Black Diamond Group Limited

Thank you for standing by. This is the conference operator, and welcome to Black Diamond's third 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 ask a question, 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 like now to turn the conference over to Mr. Jason Zhang, Investor Relations Specialist. Please go ahead.

Thank you. Good morning, and thank you for joining Black Diamond Group's third quarter 2024 results conference call. On the line with us today is Chief Executive Officer Trevor Haynes and CFO Toby Labrie, as well as COO of Modular Space Solutions, Ted Redmond, and COO of Workforce Solutions, Mike Ridley. 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 previous calls, such as adjusted EBITDA or net debt. For more information on these terms and others, please review the sections of Black Diamond's third quarter 2024 Management's Discussion and Analysis. entitled Forward-Looking Statements, Risks and Uncertainties and Non-Gap 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 CDR Plus website at www.cdrplus.ca. Dollar amounts discussed in today's call are expressed in Canadian dollars unless noted otherwise and may be rounded. I will now turn the call over to Trevor Haynes to review this quarter's operational highlights.

Thank you, Jason. Good morning and thank you all for joining. I'll provide a high-level overview of operating results and key areas of focus and then pass the call over to Toby Labrie to provide additional financial highlights and a more in-depth look at each segment's performance. I'll start by saying that I am pleased with the performance of the company and highly appreciative of the great work being done by our team across the platform. Our long-term strategies of steadily growing our diverse MSS segment, diversifying our WFS businesses, and scaling up LodgeLink are working as evidenced in our Q3 and year-to-date results, and even more so from a multi-year trend perspective. I'll provide more detail on each, but first the Q3 high-level numbers. On a consolidated basis, we achieved revenues of $101.2 million. and adjusted EBITDA of $28.8 million, down 14% and 21%, respectively, from a very strong comparative quarter. The comparative quarter included contribution from a number of unique items, upon which Toby will elaborate. The all-important return on assets, or ROA, came in at 19.3%, which is in line with the 19.9% realized in Q2 of this year, and net profit of $7.4 million, and earnings per share of $0.12 are lowered by 46% and 30% respectively when compared to Q3 2023. Management considers rental revenue operations and rental revenue to be Black Diamond's core business. The company generated a combined $37.9 million of rental revenue in the quarter, which is up $2.6 million sequentially from Q2, but down 4% from Q3 of 2023. Of note, consolidated contracted future rental revenues as of September 30th of $163.8 million were up 27% from the prior period and up $25 million sequentially from Q2. This, we believe, speaks to the strength and stability of our core rental platform, the non-speculative nature of our growth capex, and the steady tailwinds to be being experienced in end-market demand, especially in education. To state the obvious, this volume of firm-contracted future rental revenue provides strong forward visibility on Black Diamond's recurring cash flow generation. Within the business units, MSS saw rental revenue grow by 11% to another quarterly record of $24.5 million. This is offset by a 23% decline to $13.4 million in WFS rental revenue from the comparative quarter, due primarily to the completion of two large pipeline construction camps and a large emergency relief project in the comparative quarter. However, this is sequentially slightly higher than Q2 of this year. Consolidated utilization at the end of the quarter was a solid 75.8%. with MSS at 80.3% and WFS at 63.5%, compared to 80.0%, 83.1%, and 73% in the comparative quarter, respectively. Overall, management believes that the company's utilization and average rental rate trends on a year-over-year and multi-year basis are very healthy in the context of current and long-term industry trends. Year-to-date capital expenditures of $94.5 million, including $9.3 million of maintenance and refurbishment capex, is up $39.1 million, or 85% in the first three quarters of 2024 compared to the first three quarters of 2023. Fleet sales of $18.6 million compares to $13.7 million in the comparative period. Net capex is therefore 75.9 million year to date. This includes an acquisition of a third party fleet for 20.5 million, which closed in Q2. The MSS fleet has increased by 981 units since Q3 of 23, or 9%, to 12,299 units. The WFS fleet count has reduced by 464 units, or 7%, to $6,113 compared to the Q3-23 period. Outstanding capital commitments at the end of the quarter were $17.6 million, or 20% higher than compared to quarter. The majority of this capex is for fleet growth and with customer contracts already in place. In summary, the underlying fleet growth is solid with a generally non-specative complexion which points to continued rental revenue growth and the expected growth in ancillary and VAPS revenues. Turning now to our other revenue lines, we are very pleased with the performance of our LodgeLink business unit as it continues to scale at an accelerated pace, delivering record gross bookings of $27.2 million and record net revenue of $3.4 million, up 31% and 26% respectively from the comparative quarter, and up 11% and 17% on a sequential basis from Q2. Total room nights sold in the quarter rose 34% from the comparative quarter to a record $147,560. On an annualized basis, LodgeLink now handles over $100 million of gross revenue trade, and growing. MSS custom sales volumes of $16.3 million decreased 25% from a strong comparative quarter, but were up from $13.2 million in Q2 of this year. Project backlog and work in process levels continue to be in line with prior year. However, permitting and site access delays continue to hamper the company's completion timelines. As such, management expects the Q4 will realize higher year-over-year sales revenues as delayed projects from recent quarters are completed. Non-rental of $21.9 million increased 24% from the comparative quarter, due in large part to increased field-level transportation and install services, especially in the education sector. The MSS VAS revenue grew 16% from the comparative quarter to $2.2 million. WFS sales revenue of $4.3 million was up 126% from the comparative quarter due to continued opportunistic sales of unutilized large format camp assets in Canada. Non-rental revenue was $12.7 million, down 38%, and large services revenue of $8.1 million was down 51% from the comparative quarter, both due primarily to the previously referenced lower field level activity related to the two large pipeline camp projects that were completed in the comparative quarter. As I said at the beginning of my comments, our long-term strategic objectives are being realized. MSS rental revenue has a five-year compounding annual growth rate, or CAGR, of 22.7%, with the WFS rental revenue CAGR of 9.2%. Our consolidated rental revenue for the entire company as a compounding annual growth rate over the five-year period of 16.8%. And Lodge Hunt continues to scale volumes and revenues at 30% plus per year with a five-year gross booking annual growth rate of 22.2%. However, this includes the pandemic-impacted years where travel spend fell significantly. Our core rental revenues continue to grow. Our fleet performance on utilization and ROA is solid. Our future contracted rental revenue is at five-year-plus record highs, and our organic growth CapEx profile is very strong with a non-spectative complexion. Forward visibility for rental performance is very good, as is our view of continued growth for LodgeLink. Based on this visibility, the board has the confidence to increase the company's annual dividend by 17% to 3.5 cents quarter, starting with Q4 of this year. I will now turn the call over to Toby.