Enercare Reports Strong Third Quarter Results, EBITDA increases by 4%

Synergies Tracking Well Ahead of Target
Enercare Announces Pilot of Connected Home Solution

(All amounts are in Canadian dollars unless otherwise stated)

TORONTO, Nov. 14, 2017 /CNW/ -Enercare Inc. ("Enercare") (TSX: ECI), one of North America’sleading providers of essential home and commercial services and energy solutions, reported its financial results for the third quarter endedSeptember 30, 2017.

Third Quarter 2017 Highlights

• Third quarter revenue of $326 million, a 3% increase over the same period in 2016.
• EBITDA of $77 million, an increase of 4% compared to $74 million in the third quarter of 2016.
• Enercare Home Services net rental unit growth of 3,000, the ninth consecutive quarter of net growth in rental units.
• Sub-metering increased contracted units by 5,000 for the quarter and 16,000 year to date.
• Service Experts increased heating, ventilation and air conditioning ("HVAC") and water heater originations by 12% in the quarter.
• Cost synergies higher than initially forecasted, now 8 to 11 cents per share on an annualized basis by the end of 2017.
• Enercare Home Services announces a connected home pilot scheduled for Q4 2017.

Financial Highlights
(in millions of Canadian dollars except per unit amounts)¹

John Macdonald, President and CEO, said:

"Enercare had a strong third quarter in spite of unfavourable weather conditions. Rental additions, a main driver of our recurring revenue, were up overall for Enercare Home Services in the quarter and our Sub-metering segment increased EBITDA by 21%. And we are very pleased that we’re well ahead of our target on realizing synergies from our acquisition of Service Experts. We remain on course for delivering another successful year of EBITDA growth."

Results of Operations

Earnings Statement

Average Foreign Exchange

Enercare’s results of operations may be affected by the impact of movements in foreign exchange rates from operations whose functional currency is not in Canadian dollars. The results of these foreign operations are translated into Canadian dollars using the average exchange rates shown in the table below for the corresponding periods. Such translations predominantly relate to Service Experts’ U.S. operations whose functional currency is U.S. dollars. Where relevant throughout the "Results of Operations" discussion in this MD&A, reference is made to any material impacts resulting from movements in foreign exchange rates on reported amounts. The following table illustrates the approximate impact of foreign exchange on Enercare’s results for both the third quarter and year to date 2017 assuming average exchange rates during the current periods were held constant to those in 2016.

Revenues

Total revenues of $325,902 for the third quarter of 2017 increased by $9,958 or 3% and by $243,142 or 35% to $945,837 year to date compared to the same periods in 2016. The year to date increase was primarily as a result of the timing of the acquisition of Service Experts by Enercare, through an indirect wholly-owned subsidiary of Enercare Solutions Inc. ("Enercare Solutions"), on May 11, 2016 (the "SE Transaction").

Enercare Home Services revenues, excluding investment income, of $114,599 for the third quarter of 2017 increased by $3,622 or 3% and by $13,137 to $338,532 year to date, compared to the same periods in 2016, primarily as a result of a rental rate increase implemented in January 2017, changes in asset mix and growth in rental HVAC units. Contracted revenue in Enercare Home Services represents revenue generated by the rentals portfolio and protection plan contracts, while sales and other services revenue mainly pertains to one-time sales and installations of residential furnaces, boilers and air conditioners, as well as plumbing, duct cleaning and other services.

Enercare’s strategy to emphasize HVAC rentals over outright sales results in significant increases in recurring revenue at the expense of sales and other services revenue.

Service Experts revenues, excluding investment income, were $176,112 and $500,918 during the third quarter of 2017 and year to date, respectively, increasing by $13,762 and $236,359, respectively. The $13,762 or 8% increase during the third quarter was primarily from higher sales volumes, shifts towards higher value product sales and acquisitions completed during the year, partly offset by the impacts of unfavourable foreign exchange. Changes in foreign exchange rates during the third quarter and year to date 2017 accounted for approximately a $5,800 decrease and a $2,100 increase in revenues, respectively, compared to the same periods in 2016. In constant currency, revenue growth would have been 12% during the third quarter of 2017, compared to the same period in 2016. The increase in sales and rentals activity during the third quarter was despite unfavourably cooler weather trends, compared to the same period in 2016, and a lower demand, particularly in Florida, for installations during the days leading up to and after Hurricane Irma. Service Experts revenues were lowered by $1,558 for the third quarter of 2017 and $9,519 year to date as a result of purchase accounting adjustments for deferred revenue associated with the SE Transaction. These adjustments compare to $8,744 and $16,555 in respect of the same periods in 2016.

Sub-metering revenues, excluding investment income, were $34,848 during the third quarter of 2017, a decrease of $7,748 or 18%, with year to date revenues decreasing $6,861 or 6% over the same period in 2016, primarily as a result of lower flow-through commodity charges partly offset by higher billable units. Sub-metering revenue includes total flow through commodity charges of $25,153 in the third quarter and $77,147 year to date, decreases of $8,879 or 26% and $9,443 or 11%, respectively, compared to the same periods in 2016.

Investment income was $343 in the third quarter of 2017 and $983 year to date, increases of $322 and $507, respectively, when compared to the same periods in 2016. The increase in investment income is primarily from higher interest income earned from financing receivables relating to loans to customers resulting from HVAC sales.

Cost of Goods Sold

Total cost of goods sold for the third quarter of 2017 was $165,626 and $477,262 year to date, increases of $2,342 or 1% and $154,708 or 48%, respectively, compared to the same periods in 2016. The year to date increase was primarily as a result of the timing of the SE Transaction, which was completed in the second quarter of 2016.

Enercare Home Services cost of goods sold increased by $821 in the third quarter of 2017, and $1,339 year to date, compared to the same periods in 2016, increasing by 4% and 2%, respectively, as a result of changes in asset mix. Maintenance and servicing costs in Enercare Home Services primarily consist of protection plan expenses and servicing costs related to the rentals portfolio, while sales and other services expenses mainly pertain to one-time sales and installations of residential furnaces, boilers, air conditioners and small commercial products as well as plumbing, duct cleaning and other chargeable services.

Service Experts cost of goods sold amounted to $116,577 in the third quarter of 2017 and $330,638 year to date. Service Experts cost of goods sold was reduced by $1,236 for the third quarter of 2017 and $7,433 year to date as a result of purchase accounting adjustments for the service obligation associated with the SE Transaction, compared to $6,839 and $13,077 in the same periods in 2016. Changes in foreign exchange rates during the third quarter and year to date 2017, accounted for a decrease of $3,800 and an increase of $300, respectively, of cost of goods sold compared to the same periods in 2016. The increase in cost of goods sold is primarily due to increases in originations, partly offset by lower foreign exchange, due to the decrease in the valuation of the US dollar in comparison to the Canadian dollar.

Sub-metering cost of goods sold was $25,655 in the third quarter of 2017 and $79,446 year to date, decreasing by $8,677 or 25% and $8,387 or 10%, respectively, primarily from lower flow through commodity charges compared to the same periods in 2016. Sales and other services expenses for Sub-metering relate to Triacta Power Technologies Inc. ("Triacta") meter sales and the sale and installation of water conservation products in apartments and condominiums.

Selling, General & Administrative Expenses

Total selling, general and administrative expenses ("SG&A") were $82,695 in the third quarter of 2017 and $254,764 year to date, increases of $4,623 and $72,531, respectively, compared to the same periods in 2016.The year to date increase was primarily as a result of the timing of the SE Transaction, which was completed in the second quarter of 2016.

Enercare Home Services SG&A expenses of $25,500 in the third quarter and $79,096 year to date, increased by $1,682 and $5,870, respectively, compared to the same periods in 2016. The $1,682 increase in the third quarter was primarily from increases of approximately $1,300 in higher wages and benefits, $500 in higher support costs due to higher service calls during the late September heat wave, and $1,300 in higher sales and marketing expenses mainly driven by one-time costs related to the development of localized webpages to drive improvements in both search engine optimization and search engine marketing activities, and a branding refresh for our fleet of installation vehicles to promote new product offerings. Partly offsetting these increases were reduced office expenses of $1,100, primarily due to Enercare’s ownership of the corporate office, and lower bad debt expense of $400. The $5,870 year to date increase was primarily as a result of increases of approximately $4,300 in higher wages and benefits, driven partly by higher stock-based compensation costs resulting from an increase in the price of the common shares of Enercare ("Shares") and the build out of our forward staging locations, $600 in sales and marketing expenses and $2,000 of support costs, partly offset by a reduction in office expenses of $800 and professional fees of $300.

Enercare Home Services SG&A expenses included $158 in the third quarter of 2016 and $2,312 year to date of integration and business transformation costs related to the acquisition of the Ontario home and small commercial services business of Direct Energy Marketing Limited by Enercare on October 20, 2014 (the "DE Acquisition"), primarily from information technology integration activities to optimize the information technology platforms and marketing spend related to continued rebranding.

Service Experts SG&A expenses in the third quarter of 2017 of $43,994 and $133,759 year to date, increased by $2,803 and $62,986, respectively, compared to the same periods in 2016. The $2,803 increase in the third quarter was primarily from increases of approximately $4,500 in wages and benefits and $1,700 of sales and marketing expenses relating to online and television advertising campaigns, partly offset by $3,500 of lower professional fees. The increase in wages and benefits was partly driven by incremental wages from 2017 acquisitions, higher stock-based compensation costs resulting from an increase in Share price, and approximately $2,600 of non-recurring improvements to wages and benefits during the third quarter of 2016 from acquisition related opening balance sheet valuations from vacation pay and bonus accruals. In the current year, these items were expensed. The year to date increase of $62,986 was primarily the result of the timing of the SE Transaction, which was completed in the second quarter of 2016. Year to date Service Experts SG&A expenses included one-time expenses relating to prepaid software maintenance costs of approximately $1,000, which were expensed during the second quarter relating to the write-down of an enterprise resource planning system.

Service Experts SG&A expenses in the third quarter of 2017 included acquisition related expenditures of $320 and $697 year to date, primarily consisting of professional fees associated with the acquisitions of Aramendia Plumbing, Heating & Air Ltd., Hammond Plumbing and Heating Inc. and CS Operating LLC. Changes in foreign exchange rates during the third quarter of 2017 accounted for approximately $1,600 decrease in SG&A compared to the same period in 2016.

Service Experts SG&A expenses in the third quarter of 2016 included $4,189 and $10,882 year to date of acquisition related expenditures associated with the SE Transaction, primarily consisting of professional fees. These costs included $2,834 of pre-acquisition expenditures incurred by Enercare Home Services. Certain wage related expenditures, in the amount of $1,948 for the first quarter and year to date 2017, have been reclassified from SG&A expenses to cost of goods sold, compared to $2,765 and $4,603 during the third quarter and year to date, respectively, in 2016.

Sub-metering SG&A expenses in the third quarter of 2017 were $5,088 and $15,781 year to date, an increase of $171 and $1,208, respectively, over the same periods in 2016. The $171 increase in the third quarter is primarily the result of approximately $620 of higher wages and benefits and $180 of higher office expenses, partly offset by lower professional fees of $320, bad debt expenses of $200 and support costs of $160. The $1,208 year to date increase was primarily the result of approximately $1,500 of higher wages and benefits, $560 of office expenses and $120 in higher sales and marketing expenses, partly offset by lower professional fees of $500 and lower bad debt expenses of $500.

Corporate expenses of $8,113 in the third quarter of 2017 and $26,128 year to date decreased by $33 and increased by $2,467, respectively, compared to the same periods in 2016. The $33 decrease was primarily the result of approximately $500 in higher professional fees, driven mainly by continued investments relating to the implementation of an enterprise resource planning system, offset by $500 in lower wages and benefits expenses. The year to date increase of $2,467 was primarily the result of approximately $1,800 of higher office expenses mainly from increased software licensing costs and expenses relating to the implementation of an enterprise resource planning system and $700 of higher sales and marketing expenses, $200 of higher professional fees, offset by $200 in lower wages and benefits.

Corporate SG&A expenses in the third quarter of 2016 included $507 and $1,081 year to date of integration and business transformation costs related to the DE Acquisition, primarily from information technology integration activities to optimize the information technology platforms.

Amortization Expense

Amortization expense increased by $1,128 or 3% in the third quarter of 2017 and $10,909 or 10% year to date, compared to the same periods in 2016, primarily due to an increasing capital asset base from asset mix changes in the rentals portfolio and increased Sub-metering capital investments, which are amortized over a shorter life than those of the Enercare Home Services business. The year to date increase of $10,909 was primarily due to the SE Transaction, which was completed in the second quarter of 2016.

Net Loss on Disposal of Equipment and Other Assets

Enercare reported a net loss on disposal of equipment and other assets of $643 in the third quarter of 2017 and $7,637 year to date, a decrease of $91 or 12% and an increase of $4,081 or 115%, respectively, over the same periods in 2016. The net loss on disposal amount is influenced by the number of assets retired, proceeds on disposal of equipment, changes in the retirement asset mix and the age of the assets retired.

The year to date net loss on disposal includes a non-recurring write-down of $5,165 from the second quarter of 2017 of software intangible assets related to an enterprise resource system that Service Experts had been developing that will now be superseded by a common platform implemented across both the Enercare Home Services and Service Experts businesses. The year to date net loss on disposal also includes a non-recurring write down of $845 from the first quarter of 2017 relating to stranded technology investments resulting from going concern issues with a supplier that was developing software solutions for the Enercare Home Services business.

Interest Expense

Interest expense payable in cash increased by $1,304 to $9,315 in the third quarter of 2017 and by $5,976 to $28,229 year to date, compared to the same periods in 2016. These increases were primarily related to the addition of the USD $200,000 from the two 4-year non-revolving, non-amortizing variable rate term credit facilities (the "2016 Term Loan"), maturing on May 11, 2020, related to the financing of the SE Transaction and the issuance of the $275,000 of 3.38% Series 2017-1 Senior Unsecured Notes of Enercare Solutions, due February 21, 2022 (the "2017-1 Notes") and the $225,000 of 3.99% Series 2017-2 Senior Unsecured Notes of Enercare Solutions, due February 21, 2024 (the "2017-2 Notes") (collectively the "2017 Notes") during the first quarter of 2017, partially offset by the conversion of the 6.25% convertible unsecured subordinated debentures of Enercare ("Convertible Debentures") to Shares. A make-whole payment for the early redemption of the $250,000 of 4.30% Series 2012-1 Senior Unsecured Notes of Enercare Solutions (the "2012 Notes") during the first quarter of 2017 resulted in a one-time interest expense of $5,049.

Notional interest of $226 in the third quarter of 2017, $678 year to date, relates to the defined benefit employee benefits plans. Amortization of financing costs includes the previously unamortized costs associated with the 2012 Notes, which were redeemed on March 23, 2017, the $225,000 of 4.60% Series 2013-1 Senior Unsecured Notes of Enercare Solutions, which mature on February 3, 2020, the Convertible Debentures, the $210,000 4 year variable rate, non-revolving term loan facility of Enercare Solutions, which was repaid on February 23, 2017, the 2016 Term Loan and the 2017 Notes. The 2017-1 Notes were sold at a price of 99.982% of the principal amount, with an effective yield of 3.384% per annum if held to maturity and the 2017-2 Notes were sold at 99.982% of the principal amount, with an effective yield of 3.993% per annum if held to maturity.

As part of the SE Transaction, Enercare issued subscription receipts (the "SE Subscription Receipts") during the first quarter of 2016 and subsequently exchanged them for Shares upon the closing of the SE Transaction on May 11, 2016. While the SE Subscription Receipts remained outstanding, they were classified as debt, resulting in interest expense of $2,217 year to date 2016, which were the equivalent to the dividend payments on such SE Subscription Receipts if they had been Shares. Equity bridge financing fees of $198 year to date 2016 were also incurred as part of the SE Transaction.

Income Taxes

Enercare reported current tax expense of $5,785 in the third quarter of 2017 and $17,700 year to date, reductions of $9,547 and $25,147, respectively, compared to the same periods in 2016. These reductions were primarily from higher taxes owed in the first nine months of 2016, which resulted from a one-year tax deferral originated in 2015 and additional interest expense incurred in the first nine months of 2017. The deferred income tax expense of $1,929 in the third quarter of 2017 and recovery of $2,159 year to date increased by $9,451 and decreased by $22,210, respectively, compared to the same periods in 2016, primarily as a result of temporary difference reversals in the Enercare Home Services, Service Experts and Sub-metering businesses.

Net Earnings

Net earnings were $20,154 in the third quarter of 2017 and $38,225 year to date, an increase of $822 and decrease of $5,353, respectively, compared to the same periods in 2016, as previously described.

EBITDA, Adjusted EBITDA and Acquisition Adjusted EBITDA

The following table summarizes comparative quarterly results for the last eight quarters, and reconciles net earnings, an IFRS measure, to EBITDA, Adjusted EBITDA and Acquisition Adjusted EBITDA.

Outlook

The forward-looking statements contained in this section are not historical facts but, rather, reflect Enercare’s current expectations regarding future results or events and are based on information currently available to management (see "Cautionary Note Regarding Forward-looking Statements" in this news release).

Investing in Innovation

• Enercare has embarked on an ongoing program to increase efficiency and innovation by investing in its systems and technology. This program is also aimed at improving the customer experience to gain long-term customer loyalty and differentiate Enercare from its competitors. During the third quarter of 2017, in order to improve its customer experience, Enercare Home Services deployed a new interactive voice response system as well as made enhancements to its mobile app. The interactive voice response system modernized Enercare Home Services’ call center routing and will drive call center efficiencies, such as by improving first call resolution. Enercare also launched in the third quarter a human resource management system to not only automate human resource activities and processes, but also support learning and development management strategies and further improve tracking of training, licensing and performance management.
• Enercare plans to implement a customer relationship management system along with an enterprise resource planning system in its Enercare Home Services business and is considering a similar implementation for its Services Experts business. This initiative is currently in the scoping phase and these systems will be implemented through a phased approach starting with Enercare Home Services. The first phase of Enercare’s enterprise resource planning implementation is planned for the first quarter of 2018 and will support the application of IFRS 9. Additional phases targeted for the end of 2018 will automate the application of IFRS 15 and allow for the introduction of new products and bundled offerings.
• Enercare Home Services has been developing and testing a new connected home product offering that will enable customers to utilize technology to support energy efficiency savings by providing insights on heating and cooling equipment functionality. Customers will be able to use a mobile application to monitor and control their home at any time and from any place. At the outset, the solution will allow customers to manage their energy usage, monitor and control their cooling and heating appliances, detect water leaks and enable remote water shut-off amongst other things. Enercare Home Services will be testing several options with a 100-person pilot, and expects to launch the full initial offering to customers in the first half of 2018. We believe this offering will strengthen our customer relationships as we move from a reactive to a proactive service model. Enercare will be able to notify customers when issues arise, provide insights on equipment usage, and ultimately help customers conserve energy and save money.
• As these and other innovations are rolled out over the next few years, Enercare will continue making additional investments in both capital and SG&A expenditures. Historically, these investments would have been capitalized; however, with the increase of cloud based technology solutions, Enercare anticipates that these investments will be made through SG&A expenses.

Enercare Home Services Segment

• Our main priority for the business in 2017 is to grow EBITDA. The key priority to doing so is to continue to grow the number of rental contracts. We believe that we have the opportunity to continue to grow the number of contract additions in excess of Attrition for the balance of 2017. Another key priority for the Enercare Home Services business is growing the protection plan portfolio, enabled by the full launch of the electrical protection plans. In addition, Enercare Home Services continues to invest in the replacement and modernization of its information technology systems and infrastructure to continue to improve its customer experience and expand its product and service offerings in order to grow the business (see "Investing in Innovation" above).
• Our strategy to emphasize HVAC rentals over outright sales in order to create a long-term customer revenue stream and provide valuable cross-selling opportunities continues to be successful. While this strategy has resulted in a significant increase in recurring HVAC rental revenues, we anticipate the negative short-term impact on non-recurring sales and other services revenue to continue throughout 2017.
• Our collective bargaining agreement in respect of Enercare Home Services with UNIFOR Local 975 expired on March 31, 2017. Renegotiations began in March and are continuing.
• Enercare expects that the Competition Bureau (the "Bureau") will shortly request an order for production of information in connection with a Bureau inquiry into whether Enercare has a dominant market position supplying residential water heaters in the former Enbridge Gas distribution territory and has engaged in anti-competitive acts through its water heater return procedures and its buyout form of contract. Known as a so-called "Section 11 order" under the Competition Act (Canada) (the "Competition Act"), this is a routine procedural step in a Bureau inquiry. Enercare expects that it will satisfy the information requests in due course and has been voluntarily cooperating with the Bureau in its process. As disclosed previously, Enercare provided the Bureau with its voluntary assurance in November 2014 regarding return procedures when it acquired the Ontario home and small commercial services business of Direct Energy Marketing Limited. That voluntary assurance did not address the buyout form of contract a form of contract that the Bureau approved in 2010. Enercare believes that it has complied in all material respects with the voluntary assurance. Furthermore, Enercare believes that it does not have a dominant market position and, in any event, has not engaged in anti-competitive acts. Enercare strives to conduct its business in compliance with all applicable laws, including the Competition Act and the voluntary assurance provided to the Bureau. Although it is not possible to predict the outcome of the Bureau’s inquiry at this stage in the process, Enercare expects to continue to work cooperatively with the Bureau to address its concerns and hopes to arrive at a mutually satisfactory resolution.

Service Experts Segment

• Cost synergies relating to the SE Transaction are estimated to be in the range of $0.08 to $0.11 per Share on an annualized basis by the end of 2017, an increase from the previous guidance of $0.05 to $0.08 per Share. Enercare estimates that on a year to date basis approximately $0.07 per Share of these synergies have already been achieved with savings coming primarily from improved sourcing costs leading to lower cost of goods sold, SG&A and capital expenditures as well as lower current taxes.
• Our key priority for the Service Experts business in 2017 is to grow revenues and EBITDA while continuing to expand the rental programs for HVAC and water heater products in both Canada and the U.S. Service Experts will also continue to explore strategic acquisition opportunities.
• In October 2016, Service Experts introduced a rental program for HVAC products and water heaters in several centers within Canada. This rollout was completed at all 15 locations in Canada in February 2017, and while the program is still in the very early stages, Enercare is encouraged by the initial results which show an initial rental mix during the first nine months of 2017 of approximately 14% (ranging from 6% to 35% depending on the center) in Ontario and 8% (ranging from 5% to 20% depending on the center) in Western Canada, where the rental model is a new concept. The successful introduction of our recurring revenue rental model in Canada is part of our plan to integrate rentals throughout Service Experts residential heating and cooling operations by the end of 2018 to create recurring revenue. During the first quarter of 2017, Service Experts extended the rental HVAC offerings through a pilot in two U.S. states and subsequently rolled out to two additional states in late March, one in early May and two additional states in late September of 2017. The U.S. rental program is similar to Enercare’s existing Canadian rental program, except that due to U.S. regulations, the rental contracts in the United States will be for a definitive term, which in the piloted states is 10 years. Enercare anticipates that the form of the contract, as driven by the U.S. regulatory environment, will result in a slower adoption of the rental program in the U.S. The preliminary rental mix of total HVAC origination in the United States during the first nine months of 2017 was approximately 3% (ranging from 0.2% to 11% depending on the center). While the initial results in a number of these U.S. centers are encouraging, Service Experts continues to review its U.S. rental program to identify opportunities to improve its customer offerings and related rental execution processes.
• The business of Service Experts is subject to greater seasonality than Enercare Home Services as a result of it having fewer recurring revenue sources. Revenue and EBITDA tend to be seasonally highest in the second quarter of the year, followed by the third quarter, and substantially less in the fourth and first quarters, due primarily to the geography where Service Experts operates and weather patterns. The heating season (roughly November through February) and cooling season (roughly May through August) are periods when consumers transition their buying patterns from one season to the next. In most of the states that Services Experts operates, cooling equipment as opposed to heating equipment represents a substantial portion of its annual HVAC sales and service revenue. Conversely, in the three provinces that Service Experts operates, heating equipment represents a large portion of its Canadian sales and service revenue. The sales are also impacted by seasonal weather patterns; in periods of extreme heat and cold, installation and demand service revenue tend to increase. This results in higher sales in the second and third quarters due to the higher volume in the cooling season relative to the heating season and the lowest revenue and substantially reduced EBITDA, relative to other quarters, in the first quarter. Service Experts normally generates a neutral level of profitability in the first quarter of the year and as a result, the working capital needs are generally greater in the first quarter, followed by higher operating cash inflows in the second and third quarters.
• In the next several quarters, Service Experts expects demand for residential HVAC replacements in Florida and its surrounding centers to normalize and possibly increase as a result of demand caused by hurricane Irma.

Sub-metering Segment

• In respect of Sub-metering, our priorities for 2017 will be to continue to grow EBITDA by increasing contract sales. Other key priorities include reducing the capital spend per unit for new installations and introducing new products and services.
• During the first three quarters of 2017, we continued to experience the trend that almost one-half of our contracted units were for thermal, gas or water sub-metering. The majority of all new construction contracts are for both electricity and water sub-metering services, which contributes to lower billing costs over time as multiple products will be invoiced on a single bill.
• Sub-metering sales opportunities continue to be strong and skewed towards multi-commodity products within the new construction and condominium segments. During the first three quarters of 2017, over 75% of the newly contracted services have come from new construction condominiums and new construction rental properties. Although the buildings related to these contracts have yet to be constructed and as a result the bulk of the capital and all of the related revenues will occur in 24 to 36 months, once constructed, all units within these buildings will start billing on initial move-in. This is in contrast to retrofit apartment contracts for which installation starts sooner, but billing lags as it is reliant on tenant turnover.
• In a new construction scenario, the typical lead time between the signing of a sub-metering agreement, which happens prior to construction and the on-boarding of metering customers averages three years. With the current backlog, we are expecting the higher than average new construction installations completed during the third quarter of 2017 to continue into 2018 and the following years.
• Sub-metering plans to continue to negotiate new contracts with existing clients as they approach the end of their original contracts. Each of these negotiations is unique and competitive pressure may result in re-negotiated fees being below those of the original contracts; however, Enercare expects that additional capital outlays will be minimal.
• During the first quarter, Sub-metering introduced a new commercial service offering through a controlled launch process. This offering compliments our recently launched commercial consolidation billing solution and brings additional features, such as tenant level consumption reporting and client options to purchase the meters. The first commercial service meters with the new offering were installed during the third quarter and a number of new customers have signed up for the offering. Sub-metering is targeting to have 15 customers in the controlled launch by year end, 8 of which have already signed onto the program.
• Triacta has been developing the generation 5 PowerHawk metering platform. This new platform has a modular architecture, allowing for a single unit to measure multiple types of commodities, and utilizes a variety of communications protocols. During the fourth quarter, beta trial units are expected to be shipped to key customers for evaluation and to various labs for certification.
• Enercare anticipates that the implementation of IFRS 15 on January 1, 2018 will result in recognizing commodity revenue relating to sub-metering on a net basis. This change does not impact net earnings or EBITDA.

Corporate

• Enercare estimates that it will recognize approximately $23 million to $29 million in current income tax expense for the fiscal year ending December 31, 2017. Although this is consistent with previous guidance, Enercare expects to be at the low end of this range. This estimate assumes corporate tax rates of approximately 26.5% in Canada and 39% in the US. Taxable income is principally impacted by changes in revenue, operating expenses, potential acquisitions or divestitures, appropriate tax planning and capital expenditures through the capital cost allowance deduction.
• Consistent with previous guidance, Enercare is targeting a range of between $167 million and $192 million in capital investments in 2017, primarily reflecting higher unit costs due to higher end product originations, higher sales volumes and higher corporate spending on platforms for innovation and growth to enable future product offerings, including smart home products for a connected home. The target ranges for some capital expenditure categories have been adjusted in the table below.

Financial Statements and Management’s Discussion and Analysis

Enercare’s financial statements and management’s discussion and analysis for the period ended September 30, 2017 are available on SEDAR at www.sedar.com or on Enercare’s investor relations website at www.enercareinc.com.

Conference Call and Webcast

Management will host a conference call and live audio webcast to discuss Enercare’s financial results for the third quarter ended September 30, 2017 this morning at 10:00 a.m. (ET). John Macdonald, President and CEO, and Evelyn Sutherland, CFO, will review Enercare’s results and discuss the quarter’s operating highlights.

Those wishing to listen to the teleconference may access the live webcast as follows:

Cautionary Note Regarding Forward-looking Statements

This news release contains certain forward-looking statements within the meaning of applicable Canadian securities laws ("forward-looking statements" or "forward-looking information") that involve various risks and uncertainties and should be read in conjunction with Enercare’s 2016 audited consolidated financial statements. Additional information in respect of Enercare, including the Annual Information Form of Enercare dated March 31, 2017 ("AIF"), can be found on SEDAR at www.sedar.com.

Statements other than statements of historical fact contained in this news release may be forward-looking statements, including, without limitation, management’s expectations, intentions and beliefs concerning anticipated future events, results, circumstances, economic performance or expectations with respect to Enercare, including Enercare’s business operations, business strategy and financial condition. When used herein, the words "anticipates", "believes", "budgets", "could", "estimates", "expects", "forecasts", "goal", "intends", "may", "might", "outlook", "plans", "projects", "schedule", "should", "strive", "target", "will", "would" and similar expressions are often intended to identify forward-looking information, although not all forward-looking information contains these identifying words. These forward-looking statements may reflect the internal projections, expectations, future growth, results of operations, performance, business prospects and opportunities of Enercare and are based on information currently available to Enercare and/or assumptions that Enercare believes are reasonable. Many factors could cause actual results to differ materially from the results and developments discussed in the forward-looking information.

In developing these forward-looking statements, certain material assumptions were made. These forward-looking statements are also subject to certain risks. These factors include, but are not limited to:

• actual future market conditions being different than anticipated by management;
• the failure to realize the anticipated benefits of the SE Transaction, strategic initiatives and tax efficiencies;
• the risk that the pilot and subsequent roll out of rental HVAC offerings in 7 states in the United States does not realize anticipated results as the rental model is a new concept in this industry in the United States; and
• the risks and uncertainties described under "Risk Factors" in the AIF.

Material factors or assumptions that were applied to drawing a conclusion or making an estimate set out in forward-looking statements include:

• the view of management regarding current and anticipated market conditions;
• industry trends remaining unchanged;
• the financial and operating attributes of Enercare and Service Experts as at the date hereof and the anticipated future performance of Enercare and Service Experts;
• assumptions regarding the volume and mix of business activities remaining consistent with current trends;
• assumptions regarding the interest rate of the 2016 Term Loan, foreign exchange rates and commodity prices; and
• the number of Shares outstanding remaining constant.

There can be no assurance that the anticipated strategic benefits and operational, competitive and cost synergies from the SE Transaction will be realized. There can be no assurance that recent results from the introduction of the rental model to Service Experts in Canada and the United States are indicative of future results. There can also be no assurance as to any potential outcome of the Bureau’s inquiry and the effect on Enercare’s business.

Readers are cautioned that the preceding list of material factors or assumptions is not exhaustive. Although forward-looking statements contained in this news release are based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. Accordingly, readers should not place undue reliance on such forward-looking statements and assumptions as management cannot provide assurance that actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Enercare. All forward-looking information in this news release is made as of the date of this news release. These forward-looking statements are subject to change as a result of new information, future events or other circumstances, in which case they will only be updated by Enercare where required by law.

About Enercare Inc.

Enercare is headquartered in Markham, Ontario and publicly traded on the Toronto Stock Exchange (TSX: ECI). As one of North America’s largest home and commercial services and energy solutions companies with approximately 4,500 employees under its Enercare and Service Experts brands, Enercare is a leading provider of water heaters, water treatment, furnaces, air conditioners and other HVAC rental products, plumbing services, protection plans and related services. With operations in Canada and the United States, Enercare serves approximately 1.6 million customers annually. Enercare is also the largest non-utility sub-meter provider, with electricity, water, thermal and gas metering contracts for condominium and apartment suites in Canada and through its Triacta brand, a premier designer and manufacturer of advanced sub-meters and sub-metering solutions.

For more information on Enercare visit enercare.ca. Additional information regarding Enercare is available through our investor relations website at corporate.enercare.ca or on SEDAR at www.sedar.com. Subscribe to our email alerts at corporate.enercare.ca/email-alerts to receive our news releases electronically.

SOURCE Enercare Inc.

For further information: Evelyn Sutherland, CFO, 416.649.1860, [email protected]