Black Diamond Reports First Quarter 2023 Results And Declares Dividend

Black Diamond Reports First Quarter 2023 Results And Declares Dividend

CALGARY, Alberta, May 04, 2023 (GLOBE NEWSWIRE) — Black Diamond Group Limited (“Black Diamond”, the “Company” or “we”), (TSX:BDI), a leading provider of space rental and workforce accommodation solutions, today announced its operating and financial results for the three months ended March 31, 2023 (the “Quarter”) compared with the three months ended March 31, 2022 (the “Comparative Quarter”). All financial figures are expressed in Canadian dollars.

Key Highlights from the First Quarter of 2023

  • Consolidated rental revenue of $34.4 million and Adjusted EBITDA1 of $21.4 million were up 28% and 20% from the Comparative Quarter, respectively.
  • Modular Space Solutions (“MSS”) rental revenue set another quarterly record of $20.4 million and increased 27% from the Comparative Quarter. MSS Adjusted EBITDA of $16.1 million was also a quarterly record and increased 55% from the Comparative Quarter.
  • MSS average monthly rental rate per unit (excluding the impact from acquisitions made in 2022) increased 15% from the Comparative Quarter (or 11% on a constant currency basis).
  • MSS contracted future rental revenue for units on rent was $97.9 million at the end of the Quarter, up 73% from the Comparative Quarter. Workforce Solutions (“WFS”) contracted future rental revenue for contracts in place was $32.8 million at the end of the Quarter, up 62% from the Comparative Quarter.
  • WFS rental revenue of $14.0 million, increased 30% from the Comparative Quarter. WFS consolidated utilization of 65% is the highest level observed in over five years.
  • LodgeLink net revenue of $2.2 million grew 69% from the Comparative Quarter, while the business also reported 105,958 room nights sold in the Quarter, a 39% increase from the prior year. LodgeLink U.S. volumes more than doubled from the Comparative Quarter and continues to see an accelerated pace of growth.
  • Return on Assets1 for the Quarter of 16.3% represents a meaningful premium over the Company’s cost of capital and is consistent with the Comparative Quarter.
  • Capital investment into organic growth was $13.5 million, while maintenance capital for the Quarter was $2.3 million. Rental asset additions have been primarily non-speculative in that contracts are in place before the asset is built.
  • Funds from Operations of $21.4 million increased 11% while Free Cashflow1 for the Quarter of $13.0 million was down 4% from the Comparative Quarter due to higher interest costs and capitalized maintenance.
  • Long term debt and Net Debt1 at the end of the Quarter declined $12.1 million and $10.3 million from the fourth quarter 2022 respectively to $214.8 million and $208.6 million. Net Debt to trailing twelve month (“TTM”) Adjusted Leverage EBITDA1 of 2.3x remains at the lower end of the Company’s target range of 2.0x to 3.0x while available liquidity was $115.9 million at the end of the Quarter.
  • Profit for the Quarter of $4.4 million increased 10% from the Comparative Quarter. Profit growth for the Quarter was half of the 20% increase in Adjusted EBITDA due to higher share-based compensation driven by strong operating performance and increased share prices, as well as higher interest expenses due to rising interest rates.
  • Administrative costs as a percentage of Gross Profit remained consistent with the Comparative Quarter despite inflationary pressures.
  • Subsequent to the end of the Quarter, the Company also declared a second quarter dividend of $0.02 payable on or about July 15, 2023, to shareholders of record on June 30, 2023.

Outlook

The Company’s diverse and sizable rental platform has continued to grow its core, recurring rental revenue and management believes the outlook into 2023 remains positive.  Contributing factors to ongoing rental revenue growth include continued increases in average rental rates across the MSS portfolio of assets as units are re-contracted in today’s higher-rate environment, deployment of contract-backed organic growth capital in MSS, ongoing potential for improving utilization in WFS, and continued rapid scaling of LodgeLink, particularly in the U.S. market.

The MSS segment set another quarterly record in both rental revenue and Adjusted EBITDA1. The Company expects continued growth in MSS rental revenues throughout 2023 driven by ongoing increases in average rental rate per unit as contracts expire and are renewed in a higher rate environment, robust utilization levels across regions, and continued fleet growth. MSS’ opportunity pipeline and backlog remains strong and continues to be ahead of levels experienced at the same time last year. 

The Company’s outlook for the WFS segment is also constructive. The WFS segment is more project oriented than the MSS segment, resulting in more variability to rental revenues. However, the strategies put in place several years ago to diversify the WFS customer base continues to support deployment of previously idled assets into increasingly diversified geographies and customer industries. Consolidated utilization in the WFS segment was 65% for the Quarter, the highest level observed in many years. This has resulted in continued growth in core rental revenues, which were up 30% year-over-year. Management has continued to invest growth capital into Australia, where its asset base is effectively fully utilized while also opportunistically right-sizing parts of the North American WFS asset base. Management expects this to continue to provide high levels of Free Cashflow1 for reinvestment.

LodgeLink net revenues grew 69% year-over-year as Net Revenue Margin1 improved to 11.9%. While room nights sold were down modestly on a sequential basis from the fourth quarter of 2022, which had high levels of booking volumes driven by natural disaster-related work, the platform continues to see strong uptake from both new and existing customers. Volumes during this Quarter also reached a record high in the U.S. which remains as a large and significant addressable market. Supply has also continued to grow at a strong pace with over 11,000 properties listed, representing over 1.1 million rooms.

The Company expects operating performance in 2023 to remain strong given the diverse nature of the existing asset rental business, further supported by a strong level of contract coverage. The Company’s liquidity position provides a high degree of optionality, with $115.9 million of available liquidity on its debt facility which is not up for renewal until October 2026. While interest rates are significantly higher than a year ago, approximately one third of debt is hedged at fixed rates. Management believes the Company can continue to compound returns through reinvestment in high-return, long-lived rental assets with attractive contract terms and economics. That said, the Company’s growth capital expenditures remain fully discretionary. If the Company encounters an environment where macro-economic events begin impacting asset-level returns, the Company’s platform allows for the flexibility to re-allocate high levels of Free Cashflow towards accelerated debt repayment or shareholder returns. Management continues to see a healthy bid volume and backlog of projects with a diversified customer base focused on longer-term infrastructure, education and government-related services, which provides the confidence that there is ample opportunity to deploy investment capital exceeding internal hurdle rates, while maintaining a conservative balance sheet.

1 Adjusted EBITDA, Net Debt, and Free Cashflow are non-GAAP financial measures. Return on Assets, Net Debt to TTM Adjusted Leverage EBITDA, and Net Revenue Margin are non-GAAP ratios. Refer to the Non-GAAP Financial Measures section of this press release for more information on each non-GAAP financial measure and ratios.

First Quarter 2023 Financial Highlights

  Three months ended March 31,
($ millions, except as noted) 2023 2022 Change
Financial Highlights $ $ %
Total revenue 81.5 70.2 16%
Gross profit 37.3 30.7 21%
Administrative expenses 16.0 12.8 25%
Adjusted EBITDA(1) 21.4 17.9 20%
Adjusted EBIT(1) 11.6 9.3 25%
Funds from Operations(1) 21.4 19.2 11%
Per share ($) 0.36 0.33 9%
Profit before income taxes 6.5 6.6 (2)%
Profit 4.4 4.0 10%
Earnings per share – Basic and Diluted ($) 0.07 0.07 —%
Capital expenditures 15.8 6.7 136%
Property & equipment 497.5 399.2 25%
Total assets 644.4 528.1 22%
Long-term debt 214.8 160.5 34%
Cash and cash equivalents 6.5 3.9 67%
Return on Assets (%)(1) 16.3% 16.9% (60 bps)
Free Cashflow(1) 13.0 13.5 (4)%
(1) Adjusted EBITDA, Funds from Operations and Free Cashflow are non-GAAP financial measures. Return on Assets is a non-GAAP ratio. Refer to the Non-GAAP Financial Measures section of this press release for more information on each non-GAAP financial measure and ratio.

Additional Information

A copy of the Company’s unaudited interim condensed consolidated financial statements for the three months ended March 31, 2023 and 2022 and related management’s discussion and analysis have been filed with the Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com) and www.blackdiamondgroup.com.

About Black Diamond Group

Black Diamond is a specialty rentals and industrial services Company with two operating business units – Modular Space Solutions (MSS) and Workforce Solutions (WFS). We operate in Canada, the United States, and Australia.

MSS through its principal brands, BOXX Modular, Britco, MPA, Schiavi and CL Martin, owns a large rental fleet of modular buildings of various types and sizes. Its network of local branches rent, sell, service, and provide ancillary products and services to a diverse customer base in the construction, industrial, education, financial, and government sectors.

WFS, through its principal brands, Black Diamond Camps and Black Diamond Energy Services, owns a large rental fleet of modular accommodation assets of all types and sizes. Its regional operating terminals rent, sell, service, and provide ancillary products and services including turn-key operated camps to a wide array of customers in the resource, infrastructure, construction, disaster recovery, and education sectors. The WFS business unit also includes the Company’s wholly owned subsidiary, LodgeLink, which operates a digital marketplace for business-to-business crew accommodation, travel, and logistics in North America. The LodgeLink proprietary digital platform enables customers to efficiently find, book, and manage their crew travel and accommodation needs through a rapidly growing network of hotel, remote lodge, and travel partners. LodgeLink exists to solve the unique challenges associated with crew travel and applies technology to eliminate inefficiencies at every step of the crew travel process from booking, to management, to payments, to cost reporting.

Learn more at www.blackdiamondgroup.com.

For investor inquiries please contact Jason Zhang at 403-206-4739 or investor@blackdiamondgroup.com.

Conference Call
Black Diamond will hold a conference call and webcast at 9:00 a.m. MT (11:00 a.m. ET) on Friday, May 5, 2023. CEO Trevor Haynes and CFO Toby LaBrie will discuss Black Diamond’s financial results for the quarter and then take questions from investors and analysts.

To access the conference call by telephone dial toll free 1-800-319-4610. International callers should use 1-604-638-5340. Please connect approximately 10 minutes prior to the beginning of the call. 

To access the call via webcast, please log into the webcast link 10 minutes before the start time at: https://www.gowebcasting.com/12529

Following the conference call, a replay will be available on the Investor Centre section of the Company’s website at www.blackdiamondgroup.com, under Presentations & Events.

Reader Advisory
Forward-Looking Statements
Certain information set forth in this MD&A contains forward-looking statements including, but not limited to, the amount of funds that will be expended on the 2023 capital plan, how such capital will be expended, expectations for asset sales, timing and payment of a second quarter dividend, management’s assessment of Black Diamond’s future operations and what may have an impact on them, opportunities and effect of deploying investment capital, financial performance, business prospects and opportunities, changing operating environment including changing activity levels, effects on demand and performance based on the changing operating environment, amount of revenue anticipated to be derived from current contracts, anticipated debt levels, liquidity sources and needs, economic life of the Company’s assets, future growth and profitability of the Company and realization of the anticipated benefits of acquisitions and sales. With respect to the forward-looking statements in this MD&A, Black Diamond has made assumptions regarding, among other things: future commodity prices, that Black Diamond will continue to raise sufficient capital to fund its business plans in a manner consistent with past operations, that counterparties to contracts will perform the contracts as written and that there will be no unforeseen material delays in contracted projects. Although Black Diamond believes that the expectations reflected in the forward-looking statements contained in this MD&A, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurances that such expectations or assumptions will prove to be correct. Readers are cautioned that assumptions used in the preparation of such statements may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties and other factors, many of which are beyond the control of Black Diamond. These risks include, but are not limited to: volatility of industry conditions, dependence on agreements and contracts, competition, credit risk, information technology systems and cyber security, vulnerability to market changes, operating risks and insurance, weakness in industrial construction and infrastructure developments, weakness in natural resource industries, access to additional financing, dependence on suppliers and manufacturers, reliance on key personnel, and workforce availability. The risks outlined above should not be construed as exhaustive. Additional information on these and other factors that could affect Black Diamond’s operations and financial results are included in Black Diamond’s annual information form for the year ended December 31, 2022 and other reports on file with the Canadian securities regulatory authorities which can be accessed on SEDAR. Readers are cautioned not to place undue reliance on these forward-looking statements. Furthermore, the forward-looking statements contained in this MD&A are made as at the date of this MD&A and Black Diamond does not undertake any obligation to update or revise any of the forward-looking statements, except as may be required by applicable securities laws.

Non-GAAP Measures
In this news release, the following specified financial measures and ratios have been disclosed: Adjusted EBITDA, Net Debt, Net Debt to TTM Adjusted Leverage EBITDA, Return on Assets, Net Revenue Margin and Free Cashflow. These non-GAAP and other financial measures do not have any standardized meaning prescribed under International Financial Reporting Standards (“IFRS”) and therefore may not be comparable to similar measures presented by other entities. Readers are cautioned that these non-GAAP measures are not alternatives to measures under IFRS and should not, on their own, be construed as an indicator of the Company’s performance or cash flows, a measure of liquidity or as a measure of actual return on the common shares of the Company. These non-GAAP measures should only be used in conjunction with the consolidated financial statements of the Company.

Adjusted EBITDA is not a measure recognized under IFRS and does not have standardized meanings prescribed by IFRS. Adjusted EBITDA refers to consolidated earnings before finance costs, tax expense, depreciation, amortization, accretion, foreign exchange, share-based compensation, acquisition costs, non-controlling interests, share of gains or losses of an associate, write-down of property and equipment, impairment, restructuring costs, and gains or losses on the sale of non-fleet assets in the normal course of business.

Black Diamond uses Adjusted EBITDA primarily as a measure of operating performance. Management believes that operating performance, as determined by Adjusted EBITDA, is meaningful because it presents the performance of the Company’s operations on a basis which excludes the impact of certain non-cash items as well as how the operations have been financed. In addition, management presents Adjusted EBITDA because it considers it to be an important supplemental measure of the Company’s performance and believes this measure is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in industries with similar capital structures.

Adjusted EBITDA has limitations as an analytical tool, and readers should not consider this item in isolation, or as a substitute for an analysis of the Company’s results as reported under IFRS. Some of the limitations of Adjusted EBITDA are:

  • Adjusted EBITDA excludes certain income tax payments and recoveries that may represent a reduction or increase in cash available to the Company;
  • Adjusted EBITDA does not reflect the Company’s cash expenditures, or future requirements, for capital expenditures or contractual commitments;
  • Adjusted EBITDA does not reflect changes in, or cash requirements for, the Company’s working capital needs;
  • Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest payments on the Company’s debt;
  • depreciation and amortization are non-cash charges, thus the assets being depreciated and amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect any cash requirements for such replacements; and
  • other companies in the industry may calculate Adjusted EBITDA differently than the Company does, limiting its usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to invest in the growth of the Company’s business. The Company compensates for these limitations by relying primarily on the Company’s IFRS results and using Adjusted EBITDA only on a supplementary basis. A reconciliation to profit, the most comparable GAAP measure, is provided below.

Return on Assets is calculated as annualized Adjusted EBITDA divided by average net book value of Property and Equipment. Annualized Adjusted EBITDA is calculated by multiplying Adjusted EBITDA for the Quarter and Comparative Quarter by an annualized multiplier. Management believes that ROA is a useful financial measure for investors in evaluating operating performance for the periods presented. When read in conjunction with our profit (loss) and property and equipment, two GAAP measures, it provides investors with a useful tool to evaluate Black Diamonds ongoing operations and management of assets from period-to-period.

Reconciliation of Consolidated Profit to Adjusted EBITDA and Return on Assets:

  Three months ended March 31,
($ millions, except as noted)

2023 2022 Change
%
Profit 4.4 4.0 10%
Add:      
Depreciation and amortization(1) 9.8 8.6 14%
Finance costs(1) 2.9 1.5 93%
Share-based compensation(1) 2.2 1.2 83%
Non-controlling interest(1) 0.3 0.5 (40)%
Deferred income taxes(1) 1.8 2.1 (14)%
Adjusted EBITDA 21.4 17.9 20%
Less:      
Depreciation and amortization(1) 9.8 8.6 14%
Adjusted EBIT 11.6 9.3 25%
       
Total revenue(1) 81.5 70.2 16%
Adjusted EBITDA as a % of Revenue 26.3% 25.0% 130 bps
       
Annualized multiplier 4 4  
Annualized adjusted EBITDA 85.6 71.6 20%
Average net book value of property and equipment 524.7 422.1 24%
Return on Assets 16.3% 16.9% (60) bps
(1) Sourced from the Company’s unaudited interim condensed consolidated financial statements for the three months ended March 31, 2023 and 2022.

Net Debt to TTM Adjusted Leverage EBITDA is a non-GAAP financial ratio which is calculated as Net Debt divided by trailing twelve months Adjusted EBITDA. Net Debt, a non-GAAP financial measure, is calculated as long-term debt minus cash and cash equivalents. A reconciliation to long-term debt, the most comparable GAAP measure, is provided below. Net Debt and Net Debt to TTM Adjusted Leverage EBITDA removes cash and cash equivalents from the Company’s debt balance. Black Diamond uses this ratio primarily as a measure of operating performance. Management believes this ratio is an important supplemental measure of the Company’s performance and believes this measure is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in industries with similar capital structures. In the June 30, 2022 Quarter, Net Debt to TTM Adjusted EBITDA was renamed Net Debt to TTM Adjusted Leverage EBITDA, to provide further clarity on the composition of the denominator to include pre-acquisition estimates of EBITDA from business combinations. Management believes including the additional information in this calculation helps provide information of the impact of trailing operations from business combinations on the Company’s leverage position.

Reconciliation of Consolidated Profit to Adjusted EBITDA, Net Debt and Net Debt to TTM Adjusted Leverage EBITDA:

($ millions, except as noted)

2023 2022 2022 2022 2022 2021 2021 2021 Change
  Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2  
Profit 4.4 9.4 9.0 4.0 4.0 10.7 5.7 1.3  
Add:                  
Depreciation and amortization 9.8 8.6 9.2 8.8 8.6 8.9 9.4 8.8  
Acquisition costs 1.2  
Finance costs 2.9 3.6 2.1 1.7 1.5 1.7 1.5 1.6  
Share-based compensation 2.2 1.3 1.3 1.1 1.2 1.0 1.0 0.8  
Non-controlling interest 0.3 0.4 0.5 0.5 0.5 0.4 0.4 0.4  
Current income taxes 0.1 0.4 0.1  
Gain on sale of real estate assets (0.7)  
Deferred income taxes 1.8 3.7 3.9 1.7 2.1 (4.6) 1.7 0.6  
Impairment reversal (6.3)  
Adjusted EBITDA 21.4 22.0 26.0 18.2 17.9 17.5 19.7 13.5  
Acquisition pro-forma adjustments(1) 0.5 2.3 2.2 1.5  
Adjusted Leverage EBITDA 21.4 22.5 28.3 20.4 19.4 17.5 19.7 13.5  
                   
TTM Adjusted Leverage EBITDA 92.6       68.6       35%
                   
Long-term debt 214.8       160.5       34%
Cash and cash equivalents 6.5       3.9       67%
Current portion of long term debt(2) 0.3             100%
Net Debt 208.6       156.6       33%
Net Debt to TTM Adjusted Leverage EBITDA 2.3       2.3       —%
(1) Includes pro-forma pre-acquisition EBITDA estimates as if the acquisition occurred on January 1, 2022.
(2) Current portion of long-term debt relating to the payments due within one year on the bank term loans assumed as part of the acquisition in the fourth quarter of 2022.

Funds from Operations is calculated as the cash flow from operating activities, the most comparable GAAP measure, excluding the changes in non-cash working capital. Management believes that Funds from Operations is a useful measure as it provides an indication of the funds generated by the operations before working capital adjustments. Changes in long-term accounts receivables and non-cash working capital items have been excluded as such changes are financed using the operating line of Black Diamond’s credit facilities. A reconciliation to cash flow from operating activities, the most comparable GAAP measure, is provided below.

Free Cashflow is calculated as Funds from Operations minus maintenance capital, net interest paid (including lease interest), payment of lease liabilities, net current income tax expense (recovery), distributions declared to non-controlling interest, dividends paid on common shares and dividends paid on preferred shares plus net current income taxes received (paid). Management believes that Free Cashflow is a useful measure as it provides an indication of the funds generated by the operations before working capital adjustments and other items noted above. Management believes this metric is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in industries with similar capital structures. A reconciliation to cash flow from operating activities, the most comparable GAAP measure, is provided below.

Reconciliation of Cash Flow From Operating Activities to Funds from Operations and Free Cashflow:

  Three months ended March 31,
($ millions, except as noted) 2023 2022 Change
       
Cash Flow from Operating Activities(1) 31.6 13.0 143%
Add/(Deduct):      
Change in other long term assets(1) (0.2) 1.3 (115)%
Changes in non-cash operating working capital(1) (10.0) 4.9 (304)%
Funds from Operations 21.4 19.2 11%
Add/(deduct):      
Maintenance capital (2.3) (1.6) (44)%
Payment for lease liabilities (1.8) (1.6) (13)%
Interest paid (including lease interest) (2.8) (1.4) (100)%
Dividends paid on common shares (1.2) (0.7) (71)%
Distributions declared to non-controlling interest (0.3) (0.2) (50)%
Dividends paid on preferred shares (0.2) 100%
Free Cashflow 13.0 13.5 (4)%
(1)  Sourced from the Company’s unaudited interim condensed consolidated financial statements for the three months ended March 31, 2023 and 2022.

Gross Bookings, a non-GAAP measure, is total revenue billed to the customer which includes all fees and charges. Net revenue, a GAAP measure, is Gross Bookings less costs paid to suppliers. Revenue from bookings at third party lodges and hotels through LodgeLink are recognized on a net revenue basis. LodgeLink is an agent in the transaction as it is not responsible for providing the service to the customer and does not control the service provided by a supplier. Management believes this ratio is an important supplemental measure of LodgeLink’s performance and cash generation and believes this ratio is frequently used by interested parties in the evaluation of companies in industries with similar forms of revenue generation.

Net Revenue Margin is calculated by dividing net revenue by Gross Bookings for the period. Management believes this ratio is an important supplemental measure of LodgeLink’s performance and profitability and believes this ratio is frequently used by interested parties in the evaluation of companies in industries with similar forms revenue generation where companies act as agents in transactions.

Reconciliation of Net Revenue to Gross Bookings and Net Revenue Margin:

  Three months ended March 31,
($ millions, except as noted) 2023 2022 Change
Net revenue(1) 2.2 1.3 69%
Costs paid to suppliers(1) 16.3 10.3 58%
Gross Bookings(1) 18.5 11.6 59%
Net Revenue Margin 11.9% 11.2% 70 bps
(1)  Includes intercompany transactions.

Readers are cautioned that the non-GAAP measures are not alternatives to measures under IFRS and should not, on their own, be construed as an indicator of Black Diamond’s performance or cash flows, a measure of liquidity or as a measure of actual return on the shares of Black Diamond. These non-GAAP measures should only be used in conjunction with the consolidated financial statements of Black Diamond.

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