Black Diamond Group Limited

Thank you for standing by. This is the conference operator. Welcome to Black Diamond's first quarter results conference call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then 0. I would now like to turn the conference over to Jason Zhang, Vice President, Capital Markets. Please go ahead, sir.

Thank you. Good morning, and thank you for joining us today for Black Diamond Group's first quarter 2024 results conference call. On the line with us are CEO Trevor Haynes and CFO Toby Labrie, as well as COO of Modular Space Solutions, Ted Redman, COO of Workforce Solutions, Mike Ridley, and COO of LodgeLink Capital Markets. Please be reminded that our discussions today may include forward-looking statements regarding Black Diamond's future results and that such statements are subject to a number of risks and uncertainties. Actual financial and operational results may differ materially from these forward-looking expectations. Management may also make reference to various non-GAAP financial measures in today's call, such as adjusted EBITDA or net debt. For more information on these terms and others, please review these sections of Black Diamond's first quarter 24 management's discussion and analysis entitled, Forward-Looking Statements, Lists and Uncertainties in Non-GAAP Financial Measures. This quarter's MD&A financial statements and press release may be found on the company's website at www.blackdiamondgroup.com and also on the CR Plus website at www.crplus.ca. Dollar amounts discussed in today's call are expressed in comedian dollars unless otherwise noted and may be rendered. I will now turn the call over to Trevor Haines to review this purpose-operated highlights. Thank you, Jason. Good morning, and thank you for joining us and for taking the time today. Revenue of $73.5 million and adjusted EBITDA of $19.4 million, down 10% to 9%, from the comparative quarter, are admittedly light. We believe this to be transitory as it relates to timing of our variable custom sales revenues and, in part, to one-time front-end make rating costs. Chief among these factors is the lower than expected custom sales revenue from our US MSS division and lower associated operations revenues of transport and install. This is a timing issue, as our backlog of custom projects remains strong, as is our bid log and conversion rate, which leads us to believe that we will substantially catch up to typical or even stronger volumes on a full year basis. WFS incurred costs in the quarter for the relocation of camp assets from Western Canadian pipeline projects to our Eastern Canada terminal to strategically meet strong demand for future deployments. As well, WFS incurred a meaningful amount of upfront costs to open a large camp in Northeastern Alberta Supported by contracted mandates, this location is up and operating with strong volumes expected from Q2 through year-end and into 2025. Important to point out, the core rental business remains on solid footing with consolidated rental revenue of $35.1 million, which grew 2% year-over-year, despite the conclusion of two sizable pipeline projects in our WFS segment. The company has significantly grown and diversified our stable recurring rental revenues for the past six years. The continued strength of this focus can clearly be seen in this quarter's results. Our rental platform is robust with over $137 million in future contracted rental revenue, which supports our positive outlook for the balance of 2024 and beyond. We have a strong organic growth profile at the moment with committed capex higher than prior year with contract coverage in place for the bulk of this pre-build. Based on secured contracts, we expect solid growth in education in all three countries, which will bolster our contracted revenue heading into the latter part of this year and into 2025. Likewise, we have an active M&A pipeline, which could further accelerate the company's growth. MSS suggested EBITDA of $14.5 million decreased 10% year-over-year, which, as mentioned earlier, was driven substantially by lower sales revenue, which was down 55% year-over-year. This also negatively impacted associated non-rental revenues tied to these projects. We believe this is a quarterly aberration due to timing of certain projects. The MSS sales pipeline and backlog remain healthy, and we anticipate a catch-up in the coming quarter and throughout 2024, which will result in substantially higher sequential sales and non-rental revenues. MSS results remain healthy at its core, with rental revenue of $21.5 million, up 5% over the comparative quarter. Average rental rate per unit was up 9% on a constant currency basis. while utilization of 81% remains sound. Our consolidated utilization remains healthy and, in fact, at the upper end of the optimal range. Our MSS segment exited the quarter with contracted future rental revenue of approximately $103 million, a 5% increase over the comparative quarter with average rental duration of 53 months. We are pleased with the WFS performance in the quarter following the conclusion of two large pipeline projects in late 2023. WFS rental revenue of $13.6 million compared to $14 million in the prior year and adjusted EBITDA was also essentially flat over the comparative quarter at $10.9 million due in part to the prior mentioned one-time strategic relocation and cap opening costs. The rental revenue and EBITDA performance was achieved through significantly higher rental rates, offsetting a decline of 780 basis points in rental utilization, which finished at 63.5% in the quarter. Contracted future rental revenue is up 5% from prior year to $34.6 million, which leads us to expect rental revenue performance to remain relatively stable in the short term as we mobilize and redeploy assets in a higher rate environment and anticipate a return to rental revenue growth in the latter part of 2024. Our opportunity set is being driven by a broad and diverse set of customers across North America and Australia as we are seeing attractive opportunities in several verticals including mining and energy, infrastructure development, disaster relief, transitional and social housing, and other temporary accommodation requirements for government and industry applications as they arise. Our Australian operations remain a focus as we continue to strategically deploy additional growth capital in the country. We anticipate sustained rental revenue growth in this region supported by a strong education and government sector, continued activity with certain energy and mining customers, and expansion of our space rentals footprint with a new location recently opened in Melbourne. We expect that the increasing diversification of our WFS segment by geography, industry, and customer will lead to ongoing stability in rental revenue with higher degrees of predictable growth. Turning to LodgeLink, our innovative workforce travel platform, which continues to scale and sold over 115,000 room nights in the first quarter, a 9% increase compared to the same period in 2023. Q124 gross bookings rose 16%, with net revenue margins improving 20 basis points to 12.1%, and resulting in a net revenue increase of With an expanding base of corporate customers and the ongoing support of our supply partners that represent over 1.5 million rooms of capacity across North America and 15,000 properties, LodgeLink continues to scale and is expected to drive improving profitability levels throughout 2024. In summary, we encountered an air pocket in quarterly results due to mostly transitory causes, But overall, our rental platforms continue to show strength with demand tailwinds in end-market verticals such as education and infrastructure construction, where summer months are typically busiest. Our sales pipeline remains very healthy, and we anticipate strong uptake of organic growth capital investment throughout the year. Lifeline continues to scale, and most recently, we are seeing new daily volume records being set. Our M&A pipeline is increasingly active, and while we cannot predict timing or certainty with respect to deals, we have historically supplemented our ongoing growth with the good check-in acquisitions along the way. And that will very much remain a part of our playbook going forward. I'll now turn the call over to our CFO, Toby Labrie, for a more in-depth look at our financial position. Thanks Trevor and good morning everyone. The strength and diversity of our recurring rental revenue streams exemplify the value proposition of Black Diamond's diverse platform.

Our capital structure and strong balance sheet remain instrumental in funding our organic growth across multiple regions while giving us optionality to further support growth through strategic acquisition opportunities as they arise. In Q1 2024, we invested $17.3 million into organic growth capex, or 9% more than we did in Q1 2023.