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4/6/2020 1
April 2020
Investor Relations | [email protected]
OUR WAY IS TO CREATE A BETTER WAY
Investor Update
2
Forward Looking Statements
This presentation contains forward‐looking statements. The use of the words “anticipate”, “continue”, “estimate”, “expect”, “will”, “project”, “should”, “believe”, “intend” and similar expressions identify forward‐looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward‐looking statements. Management believes the expectations reflected in those forward‐looking statements are reasonable but cannot give any assurance these expectations will prove to be correct. Additional information on risk factors that could affect Black Diamond's operations and financial results are included in Black Diamond's annual information form for the year ended December 31, 2019 and other reports on file with the Canadian Securities Regulatory Authorities which can be accessed on SEDAR. Readers are cautioned not to place undue reliance on these forward‐looking statements. Furthermore, the forward‐looking statements contained in this presentation are made as at the date of this presentation and Black Diamond does not undertake any obligation to update or revise any of the forward‐looking statements, except as may be required by applicable securities laws.
3
Black Diamond Group – Who We Are
• Innovative specialty rentals and industrial services company with two business units:
• Modular Space Solutions (MSS)• Workforce Solutions (WFS)
• LodgeLink• Trades under the TSX symbol BDI
3
MODULAR SPACE SOLUTIONS WORKFORCE SOLUTIONS
LODGELINK
ANCILLIARY SERVICES
4
Creating a Better Way
4/6/2020 4
Focused on Growth, Diversity and Improved Returns
$39.3 mm 2019 Adjusted EBITDA 2, 3
Modular Space Solutions (MSS)
6,353 Units 1
WorkForce Solutions (WFS)
6,233 Units 2
1. Source data: Q4 2019 Management, Discussion and Analysis ‐ March 5, 2020, includes assets from Spectrum Acquisition in Jan 2020
$327 mm Net Book Value 2
Market Presence
82,000 LodgeLink Bookings 2
Head Office
MSS
WFS
2. Source data: Q4 2019 Management, Discussion and Analysis ‐ March 5, 20203. See “Non‐GAAP Measures” at the end of this document
5
• Rental Revenue• Sales Revenue• Non‐rental Revenue
• Lodging Revenue• Rental Revenue• Sales Revenue• Non‐Rental Revenue
Sources of Revenue
4/6/2020 5
MSS Business Unit WFS Business Unit
6
Key Highlights for 2019
4/6/2020 6
MSS• MSS Rental revenue up 13% year‐over‐year. Value‐added Products (“VAPS”) revenue growth outpacing rental revenue growth.
• MSS fleet increased by 338 units in 2019, up 6% from December 31, 2018
WFS
• Awarded $20 million workforce accommodation contract in California for 1,584 beds
• Sukunka River Lodge – officially opened in Q4‐19 as a full service turn‐key camp, 908 beds for the construction of the Coastal GasLink Pipeline Project• $47 mm, 27‐month contract, supported by our Indigenous partnership
with Black Diamond Cygnus
LodgeLink• Over 82,000 total room nights booked in 2019• Over 115,000 properties listed
Corporate • Announced $200 million asset‐based credit facility in October 2019
7
2019 Performance
7
Fleet Growth
3,000
3,500
4,000
4,500
5,000
5,500
6,000
6,500
2018 2019
MSS Fleet Growth
Profitability
0
5
10
15
20
25
30
35
40
45
2018 2019
EBITDA Growth
Capitalize on Operating Leverage Focus on putting idle assets to work
0%
10%
20%
30%
40%
50%
60%
70%
2018 2019
Utilization Growth$mm
8
Core Objectives – 2020 and Beyond
4/6/2020 8
MSSScale and Diversify• Grow market presence, introduce new products, and increase VAPSYTD: Announced the Spectrum Acquisition in January 2020
WFSDrive Profitability• Reach new target markets and diversify by customer to increase utilizationYTD: Continued to secure a number of projects in eastern Canada with previously idle assets
LodgeLinkGrowth• Increase our room capacity, customer base and room bookings• YTD: Approximately 130,000 rooms available (up from 115,670 at Dec 31, 2019)
Corporate
Operational Excellence• Continue to focus on improving operational efficiencies, advance product standardization, increase R&M efficiency and the life cycle of our assets
Shareholder Value• Demonstrate and communicate the diversified nature of the cash flows generated by Black Diamond
YTD: 2020 Capital Spending Plan of $35 million (gross) YTD: Announced Normal Course Issuer Bid (“NCIB”)
9
Current Volatility & COVID‐19 Response
4/6/2020 9
Pro Active Measures ‐Operations
• Increasing the cleaning regimen and number of sanitizing stations at facilities.
• Pre‐screening all guests and visitors.
• Providing separation in facilities and dining rooms in accordance with recommended social distancing protocols.
• Eliminating buffets and replacing with pre‐packaged meals.
Pro Active Measures ‐Corporate
• Ample liquidity of over $75 million through covenant light, four‐year committed, ABL credit facility.
• Monitoring counter‐party credit and collections in anticipation of slowing payables by customers.
• Deferring growth capex and fleet orders through Q2 into Q3.
Potential Opportunities
• Have secured projects throughout our platform as customers are looking for increasing square footage or additional facilities to comply with social distancing measures.
• Seeing an influx of requests throughout our platform for MSS and WFS assets for testing, quarantine and other related facilities.
• ~100 projects of various size in bid/quote/qualification stage.
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Ongoing COVID‐19 Projects
4/6/2020 10
11
• ~65% of Q4 revenue generated outside of western Canadian energy sector
• Diversification geographically and by industry segment
Q4‐19 Results Show Increased Diversity
4/6/2020 11
• Sixth sequential quarter of consolidated rental revenue growth
02468
101214161820
Q1‐18 Q2‐18 Q3‐18 Q4‐18 Q1‐19 Q2‐19 Q3‐19 Q4‐19
$ mm
Consolidated Rental Revenue
Rental Revenue ‐ MSS & WFS
Canada ‐WFS35%
Canada ‐MSS28% US
29%
Australia8%
Q4‐19 Geographical Diversification(% of Total Revenue)
12
Q4‐19 Result: Rental Utilization Improving
4/6/2020 12
• Black Diamond utilization continued to improve with diversification in geography and industries
• MSS rental fleet had strong and consistent utilization
• WFS rental utilization increased with diversification of assets outside of western Canada
• WFS utilization should continue to be supported by previously announced $47 mm full turnkey project, with over half the assets mobilized
15%
20%
25%
30%
35%
40%
45%
50%
55%
60%
65%
70%
75%
80%
Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19
MSS and WFS Rental Utilization
MSS WFS Rental Fleet Consolidated
13
MSS Overview
• 6,353 units across 13 branches in North America with attractive returns on long‐lived assets
• Targeting net fleet growth of 10% per year. With added scale and additional product offering, return metrics expected to improve
• Longer term vision to double MSS fleet in five years
Modular Space Solutions
14
MSS Overview – Revenue Detail
• Rental revenue up 14% from Q4‐18
• Strengthening rental revenue driven by continued capital investment, higher rates, improving utilization in Canada, and VAPS penetration
• Non Rental driven by increased installation and dismantle activity in 2019
7.07.3 7.4
7.6 7.6
8.2
8.8 8.7
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
Q1‐18 Q2‐18 Q3‐18 Q4‐18 Q1‐19 Q2‐19 Q3‐19 Q4‐19
MSS Rental Revenue
$mmm
2.4
6.94.1
7.95.6
3.85.9 5.4
4.7
5.9
4.8
7.09.3
8.5
7.67.4
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Q1‐18 Q2‐18 Q3‐18 Q4‐18 Q1‐19 Q2‐19 Q3‐19 Q4‐19
MSS Sales & Non Rental
Sales Revenue Non Rental Revenue
$mm
15
MSS Overview
4/6/2020 15
• Strong economic tailwinds in BC, Ontario, and the US
• Recovery in Alberta utilization with Y/Y improvement
• 2019 gross capital of $21 mm
• 2020 gross capital of ~$25 mm
Modular Space Solutions
16
MSS Overview – VAPS Penetration
• Value Added Products & Services (VAPS) penetration and revenue growth continues to trend positively
12%
14%
11%
12%
12%
13%
13%
14%
14%
15%
2018 2019
VAPS as a % of Rental Revenue
27%
32%
24%25%26%27%28%29%30%31%32%33%
Q4‐19 vs Q4‐18 FY 19 vs FY18
VAPS Revenue Growth
17
WFS Overview
• Continuing to diversify and capitalize on operating leverage
• US and Australia markets remain robust
• LNG Canada is a significant catalyst. A handful of other large energy infrastructure projects in Canada would quickly change supply/demand fundamentals
• 2020 WFS gross capital of $8 mm
Workforce Solutions
18
WFS Overview – Revenue Detail
• Rental revenue recovering off of bottom as utilization improves
• Secured a number of projects in eastern Canada, providing customer and geographical diversification
• Lodging is expected to recovery with infrastructure and other developmental projects
7.1
4.9
5.5
6.0
7.0
7.7
8.68.9
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Q1‐18 Q2‐18 Q3‐18 Q4‐18 Q1‐19 Q2‐19 Q3‐19 Q4‐19
WFS Rental Revenue
$mm
2.0 0.4
5.1 4.30.9 2.4 1.1 2.3
8.08.5
5.5 7.2
4.8
11.410.9 9.1
9.78.8 4.4
5.4
10.2
5.3
3.0 5.5
0.0
5.0
10.0
15.0
20.0
25.0
Q1‐18 Q2‐18 Q3‐18 Q4‐18 Q1‐19 Q2‐19 Q3‐19 Q4‐19
WFS Lodging, Sales & Non Rental
Sales Revenue Non Rental Revenue Lodging Revenue
$mm
19
176
153
105
113
87
98
50
70
90
110
130
150
170
190
2014 2015 2016 2017 2018 2019
Net Debt
Creating Financial Flexibility
1. See “Non‐GAAP Measures” at the end of this document.
10
9
12
13
11
1.0
1.5
2.0
2.5
3.0
3.5
4.0
0
2
4
6
8
10
12
14
16
Q4'18 Q1'19 Q2'19 Q3‐19 Q4‐19
Debt to
Adjus
ted EB
ITDA
Fund
s From O
peratio
ns
FFO and Leverage Ratio
Funds From Operations Debt to Adjusted EBITDA
1
20
Significant Asset Coverage Against Debt
4/6/2020 20
• Net debt1 remains well below hard asset coverage on a net book value basis
1. See “Non‐GAAP Measures” at the end of this document.
0
100
200
300
400
500
600
2014 2015 2016 2017 2018 2019
$mm
Net Book Value of Fleet Assets
MSS Book Value WFS Book Value Net Debt
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2014 2015 2016 2017 2018 2019
Net Debt as a % of NBV of Fleet and WC
21
Growth Through Disciplined Capex
21
• Capex budget of ~$35 mm (gross). Net capex of $25 to $30 mm after used asset sales.
• MSS: ~$25 mm (gross) growth capital to be allocated across North American footprint
• WFS: $8 mm growth capital• Continued Australian growth • US Energy Services initiatives• Modest capital for LodgeLink
platform development
Primary markets for Growth CAPEX
2020 Capital Program
22
LodgeLink Gaining Market Traction
22
• Custom-built platform to remove inefficiency at every stage of crew travel process.
• Very fragmented market with low-tech tools used by customers and competitors
Multi‐sided B2B platform focused on crew travel
• Customers exist in extremely diverse industries and geographies share the same challenges. No worldwide market leader in this space.
$60 ‐100 billion market opportunity
• Operations to date primarily focused on small operating footprint in Western Canada.
• Meaningful customer growth
• Positive feedback loop developing with certain clients on product improvement and development
Over 190,000 room nights booked (up until Dec. 31, 2019)
Customers validating all aspects of long‐term vision
As of Dec. 31, 2019
Total Properties Listed 1,055
Total Rooms Listed 115,670
Total Customers 865
Total Unique Customers 443
Employees 32
0100200300400500600700800900
1000
Total Customers and Unique Company Accounts
Unique Companies Customer Accounts
23
LodgeLink‐ What is Crew Travel?
23
DEMOGRAPHIC CRITERIA CORPORATE TRAVEL CREW TRAVEL
Nature of job White‐collar Blue‐collar field workers, tradespeople
Primary places traveled to Major urban areas Secondary/tertiary markets
Reason to travel Meetings, ConferencesThey generally don't work on projects where they can sleep at home
Frequency of travel Typical corporate traveler travels 1‐5 days per month
Typical crew member travels 15‐20 days per month
Length of stay 1‐2 nights 5‐45 nights, often with days on/off
Number of people traveling together 1‐2 people 5‐45 people
24
The Problem
24
Booking & Searching
Billing & Administration
• Booking 5 – 45 people at a time
• Finding adequate accommodations and travel services into remote areas
• Managing unpredictable timing for specific jobs or projects and constantly changing shifts
• Managing, tracking, and paying travel & accommodation costs by individual/reservation is a large administrative burden
• Lack of transparency between prime and sub contractors can lead to costly mark‐ups
At LodgeLink, we believe crew travel is a mission critical task that is inherently difficult.
Crew Travel has been largely untouched by recent technology transformation, but now demands a modern platform that removes frustration and inefficiency from the process.
We are on a mission to improve every aspect of crew travel, leading to travelers who delight in a seamless experience and travel program owners who have the visibility and control they’ve always wanted.
25
LodgeLink – The Value Proposition
25
Improve every step of the crew travel process
Hotels
RemoteLodges
AirTravel
Corporate & Business Users
Crew Travelers
• B2B Marketplace to book and manage crew travel
• Booking Flow curated to the unique needs of crew travel
• Powerful Payment Options for businesses to track and pay invoices more efficiently
• Interactive Reporting analyze and understand their spending patterns
• Efficient Invoicing gives companies the ability to consolidate into one invoice and/or track by job code or AFE.
• Extension of Credit: net 30 payment terms vs. credit cards used at time of booking
26
LodgeLink Market Opportunity
26
Annual Spend($billions)
2019 2022 Est.
USA 65 71
Canada 6 7
Australia 6 7
South America 13 14
Rest of World 230 244
Estimates of market size are based on Energy Resource Marine sub‐sector of Global Business Travel Association. Addressable market is larger than estimated above to the extent that general construction, transportation, and sports teams are considered crews.
Countries listed above are areas where LL Management team has extensive knowledge and experience with crew travel
27
LodgeLink Timeline & Evolution
27
2018201820172017 20192019
Status of Product
$20K invested
Concept development, discussions with customers and suppliers.
Bought off‐the‐shelf system for $500 and customized as necessary.
Size of Team
Size of Network
3 FTE
60 Customers
55 Properties
Entirely focused on Western Canada
19,500 room nights booked$3.2 mm Gross Booking Revenue
$1.9m invested
Continued customization including crew lists, map enhancements to
support remote areas.
Planning and development of LodgeLink 2.0
291 Customers
402 Properties
Entirely focused on Western Canada
83,600 room nights booked$16.4m Gross Booking Revenue
$2.0 mm invested
Launch of LodgeLink 2.0 with improved foundation. Interactive Reporting. Initial GDS integration.
Acquired 3‐person travel agency
443 Customers
1,055 Properties
Expand into Texas and select states
~82,700 room nights booked~$15.1 mm Gross Booking Revenue
6 FTE 32 FTE
28
LodgeLink Customer Adoption
28
EPC’s & Construction Oil & Gas Travel Management & Safety Transportation
29
LodgeLink Customer Adoption
29
0
1
2
3
4
5
6
7
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Gross Boo
king
Rev
enue
($MM)
Total R
oom Nights B
ooke
d
Total Room Nights Booked Gross Booking Revenue ($mm)
• 2018 bookings and gross revenue positively impacted by a handful of customers or specific projects
Room Nights Booked & Gross Booking Revenue Room Bookings Heat Map
• Recent snapshot of room bookings shows increasing geographic diversification
• Seasonality expected to be reduced as bookings gain traction in Eastern Canada and the U.S.
30
LodgeLink Website Visits
30
31
LodgeLink Supplier Adoption
Ramada by Wyndham, Best Western, Microtel Inn & Suites, Days Inn, Super 8, Canalta, Pomeroy, La Quinta
Civeo, Right Choice, Black Diamond, Aries Residences Suites, Horizon North, GNS, Target Logistics, Permian Lodging
Hotel Properties93%
Lodge Properties7%
Hotel Rooms77%
Lodge Rooms23%
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
Q1‐18 Q2‐18 Q3‐18 Q4‐18 Q1‐19 Q2‐19 Q3‐19 Q4‐19
Total Rooms Listed
Total Rooms listed
0
200
400
600
800
1000
1200
Properties Listed on LodgeLink
32
LodgeLink Vision
32
A two‐sided platform for crew accommodations.
Today we are… Our vision is to be…
A multi‐sided digital platform for crew travel that is fully immersed in the daily operations of our stakeholders.
Members of our community will delight in the efficiencies gained and insights unlocked by our platform.
33
Black Diamond Investment Attributes
4/6/2020
Addition of capital light products and services to improve rates of return on new and existing capital assets
Capitalize on significant operating leverage in underutilized Canadian WFS asset base
Recently closed Asset Based Lending facility provides flexible, low‐cost debt to grow MSS business
MSS targeting 10% annual fleet growth
MSS EBITDA growth to outpace fleet growth driven by economies of scale, VAPS and other service offerings
LodgeLink platform continues to expand
Growing revenue base from US and Australian markets in both MSS and WFS product offerings
LodgeLink digital marketplace expanded into US, as customers and listed properties continues to grow
Grow Diversify
Improve Returns
34
Non‐GAAP Measures
• Adjusted EBITDA is not a measure recognized under IFRS and does not have standardized meanings prescribed by IFRS. Adjusted EBITDA refers to consolidated earnings before finance costs, tax expense, depreciation, amortization, accretion, foreign exchange, stock‐based compensation, acquisition costs, non‐controlling interests, share of gains or losses of an associate, write‐down of property and equipment, impairment, restructuring costs, and gains or losses on the sale of non‐fleet assets in the normal course of business.
• Funds from Operations is calculated as the cash flow from operating activities excluding the changes in non‐cash working capital. Management believes that Funds from Operations is a useful measure as it provides an indication of the funds generated by the operations before working capital adjustments. Changes in non‐cash working capital items have been excluded as such changes are financed using the operating line of Black Diamond’s credit facilities.
• Net Debt is calculated as long‐term debt excluding deferred financing costs minus cash.
4/6/2020 34
