Earnings call transcript: Black Diamond Group Q1 2025 reports 287% profit rise

Black Diamond Group Limited reported a significant increase in profit for the first quarter of 2025, with earnings per share (EPS) of $0.09, slightly below the forecast of $0.0902. The company’s revenue of $102.2 million surpassed expectations of $90.7 million, reflecting a 39% year-over-year increase. Following the earnings announcement, Black Diamond’s stock surged by 7.91%, closing at $8.73, up from the previous close of $8.09. According to InvestingPro analysis, the company appears overvalued at current levels, though it has demonstrated strong fundamentals with a "GOOD" overall Financial Health score of 2.63 out of 5.

Key Takeaways

• Black Diamond’s Q1 2025 profit surged by 287% to $5.8 million.
• Revenue exceeded expectations, reaching $102.2 million.
• The stock price increased by 7.91% in after-hours trading.
• The company continues to focus on rental and accommodation services.
• ERP implementation remains on track for a 2026 go-live.

Company Performance

Black Diamond Group demonstrated robust performance in Q1 2025, driven by strong demand across its rental, accommodation, and workforce travel management segments. The company’s consolidated adjusted EBITDA rose by 37% to $26.5 million, reflecting its effective cost management and operational efficiency. With a healthy gross profit margin of 45.6% and a solid current ratio of 1.3, the company’s strategic focus on diversified geographies and end markets, including education and disaster recovery, has positioned it well for continued growth. InvestingPro data reveals the company has raised its dividend for 4 consecutive years, with a recent dividend growth rate of 16.67%.

Financial Highlights

• Revenue: $102.2 million, up 39% year-over-year
• EPS: $0.09, compared to $0.10 in the previous quarter
• Consolidated adjusted EBITDA: $26.5 million, up 37%
• Rental revenue: $37.8 million, up 8%
• Consolidated contracted future rental revenue: $161.6 million, up 18%

Earnings vs. Forecast

Black Diamond reported an EPS of $0.09, slightly below the forecast of $0.0902, resulting in a minor miss. However, the revenue of $102.2 million significantly exceeded the forecast of $90.7 million, marking a strong performance in the top line. The slight EPS miss did not overshadow the positive revenue surprise, which was a key factor in the stock’s positive reaction.

Market Reaction

Following the earnings release, Black Diamond’s stock rose by 7.91% in after-hours trading, reflecting investor optimism about the company’s revenue growth and future prospects. Analyst consensus is notably bullish, with a mean target suggesting 48% upside potential. The stock’s movement positions it closer to its 52-week high of $10.27, indicating strong market confidence. This positive trend contrasts with broader market volatility, highlighting Black Diamond’s resilience, supported by its beta of 1.05. For detailed valuation metrics and comprehensive analysis, investors can access the full Pro Research Report available on InvestingPro.

Outlook & Guidance

Looking ahead, Black Diamond maintains a positive outlook, with plans to continue its focus on profitable growth and diversification. The company is on track with its ERP implementation, targeting a go-live in the first half of 2026. With a strong Altman Z-Score of 4.33 indicating financial stability, and analysts forecasting EPS growth to $0.38 in 2025, future growth is expected to be supported by infrastructure and resource development projects, as well as expansion into specialized asset types such as at-risk housing and disaster relief. Discover more exclusive insights and detailed financial analysis with InvestingPro, including access to over 1,400 comprehensive Pro Research Reports.

Executive Commentary

Trevor Haynes, CEO, emphasized the company’s commitment to profitable growth and diversification, stating, "We continue to focus on profitable growth, diversification and scale of our portfolio." CFO Toby LaBrie added, "Our core objective of delivering strong returns and stable cash flows has not changed." These statements reflect the company’s strategic priorities and confidence in its business model.

Risks and Challenges

• Potential impacts from global tariffs and trade wars could affect supply chains.
• Fluctuations in demand for modular space and workforce solutions may impact revenue.
• Economic uncertainties in key markets like Canada, the US, and Australia pose risks.
• Maintaining high fleet utilization rates is crucial for sustaining revenue growth.

Q&A

During the earnings call, analysts inquired about the composition of sales revenue, with an emphasis on new versus used sales. Executives confirmed their satisfaction with the current size of the Workforce Solutions fleet. Additionally, there were discussions on LodgeLink’s growth dynamics and potential opportunities from Canadian infrastructure plans.

Full transcript - Black Diamond Group Limited (BDI) Q1 2025:

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.

I would now like to turn the conference over to Emma Covington, VP, Investor and Stakeholder Relations. Please go ahead.

Emma Covington, VP, Investor and Stakeholder Relations, Black Diamond Group: Good morning, and thank you for joining Black Diamond Group’s first quarter twenty twenty five results conference call. On the line today is Chief Executive Officer, Trevor Haynes and Chief Financial Officer, Toby LaBrie as well as Chief Operating Officer of Modular Space Solutions, Ted Redmond and Chief Operating Officer 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 today’s call such as adjusted EBITDA or net debt.

For more information on these terms and others, please review the sections of Black Diamond’s first quarter twenty twenty five management’s discussion and analysis entitled Forward Looking Statements, Risks and Uncertainties and Non GAAP Financial Measures. This quarter’s MD and A, financial statements and press release may be found on the company’s website at www.blackdiamondgroup.com and also on the SEDAR plus website at www.cedarplus.ca. Dollar amounts discussed in today’s call are expressed in Canadian dollars unless noted otherwise and may be rounded. It’s now my pleasure to turn the call over to Trevor Haynes to review the operational highlights. Trevor?

Trevor Haynes, Chief Executive Officer, Black Diamond Group: Thank you, Emma, and good morning, everyone. Thank you for joining us today. I’ll begin by providing a high level overview of operating results and key areas of focus for the company as we look to the coming quarters and then pass it over to Toby LaVries to provide detailed financial highlights. First, following the strong results of the recent year ended, management is very pleased to report the continuation of that trend with a robust first quarter across the platform and signs of continued momentum through the balance of ’20 ’20 ’5. This again underscores the effectiveness of our core growth and diversification strategies and ultimately the good hard work being done by our best in class team.

We continue to focus on profitable growth, diversification and scale of our portfolio of specialty rental, accommodation and workforce travel management businesses to generate strong returns and compound shareholder value. First quarter profit increased by 287% to $5,800,000 from the comparative quarter and basic earnings per share increased by 400% to $0.10 Black Diamond generated $102,200,000 of consolidated revenue, up 39% and consolidated adjusted EBITDA of 26,500,000 up 37% from the comparative quarter and a nine year record high. On a consolidated basis, rental revenue of $37,800,000 increased 8% from the comparative quarter. The company’s consolidated contracted future rental revenue was $161,600,000 up $24,500,000 or 18% from the end of the comparative quarter. We consider rental revenue to be Black Diamond’s core business and therefore are pleased with these results and the visibility we have on the stability of cash flow generation going forward.

We also have good line of sight on growth as a result of our continued commitment to reinvest in the business in line with our set hurdle rates of return. Within the quarter, capital expenditures were $17,200,000 with total capital commitments of 47,900,000 in place at quarter end, a 22% increase from the comparative quarter with most of the growth capital allocated to new fleet additions for contracted projects. ROA or return on assets improved three ten basis points from the comparative quarter to 17.4 and represents an attractive return profile given the long life and low maintenance characteristics of our rental assets. While the company favors reinvesting in the business at attractive rates of return and we continue to believe there is ample opportunity for this approach, we have concurrently been active through our NCIB share buyback program, through which we have repurchased an aggregate of 304,300 common shares for approximately $2,800,000 in the quarter. As we focus in on our respective business segments, key metrics and performance indicators show continued strength across each area.

To highlight a few, within MSS, revenue grew by 19% to $25,500,000 which is a first quarter record and sales revenue increased to $11,500,000 up 77% from the comparative quarter. While WFS rental revenue was down modestly by 10% at $12,300,000 this was offset with meaningful contributions from sales and lodge services revenues, which increased 15373% respectively from the comparative quarter. LodgeLink’s net revenue of $2,700,000 increased 4% from the comparative quarter and total room nights sold grew by 7%. Our healthy financial position remains with stable and growing free cash flow generation and a strong balance sheet, which Toby will touch on in more detail shortly. Before I pass the call over, let me address the macroeconomic headwinds resulting from the ongoing global tariffs and trade wars and the Canadian election.

While uncertainty indeed persists, the structure of our company and diversification across geographies and end markets positions us well to respond opportunistically. Black Diamond conducts business at scale across all our operating regions and does not typically sell or move assets between Canada and The United States, materially sheltering us from the direct impact of tariffs in the first instance. We continue to see demand across our local markets as shown through our steady utilization rates and strength in particular customer verticals that are not tied to typical economic drivers. These verticals are those such as education, humanitarian relief and disaster recovery. Of course, in line with our prudent and disciplined methodologies to assess risk as we grow the company, we will remain vigilant and continue to monitor the derivative effects of tariffs such as rising input costs for procurement of new assets or softening of customer activity levels.

In summary, Q1 twenty twenty five was another in a succession of very strong quarters for Black Diamond. Our effective growth strategies are firmly rooted in disciplined, prudent and return based capital allocation, complemented by ongoing operational excellence. With a substantial amount of future contract backed rental revenue, healthy free cash flow, ample liquidity and the bench strength of our best in class teams, we are well positioned to pursue our growth and operating strategies even against the backdrop of a rapidly changing macro environment. I will now turn

Toby LaBrie, Chief Financial Officer, Black Diamond Group: the call over to Toby for a more in-depth look at our quarter and overall financial condition. Toby? Thanks, Trevor, and good morning, everyone. Building on what was just covered, I’ll highlight fleet utilization and performance, review free cash flow and the balance sheet, and then provide an overview of progress made on our ongoing ERP implementation project. At the core of this quarter’s robust results is the correlating strong utilization of our fleet.

In Q1 twenty twenty five, our consolidated fleet utilization was at very healthy 75.9% with 80.8% utilization in MSS and 61.6% in WFS. MSS utilization was down slightly by 50 basis points from the comparative quarter, driven primarily by the timing of new fleet additions to meet future contracted project needs and continued strong demand. Management reiterates that MSS utilization remains at very healthy levels relative to long term industry trends. WFS consolidated utilization was relatively consistent with the comparative quarter. WFS Canada utilization remains above 50%, and we continue to see opportunities to drive incremental improvements.

U. S. WFS utilization of 71.4% remains healthy due to activity levels in various sectors, including energy and resource development, major infrastructure and government humanitarian relief projects. In Australia, utilization of 67.2% was below our expectations, primarily due to project timing issues on the customer side. However, confidence in the region remains based on the current pipeline of opportunities.

Complementing the strong utilization within the quarter was strong sales, non rental and large services revenue. Consolidated sales revenue was $21,600,000 which is an increase of 106% from the comparative quarter. Non rental revenue of $30,700,000 was also increased by 46% as a result of services associated with the rental and sale of our assets, including transportation, installation, maintenance and catering. Lodge services revenue was robust as well at $12,100,000 up 73% from the comparative quarter from increase due to occupancy and higher average rates. Our core objective of delivering strong returns and stable cash flows, primarily by efficiently and strategically managing our long lived rental asset fleet to generate sustained and compounding value over time has not changed.

Strong revenue growth across all segments drove free cash flow in the quarter of $16,900,000 up 80% from the comparative quarter and demonstrates the operating leverage in our business. Additionally, strong free cash flow enhances our flexibility, supporting further growth investments and enabling us to return capital to shareholders through dividends, share repurchases or both. The balance sheet remains in excellent condition. Long term debt and net debt of $229,300,000 and $217,800,000 both decreased by 3% sequentially from Q4 twenty twenty four. Our net debt to trailing twelve month adjusted leverage EBITDA ratio of 1.8 times is slightly below the low end of our targeted range of two to three times, resulting in $207,100,000 of available liquidity.

This amount is inclusive of the recent expansion and extension of our asset based lending facility, where the maximum available debt under the facility was increased by $100,000,000 to $425,000,000 and termed out to February 2030. The average effective interest rate on long term debt in the quarter was 4.83%, down 145 basis points from 6.28% in the comparative quarter and continues to move down in conjunction with the prevailing Bank of Canada rate. Finally, the core team executing Black Diamond’s new ERP implementation has been hard at work progressing the project, which remains on schedule and on budget. The transition for the MSS and corporate business units is well underway with $3,000,000 invested to date in the current phase and approximately $8,900,000 remaining from the initial budget of this phase. They’re on target for the plan to go live in the first half of twenty twenty six.

Again, we are very pleased with the company’s performance in the first quarter of the year and attribute these solid results to the dedication and performance of our hardworking team members across the company. We are poised to sustain our strong track record of providing an unmatched level of service to our customers, acting as a reliable partner within our networks, engaging our high performance team members and ultimately delivering a compounding return to our shareholders. With that, operator, I’d like to open the call for questions.

Conference Operator: Thank you. We will now begin the question and answer session. First question comes from Matthew Lee with Canaccord Genuity. Please go ahead.

Matthew Lee, Analyst, Canaccord Genuity: Hi, guys. Thanks for taking my question. Maybe just in terms of sales revenue, obviously, a very strong quarter from both segments. Can you maybe just talk about how that breaks down in terms of new versus used sales? And then maybe where you’re seeing opportunities to sell some of your used units, particularly in the Workforce Solutions segment?

Sure.

Toby LaBrie, Chief Financial Officer, Black Diamond Group: Thanks, Matt, and good morning. I think overall, our used fleet sales were fairly consistent with what we’ve seen in past quarters. On the MSS side, we did see a relatively weak quarter in Q1 twenty twenty four on the new manufactured sales side. And that was back at normal levels this quarter. So maybe Ted, if you want to comment on that?

Yes, I

Ted Redmond, Chief Operating Officer of Modular Space Solutions, Black Diamond Group: think you hit it right on. Our used sales were comparable to last year and our new sales were up. And as everybody knows, our new sales fluctuate up and down a bit quarter to quarter. And this Q1 was much more typical compared to a year ago Q1.

Mike Ridley, Chief Operating Officer of Workforce Solutions, Black Diamond Group: Matt, on the WFS side sorry, on the WFS side, customers will often come to us as well for new sale opportunities. And in this particular quarter, we had numerous ones that went through. And as it pertains to used asset sales, a lot of times, you could have a camp on a mine, for example, that they’re building out the mine over a period of time. And then when it turns from construction to operations, there’s a requirement to leave some or all those beds behind, and that can often happen, which can turn into sort of a used asset sale as well. Got it.

Kyle McPhee, Analyst, Cormark Securities: That’s

Matthew Lee, Analyst, Canaccord Genuity: helpful. Are you comfortable on the Workforce Solutions side with the size of your fleet? Or are you looking to maybe reduce it further through used sales?

Mike Ridley, Chief Operating Officer of Workforce Solutions, Black Diamond Group: No, we’re comfortable where it’s at right now. We’re and in some cases, actually, we’re looking to add in areas strategically, different type of assets. When you’re dealing with assets, for example, for at risk housing or disaster relief, it is a different type of asset often than a sort of a large camp going in. So we’re looking at deploying capital in those areas as well.

Matthew Lee, Analyst, Canaccord Genuity: Right. And maybe just sticking to Workforce Solutions. Contractor revenue looked really good quarter over quarter. Can you maybe talk about what end users are sort of driving that improvement? And how should we think about converting utilization over the next couple of quarters?

Mike Ridley, Chief Operating Officer of Workforce Solutions, Black Diamond Group: It’s really coming in a lot of different areas. There’s at risk housings. There’s disaster relief that we’re working on. There’s projects in Eastern Canada that are coming on stream. The U.

S. As well as we expect growth down there. And then over in Australia, which is really a microcosm of Black Diamond as a whole, which does both MSS and workforce business, classroom space rentals. So it’s not coming from one specific area necessarily. It’s broad based across the whole business.

Conference Operator: The next question comes from Kyle McPhee with Cormark Securities. Please go ahead.

Kyle McPhee, Analyst, Cormark Securities: Hi, everyone. I have questions on the MSF side. So specific to MSF rental revenue, this part of your business is heavily linked to fairly resilient and multiyear contracted types of revenue. Economic risk, overly relevant. But I think about onethree of your MSS fleet is deployed under more kind of transactional short term contracts.

So how is that pocket faring? Any signs of macro weakness starting to hurt utilization for that more transactional side of MSS rentals?

Ted Redmond, Chief Operating Officer of Modular Space Solutions, Black Diamond Group: I would say we’re seeing similar growth on both sides of the business, our transactional and what we call our modular business, which is some of the longer term educational contracts and other longer term industrial contracts. So the transactional holding up fairly steady across the system. Individual markets vary a little bit, but that’s the benefit of us being diversified by both end markets and geographically.

Kyle McPhee, Analyst, Cormark Securities: Got it. Okay. That’s great to hear. And then regarding MSS rental pricing, I think we all know you have this embedded price gains runway left at least well through the next year as contracts roll over and catch up the spot. But can you shed any light on what’s going on with MSS spot rental rates in this economic environment?

Are they also holding steady?

Ted Redmond, Chief Operating Officer of Modular Space Solutions, Black Diamond Group: Just the last part of your question. You said MSS box rental rates? Spot. Spot. Yes.

The spot is,

Toby LaBrie, Chief Financial Officer, Black Diamond Group: I

Ted Redmond, Chief Operating Officer of Modular Space Solutions, Black Diamond Group: would say, steady. So the increases in the spot have slowed down and it’s steady, but we still have renewals on contracts we signed three to five years ago that are going through. So kind of call that rental rate momentum, and we see that continuing. And obviously, the 11% year over year increase in unit rental rates reflects that continued momentum. At some point, that will start to slow.

So we’re just we’re keeping an eye on that and monitoring that.

Kyle McPhee, Analyst, Cormark Securities: Got it. Okay. Thanks for that color. And then last one, again, on MSS. Last quarter, you talked about organic growth CapEx being similar in 2025 to what you spent in 2024.

Now looking beyond your CapEx already committed, is that still the plan to be thinking this rate of growth CapEx? Or is any of this macro uncertainty kind of leading to you to kind of pull back on growth spending plans and flex that countercyclical free cash flow capability you have?

Trevor Haynes, Chief Executive Officer, Black Diamond Group: Yeah, we’re really well positioned, Matt, in terms of our ability to adjust CapEx based on what’s happening in the marketplace. For the most part, across the whole platform, but certainly in MSS, the bulk of the CapEx we commit already has customer contracts or specific projects linked to it. And so when you look at the CapEx and the cadence of CapEx currently within the system, the $17,000,000 in Q1, the $47,000,000 committed for expenditure at the end of the quarter. That’s at fairly low risk with good visibility of forward growth in terms of rental revenue. And so what we’re seeing from our market and the way we’re allocating capital is continued demand and we’re not changing our risk profile.

And we’re certainly not reducing our hurdle rate of return that we expect in terms of rental rate into the cost of an asset. And so what we’re seeing through our pipelines currently is enough recurring demand even in this environment for us to see similar levels of CapEx to prior year without taking any different risk in terms of utilization going forward.

Kyle McPhee, Analyst, Cormark Securities: Okay. That’s great to hear. Appreciate the color and I’ll pass it on.

Toby LaBrie, Chief Financial Officer, Black Diamond Group: Thanks, Doug.

Conference Operator: The next question comes from Frederic Bastien with Raymond James. Please go ahead.

Frederic Bastien, Analyst, Raymond James: Good morning, guys. Good morning. It’s hard to poke holes in your performance in the quarter, but we did see the rate of growth at Los Angeles decelerate somewhat. And I was wondering if you could provide a bit of color there. Wondering if there’s anything that was unusual or maybe one time that was behind that softness.

Trevor Haynes, Chief Executive Officer, Black Diamond Group: Yes. The growth rate at LodgeLink has flattened year over year. There’s a few reasons for that. There’s a couple of end market verticals that are a little bit softer in terms of volumes, specifically around some of the energy services customers, just slightly lighter volumes from prior year, which mutes the overall growth in terms of new customers or gain in share of existing companies, travel spend. We think that’s somewhat transitory based on commodity pricing in behind.

But we are seeing, which gives us confidence is our funnel in terms of new potential customers and the amount of opportunities for customer conversion into active trading is higher than we’ve seen in prior periods. And so it’s perspective to continuing to add to the number of customers. We also look at how many customers are actively transacting within the quarter or within the month and that continues to rise. However, we’re exposed to variances in our customers’ activity in terms of number of crew members and number of crews traveling, and so that creates some degree of variability. At the core of it, we don’t think there’s anything fundamentally changed in terms of the effectiveness of software being provided to the market nor the differentiating aspects of Loggly.

Frederic Bastien, Analyst, Raymond James: Thanks. Thanks for the detailed answer, Trevor. We just came off some elections, got a new premier or at least the Liberals are still in power, but they there’s obviously thoughts about what to do with respect to developing infrastructure exports the sorry, the export infrastructure to to handle, better movement of goods outside of The U. S. Potentially.

So I was wondering if you see any opportunities. I mean, we’re talking about the long term here, but anything that interests you or excites you about the potential plan by the federal government on a go forward basis?

Trevor Haynes, Chief Executive Officer, Black Diamond Group: It’s fairly easy to extrapolate benefits to the Black Diamond platform for any form of construction, infrastructure, development, and certainly an increase in the aggregate number of projects and the scale of those projects is all highly prospective for our business, whether it’s on the MSS side or all forms of temporary space around those projects or certainly for our workforce business where we need to accommodate trades in more remote locations. So any acceleration in timing of moving projects to FID to accelerating infrastructure build, accelerating resource extraction projects, even urban infrastructure, all of that would be beneficial to Black Diamond looking at it through the Canadian lens. So we’re hopeful that Canada will get busy, so to speak, in terms of building up infrastructure in all its forms. I guess if you think of the converse, if tariff threats were to dissipate between the two countries, we think that would augur good strong economic activity in North America. They also are of the mind that we would benefit from that.

So I guess the way I would put it is, worst case scenario is continued uncertainty and no firm policies would be moved. No firm activity being resulting from policy. But I don’t think that’s a likely outcome here.

Toby LaBrie, Chief Financial Officer, Black Diamond Group: Yes, we’re quite bullish here.

Matthew Lee, Analyst, Canaccord Genuity: Great. Thanks so much. Good luck.

Trevor Haynes, Chief Executive Officer, Black Diamond Group: Thank you.

Conference Operator: This concludes the question and answer session. I would like to turn the conference back over to Trevor Haynes for any closing remarks. Please go ahead.

Trevor Haynes, Chief Executive Officer, Black Diamond Group: Thank you for joining us today. Once again, we’re very pleased with the performance of the company, and we thank you for your interest in Black Diamond. Hope you have a great day.

Conference Operator: This brings to our close today’s conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

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