SOURCE: Black Diamond Group Limited

Black Diamond Group Limited

May 10, 2017 17:00 ET

Black Diamond Reports First Quarter 2017 Results

CALGARY, AB--(Marketwired - May 10, 2017) - 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 ended March 31, 2017 (the "Quarter") compared with the three months ended March 31, 2016 (the "Comparative Quarter"). All financial figures are expressed in Canadian dollars.

Black Diamond completed a strategic $41.0 million acquisition of the Britco rentals business in British Columbia effective March 1, 2017. This acquisition within BOXX Modular increased the business unit's fleet size by approximately 50%, and gives Black Diamond a leading position in the British Columbia work space solutions market while providing additional size and scale to the Company's existing BOXX Modular operations. This acquisition, combined with the three smaller scale acquisitions within the BOXX Modular business unit also completed in the past six months, is expected to further diversify Black Diamond by continuing to scale its non-resource business lines, broaden its geographic footprint, expand its customer base, and increase future cash flow stability for the business.

The results of the Company's BOXX Modular expansion over the last 18 months have been modest to date, due mainly to offsetting weakness in Northern Alberta. However, given the recent sales pipeline activity and $9.6 million increase in contracted revenue subsequent to the Quarter, the Company expects the results of BOXX Modular to significantly improve beginning in the second quarter of 2017. Similarly, the Energy Services business unit is seeing improvement primarily as a result of wellsite accommodations utilization increasing, particularly in the Permian Basin where the Company has relocated a portion of its fleet. Relocation costs in the first half of 2017 are expected to offset this activity, with contributions significantly improving the earnings from the business unit in the second half of 2017.

In the resource markets Black Diamond serves, activity levels for remote workforce housing remain low. Previous project and spending announcements from industry participants are anticipated to influence activity levels in the field in late 2017, and into early 2018. Black Diamond's assets remain positioned to capture future increased activity resulting from customer capital project spending, however, activity levels in the first half of 2017 are expected to remain soft. In anticipation of this near-term weakness in operating activity, the Company successfully negotiated and amended its lending agreements. These amendments are expected to provide flexibility within the current environment and the ability to continue to pursue our growth and diversification strategies.

The results of the Quarter include a loss for the period of $5.5 million and Adjusted EBITDA of $4.6 million, compared with a loss of $2.4 million and Adjusted EBITDA of $17.2 million for the Comparative Quarter. Included in Adjusted EBITDA for the Quarter are annual US property tax costs, fleet relocation costs, and settlement of a significant trade receivable. Normalizing for these items and assuming a full quarter contribution from the Britco acquisition, Adjusted EBITDA would have been approximately $6.8 million. Adjusted EBITDA for 2017 continues to be in line with the guidance provided on March 6, 2017, which stated management's expectation for Adjusted EBITDA in 2017 to be in the range of $35.0 million to $45.0 million.

    
First Quarter 2017 Financial Highlights      
    
    Three months ended
    March 31,
(in thousands, except where noted) 2017 2016 Change
  $  $ %
Revenue      
 Camps & Lodging 21.4 32.1 (33)%
 BOXX Modular 10.1 13.3 (24)%
 Energy Services 5.0 5.5 (9)%
 International 1.5 1.5 -%
 Corporate and Other 0.2 0.5 (60)%
Total Revenue 38.2 52.9 (28)%
    
Total Adjusted EBITDA 4.6 17.2 (73)%
    
Loss (5.5) (2.4) 129%
Loss per share - Basic (0.12) (0.06) 100%
       - Diluted (0.12) (0.06) 100%
    
Capital expenditures 5.0 3.3 52%
Business acquisitions 42.0 - n/a
    
Dividends declared 3.7 5.1 (27)%
Per share ($) 0.08 0.13 (38)%
Payout Ratio 59% 30% 29%
    

HIGHLIGHTS FOR THE QUARTER

  • Black Diamond completed the acquisition of the modular workspace rental fleet and related assets, including the Britco brand, from Britco LP, a wholly-owned subsidiary of WesternOne Inc. (the "Britco Acquisition") for cash consideration of $41.0 million. The Britco Acquisition includes all of Britco's 1,896 rental fleet assets, working capital in the amount of $1.2 million, nearly 1,000 existing customer contracts, nine strategic First Nations agreements, and the transfer of all key personnel.
  • Black Diamond announced and closed a bought deal financing of 8.5 million common shares at a price of $3.75 per share to a syndicate of underwriters for gross proceeds of approximately $31.9 million, including the full over-allotment option. The net proceeds of approximately $30.0 million were used to repay the debt drawn to fund the purchase of the Britco Acquisition.
  • Net Debt (see "Non-GAAP Measures") at March 31, 2017 was $107.4 million, down 29% or $43.8 million from $151.2 million as at March 31, 2016 due to a net $30.0 million equity raise in March 2017, significant collection of accounts receivable, a lower dividend, lower capital spending and continued positive operating cash flows. In the Quarter, Black Diamond finalized amendments to its lending agreements intended to provide the borrowing capacity and flexibility to support further growth primarily in the BOXX Modular business unit. These amendments pertain to Black Diamond's credit facility, due in April 2019, and its senior secured notes, with maturities in July 2019 and July 2022.
  • At March 31, 2017, Net Debt (see "Non-GAAP Measures") to trailing twelve month Adjusted EBITDA (see "Non-GAAP Measures") was 3.63. The Funded Debt to Bank EBITDA ratio as at March 31, 2017 was 3.01 and 2.18 for the Comparative Quarter, compared to a debt covenant of 4.50:1 and 3.00:1, respectively. The Funded Debt to Bank EBITDA ratio includes trailing twelve months Adjusted EBITDA (see "Non-GAAP Measures") contributed from acquisitions.
  • On March 30, 2017, Black Diamond closed the sale of certain real estate properties for cash consideration of $11.4 million. A $2.5 million gain on sale of these properties was recorded in net income for the Quarter. Black Diamond contemporaneously entered into agreements to lease these properties from the purchaser for an average term of 10 years with options to renew. These operating leases are leased at current market rates with the lease costs recorded in administrative expenses beginning in April.

2017 Capital Plan
On March 13, 2017, the 2017 gross capital spending plan of $20.0 million was revised to $12.0 million. This includes maintenance capital which is estimated to be $1.5 million for the year, but does not include any proceeds of the normal course fleet sales that are projected to be $5.0 million for fiscal 2017. The 2017 capital spending plan remains unchanged with a focus on growth capital for the BOXX Modular space rentals business outside of Alberta. The capital plan will generally be non-speculative and support our overarching strategy to diversify the Company's platform.

Capital expenditures for the Quarter were $3.5 million, excluding a $1.5 million non-cash acquisition of wellsite accommodation units in Energy Services related to the settlement of accounts receivable. Capital expenditures for the Quarter included maintenance capital of $0.3 million, unchanged from the Comparative Quarter. Capital commitments were $3.2 million as at March 31, 2017. This is compared with capital expenditures of $3.3 million and capital commitments of $2.6 million in the Comparative Quarter.

Proceeds from used fleet sales in the Quarter were $0.6 million, compared with $2.0 million in the Comparative Quarter. Book value of total used fleet sales recognized in the Quarter was higher due to a used fleet sale recognized in the Quarter where proceeds were received in the fourth quarter of 2016.

Financial Review

  • Revenue for the Quarter was $38.2 million, down 28% or $14.7 million from the Comparative Quarter primarily due to the impact of low commodity prices on utilization and pricing in Camps & Lodging, Energy Services, International and to a lesser extent BOXX Modular, particularly in Northern Alberta.
  • Adjusted EBITDA (see "Non-GAAP Measures") for the Quarter was $4.6 million, down 73% or $12.6 million from the Comparative Quarter primarily due to the impact of low commodity prices on business activity in Western Canada. Full contribution from the Britco Acquisition will be realized in future quarters, which is anticipated to build on the base level of recurring revenue and average utilization rates. Also in the Quarter, the full annual cost of $1.4 million for US property taxes is recorded in BOXX Modular and Energy Services. This is an increase of 27% from the Comparative Quarter of $1.1 million.
  • Net loss for the Quarter was $5.5 million, compared with a net loss of $2.4 million in the Comparative Quarter. The loss in the Quarter was due to lower operating income described in the sections above, partially offset by the gain on sale of real estate properties.
  • Consolidated contracted future revenue at the end of the Quarter was $41.3 million, down 36% or $22.9 million from $64.2 million in the Comparative Quarter due to lower market activity resulting from lower commodity prices. From December 31, 2016, this represents a 7% increase, or $2.7 million from $38.6 million.
  • Days Sales Outstanding (see "Non-GAAP Measures") improved significantly, declining by 43% to 40 days at the end of the Quarter compared with 70 days for the Comparative Quarter.
  • Administrative expenses for the Quarter were $9.9 million, down 6% or $0.6 million from the Comparative Quarter due to reductions in compensation costs and personnel as management continues to optimize its cost structure. Costs were also down due to a reversal of bad debt expense for recovery of previously allowed accounts receivable. This is partially offset by acquisition costs of $0.6 million.

Dividend and Payout Ratio
The Payout Ratio (see "Non-GAAP Measures") for the Quarter increased to 59% compared with 30% in the Comparative Quarter due to lower funds available for dividends and an increase in the numbers of shares outstanding (see "Non-GAAP Measures").

Additional Information
A copy of the Company's unaudited interim condensed consolidated financial statements for the three month periods ended March 31, 2017 and 2016 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.

Conference Call
Black Diamond will hold a conference call and webcast tomorrow, May 11, 2017, at 9:00 a.m. MT (11:00 a.m. ET).

Chairman, President and CEO Trevor Haynes and Executive Vice President and CFO Toby LaBrie will discuss Black Diamond'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: 79806206). Please connect approximately 10 minutes prior to the beginning of the call.

Please log into the webcast 10 minutes before the start time at: http://edge.media-server.com/m/p/4nkt5eef

Slides to accompany the conference call can be accessed through https://join.me/BDI-Investors.

Following the conference call, an audio archive will be available in the Investor Events section of the Company's website at www.blackdiamondgroup.com.

Reader Advisory

Forward-Looking Statements
Certain information set forth in this news release contains forward-looking statements including the amount of funds that will be expended on the 2017 capital plan, how such capital will be expended, Adjusted EBITDA guidance, 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, amendments to Black Diamond's debt instruments; economic life of the Company's assets, future growth and profitability of the Company and realization of the anticipated benefits of acquisitions. 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, 2016 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, Days Sales Outstanding and Payout Ratio. 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, 2017 filed on SEDAR.

About Black Diamond
Black Diamond provides workforce accommodation, modular buildings, energy services, and full turnkey lodging and major project solutions including planning and management, logistics, and catering to customers in Canada, the United States and Australia. We serve diverse sectors including oil and gas, mining, power, construction, engineering, military, government, financial services and education.

Black Diamond has four core business units: Black Diamond Camps & Lodging, BOXX Modular, Black Diamond Energy Services, and Black Diamond International. Learn more at: www.blackdiamondgroup.com.

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