Black Diamond Group Q2 2026 Earnings Report

Black Diamond Group EPS Results

• Actual EPS: C$0.09
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Black Diamond Group Revenue Results

• Actual Revenue: $129.18 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Black Diamond Group Announcement Details

• Quarter: Q2 2026
• Date: 7/30/2026
• Time: After Market Closes
• Conference Call Date: Friday, July 31, 2026
• Conference Call Time: 11:00AM ET

Black Diamond is an industrial services and asset management company with two operating business units - Modular Space Solutions (MSS) and Workforce Solutions (WFS). Black Diamond operates in Canada, the United States and Australia. MSS, through its principal brands - BOXX Modular, CLM and Schiavi - owns a large rental fleet of modular buildings of various types and sizes. Its network of local branches rent, sell, service and provide ancillary products and services to a diverse customer base in the construction, industrial, education, financial, and government sectors. WFS, through its principal brands - Black Diamond Lodging and Accommodations, Royal Camp and Summit Camps and Primco Dene Royal Camp Services Limited Partnership - owns a large rental fleet of modular accommodation assets of various types and offers a full range of catering and hospitality services both in concert with and independent of the provision of modular accommodation facilities.

Black Diamond Group Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Revenue and recurring rentals grew strongly: Q2 revenue rose 23% to CAD 129.2 million, while consolidated rental revenue increased 17% to CAD 45 million and contracted future rental revenue remained healthy at CAD 136.5 million.
• Neutral Sentiment: Adjusted EBITDA increased 4% to CAD 30.4 million, but adjusted EPS declined to CAD 0.09 from CAD 0.18 due to lower margins from the Royal Camp lodging mix and higher depreciation, interest, and share-count costs. Management expects these acquisition-related pressures to be transitory.
• Positive Sentiment: Workforce Solutions has substantial growth potential: The company cited more than CAD 2 billion of formal bids across over 20 Canadian projects, while utilization was 55.2%, leaving significant capacity to support future deployments across mining, energy, infrastructure, data centers, and defense.
• Positive Sentiment: MSS rental revenue rose 8% and utilization reached 77.9%, supported by demand in Western Canada and the U.S.; Value-Added Products and Services revenue increased 35% to 11.7% of rental revenue, with management targeting mid-teens penetration over time.
• Positive Sentiment: LodgeLink delivered record growth: Trade value rose 69% to CAD 43.5 million, net revenue increased 64% to CAD 5.4 million, and travel segments sold grew 44%; management expects the upcoming software product launch to accelerate adoption and support further margin expansion.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. My name is Elaine, and I will be your conference operator for today. At this time, I would like to welcome everyone to Black Diamond Group's second quarter 2026 results. I'd like to remind everyone that 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 would like to ask a question during this time, simply press star followed by the number one on your telephone keypad to raise your hand and enter the queue. If you would like to withdraw your question, press star one again. Thank you. I will now turn the call over to Emma Covenden, VP, Investor and Stakeholder Relations. Your line is now open.

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

Good morning, and welcome to Black Diamond Group's second 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, adjusted EPS, or net debt. For more information on these terms and others, please review the sections of Black Diamond's second quarter 2026 Management's Discussion and Analysis entitled Forward-Looking Statements, Risks and Uncertainties, and Non-GAAP Financial Measures.

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

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 calls are expressed in Canadian dollars unless noted otherwise, and may be rounded. The format for today will be similar to prior conference calls. Trevor will start with a high-level overview of the company's performance and highlights for 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 from the quarter. Then we will open the line for Q&A. With that, I'll turn the call over to Trevor.

[Trevor Haynes, CEO at Black Diamond Group]

We appreciate each of you taking the time to join us for Black Diamond's earnings conference call today. Yesterday afternoon, the company reported its second quarter 2026 results, demonstrating continued stability across the platform as we enter the second half of the year. Consolidated revenue of CAD 129.2 million increased by 23%, driven by strength in recurring rental and lodging revenue streams, contributing to adjusted EBITDA of CAD 30.4 million, up 4% from the comparative quarter. The moderation in margin is a result of the company's evolving revenue mix following the acquisition of Royal Camps, with increased contribution from Lodge Services revenue, which includes catering and hospitality that has lower margins than our core rental businesses. Nonetheless, this area of the business is performing well, further diversifies our service offering, and provides a growing source of meaningful revenue and cash flow.

[Trevor Haynes, CEO at Black Diamond Group]

Consolidated rental revenue increased 17% year-over-year to CAD 45 million, and contracted future rental revenue remained healthy at CAD 136.5 million at quarter end, showcasing the resilience of this recurring revenue stream. The quarter reflected good progress against several strategic priorities, including the successful implementation of the new ERP system for our MSS and corporate divisions. This was completed by the team on time and on budget, even though it was a multi-year project for us. Moving forward, it positions the business well for scalable growth as opportunities across the platform accelerate, it also frees up key resources as we move into an accelerated operating environment. I'd like to thank our teams for their efforts and determination on this transformational project, which while rare for these types of projects, to be completed on time and on budget.

[Trevor Haynes, CEO at Black Diamond Group]

More broadly, I'd like to recognize the team across the organization for the good hard work being done to serve our customers and create value for our stakeholders every day. Total quarterly capital expenditures were CAD 24.9 million, down 23% from the comparative quarter, while capital commitments of CAD 34.2 million at quarter end increased 24% from the comparative quarter, which combined sets the company on a similar pace to the prior year and largely represent contract-backed asset additions that are expected to generate attractive returns upon deployment. The continued investment in our business reflects our disciplined approach to capital allocation. Looking ahead, we expect CapEx will accelerate in the back half of the year based on strong demand dynamics.

[Trevor Haynes, CEO at Black Diamond Group]

We will continue to align fleet growth with customer demand, deploying capital where we see the strongest opportunities to drive utilization and long-term value creation. Overall, we remain confident in the trajectory of the business. Our base operations continue to perform consistently, supported by high margin recurring rental revenue and attractive end market dynamics across Canada, the U.S., and Australia. Several growth initiatives provide meaningful upside potential. Within our WFS segment, the substantial breadth and scale of opportunities in the pipeline continue to reinforce our conviction in Canada's nation-building thematic. Our ability to participate in this investment cycle and support our customers is not a coincidence. Through the strategic acquisition of Royal Camp Services late last year, we have positioned ourselves as a leading integrated remote accommodations platform with the ability to rapidly deploy assets and provide full team turnkey services, including best-in-class catering and hospitality.

[Trevor Haynes, CEO at Black Diamond Group]

Combine that with our longstanding track record of effective indigenous engagement with over 45 partnerships across Canada, the company is extremely well-positioned as we look ahead to the coming months and years. The timing of project mobilizations remains difficult to predict, we believe it is a matter of when, not if, these opportunities translate into demand for remote accommodations. Increasing utilization levels over the next several quarters will lead to the realization of the significant operating leverage embedded within the platform. To add context to the opportunity that lies ahead, WFS currently has more than CAD 2 billion of formal bids outstanding in Canada alone, across more than 20 active projects, representing more than two times the company's current available fleet capacity. These opportunities are broad and far-reaching, linked to energy, mining, related infrastructure, data centers, and defense and military projects.

[Trevor Haynes, CEO at Black Diamond Group]

MSS is also well-positioned to benefit from this opportunity and is already seeing increased customer activity in Canada, as seen through rental revenue growth and healthy utilization. Supported by a diversified customer base, recurring rental revenue, pricing discipline, and continued expansion of VAPS, MSS remains well-positioned to deliver steady compounding growth and value creation. Finally, LodgeLink delivered another record-breaking quarter demonstrating the continued momentum within this area of the business. Investments made over the past several years in technology and product development, and the strong execution from our growing and high-performing team is increasingly translating into positive operating results and accelerating adoption of the platform within a robust total addressable market of over $170 billion for workforce travel across Canada, the U.S., and Australia, according to the Global Business Travel Association. Booking activity, customer retention, new customer adoption, and platform engagement remain very strong.

[Trevor Haynes, CEO at Black Diamond Group]

As our new LodgeLink software product advances toward general availability later this year, we see a meaningful opportunity to deepen customer relationships and accelerate market penetration. To summarize, we are pleased with the core strength of the business as demonstrated in our second quarter results. While lower levels of episodic project and sales activity moderated reported growth, the continued expansion of our rental revenue and recurring lodging revenue further underscores the quality, predictability, and resilience of these revenue streams, which remain key compounding growth drivers for long-term value creation. With ample financial flexibility, disciplined capital allocation, and a growing base of high-margin recurring rental revenue, we remain confident in our ability to create shareholder value. We are well-positioned to deliver steady near-term performance while maintaining significant exposure to the demand catalysts across our platform.

[Trevor Haynes, CEO at Black Diamond Group]

Before I turn the call over to Toby, I'd like to recognize Ted Redmond, our EVP and COO for our MSS business unit, as he looks ahead to retirement following many years of outstanding service to Black Diamond. Ted has made significant contributions to the company and to the growth of our MSS business, and we thank him for his leadership and commitment throughout his tenure. This transition also highlights the depth of talent within the ranks of our organization as two long-term leaders step into new senior roles and assume greater responsibility as we look forward to continued growth of our MSS platform. With that, I'll conclude and pass over to Toby.

[Toby LaBrie, CFO at Black Diamond Group]

Thanks, Trevor, and good morning, everyone. I'll focus my comments on the results of the overall business, our business segments, margins, and on the balance sheet. Earnings per share of CAD 0.01 was down from CAD 0.15 in the comparative quarter. Adjusted EPS, which adds back ERP implementation costs, amortization of intangible assets from the Royal acquisition, and a provision for BC sales tax assessments was CAD 0.09, down from CAD 0.18 in the comparative quarter. This decrease is due to lower margins as a result of a shift in the revenue mix towards more lodging revenue and higher depreciation, interest costs and share counts stemming from the Royal acquisition. While these costs have weighed on the business in the first half of 2026, we believe this is transitory, and we are confident that the business is well-positioned to take advantage of the very strong demand that we are seeing in our bid pipelines.

[Toby LaBrie, CFO at Black Diamond Group]

With respect to the adjustments to EPS, I'd like to focus on the two new items. First, the intangible assets acquired as part of the Royal acquisition represent assets that were acquired on our books in excess of the consideration associated with the transaction. Therefore, we believe the add back of the amortization of these intangibles provides a better view of the true returns from the capital employed in the business. Second, the B.C. sales tax assessments stem primarily from a retroactive application of a change in definitional interpretations that affects the tax rate the company is required to charge its customers and to remit to the province of British Columbia. Black Diamond and the broader industry strongly disagree with this new interpretation and how it is being applied retroactively through audit, and the company is challenging the assessments through an appeal process.

[Toby LaBrie, CFO at Black Diamond Group]

Concurrently, we are invoicing our customers in order to recover the additional tax that the B.C. government has imposed. We have recorded a CAD 3.6 million charge to income in the quarter associated with these assessments and have added this back to adjusted EPS as they represent costs that are unusual and non-recurring in nature. Overall, the non-GAAP measure introduced this quarter, adjusted EPS, is intended to provide a more meaningful representation of the company's underlying earnings performance over reporting periods. Now, turning to specific business unit performance. I'll begin with Workforce Solutions. Within WFS, revenue of CAD 72.2 million increased 55%, and adjusted EBITDA of CAD 15.6 million increased 3% from the comparative quarter. The growth was driven primarily by a contribution from Royal Camp Services, which increased lodge service revenue by 174%. Rental revenue also grew by 35% and non-rental revenue increased 34% compared to the prior year.

[Toby LaBrie, CFO at Black Diamond Group]

Sales revenue in this business unit declined 70%, reflective of our strategic decision to preserve fleet capacity rather than opportunistically monetize assets through used fleet sales. With fleet rationalization largely complete and demand visibility continuing to strengthen, we believe this approach better positions the business to capitalize on future opportunities. WFS consolidated utilization was 55.2%, leaving ample capacity to deploy assets on projects from within our unprecedented bid pipeline of over CAD 2 billion as these projects move into their construction phase. MSS generated rental revenue of CAD 28.6 million, up 8%, and adjusted EBITDA of CAD 20.9 million, up 3% from the comparative quarter. Utilization remains healthy at 77.9%, while average monthly rental rates increased 3%. MSS sales revenue declined 18%, driven primarily by softer custom sales as a result of typical sales activity variability and funding uncertainty within the education sector.

[Toby LaBrie, CFO at Black Diamond Group]

Looking ahead, we continue to see growing momentum across the MSS sales pipeline, with a strong backlog of opportunities expected to advance through the balance of 2026. Growth in Value-Added Products and Services continues to be a key differentiator, with VAPS revenue increasing 35% and reaching 11.7% of rental revenue in the quarter. VAPS adoption continues to expand. We expect it to remain an important driver in terms of both providing value to our customers as well as expanding our margins. LodgeLink delivered a very strong quarter, with total trade value increasing 69% to a record CAD 43.5 million, while net revenue increased 64% to CAD 5.4 million. Travel segments sold increased 44% to more than 215,000, reflecting continued customer adoption, strong retention rates, and growing engagement across the platform. LodgeLink continues to demonstrate how it is becoming a driver of meaningful long-term growth for the company.

[Toby LaBrie, CFO at Black Diamond Group]

Turning to cash flow and capital allocation, free cash flow for the quarter was CAD 14.6 million, and funds from operations totaled CAD 28.6 million. Working capital was impacted during the quarter by the successful ERP go live, primarily through temporary delays in billing and collections. These impacts were anticipated, and we expect working capital to normalize through the balance of the year as processes stabilize within the new system. The successful completion of this implementation represents an important milestone that positions the company for improved efficiency and scalability moving forward. From a balance sheet perspective, the company remains in a very strong position. Net debt at quarter end was CAD 351 million, with net debt trailing 12-month adjusted leverage EBITDA of 2.4x, comfortably within our target range of two to three times.

[Toby LaBrie, CFO at Black Diamond Group]

During the quarter, we completed the expansion of our ABL facility to CAD 550 million, increasing available liquidity to nearly CAD 200 million and providing significant flexibility to support future growth opportunities. Overall, we are pleased with the performance of the business. Combination of recurring rental revenue, growing cash flow generation, and a strong balance sheet positions Black Diamond well to continue creating long-term value for shareholders. We remain confident in our ability to continue growing our business and compounding shareholder value with significant catalysts for acceleration.

[Trevor Haynes, CEO at Black Diamond Group]

With that, operator, I'd like to open the call for questions.

[Operator]

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and enter the queue. If you would like to withdraw your question, simply press star one again. Thank you. We will pause for just a moment to compile the Q&A roster. The question comes from the line of Kyle McPhee from ATB Cormark. Your line is now open.

[Kyle McPhee, Analyst at ATB Cormark]

Hello, everyone. I'm hoping to get more color on your CapEx commitments. Committed CapEx is up 24% year-over-year. How much of that 24% lift is just inflation versus actual added volume of fleet units being added versus what you added last year? Can you give me an idea of what pockets of your business this CapEx is going to? I assume it's mainly MSS at this point, and you're not yet spending material CapEx for WFS fleet expansion.

[Trevor Haynes, CEO at Black Diamond Group]

Yeah. Thanks, Kyle. Appreciate the question. CapEx, as you suggest, is primarily committed to MSS at this point in terms of growth CapEx. We haven't seen that significant an inflation rate year-over-year. I think we're 3%-4% inflation on MSS buildings, there's not a significant adjustment you need to make in terms of fleet growth for the dollar amount of CapEx committed. Q1 was a little bit lighter than previous year. Commitment at end of quarter, a little bit higher when you average it out. We're, at this point in comparison to last year, right around the same cadence. Probably 3% higher, there's your inflation. We don't have very much CapEx focused on WFS at this point.

[Trevor Haynes, CEO at Black Diamond Group]

However, quick to point out, over the last couple of years, we have added modest amounts of fleet, both in Australia and Canada, more around our rapid deployment, smaller format accommodation units, which are actually, from a utilization perspective, quite tight, if you think of the Montney, for instance. In Australia, we've been running fairly high utilization on our workforce fleet. As we're picking up contracts, we're typically adding some incremental square footage. We do have some growth in WFS. We have our maintenance capital across all parts of the business, and a modest amount of corporate capital. The bulk of what we've disclosed for Q1 and our outstanding commitments at quarter end are for MSS growth. There again, we typically have line of sight with customer contracts, it's pretty low risk deployment.

[Kyle McPhee, Analyst at ATB Cormark]

Okay. Your comments also call for acceleration of organic investment, in 2026 and 2027. What's driving that acceleration? Is that just a preemptive comment, given all the demand you see for WFS, and you predict you will in fact need to expand the fleet beyond the 6,000 excess beds you already have?

[Trevor Haynes, CEO at Black Diamond Group]

The acceleration, we do quarterly capital allocation. What we're seeing is fairly significant growth opportunities around MSS, specifically in the Southern U.S., Southeast U.S. There's a read-through on data center activity for our big construction customers. We're also seeing significant uptick in demand in Western Canada, where our utilization for MSS has tightened up. There's just a plethora of project activity, and often box is deploying bid to field level deployment is a little bit quicker in terms of cycle than our camp business. The acceleration for camps in terms of CapEx would be a ways off. We've got reasonable spare capacity. Still sitting, I think, Mike, on 5,300 to 5,500 beds of capacity available to match up with demand. We'll absorb that, obviously, before we expend capital to increase bed capacity.

[Kyle McPhee, Analyst at ATB Cormark]

Got it. Okay. Thanks for the color. I'll pass the line for now.

[Trevor Haynes, CEO at Black Diamond Group]

Thanks, Kyle.

[Operator]

The next question comes from the line of Matthew Lee from Canaccord. Your line is now open.

[Matthew Lee, Analyst at Canaccord]

Hey, morning, guys. First, I want to congratulate Ted on his career. We've had some great times. Congrats, man. Hope you have fun.

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

Thank you.

[Trevor Haynes, CEO at Black Diamond Group]

Okay, on to business. I want to think about utilization and Workforce Solutions, because I'm going to assume that, if you win half of the bid that you mentioned, you'll be at maximum, but what is maximum utilization in Workforce Solutions? Is it like 80% to some of MSS or 90%, 95%?

[Trevor Haynes, CEO at Black Diamond Group]

You'd have to go back many years in our system to see that we can run in the 90+ percentage range, and we did for many years. The sales cycle for WFS is such that we have longer visibility of forward demand, you can run a little bit higher in utilization, if we do in fact get there. Mike, pass to you.

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

Just a couple other points around utilization. Firstly, all these projects are not going to go at once, so it's not going to be 1,000, 6,000 beds going out to the market. They're going to happen over a period of a few years. There's going to be opportunities to move assets with any project or onto other projects. Along the way, we do, from time to time, use third parties to subcontract assets through, so we'll explore those avenues as well. If we can get good term and good return, we'll certainly look at deploying new capital to grow our asset base further.

[Matthew Lee, Analyst at Canaccord]

That makes sense to me. Maybe we can talk about that CAD 2 billion in bids again in Workforce Solutions. How long are those contracts, generally? Is it three or four-year contracts or are these 10-year-plus contracts?

[Trevor Haynes, CEO at Black Diamond Group]

Well, there's two different numbers there. There's the typical length of time the customer will keep the asset in terms of how long it takes on project site, but a typical timeline is usually 36 months as an average.

[Jon Warren, President at Royal Camp Services]

Yeah.

[Trevor Haynes, CEO at Black Diamond Group]

Jon, you're pretty close to this.

[Jon Warren, President at Royal Camp Services]

I would say on the pipeline infrastructure projects, you're looking at a maybe three to four-year timeframe from start of project to end of project. Within that three to four years, we're going to be moving along the line. Some of the larger construction projects that we foresee coming, think a mining project or something like that, it could start with three years of construction leading to operations that might net 20+ years.

[Trevor Haynes, CEO at Black Diamond Group]

In terms of the specific bid pipeline, the projects and the quantification of that is based on a roughly three-year average term in the bids.

[Jon Warren, President at Royal Camp Services]

Yeah.

[Matthew Lee, Analyst at Canaccord]

Okay, that's helpful. Some of these projects might have extensions as well then. Okay. I'll pass along. Thanks, guys.

[Trevor Haynes, CEO at Black Diamond Group]

Thanks, Matt.

[Operator]

Our next question comes from John Gibson from BMO Capital Markets. Your line is now open.

[John Gibson, Analyst at BMO Capital Markets]

Morning. Thanks for taking my questions. Just starting on WFS, obviously a lot of bids outstanding. I was wondering what your customer conversations are like based on this. Are they recognizing the flurry of activity that is going to happen and then maybe the supply crunch and potentially look into lock equipment ahead of the flurry of activity, or is it just still primarily sort of FID dependent on winning this work?

[Trevor Haynes, CEO at Black Diamond Group]

Yeah, it is interesting. I think there is a growing sense of competition for limited services and assets. Again, Jon, you are very close to these conversations.

[Jon Warren, President at Royal Camp Services]

Yeah. We are definitely getting calls to get a sense of the whole industry from certain clients that we're close to, they just want to know the full scope of it, for that exact reason, to get ahead of it and plan their projects. Some projects are trying to move ahead and get ahead of other ones, it's definitely phone calls that are happening.

[Trevor Haynes, CEO at Black Diamond Group]

We do have some mining customers who have secured assets on rent in advance, well in advance.

[Jon Warren, President at Royal Camp Services]

Well in advance, yeah.

[Trevor Haynes, CEO at Black Diamond Group]

When their project is going to start off, I think that's entirely, Jon, because they're concerned the assets won't be there.

[Jon Warren, President at Royal Camp Services]

100%.

[Trevor Haynes, CEO at Black Diamond Group]

When the project kicks off.

[Jon Warren, President at Royal Camp Services]

Yeah.

[John Gibson, Analyst at BMO Capital Markets]

Okay. Appreciate that.

[Trevor Haynes, CEO at Black Diamond Group]

John, I'll pass that one.

[John Gibson, Analyst at BMO Capital Markets]

Second one for me.

[Trevor Haynes, CEO at Black Diamond Group]

I want to point out, John, that's a limited set that are doing that yet, but thematically it's coming through. Sorry, go ahead.

[John Gibson, Analyst at BMO Capital Markets]

Okay. Yeah, no. Got it. Appreciate that. Just second one for me. How can we think about demand strengthening across the MSS platform? Obviously, you gave us the numbers you are bidding on for Workforce. Is there a way to quantify that, or is it kind of like a second derivative of Workforce going ahead and then MSS picking up on the back of that?

[Trevor Haynes, CEO at Black Diamond Group]

MSS, one of the great things about the platform is it services so many verticals across so many different geographies, and that's by intent. Where the verticals and the geography overlap with our Workforce business, very similar drivers. All of these big projects also need project offices, training facilities, security, lavatories, and lunchrooms. There is a commonality, and we get some visibility there. I don't think, Ted, we've got, certainly we haven't disclosed the aggregate bid value, but we do know that our bid pipeline is growing for MSS, correct?

[Jon Warren, President at Royal Camp Services]

Our backlog, because the projects we've won, is ahead of where it was last year at this time, we have a larger backlog. We mentioned that earlier. Also, when you look at our proposals in progress and proposals delivered, both of those are above where we were at this time last year. In addition to the big nation-building projects, we have a lot of, I would call them, more industrial type projects. Petrochemical projects, data center projects in both Canada and the U.S. that are well underway and that we have units on those site. We expect as those sites continue to ramp up, we're going to have more units on it.

[Jon Warren, President at Royal Camp Services]

That's what's driving the firm backlog that we have today is existing rentals and then we know that those customers are going to have additional rental demand over the next 12 months as they ramp their projects up. It's both kind of our normal industrial education, commercial type business, in addition to, there's definitely pull through from the nation-building projects that we're expecting.

[Toby LaBrie, CFO at Black Diamond Group]

Where we also see the impact of that is in increasing utilization. We're starting to see more of the front end, as well as Trevor mentioned, in the capital commitments that we're seeing for growing our asset base to meet some of that demand. We expect on more of a lagging basis, we start to see that going through our results in coming quarters as well.

[John Gibson, Analyst at BMO Capital Markets]

Got it. If I could sneak one more in, actually, just on pricing in WFS. I know it's been a while now, but what would like for like pricing be now in WFS versus, say, the peak period when you were running at 90% plus utilization?

[Trevor Haynes, CEO at Black Diamond Group]

It's a tough comparison, John, because of inflation of the asset base, et cetera. I would say on a payback versus new or cost of replacement, on that ratio, rates are still well behind. I would think, Mike, Jon. The bid rates have come up. They're probably up easily 15% from trough 2+ years ago. We still need to increase, probably double from where we are now to justify CapEx on brand new camp gear. Again, we're dealing with it day to day, Jon.

[Jon Warren, President at Royal Camp Services]

Yeah, definitely. The cost of a dorm has gone up considerably. The rates need to follow. Right now, we're bidding with all our existing fleet, so not really taking that consideration today, but it is in consideration as we move forward on some of these bids.

[John Gibson, Analyst at BMO Capital Markets]

Got it. I'll turn it back. Congrats, Ted, on.

[Jon Warren, President at Royal Camp Services]

Yeah.

[John Gibson, Analyst at BMO Capital Markets]

Okay, got it. Yeah. I'll turn it back. Congrats, Ted, on the retirement. You put the MSS business in a pretty good position here.

[Jon Warren, President at Royal Camp Services]

Thank you. We've got some good people that are going to keep it in a good position.

[Trevor Haynes, CEO at Black Diamond Group]

Yeah. Absolutely. Thanks, Jon.

[Jon Warren, President at Royal Camp Services]

Thanks.

[Operator]

Our next question comes from Razi Hasan from Paradigm Capital. Your line is now open.

[Razi Hasan, Analyst at Paradigm Capital]

Yeah, good morning. Thanks for taking my questions. My first one, just to follow up on John's, did you say bid rates are up 15% from the trough? 15? Did I get that number right?

[Trevor Haynes, CEO at Black Diamond Group]

50.

[Razi Hasan, Analyst at Paradigm Capital]

50. Okay, great. Okay, 50. Thanks. Maybe just switching gears a little bit on gross margins down year-over-year. Was it all just the product mix that was related to that? Was there anything else that stuck out in terms of an elevated cost?

[Trevor Haynes, CEO at Black Diamond Group]

Gross margins down, Toby.

[Toby LaBrie, CFO at Black Diamond Group]

Yeah, gross margins is primarily the revenue mix. We're seeing with the Royal contribution of primarily contributing a lot more lodging revenue than we previously had in our mix. That revenue being at relatively lower margins than the rental revenue, is primarily driving the overall decrease. It's not necessarily a decrease in our margins on any given revenue stream. Those are holding and healthy. It's simply the mix of revenue within that makes up our total revenue that's driving the average margin down.

[Razi Hasan, Analyst at Paradigm Capital]

Okay, that's helpful. Maybe if you think about sales revenue, just in terms from an industry point of view, what do you need to see for sales revenues to start improving? Is there anything that you can point to at all, just seeing the sequential decline there?

[Trevor Haynes, CEO at Black Diamond Group]

There's two components there. We have a recurring sales business in MSS, especially in the U.S., where we are offering permanent turnkey modular solutions to our customers. Manufacturers in the U.S. typically work only selling through dealers like ourselves. There's a variability in that revenue stream that we've talked about over the years that makes it a little bit difficult to forecast. We have that, and Ted has some great visibility on that we can talk about in just a second. Just quickly, the other is where we sell assets out of our fleet. We have intentionally restricted the sale of workforce assets. When we look at demand for the use of the assets on a turnkey or rental basis, we have purposely reduced the sale of fleet assets into the market. Higher and best use is rental.

[Trevor Haynes, CEO at Black Diamond Group]

That's also down on a year-over-year or multi-year basis in our workforce business. However, let's switch back to MSS, which is where this is a recurring business line for us, Ted. What are we seeing?

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

The sales are up and down over the comparable quarter. Q2 2025, we had high sales. Q2 2026 was more of like, if you go back over the last six Q2s, it's in the middle of the range. It wasn't a terrible quarter, just it's against a tough comparable. As we said, the education sales were a bit softer, that was where that came from. When we look forward, the backlog is good. Q3, Q4 should be decent sales quarters. It's a bit hard to predict, even when you have a project in the backlog, because as we know, projects slip. Is this going to hit in Q3? Is it going to hit in Q4?

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

Some of them might even slip into Q1 like we had a couple of years ago, where we had a lot of projects slip from Q4 to Q1. A solid pipeline there. On the Canadian side, we've been trying to grow that custom sales, and diversify into more end markets. We've got some nice projects in the second half of the year on the Canadian side, which is good for us and stronger than, say, last year on the Canadian side. Overall, you just got to live a little bit with the lumpiness, but there's nothing fundamentally wrong on the custom sales side, with the exception of some temporary softness in education due to government funding in the U.S.

[Razi Hasan, Analyst at Paradigm Capital]

Okay, thanks. That's helpful. If I could just get one more in. Just on the bid pipeline in Workforce Solutions, you mentioned a couple of industries. Is there any one industry in particular that's fueling a lot of this growth, or is it just across the board for you guys in terms of the bid pipeline?

[Trevor Haynes, CEO at Black Diamond Group]

Well, those of us who have been doing this for the better part of 40 years continue to comment to each other. We don't think we've seen anything like this. Usually, when we go through high-activity areas, it's driven by a particular vertical, like oil sands or mining or even specific types of mining. What's truly interesting here is it seems to be everything everywhere. It's mining, it's large military infrastructure builds, it's civil infrastructure, it's LNG, it's oil, it's data centers. It isn't just Canada. We're seeing it in all three countries. No, thematically, there isn't one particular driver here. At least, unless change in geopolitics is where you're going to pull it all back to. Maybe that's one of the drivers. I don't know, Mike, Jon, you guys have been doing it. You're not quite as old. Oh, maybe you're older than me. I don't know.

[Razi Hasan, Analyst at Paradigm Capital]

I think I have a few years on you.

[Jon Warren, President at Royal Camp Services]

Yeah. I've been in this industry for 30 years, this is the strongest active pipeline that I've seen in my time. It's super exciting for us. To Trevor's point, it isn't from just one specific area or industry. Geographically, it's across Canada, it's into the U.S., and we also have a really strong and active pipeline in Australia. We're super excited what the future's going to bring for us. A lot of this, if you go back to our core strategy and where we were 10 years ago to where we are today with growing MSS and diversifying our WFS business, a lot of that pipeline is due to, I think, the strategy that we employed many, many years ago.

[Trevor Haynes, CEO at Black Diamond Group]

The positioning.

[Jon Warren, President at Royal Camp Services]

Yeah. It's very interesting. On any given day, we could put on a data center hat and study that and look at something in southern B.C. or go look at a uranium play in northern Saskatchewan, and military projects in the Northwest Territories. It's every industry.

[Trevor Haynes, CEO at Black Diamond Group]

It's super interesting.

[Jon Warren, President at Royal Camp Services]

Yeah.

[Trevor Haynes, CEO at Black Diamond Group]

We just want to get going at the field level.

[Jon Warren, President at Royal Camp Services]

Yeah.

[Trevor Haynes, CEO at Black Diamond Group]

We're ready.

[Razi Hasan, Analyst at Paradigm Capital]

Just Trevor, in the past, you've talked about step function growth and utilization rates going forward, not necessarily incremental growth. Is that fair to say that's still the expectation here on utilization rates and Workforce Solutions?

[Trevor Haynes, CEO at Black Diamond Group]

I think you're going to see two things happening here. Currently, the smaller projects seems to be getting out of the gate, sort of a gradual utilization improvement. I think Mike, Jon, we'd be aligned on that over the next couple of quarters. Then step change is where the bigger projects, FID, you've got everything from LNG Canada phase two, Coastal GasLink, compression expansion, the Prince Rupert Gas Transmission line with the Ksi Lisims. These are the big ones that the announcement of those projects, and hopefully our success in securing work with them, would indicate that large components of our fleet are going to be mobilizing over a two or three quarter time horizon. It's a little bit of both. Right now, smaller components are beginning to mobilize, then we'll start having those step change utilization moves.

[Trevor Haynes, CEO at Black Diamond Group]

That's the way I think it's going to happen.

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

Yeah. No, I agree. You nailed that on the head.

[Razi Hasan, Analyst at Paradigm Capital]

Thanks very much. I'll pass the line.

[Trevor Haynes, CEO at Black Diamond Group]

Thanks, Razi.

[Operator]

Our next question comes from the line of Frederic Bastien from Raymond James. Your line is now open.

[Frederic Bastien, Analyst at Raymond James]

Hi, good morning, everybody. First question I've got is on the MSS side. Rental revenue growth for the quarter came in stronger than what we were expecting. It was also up quite materially quarter-on-quarter. Was this directly tied to the CapEx you deployed, perhaps some large deployments or I think you noted some very healthy growth on the VAPS side. Is it a combination of it all? Just wondering if you could provide a bit more color, please.

[Trevor Haynes, CEO at Black Diamond Group]

Thanks, Frederic. Ted, why don't you take it?

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

It's due to steady continued CapEx spend on good opportunities, where we've got good visibility on demand. A bunch of that is what we call bid set, which is projects that we're bidding on that we only buy the asset if we win the project. That would be the majority. VAPS growth has been significant. I don't know the exact percentage. The majority would be from the CapEx deployment. The VAPS is kind of gravy on top of that. Both of those have very healthy margins. We're investing capital, obviously. We expect healthy margins.

[Frederic Bastien, Analyst at Raymond James]

Okay, cool. Ted, while we're at it, you commenting on the value-added products, it was up 35%. It's high margin, quite encouraging to see that. The release says it's now contributing 12% of MSS rental revenue. How high could that go over the long term?

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

In the past, we've said our target is mid-teens. I think we still have that mid-teens target. There's still room to grow there. We continue to add additional VAPS packages. We continue to add additional VAPS products. We're growing our VAPS service line, and we're still getting adoption of VAPS from some of our acquisitions that we're selling a lot of VAPS. There's a whole number of initiatives around the VAPS. The quoting activity continues to indicate that we'll see VAPS growth. It can be a bit lumpy from quarter to quarter, because if a big unit comes off a project that had a lot of VAPS in it, then the VAPS goes down. On average, we've obviously been adding a lot more VAPS than have been coming back. You got to look at that over a year-long trend, not a quarter-to-quarter trend.

[Frederic Bastien, Analyst at Raymond James]

Awesome. Thanks, Ted. Again, congrats on your upcoming retirement and all the best. I do have one more, however, on LodgeLink. Delivered exceptional growth during the quarter. That was even ahead of the general availability of the new platform later this year. How does that inform your growth expectations for LodgeLink over the next couple of years?

[Trevor Haynes, CEO at Black Diamond Group]

Thanks, Frederic. We're excited to talk about LodgeLink. Thank you for the question. I'm quick to point out that the current performance is before the new software is in market. The new software is just moving into beta testing next week. We think the firepower of the tool, the platform itself, is going to have a step change improvement by the end of the year. When you think about where we're at with customer adoption, growth within customers, our margin expansion, you can sort of read through how excited we are. We've been working on this for many years. A very significant percentage of the revenue growth is from new customers. At the same time, our retention of our tier one and tier two customers is very high. In fact, we're increasing share of wallet for travel with key customers.

[Trevor Haynes, CEO at Black Diamond Group]

The team is doing a fantastic job a commercial perspective. With the steady automation of the platform, we're seeing gross margin expansion for LodgeLink itself, and comfortably generating positive EBITDA at this point. We think given how large the addressable market is, how broad our footprint is in terms of coverage, and we're over 2 million hotel rooms signed onto the platform now, that there's lots of runway, especially when we think about how differentiated the new product is in terms of solving this complicated type of travel. If you correlate it to what we're seeing happening in the project world, the increase of labor into remote project areas, you could also read through there that it's a great application for LodgeLink. We expect to be showing good growth trends over the foreseeable future for this company.

[Frederic Bastien, Analyst at Raymond James]

Thanks. Can you please remind me through which revenue line item it goes through under WFS? Is it non-rental?

[Trevor Haynes, CEO at Black Diamond Group]

Yeah, we primarily see that in non-rental, Frederic.

[Frederic Bastien, Analyst at Raymond James]

Okay, sweet. Thank you, guys. That is all I have.

[Trevor Haynes, CEO at Black Diamond Group]

Thank you, Frederic.

[Operator]

Our next question comes from Trevor Reynolds from Acumen Capital. Your line is now open.

[Trevor Reynolds, Analyst at Acumen Capital]

Morning, guys. The timing that you expect to be able to announce some of these projects, and when you see them actually being deployed. Obviously, you provided some color, but anything else you are able to provide on that would be helpful.

[Trevor Haynes, CEO at Black Diamond Group]

Thanks, Trevor. Needless to say, these are complicated projects in terms of project engineering, planning, takeoff agreements, supply agreements, and financing. For us to say we have got any particular insight of where these big projects are in getting to the finish line, is just a little bit outside of our fairway. What we can tell you, engaging with these type two projects over a whole career is, they are certainly well advanced, I would say, Mike and Jon, in terms of where we are at in engagement and negotiating key terms, et cetera. You just get a sense of when these projects tip to a bias to proceeding, and I would say, Jon, there is a number that would fall into that category, so we think it is close.

[Jon Warren, President at Royal Camp Services]

Yeah, definitely moving forward. The clarifications are coming. There is activities, questions and answers being back and forth, and having calls. A few of the bigger projects, on the bigger pipeline type stuff, and then some of the construction and projects are having weekly calls, so good activity on those as well.

[Trevor Haynes, CEO at Black Diamond Group]

Intensity, urgency.

[Jon Warren, President at Royal Camp Services]

Oh, yeah. There's definitely an urgency. I've got a text right now saying, "Call me at 10:00 A.M. when this is done." It's definitely moving along.

[Trevor Haynes, CEO at Black Diamond Group]

We should have set up for one of our phones to ring. It seems like a number of these are imminent, but at the same time, we don't need for a meaningful change for our workforce business. We don't need all of what's in the market right now to go ahead. Our win rate % we can get to near fully utilized without every major project going ahead. A fraction of them with our market share, and we're in good shape. We feel this is actually coming to fruition, but there are more complicated macros involved as well, we're quick to point out.

[Trevor Reynolds, Analyst at Acumen Capital]

Great. That's helpful. You mentioned some of the smaller projects are moving along a little quicker. How much could those eat into that spare capacity that you're talking about today?

[Trevor Haynes, CEO at Black Diamond Group]

There's probably math where there's enough of the small to mid-size projects that they could absorb all our spare capacity. It's really a timing question of which projects commit to us first in terms of securing supply. You can think through that and get to a bit of a complicated situation of wanting to support all of our customers. How do we do that? Mike sort of hinted that we can aggregate supply from our industry as a way of expanding our available capacity. Also the way that these projects ramp through a manpower curve. You can move assets between projects as they time through their project cycle. There's a lot of factors that come into matching up our capacity to projects.

[Trevor Haynes, CEO at Black Diamond Group]

We can certainly take on more than our current inventory based on those factors, is I guess the way to say it.

[Trevor Reynolds, Analyst at Acumen Capital]

Great. Lastly, just on the U.S. education segment, do you think that's kind of hit a trough here or bottomed out? Just kind of what you're seeing on that front, as you pointed out for a number of quarters here.

[Trevor Haynes, CEO at Black Diamond Group]

It is a good read-through from the larger U.S. public, especially rentals. We don't think it's sort of idiosyncratic from a Black Diamond perspective. I think, Ted, there's a sort of a thematic in the U.S. education vertical.

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

Yeah, I think the last three quarters, you've heard various companies talk about it. It's not a huge trough. It's probably down double digits, but not down a lot more than that. When that comes around, I think there's still some uncertainty in U.S. government funding. Still lots of school rentals going on, lots of school sales. It's just not at kind of the peak it was in COVID, and with some of the Joe and early Trump infrastructure incentive programs encouraged probably higher than normal sales. Maybe another way to say it is we're closer to normal, but as the funding uncertainty changes.

[Trevor Haynes, CEO at Black Diamond Group]

Might be helpful, Ted, to bifurcate between the existing fleet and its contract base and the recurring revenue versus mostly what we're talking about is a reduction in demand for incremental capacity and for the sale of classrooms.

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

Right. We have always liked the classroom and education business. We still like it. It's steady, recurring revenue. The average contract terms, most of our contracts are 60-month rentals, there's lots of advance warning. A unit comes off, if the unit comes off at the end of the year, it might take us a little while to get it back on rent, but we get it back on rent the following year. The rental side is, I think, pretty steady. On the custom sales, school boards have a little bit less money for custom sales. But again, what we've done this year is kind of in the middle of the trend over the last six years. It's just not at the peak of last year. That might continue. Hopefully, I answered that question, but.

[Trevor Haynes, CEO at Black Diamond Group]

The core rental portfolio is fine. It's healthy. It's the level of growth for new classrooms is muted, the sales business is a bit soft this year.

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

Yeah. Our first priority is we put units that come off rent first. We make sure that we're quoting those first. We quote new units primarily when we don't have existing units available to supply to customers.

[Trevor Reynolds, Analyst at Acumen Capital]

Great. That's helpful. I will turn the line over. Thanks, guys.

[Trevor Haynes, CEO at Black Diamond Group]

Thanks, Trevor.

[Operator]

That concludes our question and answer session, and I will now turn the call back over to Trevor Haynes, CEO, for the closing remarks. Please go ahead.

[Trevor Haynes, CEO at Black Diamond Group]

Thank you, operator. Thank you, everybody, for joining us today. We continue to be very constructive in our view with regard to forward demand. We think the core business is healthy and steadily growing. We're seeing lots of opportunities. We look forward to updating you on the next quarter, and we believe that the thematic will roll forward in a favorable way. Lastly, thank you again, Ted, for working with us and the great work in building up our MSS business into the powerhouse it is today. Wish you well in retirement. To everybody on the line, thank you. Have a great day.

[Operator]

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Participants

Executives

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

Analysts

• Kyle McPhee, Analyst at ATB Cormark
• Matthew Lee, Analyst at Canaccord
• Jon Warren, President at Royal Camp Services
• John Gibson, Analyst at BMO Capital Markets
• Razi Hasan, Analyst at Paradigm Capital
• Frederic Bastien, Analyst at Raymond James
• Trevor Reynolds, Analyst at Acumen Capital