Black Diamond Group Q1 2026 Earnings Report

Black Diamond Group EPS Results

• Actual EPS: C$0.04
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Black Diamond Group Revenue Results

• Actual Revenue: $129.98 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Black Diamond Group Announcement Details

• Quarter: Q1 2026
• Date: 4/30/2026
• Time: After Market Closes
• Conference Call Date: Friday, May 1, 2026
• Conference Call Time: 11:00AM ET

Black Diamond Group (TSE:BDI) Ltd 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. Besides, 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 its 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.

Black Diamond Group Q1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Consolidated results — Revenue was CAD 130 million (+27% YoY) and Adjusted EBITDA CAD 32 million (+21% YoY), with rental revenue up 16% and contracted future rental revenue of CAD 142.5 million, signalling stable, compounding core performance.
• Positive Sentiment: Workforce Solutions upside — WFS revenue was CAD 81.5 million (+54%) with Adjusted EBITDA CAD 18.9 million (+48%); utilization is 56.5% with ~6,000 ready-to-deploy beds and management cites a >CAD 1 billion pipeline, though deployment timing remains uncertain.
• Positive Sentiment: Strong balance sheet & liquidity — Net debt was CAD 330.7 million (2.1x trailing EBITDA at the low end of target), free cash flow was CAD 17.8 million, and the asset-based lending facility was expanded to CAD 550 million, providing capital flexibility.
• Positive Sentiment: LodgeLink growth & product upgrade — LodgeLink total trade value rose 52% to CAD 32.7 million (net revenue +37%), and management expects the new LodgeLink 3.0 to reach beta this summer with general availability later in 2026, which could materially improve economics as adoption scales.
• Negative Sentiment: EPS and execution headwinds — EPS fell by CAD 0.06 largely due to additional depreciation/amortization from the Royal Camp acquisition, share issuance and higher stock‑based compensation, and ERP/integration work plus uncertain timing on large nation‑building projects present execution and timing risks.

Presentation

[Operator]

Welcome everyone to the Black Diamond Group first quarter 2026 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you'd like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Emma Covenden, VP Investor and Stakeholder Relations. Please go ahead.

[Emma Covenden, VP of Investor and Stakeholder Relations at Black Diamond Group]

Thank you. Good morning and welcome to Black Diamond Group's first quarter 2026 results conference call. With me this morning we have Chief Executive Officer, Trevor Haynes, Chief Financial Officer, Toby LaBrie, Chief Operating Officer of Modular Space Solutions, Ted Redmond, Chief Operating Officer of Workforce Solutions, Mike Ridley, and President of Royal Camp Services, Jon Warren. 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.

[Emma Covenden, VP of Investor and Stakeholder Relations at Black Diamond Group]

For more information on these terms and others, please review the sections of Black Diamond's first quarter 2026 Management's Discussion and Analysis entitled Forward-Looking Statements, Risks and Uncertainties, and 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 SEDAR+ website at www.sedarplus.ca. Dollar amounts discussed in today's call are expressed in Canadian dollars unless noted otherwise and may be rounded. The format for today will be similar to prior calls. Trevor will start with a high-level overview of the company's performance and highlights from the quarter, including our view of the current and forward-looking operating environment. Trevor will then pass the call over to Toby for a more in-depth summary of the financials, including details of the quarter, and then we will open the line for question and answer.

[Emma Covenden, VP of Investor and Stakeholder Relations at Black Diamond Group]

With that, I'll turn the call over to Trevor.

[Trevor Haynes, CEO at Black Diamond Group]

Thank you, Emma Covenden, good morning, everyone. Thank you for joining our earnings conference call today. Yesterday afternoon, Black Diamond Group reported our first quarter 2026 results, showcasing continued stability across the platform. Consolidated revenue of CAD 130 million increased by 27% with Adjusted EBITDA of CAD 32 million, up 21% from the comparative quarter. These results are inclusive of contribution from Royal Camp Services, which was acquired in November of 2025. Consolidated rental revenue increased 16% year-over-year to CAD 43.8 million, driven by disciplined capital allocation for organic fleet growth, optimal and steady utilization, and moderate rate improvement.

[Trevor Haynes, CEO at Black Diamond Group]

Contracted future rental revenue totaled a robust CAD 142.5 million at quarter end, which we continue to view as healthy and supportive of activity levels as we progress through the year and into the next. This trend of compounding performance across the business is not only a result of our well-defined growth strategies and strong leadership across the platform, but also the ability and character of our high-performance teams. Thank you all for your dedication to safety and serving our customers, disciplined focus on execution, and relentless commitment in creating value for our stakeholders. Total capital expenditures were CAD 16.8 million, consistent with the comparative quarter, and capital commitments at quarter end totaled CAD 26.5 million, largely allocated toward contract-backed asset additions.

[Trevor Haynes, CEO at Black Diamond Group]

The organic reinvestment in the business underscores our commitment to putting our shareholders' capital to work prudently and in a manner that garners the highest rates of return. Given this, we will maintain our disciplined capital deployment approach and further scale our fleet in line with end market demand. Beyond organic growth of the business, the company is also well-positioned to take advantage of all capital allocation mechanisms at our disposal, including accretive inorganic opportunities, debt repayment, and return to shareholders through dividends or share buybacks. Our recent expansion of the asset-based lending facility to CAD 550 million from CAD 425 million with an uncommitted accordion of CAD 75 million at preferred terms ensures we have the financial flexibility to continue scaling business. Looking ahead, our outlook remains constructive with convexity of optionality across the business.

[Trevor Haynes, CEO at Black Diamond Group]

We continue to see stable baseline performance across all our operating businesses, underpinned by high margin recurring rental revenues and generally healthy end market dynamics across Canada, United States, and Australia. For WFS, the breadth and volume of opportunities in our pipeline suggests the nation-building thematic in Canada is indeed of substance and the pending impact of asset deployment on fleet utilization is a matter of timing. We remain bullish on our ability to unlock the significant operating leverage in this area of the business, but caution a realistic assumption on the timing of this scenario. MSS remains a resilient cash generative business with clear runway for growth, underpinned by strong fundamentals and tailwinds in the infrastructure and construction verticals. While U.S. public sector education funding uncertainty has impacted the cadence of new sales, we expect this to stabilize moving forward.

[Trevor Haynes, CEO at Black Diamond Group]

Finally, we are encouraged by the exponential growth trends we're seeing in LodgeLink. This performance reinforces its accretive potential, which we expect to compound as the platform moves toward general availability of its new generation 3.0 product as we exit 2026. To summarize, we are pleased with the results of the company in the first quarter and expect similar steady near-term performance to carry through the first half of the year with the potential for a more pronounced acceleration in the back quarters. With strong financial flexibility, disciplined capital allocation, best-in-class operational execution, and a growing base of high-margin rental revenue, we are well-positioned to continue compounding value through 2026 and beyond. With that, I'll now turn the call over to Toby.

[Toby LaBrie, CFO at Black Diamond Group]

Thanks, Trevor. Good morning, everyone. I'll focus today on the results of our segments, margins, and balance sheet. First, I'll address earnings per share for the quarter. While EPS declined CAD 0.06 from the comparative quarter, the decrease was due to several circumstantial factors versus any indication of eroding business performance beyond its typical episodic nature, as shown through our growing consolidated revenue, EBITDA, and cash flow. First, the impact of depreciation and amortization related to the acquired Royal Camp business had a CAD 0.075 impact on EPS. EPS was also impacted by shares issued in conjunction with the Bot deal and acquisition of Royal Camp Services last year.

[Toby LaBrie, CFO at Black Diamond Group]

Higher stock-based compensation due to the increased share price and moderated activity in the company's legacy WFS operations due to the prepayment of a large U.S. contract in Q4 2025, partially offset by meaningful contributions from Royal Camp and stable performance from MSS. With respect to specific business unit performance, I'll begin with Workforce Solutions, where revenue of CAD 81.5 million increased 54% and Adjusted EBITDA of CAD 18.9 million was up 48% from the comparative quarter, driven primarily by large services growth and contributions from Royal Camp Services. Utilization for the segment was 56.5%, leaving meaningful available fleet capacity as we look to significant opportunities on the horizon. MSS generated rental revenue of CAD 26.8 million, up 5%, with Adjusted EBITDA of CAD 19.4 million consistent year-over-year.

[Toby LaBrie, CFO at Black Diamond Group]

Utilization remained within the optimal range at 77.7%. Average monthly rates increased 3% on a constant currency basis. We continue to see strength in our value-added products and services with VAPS revenue increasing 35%, driving VAPS as a percentage of rental revenue to 10.8%, which continues to be an important focus and driver of margin expansion. LodgeLink delivered a strong quarter with total trade value of CAD 32.7 million, an increase of 52%, generating net revenue of CAD 3.7 million, up 37%. Total travel segments increasing 15% to 154,979 from the comparative quarter.

[Toby LaBrie, CFO at Black Diamond Group]

From a balance sheet perspective, Net Debt at quarter end was CAD 330.7 million, with Net Debt trailing twelve-month Adjusted Leverage EBITDA of 2.1x, remaining at the low end of our target leverage range. Liquidity at quarter end was CAD 93.3 million prior to the CAD 125 million expansion of the ABL facility, providing flexibility to support further growth. The average interest rate paid on debt during the quarter was 4.21%, which was 62 basis points lower than the comparative quarter as benchmark interest rates are lower year-over-year. Business's ability to generate stable and growing free cash flow supported by a strong balance sheet remains a defining characteristic of Black Diamond.

[Toby LaBrie, CFO at Black Diamond Group]

In the first quarter of 2026, we generated CAD 17.8 million of free cash flow, representing a 5% increase from the comparative quarter. We also continue to make progress on the ERP implementation. Total investment to date is approximately CAD 9.3 million, with roughly CAD 2.6 million remaining. Project is on schedule with this phase of MSS and corporate scheduled to go live in the current quarter. To reiterate Trevor's comments, we remain confident in the performance of the business. The near-term outlook is steady from these first quarter results, with meaningful improvements expected in the second half of 2026 due to seasonal education and construction sector-related activity. Continue to gain confidence in a further potential positive inflection point beginning as early as late 2026, aligned with progress on major nation-building, infrastructure, and resource projects in Canada.

[Toby LaBrie, CFO at Black Diamond Group]

While the timing of large-scale construction project starts often extends beyond initial expectations, their extended duration once underway has historically provided durable multiyear demand that we believe we are well-positioned to capture over time. With that, operator, I'll ask you to open the call for questions.

[Operator]

As a reminder, if you'd like to ask a question in today's call, simply press star followed by one on your telephone keypad. We'll just take a brief moment to compile the Q&A roster. Your first question comes from the line of Kyle McPhee from ATB Cormark. Your line is live.

[Kyle McPhee, Analyst at ATB Cormark]

Hi, everyone. I just wanna start on the workforce demand wave on the way here. I'm hoping you can help us quantify some of the upside potential here. Do you expect to be able to start utilizing all of your unutilized camp fleet assets over the midterm? You know, is the demand coming down the pipe enough to soak up all of your excess fleet? You know, notably when you're layering your odds of winning a chunk of this business on the way.

[Trevor Haynes, CEO at Black Diamond Group]

Morning, Kyle. Thanks for the question. The simple answer is yes, although there's many factors involved. Certainly what we're looking at here from my perspective, having been involved in remote accommodation business for a better part of 40 years, I don't think I've ever seen a pipeline of active project bidding like we have today. By that, I mean the breadth of what we're seeing, certainly across pretty much every type of mining across the country as well as energy infrastructure, basically coast to coast and across the north when you pull in the Canadian military initiatives. From that perspective, you know, we're very optimistic, and it's based on what we're seeing in our pipeline.

[Trevor Haynes, CEO at Black Diamond Group]

When we add up the number of beds of demand, when we think of everything that we're quoting to, it does exceed the available capacity. We've got about 6,000 beds of ready-to-deploy assets. We have to get into the nuance of, well, which projects go ahead in the near term and in what combination and how do we align? I would say, Mike, we're really well-positioned with regard to our First Nations partners, you know, our relationship with customers, et cetera, et cetera, our capabilities. Maybe add a little bit more granular color.

[Mike Ridley, COO of Workforce Solutions at Black Diamond Group]

I mean, if and when these go, whether FID is, you know, later this year or early next year, Trevor's point with some of our partnerships that we have in Western Canada in particular, we're very well-positioned and poised to win our fair share of work and, you know, even beyond these nation-building projects, the sales pipeline in all of our markets right now is very, very active. When you look at mining in Eastern Canada, for example, even in the West, construction, government spend, disaster relief, homelessness, oil and gas in the Duvernay and Montney is also very active. In moving down into the U.S., solid oil and gas sector.

[Mike Ridley, COO of Workforce Solutions at Black Diamond Group]

Construction, everybody's talking about data centers these days and what they bring and benefiting potentially for Black Diamond, not only our workforce business, but we're very active with our MSS business on data centers as well. Over into Australia, again, a really strong resource sector, construction, government, education. Yeah, I would agree with Trevor's comments around I've been in the industry since 97, in terms of what the sales pipeline looks like, it's as strong as I've ever seen it.

[Trevor Haynes, CEO at Black Diamond Group]

As much as we talk about the timing with regard to major projects and sort of the front-end ramp-up, characteristics of those projects, it's important to point out there's many smaller projects around mining, et cetera, that are mobilizing now. There isn't this sort of gap we're looking at before the bigger projects, pick up, and that's what gives us the confidence of current operating levels. Jon, anything to add from the Royal perspective?

[Jon Warren, President of Royal Camp Services at Royal Camp Services]

Yeah.

[Trevor Haynes, CEO at Black Diamond Group]

Quick to point out to investors, we now have the full menu, so to speak, of providing catering along with assets. The opportunity is even bigger.

[Jon Warren, President of Royal Camp Services at Royal Camp Services]

Oh, yeah, definitely. The timing is the key thing. You know, even with some starting, what's coming off and how do those roll into the other projects, I think that'll be a big part of it. As far as the operational side goes, you know, ramping up for that, I think we have good opportunity to roll the operations into those different projects as they come on.

[Trevor Haynes, CEO at Black Diamond Group]

To summarize, Kyle, we really like what we're looking at in our opportunity pipeline. We're very active, and we do believe we're really well-positioned with the great Royal team and platform added to the Black Diamond capabilities. We just need the thematic to evolve over the next months and we believe we'll see activity gradually climbing.

[Kyle McPhee, Analyst at ATB Cormark]

Okay. That's a lot of good color. Really appreciate it. Trevor, you mentioned, you know, you add up the total potential pipeline of sector-wide camp bed demand. Can you share what that kind of total pipeline number is sector-wide?

[Trevor Haynes, CEO at Black Diamond Group]

Well, it's complicated because you get some elements of duplication where you have multiple subcontractors bidding on the same pipeline project, et cetera. You know, it's difficult for us to comment. I would say, you know, netting out of that, I mean, we're well in excess of CAD 1 billion of high quality outstanding bids. You know, that's being somewhat conservative. I'm sure you can get read-throughs from some of our general contractor customer partners and what they're looking at and how they talk about their or their the bid pipeline, et cetera. I think ours would chime with theirs.

[Kyle McPhee, Analyst at ATB Cormark]

Yeah. I'm not even just talking specific to Black Diamond. Just if all projects in the pipeline come to fruition sector-wide, you know, how many more beds are needed? I think some of your peers are kind of softly indicating, you know, 10,000-15,000 more beds, maybe more. Does that sound ballpark accurate?

[Trevor Haynes, CEO at Black Diamond Group]

Certainly. I think in the scenario if all of these large projects go ahead, most of the existing beds, you can leave aside who wins prime contracts, et cetera, and how we organize amongst the industry. Pretty much everything existing will be needed to go out. Then we get into a question of, it's been a long time since any meaningful capacity has been built for remote accommodation in Canada. You know, what is the capacity of the supply chain? It's sort of an open question. What we wanna focus on currently is making sure we're positioned to service our customers on the immediate opportunity. We've got reasonable amount of capacity to match with that.

[Trevor Haynes, CEO at Black Diamond Group]

As we work through it, we'll start taking up the question of how to strategically add capacity if that's what's needed.

[Kyle McPhee, Analyst at ATB Cormark]

Do you expect this type of demand to benefit your MSS segment as well? I mean, you just briefly mentioned the U.S. data centers might benefit both segments. All these big infrastructure projects across Canada, is that a WFS beneficiary only, or do you expect it to be meaningful for MSS?

[Trevor Haynes, CEO at Black Diamond Group]

No, it's absolutely an opportunity for the MSS platform as well. All of these remote locations also require the temporary project offices, office, hard wall laboratories, security training buildings all over these project sites. You know, areas of infrastructure build that aren't remote and don't require or not to the extent that the truly remote projects do require temporary accommodation for trades. They still require the site infrastructure for all the various types of temporary buildings. We think the thematic applies to both MSS and WFS. Ted, when we look at the U.S. side for MSS, the data center opportunity is much bigger for our box modular platform than for our workforce platform. Maybe a bit of color on that, Ted.

[Ted Redmond, COO of Modular Space Solutions at Black Diamond Group]

Yes. These data center projects are large construction projects. The data center trend has been going on for 10 years, and we've been participating in it over the last 10 years. What's changed is the dollars being put into it have increased dramatically. I think there's well over CAD 1 trillion of data center projects in the U.S. We're participating in this growth. We've got long-term contractor customers who we're renting construction complexes to house their construction staff. Once you get on a project, they keep adding in more buildings on the sites that they have. Once you get on a site, your buildings stay on for quite a long time. We're currently on a significant number of data centers, and we think that that's gonna continue.

[Trevor Haynes, CEO at Black Diamond Group]

If we switch back to the Canadian nation-building thematic, any nukes in Ontario at Darlington, et cetera, Bruce, infrastructure and around our major cities, high speed rail, this is all right down the fairway for MSS, Ted.

[Ted Redmond, COO of Modular Space Solutions at Black Diamond Group]

There's almost a trillion CAD of Canadian infrastructure projects. All the ones Trevor mentioned, and we're strong in the Ontario market. We're already working on a number of those infrastructure projects and bidding on the ones that are coming forward.

[Trevor Haynes, CEO at Black Diamond Group]

Thanks, guys.

[Kyle McPhee, Analyst at ATB Cormark]

Okay. Appreciate all the answers. Thanks, guys.

[Operator]

Your next question comes from the line of Frederic Bastien from Raymond James. Your line is live.

[Frederic Bastien, Analyst at Raymond James]

Good morning, everybody. It's been, I guess, nearly 6 months that you've had, that Royal Camp Services has been under your ownership. Can you just indicate how well the acquisition's going? Is it going on plan? Any, anything that we, you can point to that would help in our modeling as well?

[Trevor Haynes, CEO at Black Diamond Group]

Thank you, Fred. The integration, at Toby, we've done close to 35 acquisitions. Many great outcomes. I would say so far with Royal, it's probably the quickest and most seamless integration from a people perspective. Really great alignment. The Royal team are a really good solid group of professionals, and it's fit in well with our team. We're already working in concert on the commercial side. Looking at all the assets as one asset pool as we match up against opportunities. From that perspective, it's gone well. Some of the synergies, I think, Mike and Jon, we've replaced external caterers with Royal to really positive effect and picked up a element of margin in operated facilities.

[Trevor Haynes, CEO at Black Diamond Group]

You know, it takes a bit longer on the system side for switch over of ERP, et cetera. I would say from integration, that's the work that's left to do. Big risk of whether or not the businesses have good social fit, I think is pretty low. Jon, maybe you can.

[Jon Warren, President of Royal Camp Services at Royal Camp Services]

Yeah. I honestly couldn't see it going any better. You know, since the six months has just flown by. Seems like, in a way it was yesterday, but it seems like it was so far back. The teams just came together in every department very well. You know, our IT is fully integrated now. We're on the Black Diamond platform, going very well. The catering operations at Sunset Prairie, we're getting great accolades there. As you mentioned, now we're hitting that margin. We moved into a couple drill camps as well, and we're working together on that. You know, the cross-marketing between the platforms. Royal was speaking of that and how we can bring MSS into Workforce, and we've got several units out in place in different locations. Very happy with it.

[Trevor Haynes, CEO at Black Diamond Group]

I think the exciting part is being able to bring the full turnkey across the Black Diamond platform.

[Jon Warren, President of Royal Camp Services at Royal Camp Services]

Yeah

[Trevor Haynes, CEO at Black Diamond Group]

The asset platform to the Royal platform.

[Jon Warren, President of Royal Camp Services at Royal Camp Services]

Yeah. Yeah.

[Trevor Haynes, CEO at Black Diamond Group]

The upside is in the new revenues we should be able to capture.

[Jon Warren, President of Royal Camp Services at Royal Camp Services]

Yeah.

[Trevor Haynes, CEO at Black Diamond Group]

That would be more difficult on our own. Hopefully, that addresses your question, Frederic.

[Frederic Bastien, Analyst at Raymond James]

Yes, that's helpful. Could you address seasonality of the business? How do we think about, you know, historically as we go into the spring breakup, things slow down with respect to energy services company. How is Royal similar to that or not similar?

[Trevor Haynes, CEO at Black Diamond Group]

Yeah. When you think about the energy sector, the way it works today is much different than the old shallow drilling days. I mean, we see less and less seasonality, but I'll have Jon-

[Jon Warren, President of Royal Camp Services at Royal Camp Services]

Yeah

[Trevor Haynes, CEO at Black Diamond Group]

Mike comment on that.

[Jon Warren, President of Royal Camp Services at Royal Camp Services]

You know, up in some of the open camps, we do have the drilling rigs that do quiet down for, you know, pretty much the month of April. It's also the start of turnaround season. What we lost in drilling, we gained in turnaround. Right behind that.

[Trevor Haynes, CEO at Black Diamond Group]

Turnaround at the oil sands.

[Jon Warren, President of Royal Camp Services at Royal Camp Services]

Yeah, the oil sands side of things. We're starting to see the rigs starting to come back in May, so it was a very short breakup. It's not like it was, you know, 10 years ago or 15 years ago, where it would be a three month season where it was very quiet, so.

[Trevor Haynes, CEO at Black Diamond Group]

Be quick to point out a lot of the Royal revenue comes from long-term operating camps where Royal is providing the turnkey service. Good deal of that is mining related.

[Jon Warren, President of Royal Camp Services at Royal Camp Services]

Yeah. Yeah. Mining is very, it's constant. It doesn't really have a season where it slows up.

[Trevor Haynes, CEO at Black Diamond Group]

A little less seasonality, Frederic, currently and going forward, is our expectation.

[Mike Ridley, COO of Workforce Solutions at Black Diamond Group]

Just one other thing. I feel like I talk about it every quarter. It's just, again, our core strategy in being more diversified and not necessarily focused on oil and gas, I think really balances out the year very nicely in terms of the type of work that we're focused on in all sectors, where it is much less seasonal than it was to Jon and Trevor's point, years ago.

[Frederic Bastien, Analyst at Raymond James]

Awesome. One more from me, please. Yeah, one more from me, please.

[Trevor Haynes, CEO at Black Diamond Group]

Yeah.

[Frederic Bastien, Analyst at Raymond James]

MSS, obviously, you have grown this business through acquisition in the past. You were busy on the Workforce side last year. You also did an acquisition in Lodging. How's the M&A landscape looking for that particular space rentals business? Thank you.

[Trevor Haynes, CEO at Black Diamond Group]

Oh. Yeah, we maintain a healthy pipeline, as you know. Ebbs and flows, the number of platforms that are looking to sell. Also, we have competition, so it's hard to predict when and whether we're able to complete something, but we're always working on it, and I think we've got a pretty good reputation in our industries as good buyers. Would point out on the MSS side, the industry is more and more consolidated, and so there's just fewer pieces out there. So, you know, our first means of growth is organic. Where we have strong end market demand, we're leaning in. It's a lower risk, actually higher return set, way to grow. If we can augment that with some tuck-ins, we'd be very happy.

[Trevor Haynes, CEO at Black Diamond Group]

I don't know if there's anything you would add there, Ted.

[Ted Redmond, COO of Modular Space Solutions at Black Diamond Group]

Well, we're putting out a significant amount of capital, over the last five years, our target is to

[Ted Redmond, COO of Modular Space Solutions at Black Diamond Group]

Good strong organic growth. We've got a whole series of growth strategies we're working on around that. We're definitely looking for opportunities in all of our markets where we've got high utilization, high customer demand, and we try to make sure that we have the fleet available to meet that customer demand.

[Trevor Haynes, CEO at Black Diamond Group]

We've got the dry powder to transact. For all the analysts on the call, maybe nudge your investment bankers to bring us some fantastic ideas.

[Frederic Bastien, Analyst at Raymond James]

Thank you.

[Operator]

Your next question comes from the line of Razi Hasan from Paradigm Capital. Your line is live.

[Razi Hasan, Analyst at Paradigm Capital]

Good morning. Thanks for taking my questions. Maybe just one on gross margin. Could you maybe give us some indication on how you see gross margin levels for the remainder of the year?

[Trevor Haynes, CEO at Black Diamond Group]

Good morning. Thanks for the question. I think let's go straight to you, Toby.

[Toby LaBrie, CFO at Black Diamond Group]

Yeah. Thanks, Razi, for the question. Our margins within our existing revenue streams are continue to remain fairly consistent. We expect those to remain fairly consistent. The biggest fluctuation you'll see is generally with the revenue mix itself. As we have higher rental revenue, rental revenue being our highest margin business, lodging, kind of, following up as the second, and then our non-rental being the lower margin business. As that mix changes from quarter to quarter, you'll see changes in our overall margin levels. With Q1 being relatively light on sales and non-rental, seeing a bit higher gross margin levels overall.

[Toby LaBrie, CFO at Black Diamond Group]

As we see higher sales volumes and higher overall revenue, typically in Q3 when we have more education sales and non-rental related activity, in particular, we tend to see a bit our overall margins dropping a little bit. Overall, on a full year basis, we expect things to be pretty consistent year-over-year.

[Razi Hasan, Analyst at Paradigm Capital]

Okay. That's helpful. Then maybe just one more. I think you mentioned earlier, Trevor, just in regards to having a realistic timeline for capital deployment on nation-building projects. Could you maybe talk about how you think utilization levels in the workforce segment, you know, carry through for the remainder of the year? You're at 56.5% or so now. You know, how do you see that ending by the end of the year?

[Trevor Haynes, CEO at Black Diamond Group]

Yeah, I mean, that's something we look at and try to forecast out here. It's not an exact science because even when projects go to field level execution and we expect, you know, a few that are in the headlines to move forward this year, the front-end work of preparing sites and starting to move the initial capacity for housing trades, you know, there's a ramp-up element to it. Some of these locations are complicated, impacted by weather and various restrictions on action, et cetera. What we expect to see is being able to give indication that we are mobilizing on larger projects, and then you would see operations type of revenue upfront as we begin to move assets in place.

[Trevor Haynes, CEO at Black Diamond Group]

A ramp-up on each project as the capacity grows to peak demand alongside of the number of trades that are going into the site. That isn't exactly a 1%, you know, increment. They do go out in blocks, and so you're gonna see these sort of staircase step changes in utilization as we progress to a higher utilization run. I'm not sure if that's a very precise answer for you, but that's the way we think about what happens over the next, you know, 3, 4, 5 quarters here.

[Razi Hasan, Analyst at Paradigm Capital]

Yeah, that's helpful. Thanks. I'll pass the line.

[Toby LaBrie, CFO at Black Diamond Group]

Thanks.

[Operator]

Your next question. Oh, sorry about that. Your next question comes from the line of John Gibson from BMO Capital Markets. Your line is live.

[John Gibson, Analyst at BMO Capital Markets]

Morning, all. When we think about unused capacity out there for workforce, you know, you and your peers report in the mid-fifties utilization. Based on increasing work and labor housing requirements, is most of this equipment able to go back to work, or could we reach a point where we maybe need new build workforce housing more quickly than expected?

[Trevor Haynes, CEO at Black Diamond Group]

Morning, John. Thanks. To begin with characterizing the condition of our unutilized fleet, our view is that when we talk about 6,000 beds of capacity, that essentially all of that is in market-ready condition. There's always a little bit of work as we assemble them. You know, an air conditioner might not turn on or something, and so we have a little bit of maintenance capital. But we do believe that the fleet is ready for market. As we said earlier, based on what we see in the pipeline, there are scenarios where demand could exceed our internal capacity.

[Trevor Haynes, CEO at Black Diamond Group]

We think we've got arrangements in place that would allow us to access other equipment existing in the market to be able to meet demand prior to that coming the decision of how to add new manufacturing capacity into our system or into our industry. We, we kinda have a sort of a staged view of how utilization may exceed what we have available in our system. Again, our capacity is marketable with very little capital required to get it to market, if that's the primary question.

[John Gibson, Analyst at BMO Capital Markets]

Yeah, I guess that answers my question mostly. I just was wondering, like, are we seeing a higher level of customization now that may require some new build equipment that's not in your existing fleet, more closely than expected?

[Mike Ridley, COO of Workforce Solutions at Black Diamond Group]

Yeah, I don't, I don't think much. I mean, we are putting in, just to sort of add on to Trevor's answer. Yeah, I think the short answer is that most of our units are ready to go with minimal capital required to get them to the market. Customization, project-specific with good term, good customer, good returns, we will certainly look at deploying capital in that regard. Some of our other asset types are like I'll describe as our small format asset. We are adding capital in that area. 3-person sleepers, 4-person sleepers, self-contained units, drill camps. Not necessarily a huge piece of the pie, but we're putting capital into that to serve some of the changing dynamics in the oil and gas sector, for example. What the market's demanding.

[Mike Ridley, COO of Workforce Solutions at Black Diamond Group]

It's also because we're essentially fully utilized with those assets that work more upstream, in the Montney.

[Trevor Haynes, CEO at Black Diamond Group]

Yeah. With that, we're seeing rate improvement in that particular area as well. Yeah. The, the base large format fleet though, is ready to go.

[John Gibson, Analyst at BMO Capital Markets]

Great.

[Mike Ridley, COO of Workforce Solutions at Black Diamond Group]

Sorry, I was just gonna mention the type of fleet that we have goes well with the demand. The layouts and such is exactly what is being asked for.

[Trevor Haynes, CEO at Black Diamond Group]

Normally private washroom format.

[Mike Ridley, COO of Workforce Solutions at Black Diamond Group]

Yeah.

[Trevor Haynes, CEO at Black Diamond Group]

The combination of-

[John Gibson, Analyst at BMO Capital Markets]

Okay

[Trevor Haynes, CEO at Black Diamond Group]

... Black Diamond and Royals fleet just mesh as well.

[John Gibson, Analyst at BMO Capital Markets]

No, that's great. That answers it. Second one, can you talk more specifically about military-related spending and how you're positioned? Are you seeing demand more on the WFS or MSS side and, you know, just I guess, how are you positioned with government qualifications, that sort of stuff to win your share of work there?

[Trevor Haynes, CEO at Black Diamond Group]

Yeah, interestingly, we've been spending time building relationships with Canadian military and government procurement for the better part of say four years. Emma also handles our government relations. We've positioned ourselves quite well with our security clearances and certifications, et cetera. We did create a new corporate entity called Black Diamond Defense Services based in Ottawa with the skill sets for being able to effectively interact and work with those customers on the specifics of what they need. When we think about that, it's opportunity for all three businesses, MSS, WFS, as well as LodgeLink, and with various partners to take on expanded scopes to provide larger turnkey contract outcomes for Canadian military.

[Trevor Haynes, CEO at Black Diamond Group]

We're running in parallel or some opportunities that are moving forward quite quickly. I think, like Jon Warren, we're gonna see a project deployment that's of some magnitude, likely over the next six months.

[Mike Ridley, COO of Workforce Solutions at Black Diamond Group]

Yeah.

[Trevor Haynes, CEO at Black Diamond Group]

Show revenue, from military.

[Mike Ridley, COO of Workforce Solutions at Black Diamond Group]

Yeah. Yeah. It's, we've got a project we're working on right now that potentially is looking good for Q3 for deployment and operations, to handle workforce accommodations on one of those projects.

[Trevor Haynes, CEO at Black Diamond Group]

Infrastructure build, it should be five, six, seven year.

[Mike Ridley, COO of Workforce Solutions at Black Diamond Group]

Yeah.

[Trevor Haynes, CEO at Black Diamond Group]

Wow. Short answer, we've been working on it for a while. We're positioning as best we can, and we've got real opportunities in that vertical.

[John Gibson, Analyst at BMO Capital Markets]

Okay, great. Appreciate that. Last one from me. Not sure if you can even answer this, what percent of your U.S. business would be data center levered now, and where could this get to over the next few years?

[Trevor Haynes, CEO at Black Diamond Group]

Not sure we have that on hand, Ted, but maybe you do.

[Ted Redmond, COO of Modular Space Solutions at Black Diamond Group]

I don't have an exact number for you. I think it's increasing part of our business. Our business is very diversified. You know, we're in many of the major markets in the U.S. Southwest and the U.S. East. Those cities have a lot of different projects going on them. Data centers are not uniformly distributed. There are some states where there's more data centers like Texas, and we've got significant data center activity in Texas. Other states are less data center friendly.

[Ted Redmond, COO of Modular Space Solutions at Black Diamond Group]

It is a much less than 50% of our construction activity in construction. If you look in our MD&A, you can see is only a portion of our total revenue. It's a meaningful, but, you know, a growing segment of our business.

[John Gibson, Analyst at BMO Capital Markets]

Got it. I really appreciate the responses. I'll turn it back to you. Thanks.

[Trevor Haynes, CEO at Black Diamond Group]

Thanks, John.

[Operator]

Your next question comes from the line, Vritti Munjal from Canaccord Genuity. Your line is live.

[Vritti Munjal, Analyst at Canaccord Genuity]

Hi, everyone. Thanks for taking my question. I'm filling in for Matt. You've indicated LodgeLink 3.0 is progressing towards general availability. Could you give us some color on the timeline and how should we expect the economics of the new platform relative to the current platform? Kinda more specifically, does it improve the revenue margin structurally, or do you see, like, more volume-driven benefits?

[Trevor Haynes, CEO at Black Diamond Group]

Yeah, thank you for the question. We're really excited about what's happening at LodgeLink. We've done a lot of work in positioning LodgeLink for its next phase, and we've been working at that, as we've talked about 3.0 for the better part of 15, 16 months now. The new product, which is sort of a much more integrated, more dynamic type of workforce travel solution, is really compelling. We're just moving from pilot phase to advanced pilot. We expect to have the product in beta this summer and at a certain point this fall. Don't have an exact date yet. We'll see how beta goes. We expect to have general availability or GA.

[Trevor Haynes, CEO at Black Diamond Group]

As we get there'll be a maturing of the revenue model that we anticipate will bring in a new type of user or revenue to add to the margins that we enjoy on the supply and through our intermediary partners. At the same time, our customer sign-ups, even prior to 3.0 availability, have been really quite strong, and retention of our largest long-term customers continues to be high 90s to 100%. We've got lots of validation points that what we're doing is adding value in the ecosystem of demand and supply. Really what we're doing here is really complicated itineraries of moving large groups of people around. We're really excited. We think we'll get to GA later this year.

[Trevor Haynes, CEO at Black Diamond Group]

How quickly the inflection point will show, certainly our KPIs will give a strong indication, but it is business-to-business sale and business-to-business sort of operational behavioral change for our customers' teams. There's an element of transition timeline there, but we hope to have some really good data points to indicate whether the product is hitting the market or the target market by late this year. Nothing has changed in our view about how large this addressable market is. We've got good traction in Australia, and we're looking more broadly at Asia-Pacific, and we just think this is gonna be a tremendous part of our business as we continue to move through the next phase. Thank you for asking.

[Vritti Munjal, Analyst at Canaccord Genuity]

Yeah, that's very helpful. Just one more for me. With regards to the Spencer Group integration, this quarter you've the margin compression this quarter you've attributed to Spencer Group corporate travel mix. Is 11%-11.5% the right steady-state margin that we that we expect for LodgeLink, or do you expect, say, the crew accommodation business to re-accelerate and pull up the blended margin back to the 12%-13% range we've seen before the acquisition?

[Trevor Haynes, CEO at Black Diamond Group]

The blended margin is. If we look at the business without the Spencer Group of Companies revenues added, we actually had slight margin improvement that we would ascribe to elements of economy of scale as we're just handling more and more volume. When we blend in the more traditional travel management revenue streams, the margins are lower. You know, it's a profitable small business part of our LodgeLink platform. Mostly the intent was to get the infrastructure, the IATA licenses, et cetera, to be able to grow our LodgeLink business in Australia. Why do I point that out? Because we anticipate seeing significant growth on the LodgeLink side, you know, moderate growth on the traditional travel management. The margins, even on a blended basis, will increasingly be influenced by the LodgeLink side.

[Trevor Haynes, CEO at Black Diamond Group]

You should see gradual improvement as that mix changes, based on the different growth levels of the two types of revenue stream. Hopefully, that makes sense to you. I don't know, Toby, if I explained that well enough.

[Toby LaBrie, CFO at Black Diamond Group]

Yeah. Yeah, I think that's right. I think the, you saw the margins blend down, even though we were seeing margin expansion in year-over-year. As Trevor mentioned, as we continue to see that mix of revenue shift towards stronger growth on the accommodation side, we should see that on a sequential quarterly basis continue to improve.

[Trevor Haynes, CEO at Black Diamond Group]

Thanks again for the question.

[Operator]

That concludes the question and answer session. I would now like to turn it over to Trevor Haynes for closing remarks.

[Trevor Haynes, CEO at Black Diamond Group]

Thank you. Thank you everyone for joining today. Once again, we're pretty pleased with how the business is operating. We think we've got a great deal of optionality as we look forward with a nice stable base and a compounding core business here. Thanks again to our teams across the platform for their great work. Hope everybody has a great day and a good weekend. Thank you.

[Operator]

That concludes today's meeting. You may now disconnect.

Participants

Executives

• Emma Covenden, VP of Investor and Stakeholder Relations
• Mike Ridley, COO of Workforce Solutions
• Ted Redmond, COO of Modular Space Solutions
• Toby LaBrie, CFO
• Trevor Haynes, CEO

Analysts

• Frederic Bastien, Analyst at Raymond James
• John Gibson, Analyst at BMO Capital Markets
• Jon Warren, President of Royal Camp Services at Royal Camp Services
• Kyle McPhee, Analyst at ATB Cormark
• Razi Hasan, Analyst at Paradigm Capital
• Vritti Munjal, Analyst at Canaccord Genuity