Black Diamond Reports Third Quarter 2017 Results and Extension of its Committed Extendible Revolving Operating Facility
CALGARY, AB--(Marketwired - November 07, 2017) - Black Diamond Group Limited ("Black Diamond", the "Company" or "we"), (
Black Diamond has continued to execute on its strategy of diversifying the business and growing its non-energy dependent cash flow. As a result, revenue for the Quarter was $36.5 million, up 33% from the Comparative Quarter and adjusted EBITDA was $9.0 million, up 58% from the Comparative Quarter. The increased scale and performance of the Company's diversified businesses allowed it to reduce the net loss to $3.3 million for the Quarter, down 58% from the Comparative Quarter.
The BOXX Modular space rentals segment continues to expand and generate significant opportunities in non-resource facing end-markets such as the build-out of infrastructure facilities for the United States ("US") technology sector and offices for the refurbishment of government buildings in Ottawa.
Other notable improvements in the Quarter include Energy Services, which more than tripled its accommodation unit utilization to 64% from 19%; and International, which recognized a high margin sale of a camp for a new coal project in Queensland, Australia.
Partly offsetting these improvements were a decrease in lodging revenue and lower rental revenue in Camps & Lodging. Due to the lack of new large capital projects in western Canada and a reluctance of resource producers to make long-term commitments, consolidated contracted future revenue at the end of the Quarter was $27.5 million, down 47% from the Comparative Quarter.
Reflecting the Company's geographic diversification, revenue outside of Alberta is 60% of total revenue in the Quarter, a significant increase from 38% in the Comparative Quarter. This has been achieved through fleet growth as well as improved utilization and rates in space rentals outside of Alberta, significant increases in utilization for US wellsite accommodations, and increased utilization and sales activity in Australia.
Black Diamond remains committed to its strategy of investing in markets outside Alberta, selling and redeploying underutilized assets, and capitalizing on opportunities to generate value from its significant existing asset base. The diversification provides a more stable base of cash flows for Black Diamond, while retaining the opportunity for significant upside on the expectation that the western Canadian energy markets recover over the longer term. In support of this strategy and partially funding the growth of the Company's diversified business, during the twelve trailing months ended September 30, 2017, the Company sold 467 units, which includes 698 beds, for total proceeds of $17.9 million. These disposals are almost entirely made up of underutilized fleet sold higher than their net book value.
The Company continues to innovate, finding new ways to compete in the challenging remote accommodations sector. Subsequent to the end of the Quarter, Black Diamond commercially launched LodgeLink.com, an online accommodation marketplace for workforce housing that provides customer solutions and increases demand for underutilized camps and lodging assets. LodgeLink.com's system currently provides access to 25 remote accommodation facilities in Alberta and British Columbia and management believes it has significant growth potential.
Management also remains focused on its cost structure and debt management, following on the restructuring initiative announced with the Q2 2017 results. Normalized for the incremental costs related to the business acquisitions that have occurred since Q3 2016, administrative expenses have decreased by 9%, or $0.9 million, which is on pace to realize management's expected $3.0 million of annualized savings from the restructuring. Without normalization, administrative expenses for the Quarter were $9.1 million, up 1% or $0.1 million from the Comparative Quarter. As part of the restructuring, Black Diamond purchased land and property in the Dallas-Fort Worth area for $4.1 million to further reduce costs and improve the efficiency of the operating structure in the area by consolidating five operating locations into one. This land acquisition is expected to be almost fully offset by sales of approximately $4.0 million of redundant land in the US estimated to occur in 2018.
Long-term debt was slightly higher at September 30, 2017 compared with September 30, 2016, and $3.1 million higher than at June 30, 2017. This was mainly due to operating cash flows being more than offset by the final two monthly cash dividends paid in Q3 2017 of $2.8 million, an increase in working capital of $3.6 million, and capital expenditures of $7.7 million. Black Diamond announced the suspension of its dividend in August so management could focus the investment of cash flow from operations on capital growth in its space rentals business and on debt repayment. Cash dividends were still paid in July and August so the full benefit of the dividend suspension on the Company's cash flows will be realized in Q4 2017. Working capital increased in the Quarter as a result of improvements in operating results from the business. Capital expenditures were higher due to the land purchased in the Dallas-Fort Worth area as noted above. Management expects net capital expenditures for Q4 to be approximately $5.0 million and therefore overall debt is expected to remain approximately level through year-end 2017, with meaningful reductions in debt expected in the first half of 2018.
Effective November 7, 2017, the Company reached an agreement with its lenders to extend the committed extendible revolving operating facility term by one year to April 2020. The agreement also amends the terms of this facility and the senior secured notes to provide more operating flexibility through extension of the relaxation of covenants agreed to in March 2017.
While the Company is realizing the benefits of its diversification strategy, the difficult market environment in western Canadian energy markets persists. With an oversupplied market for camps and lodging, visibility for this segment remains limited and management has reduced the upper end of the range for Adjusted EBITDA in 2017 to $30.0 million from $35.0 million. The lower end of the range remains unchanged at $25.0 million.
|Third Quarter 2017 Financial Highlights|
|Three months ended
|Nine months ended
|(in millions, except where noted)||2017||2016||Change||2017||2016||Change|
|Camps & Lodging||11.2||11.4||(2)%||43.8||63.3||(31)%|
|Corporate and Other||0.1||0.4||(75)%||0.5||1.4||(64)%|
|Total Adjusted EBITDA||9.0||5.7||58%||19.0||30.5||(38)%|
|Funds from Operations||12.4||7.5||65%||33.4||37.8||(12)%|
|Per share ($)||0.23||0.17||35%||0.64||0.90||(29)%|
|Loss per share - Basic and diluted||(0.06)||(0.18)||(67)%||(0.32)||(0.45)||(29)%|
HIGHLIGHTS FOR THE QUARTER
- BOXX Modular asset utilization for the Quarter was 72%, an increase from 66% in the Comparative Quarter. The space rental fleet count increased by 51% from the Comparative Quarter due to increased activity outside of Alberta resulting in a 54% increase in revenue and a 71% increase in Adjusted EBITDA.
- Energy Services drilling accommodation utilization for the Quarter was 64%, an increase from 19% in the Comparative Quarter. The improved utilization is due to an increase in drilling and completion activity in Canada and the US and increased market share in the Permian Basin.
- International recognized revenue of $2.4 million from a high margin sale of a camp for a new coal project in Queensland. Management believes this transaction is indicative of improving demand for camps assets in Australia.
- During the Quarter, Smoky River Lodge opened due to increased demand in the Duvernay area for what is normally a winter-only camp. In Q4, Little Prairie Lodge in Chetwynd, BC was installed and opened to service demand in northeastern BC.
- Net Debt (see "Non-GAAP Measures") at September 30, 2017 was $119.6 million, up 6% or $7.2 million from $112.4 million as at September 30, 2016. Funded Debt to Bank EBITDA (see "Non-GAAP Measures") was 3.41 compared to a covenant of 4.25 for the Quarter.
- Revenue for the Quarter was $36.5 million, up 33% or $9.1 million from the Comparative Quarter primarily due to increased BOXX Modular fleet size and utilizations, partially offset by the impact of low commodity prices on utilization and occupancy in Camps & Lodging.
- Adjusted EBITDA (see "Non-GAAP Measures") for the Quarter was $9.0 million, up 58% or $3.3 million from the Comparative Quarter primarily due to fleet growth and increases in utilization in BOXX Modular, higher accommodation unit utilization in Energy Services, and a high margin sale of a camp for a new coal project in International. This was partially offset by a decrease in occupancy in Camps & Lodging.
- Net loss for the Quarter was $3.3 million, compared with a net loss of $7.9 million in the Comparative Quarter. This resulted in a loss per share of $0.06, compared to a loss per share of $0.18 in the Comparative Quarter.
- Consolidated contracted future revenue at the end of the Quarter was $27.5 million, down 47% or $24.4 million from $51.9 million in the Comparative Quarter due to the lack of new large capital projects in western Canada and a reluctance of resource producers to make long-term commitments.
- Administrative expenses for the Quarter were $9.1 million, up 1% or $0.1 million from the Comparative Quarter primarily due to an increase in occupancy costs related to acquisitions, offset by reductions in personnel costs.
- For the BOXX Modular business unit, there was strength in space rentals outside of Alberta, more than offsetting utilization decreases in Alberta. Despite this success, certain BOXX Modular assets in Alberta will be coming off contracts in Q4 which will result in lower utilization for the segment in Q4.
- Energy Services US is expected to continue to benefit from relocation of assets to Texas. The Canadian segment is expected to continue to benefit through to the end of the year with increased drilling and completions activity in western Canada.
- An increased demand for assets in Australia from the education sector has led to higher utilization, which management expects to continue in the near-term. Signs of increased development and capital spending in the mining sector could lead to higher utilization of accommodation assets as well.
- Camps & Lodging continues to be challenged in the near term due to an expectation of a slow recovery in major capital projects in the western Canadian energy sector.
- Management has adjusted its expectation for Adjusted EBITDA in 2017 to be in the range of $25.0 million to $30.0 million.
2017 Capital Plan
The 2017 gross capital spending plan remains at $23.0 million. This includes maintenance capital which is estimated to be $1.5 million for the year. This does not include proceeds from the sale of assets which are projected to be $9.0 million for fiscal 2017. On a net basis, the 2017 capital spending plan is focused predominantly within the BOXX Modular space rentals business outside of Alberta. The capital plan will generally be non-speculative and support management's overarching strategy of diversifying the Company's asset base.
Capital expenditures for the Quarter were $7.7 million. For the YTD, capital expenditures were $14.5 million. Capital expenditures for the Quarter included maintenance capital of $0.6 million, down $1.3 million from the Comparative Quarter. Capital commitments were $5.3 million as at September 30, 2017. This is compared with capital expenditures of $4.7 million and capital commitments of $4.9 million in the Comparative Quarter.
Proceeds from used fleet sales in the Quarter were $2.5 million, compared with $3.4 million in the Comparative Quarter.
Effective November 7, 2017, the Company reached an agreement with its lenders to extend the committed extendible revolving operating facility term by one year to April 2020 and to amend debt covenants. The committed extendible revolving operating facility Funded Debt to Bank EBITDA covenant was amended to a maximum ratio of:
- 4.50:1 for fiscal quarters ending December 31, 2017 to December 31, 2018;
- 4.25:1 for fiscal quarter ending March 31, 2019;
- 4.00:1 for the fiscal quarter ending June 30, 2019;
- 3.75:1 for the fiscal quarter ending September 30, 2019;
- 3.50:1 for the fiscal quarters ending December 31, 2019; and
- 3.00:1 for all fiscal quarters thereafter.
The interest coverage covenant remains unchanged and corresponding covenant amendments were also granted under Black Diamond's senior secured notes. The senior secured notes maturing on July 8, 2019 and July 3, 2022 were amended to increase the interest rate by 0.50% to 6.44% and 5.58%, respectively. Management believes the extension of the credit facility and the adjustments to the covenant package will give it the flexibility to continue to execute on its core strategies of diversification and debt repayment.
A copy of the Company's unaudited interim condensed consolidated financial statements for the three and nine month periods ended September 30, 2017 and 2016 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.
Black Diamond will hold a conference call and webcast tomorrow, November 8, 2017, at 8:30 a.m. MT (10:30 a.m. ET).
Chairman, President and CEO Trevor Haynes and Executive Vice President 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 1-855-435-1153. International callers should use (210) 229-8824 (Conference ID: 1051662). Please connect approximately 10 minutes prior to the beginning of the call.
Please log into the webcast 10 minutes before the start time at:https://edge.media-server.com/m6/p/wdvn3vf3
Slides to accompany the conference call can be accessed through https://join.me/BDI-Investors.
Following the conference call, an audio archive will be available in the Investor Events section of the Company's website at www.blackdiamondgroup.com.
Certain information set forth in this news release contains forward-looking statements including, but not limited to, the amount of funds that will be expended on the 2017 capital plan, how such capital will be expended, expectations for land sales, Adjusted EBITDA guidance, Management's assessment of Black Diamond's future operations and what may have an impact on them, financial performance, business prospects and opportunities, changing operating environment including increased activity levels, amount of revenue anticipated to be derived from current contracts, anticipated debt levels, amendments to Black Diamond's debt instruments, economic life of the Company's assets, future growth and profitability of the Company and realization of the anticipated benefits of acquisitions and sales, and expected savings from the restructure. With respect to the forward-looking statements in the news release, Black Diamond has made assumptions regarding, among other things: future commodity prices, that Black Diamond will continue to conduct its operations in a manner consistent with past operations, that counter-parties 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 news release, 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: the impact of general economic conditions, industry conditions, fluctuation of commodity prices, the Company's ability to attract new customers, failure of counterparties to perform on contracts, industry competition, availability of qualified personnel and management, timely and cost effective access to sufficient capital from internal and external sources, political conditions, dependence on suppliers and stock market volatility. 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, 2016 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 news release are made as at the date of this news release 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.
In this news release, the following terms have been referenced: Adjusted EBITDA, Net Debt, Days Sales Outstanding and Payout Ratio. Readers are cautioned that these measures are not defined under International Financial Reporting Standards ("IFRS"). 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. A reconciliation between these measures and measures defined under IFRS is included in management's discussion and analysis for the three month period ended September 30, 2017 filed on SEDAR.
About Black Diamond
Black Diamond provides workforce accommodation, modular buildings, energy services, and full turnkey lodging and major project solutions including planning and management, logistics, and catering to customers in Canada, the United States and Australia. We serve diverse sectors including oil and gas, mining, power, construction, engineering, military, government, financial services and education.
Black Diamond has four core business units: Black Diamond Camps & Lodging, BOXX Modular, Black Diamond Energy Services, and Black Diamond International. Learn more at: www.blackdiamondgroup.com.