Black Diamond Group Reports Fourth Quarter 2018 Results
March 5, 2019 - 6:20 PM EST
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Black Diamond Group Reports Fourth Quarter 2018 Results
CALGARY, Alberta, March 05, 2019 (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 ("2018" or the "Year") ended December 31, 2018 compared with the three and twelve months ended December 31, 2017 (the "Comparative Quarter"). All financial figures are expressed in Canadian dollars.
Black Diamond’s consolidated revenue in the Quarter rose 9%, but Adjusted EBITDA decreased to $6.6 million from $9.5 million in the Comparative Quarter. These results are due primarily to a weaker than expected operating environment in the western Canadian resource sector.
Revenue for the Quarter was $45.4 million, up 9% or $3.8 million from the Comparative Quarter mainly due to increased used fleet sales which was partially offset by a decrease in rental revenue in WFS.
MSS revenue for the Quarter of $22.5 million accounted for 50% of consolidated revenue.
Adjusted EBITDA (see "Non-GAAP Measures") for the Quarter was $6.6 million, down 31% or $2.9 million from the Comparative Quarter primarily due to lower rental revenue in WFS.
The Company's leverage position was significantly improved during the last twelve months as a result of a reduction in Net Debt from $112.6 million as at December 31, 2017 to $86.9 million as at December 31, 2018. The Company exited the year with a Funded Debt to EBITDA ratio of 2.95 (December 31, 2017 - 3.30) and a Funded Debt to Tangible Book Value ratio of 0.44 (December 31, 2017 - 0.55).
Financial Highlights:
Three months ended December 31,
Twelve months ended December 31,
(in millions, except as noted)
2018
2017
Change
2018
2017
Change
$
$
$
$
Revenue
Modular Space Solutions
22.5
20.0
13
%
73.1
65.0
12
%
Workforce Solutions
22.9
21.5
7
%
92.8
88.3
5
%
Total Revenue
45.4
41.6
9
%
165.9
153.4
8
%
Adjusted EBITDA
6.6
9.5
(31
)%
29.3
28.5
3
%
Funds from Operations
10.0
13.9
(28
)%
42.7
47.3
(10
)%
Per share ($)
0.18
0.25
(28
)%
0.78
0.89
(12
)%
Loss
(3.8
)
(78.8
)
(95
)%
(11.4
)
(95.4
)
(88
)%
Loss per share - Basic and diluted ($)
(0.07
)
(1.43
)
(95
)%
(0.21
)
(1.81
)
(88
)%
Capital expenditures
8.4
9.1
(8
)%
17.4
23.6
(26
)%
Property & equipment (NBV)
339.9
369.3
(8
)%
339.9
369.3
(8
)%
Total assets
403.3
430.9
(6
)%
403.3
430.9
(6
)%
Long-term debt
90.1
115.1
(22
)%
90.1
115.1
(22
)%
Revenue from sources outside of the western Canadian resource sector was approximately 70% of consolidated revenue for the Quarter (60% for the Year). Accordingly, management is encouraged by the continued traction shown in diversifying our overall platform.
Within our geographically diverse MSS segment, revenue in the Quarter of $22.5 million grew 13% from $20.0 million in the Comparative Quarter. MSS adjusted EBITDA of $5.2 million was slightly lower than EBITDA in the Comparative Quarter of $5.5 million due to modestly lower rental revenue, partially offset by higher sales and non-rental revenue. Lower year-over-year rental revenue in MSS was driven primarily by a decline in rates and utilization in the Alberta market due to a lack of resource sector infrastructure projects, slightly offset by continued strength in utilization throughout the Company’s other operating regions. MSS rental revenue has increased steadily since its low point in Q1 2018.
The Company’s WFS segment generated revenue in the Quarter of $22.9 million, up 7% from $21.5 million in the Comparative Quarter. WFS adjusted EBITDA in the Quarter declined to $4.8 million from $6.9 million in the Comparative Quarter due to lower contribution from higher-margin rental revenue in the Quarter.
Subsequent to the Quarter, the Company extended its revolving operating facility, with a new maturity date of April 30, 2021. All other terms of the $100 million facility are unchanged, along with the $75 million accordion feature.
Outlook
Management's outlook into 2019 is constructive. The MSS business is planning for continued organic expansion which is expected to be supported by roughly $25 to $30 million of capital investment throughout the year. Fleet growth will be focused primarily in regions where the Company is seeing ongoing strength in rates and utilization. This includes our British Columbia, Ontario, and United States MSS markets which are by and large being driven by strong economies and robust general construction activity. While rates in our Alberta market remain well below peak, utilization has strengthened considerably and management expects continued improvement in this market in 2019. As Black Diamond continues to grow the MSS fleet, management anticipates that growth in bottom line performance in this business should outpace fleet growth due to increased scale and the expected continued growth of Value-Added Products and Services ("VAPS"). The Company’s longer term vision for its MSS business is to double the fleet count over the next five years, while maintaining discipline on achieving strong returns on investment.
Our WFS business is benefiting from continued strength in the United States and Australian markets. The Company’s WFS assets in these regions are nearly fully utilized and are experiencing continued momentum against a backdrop of supportive rental rates. Management expects to invest $5 to $10 million of growth capital in the United States and Australia in 2019. The WFS segment in Canada has been challenging and ongoing weakness throughout the back half of 2018 has carried into the first quarter of 2019. However, management expects an improvement in this business moving forward as recently awarded contracts related to LNG development in western Canada are expected to provide a base-line of activity with little-to-no requirements for additional capital spending. The Company announced in late January that it had received formal notice to proceed on a $42.5 million, 908-bed turnkey project, and announced a separate award of a 304-bed rental project in Kitimat. Both projects are expected to begin generating revenue throughout the first half of 2019. While visibility into Q2 2019 is somewhat limited, management anticipates that certain lodges will benefit from maintenance and turn-around activity, which will help offset an expected seasonal slow-down in lodges geared towards drilling and completion activity.
The Company’s digital marketplace for workforce accommodation, LodgeLink, continued to gain traction with customers and suppliers during the Quarter. LodgeLink now has over 430 properties listed, representing over 53,000 rooms of capacity within workforce lodges and hotels across Canada. The Company has begun to sign up properties in the United States onto the platform, which management believes will result in continued adoption from our nearly 250 unique corporate customers who booked over 83,000 room nights in 2018. Modest capital investment has been allocated to further development throughout 2018 and into 2019 to continue building on the rapid growth this business has displayed.
Given continued growth and capital investment in our MSS business, combined with improving WFS performance driven by contracts in hand and active Australian and U.S. markets, management expects 2019 to show improved EBITDA generation compared to 2018.
Black Diamond’s balance sheet ended the year with net debt of $86.9 million, down from $112.6 million at the end of 2017. Management anticipates that the 2019 capital budget will be funded through internally generated funds, and that any excess cash flows, either from asset sales or continued improvement in the Company’s business, will go towards further debt repayment.
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 were $8.4 million for the Quarter and $17.4 million for the Year. Capital commitments were $10.9 million as at December 31, 2018. This is compared with capital expenditures of $9.1 million and capital commitments of $2.5 million in the Comparative Quarter. Capital expenditures for the Quarter included maintenance capital of $0.2 million, compared to $0.3 million in the Comparative Quarter.
Proceeds from used fleet asset sales in the Quarter were $6.2 million compared with $2.9 million in the Comparative Quarter.
Additional Information
A copy of the Company's audited consolidated financial statements for the years ended December 31, 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.
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.
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, management's assessment of Black Diamond's future operations and what may have an impact on them, growth in MSS fleet, financial performance, business prospects and opportunities, changing operating environment including increased activity levels, amount of revenue anticipated to be derived from current contracts or asset sales, anticipated debt levels, and future growth and profitability of the Company. 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 and twelve month periods ended December 31, 2018 filed on SEDAR.
