-president Jeff Hunter puts it, “screams to the value of data.”

57

Knowledge Economies

Data is a strategic asset providing or maintaining competitive advantages

• For the company, data can be used to optimize the way it does business: acquisition, retention, targeting, pricing, etc.

• For the shareholder, data embodies a financial potential

Raw data has low value. The more it is enriched, analyzed and leveraged for focused uses, the more its value increases

58

PureNetBI

PureNetBI Objectives• Deliver a paradigm shift – reactive to proactive

• Drive client’s desire for information, and motivate

data collection through linkage to KPIs

• Grow the core businesses of Pure and Wachs

60

PureNetBI Goals

1. Maximize the value of our data for us and clients

2. Deliver a reporting portal for Pure tools and data

61

Key Performance Indicators

62

A key performance indicator (KPI) is a business metric used to evaluate factors that are crucial to the success of an organization.

63

Why Clients need a BI Tool

• Data-Centric

• Interactive

• KPI Metric Tracking

• Powerful Data Visualization

• Clear Linkage from Data to KPI to Decision Making

• Tells a Story with Data

64

65

Failures vs Replacement

66

Project Planning

67

Supports Pure’s Strategy

• Use our technology and analytical IP to delivery unique value proposition

• Builds out Assess & AddressTM approach

• Using PureNetBI makes services incredibly sticky

15 Minute Break Back at 11am

PureHM – Managing GrowthShamus MacDonnell, President PureHM

Muthu Chandrasekaran, Senior VP Energy Pipelines

• Strong cultural synergies with Pure Technologies

• Growing, but staying true to our roots – customer service, quality and innovation

• Dedicated and quality people

• Acquisition has allowed us to be more focused and detailed in our approach

70

PureHM History

Oil & Gas Technology Evolution

71

Oil & Gas Technology Evolution

72

PureHM’s Services• Pig Tracking

• Since 1995 - More than 1600 pig runs tracked on over 300 pipelines using traditional methods

• Since 2000 – More than 700 runs with Armadillo Live Map

• Since 2014 – More than 160 remote tracking runs

• SmartBall• Since 2008 - more than 23,000 km of SmartBall

completed in over 200 inspections

• Direct Assessment• Since 1996 – More than 16,000 km of direct

assessment inspection

• PipeWISE• Since 1996 – More than 22,000Km of pipeline

inspection data

FOOT GOES HERE 73

• Strong YoY revenue growth expected for 2016

• Represents 15% of Pure’s business (2015)

• Roughly 100 employees

• ~ 100 clients in 2015 and growing

74

PureHM Today

Gathering Processing Storage DistributionProductionTransmission

Pipelines

Pipeline Integrity Consulting


Pipelines

Hydro Testing



Pipelines

Inline Inspection

Hydro Testing



Pipelines

Direct Assessment

Inline Inspection

Hydro Testing



Pipelines

Data Management

Direct Assessment

Inline Inspection

Hydro Testing



Pipelines

Data Management

Direct Assessment

Inline Inspection

Hydro Testing


Integrity Dig Management


Pipelines

~

900,000 miles of

transmission

mains in North

America

Oil and Gas Integrity MarketPipeline Assessment Budget

82

0

100

200

300

400

500

600

700

800

Kinder Morgan TransCanada Enbridge Pembina

$M

CA

D

2012

2013

2014

210M

8M

701M

200M

PureHM Office Coverage

83

PureHM offices

Pure Technologies offices

Combined offices

New PureHM offices

84

• PureHM head office

• Most R&D conducted in this office

• Test pipeline for new technologies

• Production

• Data analysis

Edmonton, AB

• Building leadership and operations at existing Houston office

• Experienced leader with strong industry presence

• Opportunity developed in pipeline company in Southeastern U.S.

• Annual SmartBall inspection and Armadillo Tracking on their mainline (5,500 miles) from Houston to Maryland

85

Houston, TX

• Local office to serve Pacific Gas & Electric

• Strong leadership located in San Ramon

• Team of 5 technicians to support work

• MSA with PG&E

• Expanding opportunities within PG&E and beyond

86

San Ramon, CA

• Purchased leak detection and mapping company assets

• Strong regional presence for growing Eastern Canadian clients

• Already building team of technicians for ongoing water crossing program with Eastern Canadian pipeline company

• Support R&D efforts in gas leak detection supported by SDTC

87

Morden, Manitoba

The Path to Growth

88

Digging Deeper with Key Clients

Adding Personnel and Resources

Continuous Innovation

The Bottom Line

Geoff Krause, CFO

2015: Setting the Foundation

Strategic Planning & Implementation

Excellence in Financial Operations through

Business Partnership

Transactional Efficiency &

Effectiveness

77

Driving Sustainable Growth & Profitability

Strategic Priorities:

• Revenue and profitability growth through targeted sales, world class execution and disciplined cost control

• Investment in complementary, new, and enhanced technologies and services

• Investment in employee development to enhance service and position Pure Technologies for success

• Selective and accretive acquisitions that enhance Pure Technologies’ technology portfolio and increase market penetration

FOOT GOES HERE 91

Project execution &

risk management

Efficient resource

management

Levering corporate foundation

Targeted capital

deployment

Sales efficiency &

effectiveness

Sustainable Revenue Growth

Achieving 20% Growth Through:

• Reduced reliance on lumpy equipment sales

• Diversified water inspection capabilities on established platforms

• Enhancing complementary field services in water space

• Sector diversification into Oil & Gas

92

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Q410

Q111

Q211

Q311

Q411

Q112

Q212

Q312

Q412

Q113

Q213

Q313

Q413

Q114

Q214

Q314

Q414

Q115

Q215

Q315

Q415

Q116

$ 0

00

's

Trailing 12 Month Revenue

Americas & International Water WWS PureHM Equipment

Shift to Inspection and Consulting, Programs

• Increased consulting & inspection services reduces one off equipment sales volatility

• Creates quasi-recurring revenue stream through repeat customers and ability to go deeper with existing

93

Project Delivery Profitability Levers

94

Project planning & execution

Labour resourcing & management

Divisional sales

pipeline & forecasting

Two drivers of profitability: optimizing direct costs and resource utilization

Direct costs40%

Salaries, benefits &

bonus44%

Stock based comp1%

Travel1%Depreciation

10%

Other4%

Breakout of Cost of Delivery (COS & E&O)

Project

Management

Resource

Management

Expected Cost Structure Impacts

95

2012 2013 2014 2015 Change 2016

Revenue 100% 100% 100% 100% 100%

Less: Cost

Direct 22% 22% 22% 24% 1% 25% Additional quarter of WWS

E&O 25% 29% 31% 37% -4% 33% Increased utilization, reduced ESPP

G&A 23% 22% 21% 25% -4% 21% Shared service consolidation, effect of leverage

Marketing 14% 17% 15% 13% -1% 12% Increased sales efficiency

R&D 6% 2% 2% 1% 1%

Operating Income 10% 8% 9% 0% 8% 8%

Add back:

Depreciation 10% 10% 9% 10% -1% 9%

SBC 2% 2% 2% 2% 2%

Other 0% 0% 0% 1% 1%

Adjusted EBITDA 22% 20% 20% 13% 7% 20%

96

EBITDA

margins at

20% target

Sustaining

capex

$4 – 5 mm

R&D

$3 – 4

mm

Office &

AX

$3 - 3.5

mm

Dividends

$6.5 mm

($0.12/sh)

Net cash

generation

after dividends

$4 - $7 mm

2016 Capex, Dividends and Cash Generation

Targeted Capital Deployment

• AX completed in 2016 on time and on budget

• Research & Development

• Focus on development of new applications & add-ons for existing delivery platforms

• Field equipment demand driven by forecasting and sales processes

97

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2012 2013 2014 2015

$ 00

0's

Capital Spending

Field Equipment Office Development AX

Maintaining a Conservative Capital Structure

98

Cash on Hand

$9.8mm as of

March 31, 2016

Working Capital

Management

Reducing DSO to

<120 days

Unused Credit

Facilities

$10mm revolver

$10mm letter of

credit

Paul Moon

+1 (403) 537-3244

[email protected]

Director, Investor Relations and Corporate Communications

Questions & AnswersCapital Markets Day – June 9, 2016

Documents

June 9, 2016 - Xylem · Optimization Plan, market changes, the Company’sability to deliver services in a timely and cost effective manner, technological change, ... Risk Prioritization