Black Diamond Group Reports First Quarter 2019 Results
CALGARY, Alberta, May 02, 2019 (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, 2019 (the "Quarter") compared with the three months ended March 31, 2018 (the "Comparative Quarter"). All financial figures are expressed in Canadian dollars.
- Revenue for the Quarter was $45.4 million, up 11% or $4.5 million from the Comparative Quarter due to an increase in custom sales in Modular Space Solutions ("MSS").
- MSS revenue increased to $22.5 million, a 60% increase from the Comparative Quarter, and represented 50% of consolidated revenue for the Quarter.
- Adjusted EBITDA (see "Non-GAAP Measures") for the Quarter was $8.1 million, a decrease of 6% or $0.5 million from the Comparative Quarter primarily due a change in revenue mix. Included in Adjusted EBITDA is a positive $1.0 million impact from the adoption of the IFRS 16 Leases accounting standard.
- The Company's leverage position remains substantially unchanged from December 31, 2018, as net debt increased slightly to $88.0 million from $86.9 million at year-end. The Company exited the Quarter with a Funded Debt to EBITDA ratio of 2.84 (December 31, 2018 - 2.95) and a Funded Debt to Tangible Book Value ratio of 0.44 (December 31, 2018 - 0.44).
- Subsequent to the Quarter, Black Diamond announced a $20 million rental contract for the Company's U.S. WFS business unit.
"We believe our first Quarter results are indicative of Black Diamond's continued focus to diversify our business as the MSS segment continues to show growth in rental revenue supported by sequential quarter-over-quarter fleet growth and healthy markets throughout our North American footprint," said Trevor Haynes, CEO of Black Diamond Group. "Our MSS fleet is expected to show growth of 10% as we continue to invest in the fleet. The Workforce Solutions business remains well positioned to capitalize on an improvement in sector activity levels in Canada, with improving backlog and healthy bid logs being seen throughout the system. Outside of Canada, the Workforce Solutions business in Australia and the United States are strong and expect to see modest capital investment this year. We remain excited with respect to our LodgeLink platform and are expecting to roll out an upgrade to the digital marketplace in the coming months, which will support the ongoing growth of both supply, customers and room night bookings."
Black Diamond's consolidated revenue in the Quarter increased 11% to $45.4 million from $40.9 million in the Comparative Quarter. Despite higher revenues, Adjusted EBITDA decreased to $8.1 million from $8.6 million in the Comparative Quarter, due primarily to lower margins. Lower margins for the quarter were driven by an increase in contribution from sales and non-rental revenue which generate lower margins compared to rental revenue. Operating margins were also lower year-over-year due to comparably strong sales margin performance in the Comparative Quarter. Revenue derived from outside of western Canadian energy sources increased to 63% in the Quarter, compared to 45% in the Comparative Quarter.
In the MSS segment, revenue in the Quarter increased to $22.5 million, up 60% from $14.1 million in the Comparative Quarter. MSS utilization averaged 73% in the Quarter, up from 66% in the Comparative Quarter, while average rental rates remained consistent with the Comparative Quarter. MSS Adjusted EBITDA of $4.9 million was higher than Adjusted EBITDA in the Comparative Quarter of $3.8 million due to increased rental and non-rental revenue. Adjusted EBITDA was also positively impacted by IFRS 16 in the amount of approximately $0.6 million.
The Company's Workforce Solutions ("WFS") segment generated revenue in the Quarter of $22.9 million, down 15% from $26.8 million in the Comparative Quarter. WFS Adjusted EBITDA in the Quarter declined to $6.0 million from $7.1 million in the Comparative Quarter due to lower used-fleet sales in the Quarter, offset by $0.4 million from the positive impact of adopting IFRS 16. Lodging occupancy in the Quarter was consistent at 33%.
Outlook
In our MSS business, we expect continued growth in regions such as British Columbia, southern Ontario and the United States ("U.S."); supported by a healthy economy and strong activity levels in construction and infrastructure. The Company continues to focus on MSS fleet growth of 10% this year, supported by $25 to $30 million of capital investment in this segment throughout 2019. We expect cash flow generation to out-pace fleet growth due to continued increase in scale and additional product offerings through Value Added Products and Services ("VAPS"). Longer term, over the next five years, the Company's goal is to double the MSS fleet.
Within our WFS segment, we expect activity levels in the U.S. and Australian markets to remain robust, and the Canadian market has performed relatively in line with year-ago levels. However, we are optimistic that the Canadian market will show improved WFS performance into the second half of the year. This optimism is supported by previously announced contract wins related to a 908-bed turnkey project ("Sukunka") for the Coastal Gas Link project and a separate, smaller rental project in Kitimat, British Columbia. Install and transportation of the 908-bed Sukunka camp has begun in the second quarter with rent expected to begin in the third quarter. The smaller Kitimat rental project was installed in late March and is currently on rent. Our large WFS asset base continues to provide meaningful operating leverage to a recovery in activity levels. Our ability to move these WFS assets into diversified markets outside of the western Canadian energy sector is evidenced by our recently-announced $20 million rental contract to supply 1,584 beds to support the reconstruction of Paradise, California. Given our healthy bid log, we believe the market for private dormitory assets could tighten relatively quickly should a handful of infrastructure projects move forward over the next several quarters. Amongst this backdrop, we will remain disciplined with our pricing and capital allocation decisions while continuing to optimize our fleet by selling down underutilized assets.
LodgeLink, the Company's digital marketplace for workforce accommodation, continued to gain traction with customers and suppliers during the Quarter. LodgeLink now has over 520 properties listed, representing over 61,000 rooms of capacity across North America. We've begun expanding into the U.S. in 2019, with an increase in customers and listed properties. Our first U.S. bookings were completed recently, and we continue to expect growth in both customer and supplier volumes throughout the year.
Black Diamond exited the Quarter with net debt of $88.0 million, up slightly from $86.9 million at the end of 2018. Black Diamond's capital budget for 2019 remains unchanged. The Company expects to invest approximately $35 million of capital on a gross basis, which is expected to be funded with internally generated cash flow. Any excess cash flows is expected to be directed towards further debt repayment.
First Quarter 2019 Financial Highlights
| Three months ended March 31, | ||||||
| (in millions, except as noted) | 2019 | 2018 | Change | |||
| $ | $ | |||||
| Revenue | ||||||
| Modular Space Solutions | 22.5 | 14.1 | 60 | % | ||
| Workforce Solutions | 22.9 | 26.8 | (15 | )% | ||
| Total Revenue | 45.4 | 40.9 | 11 | % | ||
| Total Adjusted EBITDA | 8.1 | 8.6 | (6 | )% | ||
| Funds from Operations | 8.8 | 10.9 | (19 | )% | ||
| Per share ($) | 0.16 | 0.20 | (20 | )% | ||
| Loss | (2.7 | ) | (1.9 | ) | 42 | % |
| Loss per share - Basic and diluted | (0.05 | ) | (0.03 | ) | 67 | % |
| Capital expenditures | 8.3 | 1.3 | 538 | % | ||
| Property & equipment (NBV) | 336.6 | 362.2 | (7 | )% | ||
| Total assets | 418.2 | 416.0 | 1 | % | ||
| Long-term debt | 88.3 | 107.5 | (18 | )% | ||
Additional Information
A copy of the Company's unaudited interim condensed consolidated financial statements for the three months ended March 31, 2019 and 2018 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 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: Modular Space Solutions and Workforce Solutions. Learn more at www.blackdiamondgroup.com.
For investor inquiries please contact Jason Zhang at 403-206-4739 or investor@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 2019 capital plan, how such capital will be expended, expectations for asset 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, 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 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, 2018 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, Funded Debt, Tangible Book Value and Funds from Operations. 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 March 31, 2019 filed on SEDAR.
