Black Diamond Group Reports Fourth Quarter 2017 Adjusted EBITDA of $9.5 Million
CALGARY, Alberta, March 06, 2018 (GLOBE NEWSWIRE) -- Black Diamond Group Limited ("Black Diamond", the "Company" or "we"), (TSX:BDI), a leading provider of workforce accommodation and space rental solutions, today announced its operating and financial results for the three months (the "Quarter") and twelve months ("2017" or the "Year") ended December 31, 2017 compared with the three and twelve months ended December 31, 2016. All financial figures are expressed in Canadian dollars.
The Company experienced growth in all of its key markets outside of Alberta during 2017. Strong economic growth in infrastructure development and general construction in eastern Canada, British Columbia and the United States have contributed to the company's improving performance. Management has also developed and executed against strategies that enhance the current position and long term prospects of the Company, including:
- Diversification of operating cash flows
- Acquisition of the rental fleet from Britco, the largest workspace rental platform in British Columbia, with a diversified customer base and significant exposure to the infrastructure development and general construction end markets.
- Organic capital growth of the diversified BOXX business unit, with over $14 million gross capital expenditures allocated to new fleet primarily in the US and eastern Canada.
- Improved financial flexibility
- Extended and amended debt facilities.
- Restructured the business in Q2 2017 for increased operating efficiencies and cost savings of roughly $3 million annually.
- Reduced net debt (see "Non-GAAP Measures") from $119.6 million to $112.9 million from Q3 to Q4 2017.
- Sales of underutilized assets
- Reduced Camps & Lodging bedcount by roughly 420 beds in the last year and roughly 1,000 beds in the last two years, with proceeds on the sale of these assets in excess of net book value.
- Reduction of 386 beds from workforce accommodation fleet in Australia, with proceeds on the sale of these assets in excess of net book value.
- Innovation and business development in response to changing market dynamics
- Launched LodgeLink in Q4 2017, an online marketplace for remote workforce accommodations.
- Increased focus on small format open camps in strategic locations, including the opening of Little Prairie Lodge in Q4 2017.
- Relocated certain Energy Services US assets to the Permian Basin in Texas, which are now 100% utilized.
Highlights
- The BOXX Modular business showed significant growth outside Alberta with an asset utilization for the Quarter of 69%, an increase from 64% in Q4 2016. The space rental fleet count increased by 49% to 5,882 units from Q4 2016 resulting in a 47% increase in revenue and a 54% increase in Adjusted EBITDA.
- Energy Services drilling accommodation utilization for the Quarter was 69%, an increase from 21% in Q4 2016. Energy Services experienced significant growth where revenue, Adjusted EBITDA and utilization are all greater than Q4 2016 by at least 48%.
- In late December, the Company reopened its Sunday Creek Lodge to support demand from customers performing turnaround work, pipeline projects, and phased development in the southern oil sands.
- During the Quarter, Little Prairie Lodge in Chetwynd, BC was installed and opened to service demand in northeastern BC. Little Prairie Lodge is a 252-person lodge providing temporary workforce accommodation to serve diverse industry demand from infrastructure, oil and gas, wind power developments, and mining activity in the region surrounding Chetwynd, Fort St. John and Dawson Creek in northern British Columbia.
- In Q1 2017, Black Diamond completed the acquisition of the modular workspace rental fleet and related assets, including the Britco brand, from Britco LP for cash consideration of $41.0 million. This acquisition was funded by a bought deal equity financing and sale and leaseback of certain real estate properties.
- In response to changing demand requirements in the Canadian workforce accommodation industry, management developed a product that provides a solution to customers requiring small-scale and short term remote accommodations. With the launch of LodgeLink in 2017, the Company is bringing innovation to the workforce accommodation industry through an online marketplace that aggregates remote accommodations in Canada. LodgeLink now offers more than 100 properties representing over 17,000 rooms, serving roughly 130 distinct corporate customers.
Fourth Quarter 2017 Financial Highlights:
| Three months ended December 31, | Twelve months ended December 31, | |||||||||||
| (in millions, except as noted) | 2017 | 2016 | Change | 2017 | 2016 | Change | ||||||
| $ | $ | $ | $ | |||||||||
| Revenue | ||||||||||||
| BOXX Modular | 20.1 | 13.7 | 47 | % | 65.1 | 47.9 | 36 | % | ||||
| Camps & Lodging | 13.1 | 17.4 | (25 | )% | 56.9 | 80.7 | (29 | )% | ||||
| Energy Services | 6.0 | 3.6 | 67 | % | 21.1 | 15.4 | 37 | % | ||||
| International | 1.6 | 2.7 | (41 | )% | 8.9 | 6.7 | 33 | % | ||||
| Corporate and Other | 0.8 | 0.5 | 60 | % | 1.4 | 1.9 | (26 | )% | ||||
| Total Revenue | 41.6 | 37.9 | 10 | % | 153.4 | 152.6 | 1 | % | ||||
| Total Adjusted EBITDA | 9.5 | 11.7 | (19 | )% | 28.5 | 42.2 | (32 | )% | ||||
| Funds from Operations | 13.9 | 13.3 | 5 | % | 47.3 | 51.1 | (7 | )% | ||||
| Per share ($) | 0.25 | 0.29 | (14 | )% | 0.89 | 1.18 | (25 | )% | ||||
| Loss | (78.8 | ) | (45.2 | ) | 74 | % | (95.4 | ) | (64.2 | ) | 49 | % |
| Loss per share - Basic and diluted ($) | (1.43 | ) | (0.98 | ) | 46 | % | (1.81 | ) | (1.49 | ) | 21 | % |
| Capital expenditures | 9.1 | 5.8 | 57 | % | 23.6 | 15.2 | 55 | % | ||||
| Business acquisitions | — | 4.2 | (100 | )% | 42.0 | 5.5 | 664 | % | ||||
Financial Review
- Revenue for the Quarter was $41.6 million, up 10% or $3.7 million from Q4 2016 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.
- Administrative expenses for the Quarter were $9.3 million, down 3% or $0.3 million from Q4 2016 primarily due to reductions in personnel costs, partially offset by administrative expenses from prior acquisitions. Normalized for administrative expenses related to acquisitions, on a percentage of revenue basis, administrative costs for the Quarter were 22%, down by 6 percentage points from Q4 2016.
- Adjusted EBITDA (see "Non-GAAP Measures") for the Quarter was $9.5 million, down 19% or $2.2 million from Q4 2016 primarily due to reduced utilization and rates in the Camps & Lodging segment, as well as the payments associated with termination of rental and lodging contracts received in Q4 2016. Compared to Q3 2017, Adjusted EBITDA was up 6% or $0.5 million.
- Net loss for the Quarter was $78.8 million, an increase from the Q4 2016 net loss of $45.2 million. Non-cash impairment charges of $98.2 million were recognized in Camps & Lodging in the Quarter, compared to $49.9 million of non-cash impairment charges in Q4 2016 for Energy Services and International. The impairment in Camps & Lodging was comprised of a $24.5 million write-down of goodwill and a $73.7 million write-down of intangible assets and property and equipment, primarily to higher density dorms which have lower demand than private washroom style dorms in western Canada.
Outlook
- BOXX Modular’s growing markets in British Columbia, Ontario, and the southern US are driving increased utilization and rental revenue which is expected to continue in 2018. This will be moderated by a significant number of assets coming off rent in the Alberta marketplace in the first quarter of 2018. Management expects some recovery in the market in subsequent quarters.
- The near-term visibility for Camps & Lodging is improving and led to the opening of two operated facilities, Little Prairie Lodge and Sunday Creek Lodge. Both camps are expected to contribute meaningfully in Q1 2018. Field level activity in the Montney and Duvernay regions is showing noticeable improvement and could lead to higher levels of utilization for the Company’s 2,500 rooms in operation in the area in 2018.
- Improvement in utilization and rates in Energy Services across the US markets is expected to continue.
- Higher and more stabilized commodity prices in Australia are leading to increased development and capital spending in the mining and natural resource sectors. Greater spending is expected to continue to contribute to higher levels of utilization for accommodations assets while increased government infrastructure spending should lead to improved demand for the Company's space rentals assets in Australia.
- Debt reduction in 2018 is expected to be achieved by collection of a tax refund of roughly $7 million, selling redundant real estate assets for expected proceeds of approximately $5 million, and targeting a net-zero capital expenditure plan. This leaves most cash flow from operations available for debt repayment after debt service costs and working capital requirements. Management believes that a lower leverage position will create immediate shareholder value and provide added financial flexibility to pursue future growth opportunities.
Capital Plan
The company plans to continue to grow the BOXX Modular space rentals business outside of Alberta, which benefits from broad exposure to multiple industry segments. Gross capital outlays are projected to be fully funded by proceeds from the sale of underutilized assets. The 2018 capital plan will generally be non-speculative and support management's overarching strategy to diversify the Company's asset base.
Capital expenditures for the Quarter were $9.1 million and $23.6 million for the YTD. Net of proceeds from used fleet sales, YTD capital expenditures were $13.6 million. Capital expenditures for the Quarter included maintenance capital of $0.3 million, down $1.0 million from Q4 2016. Capital commitments were $2.5 million as at December 31, 2017. This commitment extends over the next 5 quarters. This is compared with capital expenditures of $5.8 million and capital commitments of $1.7 million in Q4 2016.
Debt Management
Effective December 29, 2017, the Company extended the committed extendible revolving operating facility term by one year to April 2020 and amended its 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 remained 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 reduction.
Additional Information
A copy of the Company's audited consolidated financial statements for the years ended December 31, 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.
Conference Call
Black Diamond will hold a conference call and webcast tomorrow, March 7, 2018, 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: 8489205). 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/mtyd3dt4
Following the conference call, an audio archive will be available in the Investor Events section of the Company's website at www.blackdiamondgroup.com
Reader Advisory
Forward-Looking Statements
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 2018 capital plan, how such capital will be expended, expectations for land sales, 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, 2017 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.
Non-GAAP Measures
In this news release, the following terms have been referenced: Adjusted EBITDA, Net Debt, and DSO. 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 and twelve month periods ended December 31, 2017 filed on SEDAR.
About Black Diamond
Black Diamond rents and sells portable workforce accommodation and space rental solutions to business customers in Canada, the United States and Australia. In addition to providing turnkey lodging and other support services related to remote workforce accommodation and space rentals, we also provide specialized field rentals to the oil and gas industries of Canada and the United States. From twenty-four locations, we serve multiple sectors including oil and gas, mining, power, construction, engineering, military, government and education.
For investor inquiries please contact Keenan Killackey at 587-293-3410 or kkillackey@blackdiamondgroup.com
For media inquiries, please contact Elaine Mazurick at 587-233-7461or emazurick@blackdiamondgroup.com
