Black Diamond Group Reports Third Quarter 2018 Results
CALGARY, Alberta, Nov. 06, 2018 (GLOBE NEWSWIRE) -- Black Diamond Group Limited ("Black Diamond Group", 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 and nine months ended September 30, 2018 (the "Quarter") compared with the three and nine months ended September 30, 2017 (the "Comparative Quarter"). All financial figures are expressed in Canadian dollars.
Revenue for the Quarter increased slightly, but Adjusted EBITDA decreased to $4.6 million. The softer results in the Quarter are primarily due to revenue mix, loading at our open lodges and project timing in the Workforce Solutions ("WFS") business unit. However, visibility into next year continues to improve and management retains a positive long-term outlook for performance in 2019 and beyond.
- The Company's leverage position was significantly improved during the last twelve months as a result of a reduction in Net Debt (see "Non-GAAP Measures") from $119.3 million at September 30, 2017 to $82.0 million as at September 30, 2018.
- Revenue for the Quarter was $36.8 million, up 1% or $0.3 million from the Comparative Quarter mainly due to increased used fleet sales.
- Administrative expenses for the Quarter were $9.3 million, up 2% or $0.2 million from the Comparative Quarter primarily due to the filling of vacant positions in the Quarter.
- Adjusted EBITDA (see "Non-GAAP Measures") for the Quarter was $4.6 million, down 49% or $4.4 million from the Comparative Quarter primarily due to changes in the revenue mix.
|Third Quarter 2018 Financial Highlights|
|Three months ended|
|(in millions, except where noted)||2018||2017||Change|
|Modular Space Solutions||16.3||16.3||—%|
|Total Adjusted EBITDA||4.6||9.0||(49)%|
|Funds from Operations||10.0||12.4||(19)%|
|Per share ($)||0.18||0.23||(22)%|
|Loss per share - Basic and diluted||(0.09)||(0.06)||(50)%|
|Property & equipment (NBV)||340.5||440.5||(23)%|
With LNG Canada receiving a positive final investment decision ("FID"), the Company expects notice to proceed on the $42.5 million camp contract related to construction of the Coastal GasLink pipeline in the near future, with expected initial revenue in the first half of 2019 and first occupancy occurring in Q3 2019. The Company has secured additional work related to LNG Canada for the provision of accommodation assets on a rental basis and expects the Modular Space Solutions ("MSS") business to participate through its Britco and BOXX Modular brands in Kitimat, British Columbia.
Improving market dynamics across the MSS platform has resulted in modest growth in the high margin rental revenue stream from Q2 to Q3 2018. On a year-over-year basis, rental revenue is down 6% to $7.4 million primarily due to significant contracts ending in the Alberta market in early 2018, which was partially offset by higher rates and utilization in other markets. MSS performance in Alberta is believed to have reached a trough during the first half of 2018 and continues to recover, while stronger market conditions in British Columbia, Eastern Canada, and the southern United States ("U.S.") are expected to continue to generate improving results going forward. New manufactured sales were lower in the Quarter due to contract timing but activity is expected to pick up moving into 2019 as contracted work is completed from the growing backlog of new projects.
A decline in occupancy due to completed turnaround work in Q2 2018 resulted in lower Q3 2018 lodging revenues in the WFS business unit, which was exacerbated by reduced completions and field level activity in the regions surrounding the Company’s open camps. Rental revenue in the WFS business fell 32% from the Comparative Quarter largely due to the conversion of Sunset Prairie Lodge to an open camp. Occupancy at Sunset Prairie Lodge was lower than expected due to the effects mentioned above. The WFS business unit has secured contracted occupancy in a number of open camps for the upcoming drilling season and a stronger bid pipeline is supporting better visibility and improving long-term fundamentals. Wellsite accommodations in the U.S. exhibited strong utilization during the Quarter and market conditions remain constructive for increasing rental rates. In the Company’s Australian operations, increasing private and public spending across various sectors is driving improving results, reflected in revenue increasing 14% from the Comparative Quarter.
The Company’s digital marketplace for workforce accommodation, LodgeLink, continued to gain traction with customers and suppliers during the Quarter. LodgeLink now has over 350 properties listed, representing over 45,000 rooms of capacity within workforce lodges and hotels across Canada. Nearly 250 unique corporate customers have now booked through the online tool, with over 62,000 room nights booked in 2018. Development on the next phase of the digital platform is currently underway and we are looking forward to releasing a major upgrade of the marketplace with additional features for customers and suppliers to utilize in 2019. Modest capital investment has been allocated to this development work in 2018 and 2019 in order to continue building on the rapid growth this business has displayed.
With the balance sheet in a healthier position, management is shifting its focus and returning to a growth cycle. Investing free cash flow into our diversified MSS business in growing markets remains a top priority. The Company aims to grow the MSS fleet by 10% annually on a net basis over the next several years and will do so by deploying capital into markets and projects that are expected to achieve stable risk-adjusted returns.
The Company generated Funds from Operations (see "Non-GAAP Measures") of approximately $10.0 million during the Quarter and approximately $33.2 million year-to-date. With increased balance sheet flexibility, management will continue to allocate capital towards the most attractive, risk-adjusted investment opportunities throughout our platform. The Company will assess both organic and inorganic opportunities in new and existing markets to achieve ongoing growth in 2019 and beyond.
- The Company plans to grow the MSS fleet by 10% annually, net of fleet sales, which is expected to translate into sequential quarterly growth of rental revenue into 2019. The current backlog and bid log of new sales projects is also expected to translate into increasing non-rental revenue in MSS.
- Based on contract visibility, WFS rental and lodging revenue is expected to improve modestly in the fourth quarter and strengthen further in 2019. WFS also expects to continue selling unutilized assets in 2019 in order to rationalize the fleet and fund acquisitions of new assets in higher growth areas across the Company's platform.
- With LNG Canada receiving a positive FID, the Company expects notice to proceed on the $42.5 million camp contract related to construction of the Coastal GasLink pipeline in the near future, with expected initial revenue in the first half of 2019. We anticipate that this project will generate numerous ancillary opportunities to support the build-out of related infrastructure. The workforce accommodation requirements for this project, coupled with the rationalization of accommodation assets over the last several years, should result in a rebalancing of supply and demand fundamentals for such assets. As LNG Canada moves ahead, it is increasingly likely that additional LNG development on the west coast occurs. This would further enhance the long-term outlook for our Canadian WFS market and drive ongoing improvement in pricing and asset pay-back periods.
- Wellsite revenue is expected to continue to strengthen in the U.S. West Texas and Colorado remain our strongest markets, with rates continuing to rise.
- Market conditions in Australia are expected to continue to improve into 2019, driving increased rental revenue.
- LodgeLink is expected to continue on its growth trend for the remainder of 2018 and into 2019, with anticipated increases to listed properties and customer bookings. Development on the next phase of the digital platform is currently underway, supported by a modest capital investment allocation in 2018 and 2019 which is expected to enhance the customer experience and lead to accelerated revenue growth in 2019.
2018 Capital Plan
The Company is generating increasing cash flows from operations, which management anticipates will lead to increasing growth capital expenditures. The disciplined capital plan will support management's overarching strategy of diversifying the Company's asset base and cash flows.
Capital expenditures for the Quarter were $4.1 million and capital commitments were $6.8 million as at September 30, 2018. This is compared with capital expenditures of $7.7 million and capital commitments of $5.3 million in the Comparative Quarter. Capital expenditures for the Quarter included maintenance capital of $0.2 million, compared to $0.6 million in the Comparative Quarter.
Proceeds from used fleet asset sales in the Quarter were $7.4 million compared with $2.5 million in the Comparative Quarter.
A copy of the Company's unaudited interim condensed consolidated financial statements for the three and nine months ended September 30, 2018 and 2017 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 Group will hold a conference call and webcast tomorrow, November 7, 2018, at 8:30 a.m. MT (10:30 a.m. ET).
CEO Trevor Haynes and CFO Toby LaBrie will discuss Black Diamond Group'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: 5895657). 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/rzbnuk82.
Following the conference call, an audio archive will be available in the Investor Events section of the Company's website at www.blackdiamondgroup.com.
About Black Diamond Group
Black Diamond Group rents and sells space rental solutions and modular workforce accommodations to business customers in Canada, the United States and Australia. The Company also provides specialized field rentals to the oil and gas industries of Canada and the United States. In addition, Black Diamond Group provides turnkey lodging services, as well as a host of related services that include transportation, installation, dismantling, repairs, maintenance and ancillary field equipment rentals. From twenty-two locations, the Company serves multiple sectors including oil and gas, mining, power, construction, engineering, military, government and education.
Black Diamond Group has two core business units: Workforce Solutions and Modular Space Solutions. Learn more at www.blackdiamondgroup.com.
For investor inquiries please contact Keenan Killackey at 587-293-3410 or email@example.com.
For media inquiries, please contact Elaine Mazurick at 587-233-7461 or firstname.lastname@example.org.
Certain information set forth in this news release contains forward-looking statements including, but not limited to, receiving a notice to proceed with respect to the Coastal GasLink agreement, the amount of funds that will be expended on the 2018 capital plan and how such capital will be allocated, Management's assessment of Black Diamond Group's future operations and what may have an impact on them, occupancy levels, growth in MSS fleet, financial performance, sales activity, business prospects and opportunities, changing operating environment including increased activity levels, amount of revenue anticipated to be derived from current contracts, anticipated debt levels and the anticipated reduction thereof, 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 the news release, Black Diamond Group has made assumptions regarding, among other things: future commodity prices, that Black Diamond Group 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 Group 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 Group. 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 Group's operations and financial results are included in Black Diamond Group'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 Group 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 and Net Debt. 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 nine month periods ended September 30, 2018 filed on SEDAR.