Black Diamond Gr Q3 2026 Earnings Call Transcript

Black Diamond Gr (TSX:BDI) reported third-quarter financial results on Friday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Black Diamond Gr reported record revenue of $159.9 million for Q3 2026, a 52% increase from the previous year, while adjusted EBITDA rose 33% to $42.3 million.

All business segments, including Workforce Solutions (WFS), Modular Space Solutions (MSS), and LodgeLink, contributed positively to the performance. LodgeLink achieved record growth and significantly expanded its customer base.

The company announced a 22% increase in its quarterly dividend, marking the sixth increase since 2021 and reflecting confidence in its long-term outlook and strong free cash flow generation.

The future outlook is positive, with a robust pipeline of opportunities, notably in Canada with over $2.3 billion in formal bids, along with strong market conditions in the US and Australia.

Management highlighted a strategic focus on deploying capital prudently to support growth, emphasizing the importance of safety and operational excellence.

Net debt stood at $355.7 million, with leverage at 2.4 times adjusted EBITDA, maintaining financial flexibility for future investments.

Full Transcript

OPERATOR (Moderator)

Ladies and gentlemen, welcome to the Black Diamond Gr third quarter 2026 results. All lines have been placed on mute to prevent any background noise and after the speakers’ remarks we will conduct a question and answer session. If you would like to ask a question at that time, please press star then the number one on your telephone keypad to raise your hand and enter the queue. If you would like to withdraw your question at any time, please press star one again.

I will now turn the call over to Emma Covenden. You may begin.

Emma Covenden (Investor Relations)

Good morning and welcome to Black Diamond Gr’s third 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 Workforce Solutions, Mike Ridley, President of Royal Camp Services, John Warren, and Chief Financial Officer of LodgeLink, Jason Zhang. Please be reminded that our discussions today may include forward-looking statements regarding Black Diamond Gr’s 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 reference 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 Gr’s third 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 and also on the SEDAR+ website. 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 conference calls. Trevor will start with a high level overview of the Company’s performance and highlights from the quarter, including commentary on current market conditions. Trevor will then pass the call over to Toby for a more detailed review of our financial performance before we open the line for questions. With that, I’ll turn the call over to Trevor.

Trevor Haynes (Chief Executive Officer)

Thank you, Emma, and good morning everyone. We appreciate you taking the time to join us today. Yesterday we reported strong third quarter results reflecting continued growth across the platform and building momentum as we head into the final quarter of the year and look ahead to 2027. Revenue reached an all-time quarterly record of $159.9 million, an increase of 52% from the comparative quarter, while adjusted EBITDA increased 33% to $42.3 million.

Record rental revenue of $48.9 million was up 18% from the comparative quarter, while contracted future rental revenue remained robust at $152.3 million at quarter end, down 4% from the comparative quarter. Based on our continued growth, strong free cash flow generation and confidence in the long-term outlook for the business, we announced a 22% increase in our quarterly dividend to 5.5 cents per share, marking the sixth increase since reinstating the dividend in 2021.

This reflects our commitment to rewarding shareholders. Even with the increase, the dividend still maintains a relatively low percentage of free cash flow, allowing financial flexibility to reinvest in the business and drive future growth. All three areas of the business, WFS, MSS and LodgeLink contributed to our strong Q3 performance, which is the result of our focus on execution against our long-range strategic framework, including the growth initiatives undertaken over the past several years. As we look ahead, we are bullish about the macro backdrop and the opportunity set developing across our operating regions. From our perspective, the combination of project volume and the breadth of activity across end markets is unprecedented.

Demand in Canada continues to build across resource development, pipelines, data centers, mining, defense and remote infrastructure, with the opportunity being particularly strong in Western Canada, creating opportunities to deploy existing capacity along with incremental capex. In the U.S., activity associated with data centers and the related infrastructure buildout across the Gulf Coast and Southeast is expanding, and in Australia market conditions are also positive, with mining, defense and remote infrastructure activity creating tangible opportunities.

Our elevated bid pipelines across the company are highly prospective, indicative of considerable opportunity ahead. In Canada alone, WFS has more than $2.3 billion of formal bids outstanding, representing well over twice the capacity of our current fleet. With several projects now in advanced stages of contract negotiation within WFS, our expanded accommodations platform gives us greater scale and capability to support major projects, backed by a growing network of customer relationships and a strong network of Indigenous partnerships. Within MSS, our strategy remains straightforward.

We’ll continue to invest in the fleet, grow recurring rental revenue, maintain strong utilization and ensure capital is deployed prudently in line with customer demand and where we see attractive returns. Based on growing customer demand, the cadence of capital investment is increasing and will continue to accelerate in the coming quarters. Taken together, we believe our asset-based businesses are very well positioned to capitalize on the strong macro environment and the existence of opportunities across our markets.

Beyond our asset-based businesses, we are also very excited about the momentum at LodgeLink. LodgeLink achieved another record quarter and continues to demonstrate the value and scalability of its sophisticated two-sided marketplace. Customer retention remains very high while customer acquisition continues to accelerate, with expansion in the U.S. currently outpacing Canada by nearly double. LodgeLink will continue to be an increasingly important part of Black Diamond Gr’s portfolio, providing exposure to workforce mobility across multiple industries and geographies through a capital-light platform business model.

We believe the platform will continue to scale for the foreseeable future. Before Toby gets into the details of our operating results, I want to recognize and thank our people across Black Diamond Gr. The results we reported yesterday are the culmination of the hard work and commitment of our teams across our branches, camps, lodges, project sites and offices. And nothing is more important than doing that work safely. Ensuring our people, our partners and everyone working alongside us goes home safely at the end of each day remains our most important responsibility.

Overall, we are very pleased with our third quarter performance and more importantly with the current momentum and with how the business is positioned. We have a diversified platform, meaningful operating leverage, a healthy balance sheet and a strong team executing against a clear vision. We believe that combination positions Black Diamond Gr very well to continue compounding growth and creating long-term value for our shareholders. With that, I’ll turn the call over to Toby.

Toby Labrie (Chief Financial Officer)

Thanks, Trevor, and good morning everyone. As Trevor highlighted, the company delivered record revenue during the quarter translating to adjusted EPS of $0.19, up from $0.16 in the comparative quarter. Despite record rental revenue, adjusted EBITDA margin was 26.5% during the quarter compared to 30.2% in the comparative period. Margins are influenced by revenue mix and may vary from period to period, with the moderation in margin primarily a result of the increased contribution from lodge services revenue, which increased significantly due to the Royal acquisition and relates to catering and hospitality services that transact at lower margins than the core rental business. In MSS, lower margins were driven primarily by elevated repair and maintenance and transportation costs in preparation for asset deployment on projects.

Looking at the individual divisions and beginning with Workforce Solutions, the business continued to deliver strong growth across all revenue streams. Total revenue increased 127% to $97.9 million, while adjusted EBITDA increased 99% to $28.2 million. The acquisition of Royal Camp is one of the key year-over-year growth drivers, contributing to strong performance across the segment’s revenue streams. Rental revenue increased 43% to $18.9 million, reflecting the addition of Royal Camps as well as modest organic growth in Canada and Australia.

Lodge services revenue increased 389% to $40.6 million. WFS sales revenue increased 140% to $13.2 million, driven by higher custom sales activity in the U.S. and Australia. Non-rental revenue increased 56% to $25.2 million, supported by increased transportation activity in the U.S. and contributions from LodgeLink. WFS utilization improved modestly to 58% from 55% in Q2 2026, leaving ample spare fleet capacity to deploy within the bid pipeline. Turning to MSS, this segment generated total revenue of $62 million during the quarter, which is in line with the comparable quarter, and adjusted EBITDA of $21.2 million was down 7%. The recurring rental business continues to compound and perform well, with rental revenue increasing 7% to $30 million. Sales revenue was down 18% to $13 million from $15.8 million in the comparative quarter, with permitting delays shifting project deployment timing, which offset growth in rental and non-rental revenue streams.

Utilization remains healthy at 77.1%, while average monthly rental rates increased 3% compared to the third quarter of 2025. A continued area of focus within MSS is value-added products and services as a means of further expanding our revenue generation opportunity and providing our customers with convenient packaged solutions. VAPS revenue increased 25% to $3.5 million and represented 12.7% of rental revenue. Finally, LodgeLink delivered another strong quarter and continued to deliver profitable growth due to strong retention of existing customers, new customer acquisition and increased share of wallet of existing customers. Total trade value reached a record $51.5 million during the quarter, up 44% from the comparative quarter. Net revenue increased by 51% from the comparative quarter and reached $6.5 million.

Now turning to cash flow and capital allocation, funds from operations for the quarter increased 32% to $43.6 million, while free cash flow increased 47% to $33.8 million. Capex in the quarter totaled $26.8 million, an increase of 37% from the prior year. In addition to this investment, capital commitments increased to $49.7 million, up 26% from the comparative quarter, reflecting the meaningful customer demand and contract backlog. Consistent with our approach in previous quarters, capital deployment remains focused on opportunities that support long-term rental revenue growth and meet our return thresholds.

Investment decisions continue to be evaluated across the portfolio with consideration given to investment returns, market demand for fleet and available existing capacity. As for the balance sheet, we ended the quarter with net debt of $355.7 million. Net debt to trailing twelve months adjusted EBITDA leverage was 2.4 times at quarter end, which remains within our target range of two to three times. Maintaining a strong balance sheet and financial flexibility remains important to our capital allocation framework. Earlier this year we completed the expansion of our asset-based lending facility to $550 million, increasing our available borrowing capacity and supporting future growth opportunities.

Overall, our third quarter results demonstrated the strength of our diversified business and our ability to generate meaningful cash flow while investing in future growth opportunities and increasing shareholder returns. With that, operator, I’d like to turn the line over for questions.

OPERATOR (Moderator)

Thank you. We will now begin the question and answer session again. If you would like to ask a question, please press star, then the number one on your telephone keypad to raise your hand and enter the queue. If you’d like to withdraw your question at any time, you can press star one again. We’ll pause just for a moment to compile the roster. Your first question comes from Kyle McPhee with ATB Core. Kyle, your line is open.

Kyle McPhee (Analyst)

Hi everyone. First one for me. Just regarding your modular space EBITDA margin, as you pointed out, a bit soft. You are spending money on fleet repairs and maintenance ahead of new deployments. Can you help me understand the read-through here? Is there a meaningful modular space utilization boost on the come near term, and if so, what’s driving it? And can you help us quantify the timing?

Trevor Haynes (Chief Executive Officer)

Yeah, thanks, Kyle. I think something that may not be entirely obvious is how complementary our business units are and how we have an overlap in terms of customer projects. So if you think about what’s happening in terms of resource remote infrastructure, especially in Western Canada right now, where we’re talking about the need for camp beds and WFS services, there’s in many cases an equally significant demand for space at those work sites. So all the different complements of buildings, whether that’s for lunchrooms, project offices, security rooms, training rooms, all of that building requirement comes through our MSS business.

So when we look at what’s happening in Western Canada, we see a very steep demand wall, and some of that is contracting already and in advance of WFS completing negotiation on the big camps. And so what we’re encountering in terms of upfront costs is getting those assets ready. In many cases, we’re moving them between branches and incurring the cost of that to get them positioned to then mobilize. I think you’ll see the outcome of this fairly quickly over the next few quarters as MSS is accelerating along with the project activity in Canada.

And so that’s the primary impact. We’re seeing something similar in many of our branches in the US as the acceleration in demand around data centers for large project complexes, etc., has been accelerating. And our branch service teams have been busy getting assets ready. And again, we’ll see the corresponding rental revenue increase for MSS over the next few quarters. And then lastly, Kyle, I would point to our CapEx outstanding at the end of the quarter of just under 50 million, which is up significantly year over year. Almost all of that is related to MSS fleet build. And so another data point showing how the MSS business is accelerating into the same macro theme that we’ve been talking about for our workforce business. So those costs and pressure on the margins are in advance of an acceleration and fleet expansion that’s underway with MSS.

Kyle McPhee (Analyst)

Okay, so it sounds like you’re actually expecting an MSS demand wave to start ahead of it translating into your WFS segment. Like it’s kind of, it’s leading the WFS demand. Is that accurate? Like we’ll see the utilization boost for MSS first.

Trevor Haynes (Chief Executive Officer)

They run somewhat in parallel, but not all of the projects require camp. So a lot of data centers here in Canada are mobilizing large complements of modular buildings, but they don’t require camps. So we have some of that going on. And then even where we have both MSS and WFS assets mobilizing to project sites, the MSS buildings can mobilize more quickly or in smaller tranches of buildings going out. And so we fully expect that you’ll see the ramp-up on rental related to MSS a little bit more quickly than you’ll see the operating revenue coming in on the camp side.

Just a longer mobilization up front.

Toby Labrie (Chief Financial Officer)

And I would add to that. Sorry, Kyle, Toby here. I would add to that that at 77%, we have nearly full utilization with MSS. And so as Trevor mentioned, we are deploying additional capital there to meet demand. So we expect we should see modest improvements in utilization over the coming quarters, but we wouldn’t expect large step changes where we run into a situation where our utilization could become too high.

Kyle McPhee (Analyst)

Got it. Okay. And then I get one quick follow-up on MSS. The contract duration, I think 44 weeks. Now that’s down from where it’s typically been residing in the 50-week range. Is something going on with mix or can you help me understand this?

Trevor Haynes (Chief Executive Officer)

It has to do with mix. We’ve talked about a softness around the education vertical. Our education customers typically contract our MSS assets longer than our other customer verticals, typically 60 to 84 months. When we’ve seen a moderation in the demand for incremental capacity around education, we just have fewer new buildings going out on those very long contracts. And so if you look at how that impacts the mix, as existing contracts run off, we’re seeing an adjustment to average length of contract term.

I don’t believe we’ve seen a change in the average time that our customers are keeping assets on site, but we’re certainly, because of the mix of education—and as a reminder, the education vertical for us is fairly significant in our MSS mix—and so you can see that average contract term changing with the complexion of the education market.

Kyle McPhee (Analyst)

Got it. Okay. Appreciate it. I’ll pass the line. Thanks.

OPERATOR (Moderator)

Thank you. Your next question comes from Frederick Bastine from Raymond James. Your line is open.

Frederick Bastine (Analyst)

Good morning, everybody. You guys exited the quarter with over 2 billion bids in Canada alone. Obviously that’s an impressive number, but I’d like to better understand what’s behind it. Can you give us some color on the composition of that pipeline, specifically how it breaks down geographically across end markets and client types, as well as perhaps a distribution of contract sizes? Basically, are we talking about a handful of large opportunities driving that figure or a broader collection of projects?

Trevor Haynes (Chief Executive Officer)

Thank you, Frederick. The composition of the 2.3 billion, you know, there are some large, sizable projects in there which would be familiar from Canadian headlines. But that being said, what’s interesting to us in this macro is how broad—and broad by industry and broad by geography—that list is. So you have a couple of projects that make up larger, chunkier percentages of that. But as we look across our 10 to 12 significant projects, all of them have significant scale in terms of the types of projects.

John, maybe quickly—

John (Analyst)

Like you say, it spreads across Canada and across several different industries. LNG is obviously one that’s in the headlines right now. And there are some FIDs on some of those projects and hopefully future positive FIDs are coming on others. But then we get into some of the mining, and now data centers are requiring camps. So those are new opportunities above and beyond what’s in the pipeline. So it’s—

Trevor Haynes (Chief Executive Officer)

Large, military-related as well.

John (Analyst)

Military and infrastructure is within that. So it’s very diverse.

Trevor Haynes (Chief Executive Officer)

So, Frederick, even if you took out a couple of large LNG-related projects, we still have a significant amount of that 2.3 billion. And when you line it up against our available capacity, we could absorb existing capacity, I think, John, even if the LNG projects were delayed and didn’t go ahead in the near term.

John (Analyst)

Yeah, you know, just thinking on a geographic basis, really, we have projects from Nova Scotia to the far west coast, Prince Rupert. So it’s really exciting to see. And north. Yeah, and right up north. So definitely.

Frederick Bastine (Analyst)

And what markets are moving faster? Is it all coming at once?

John (Analyst)

Well, right now, the one that’s been given a positive FID, I’m going to say it’s the closest. Right now we’re expecting some activity in the final negotiations on that project. There’s a team working on it daily. The other ones, in the mining industry, it’s a little bit slower getting through the regulatory, but there’s a few that are right at the goal line, so waiting on some final negotiations on those projects. Quick to point out the 2.3: we typically take a fairly conservative approach, and so those are true formal submitted advanced bids, but the pipeline we’re working with and the funnel of opportunities exceeds that amount.

Trevor Haynes (Chief Executive Officer)

Yeah, just—excuse me. Just to add one other point, Frederick, one market that is new is data centers. And the opportunities—there seems to be a new one a week—that creates opportunities for not only the camp business, but the space rentals business as Trevor was alluding to earlier. So that’s become a growing part of our business and not just in Canada, but in the US it’s massive down there. Massive opportunity down there, and we’re also seeing it over in Australia.

So yeah, the pipeline, when you have a look at today, very healthy. But there are new projects coming on stream day after day, week after week. It’s pretty exciting. Magnitude of what we’re looking at in Canada sort of overshadows the other two countries, but maybe quickly touch on—we’re stocked out in the US right now. Yeah, we landed some nice contracts in the US recently that we’ll see improving results down there in the near future. And it’s tied to data centers and a solid oil and gas sector in the US, and similarly in Australia.

Great pipeline of activity with the workforce business in particular, but also strengthening space rentals business, classroom business in Australia. So all three markets, Canada, the US and Australia, have very healthy pipelines. Super exciting. Everything everywhere, all at once.

Frederick Bastine (Analyst)

Everything everywhere. Turning to lodging, how far are you along with the rollout of Lodging 3.0? I mean, you’ve obviously got great traction, revenue growth, and I mean is that contributing at all or do you expect incremental growth to come out of that rollout? And just wanted to get a quick update on how things are progressing. Thanks.

Trevor Haynes (Chief Executive Officer)

Yeah, it’s a good question. Our technology team has done a fantastic job. The new product has reached general availability, but we have a tactical plan to converge it with the marketplace. So nothing we’re seeing right now, Jason, in the performance of LodgeLink yet has to do with the strength and innovation of the new software coming in.

Gus

Yeah, Fred. So as Trevor mentioned, the growth we’ve been seeing is on the existing platform. We reached GA and we’re working on a plan to roll over into the new product platform, which we think will not only accelerate our various revenue streams, but on the gross margin side as well. So we think ’27 is going to be a really interesting year for LodgeLink.

Frederick Bastine (Analyst)

Okay, so you expect that rollout to occur over the coming quarters or throughout ’27?

Gus

Yeah, I’d say Q1 ’27 is probably a good timeframe for a more accelerated launch.

Trevor Haynes (Chief Executive Officer)

The bridge between the existing platform, which is performing really well and continuing to grow, and the bridge allowing our existing customers to access the new software from the base platform is what’s being done right now and moving very quickly. So we think the characteristics you’re seeing in terms of acceleration of market share capture with new logos joining, the retention of logos—you know, Jason, we have retention greater than 100% because our existing customers are growing as well as retaining—so all the characteristics that we’re trying to inform in this business seem to be clicking right now.

And then we’re really excited about the new capabilities of the software, and it should position us with a greater differentiation. And it may take a couple of quarters to be able to show it, but it should accelerate our market share capture. And as a reminder, I mean, we’re facing an extremely large addressable market in terms of companies that move workforce, travel-wise, for work.

Frederick Bastine (Analyst)

Great. Thanks for your time, Gus.

OPERATOR (Moderator)

Thank you. Thank you. Your next question comes from the line of Razi Hassan with Paradigm Capital. Your line is open.

John (Analyst)

Good morning. Thanks for taking my questions. Just following up on the 2.3 billion in opportunities. Are you, given what you mentioned, are you still expecting a step function in the utilization rate for workforce solutions into the back half of 2017?

Trevor Haynes (Chief Executive Officer)

If you talk about back half of ’27 versus today, yes, that would be our expectation. We’re quick to point out the mobilization phase of these larger projects. You know, we generate operations revenues of preparing sites and moving and assembling these large assets and then the rental and hospitality services revenue begins to ramp after that. So I think, John, we think of this quarter versus this time next year based on what we’re seeing. Yeah, we’ll be, you know, expectation and we get more information on these projects. And their histograms, as we look at their front-end work and then going up into construction, all the projects that kind of stack on top of each other and their timeline through multiple years, I would expect that that front work will happen Q2, 3, 4, and then, you know, grow into construction with that.

Steady progression. Probably Q2–Q3 window, ’28. And that’s the larger pipeline jobs. The other construction-type jobs are a little more flatter. They ramp up pretty steady straight through, set up quickly and then they get to. Exactly. And then you’ve got a constant flow through the years. They’re a little smaller jobs, but stacked on top of each other. They add up significant.

John (Analyst)

Okay, fair enough. And maybe just on that, are you seeing, is there discrepancy between larger and smaller jobs or are you seeing like more smaller jobs in the short term and larger jobs long term? I guess that’s the way to think about it. Or

Trevor Haynes (Chief Executive Officer)

There’s a couple of components. We have smaller format camp assets, rapid deployment, which we’re essentially at 100% utilized, and we’ve been adding capacity there and we expect that continues. Then you have smaller deployments of larger camp assets that can move more quickly. And then we have operated open camps and then we have catering-only contracts. So if you look through the four lenses, you know, we’ve got different timelines and different drivers and we’re seeing all four very active.

Right, John? Yeah, yeah, definitely. You know, on the base business, the catering side of any lodging, you know, as we’ve been preparing to on large projects that are coming, we’re seeing that area ramp up and it really correlates, you know, to the rig count, oil and gas activity in your conventional areas and then the oil sands area as well. It’s all ramping up. Yeah, and I think that’s an important point. The results from workforce that we see in Q3, the increase from the first half of the year is largely around lodge loading in one of our open camps. And not only do we see increased revenue with the activity in the areas primarily in the Montney, but we also see higher margins as we get higher occupancy in those camps. And so that’s primarily what’s driven the near-term performance and without a lot of utilization improvement.

But as we start seeing that utilization, we expect that to continue to grow. But it’s another element of growth that we have available within the WFS segment. It’s not really in the 2.3 billion. Those are mostly large infrastructure projects that provide egress in the oil and gas industry. When you switch and think about the upstream, where we provide accommodation or hospitality services, open camps, or even the small format, we expect—we’re already seeing—our customers get significantly busier as they continue to develop their resource to be able to fill the infrastructure that those large projects represent.

So, and as Toby mentioned, we’re seeing manpower increase upstream and it doesn’t require mobilization of large blocks of assets the way the infrastructure build does. So it’s a really healthy complexion when we think about our platform because we participate in the upstream operating side. Even if you switch over to mining, once mines are completed and on production, now we have the opportunity to provide catering, hospitality services throughout the operating life of those mines.

And so our long-term base business is also growing and behind these big infrastructure projects, which helps you understand why we try to temper our excitement of what’s going on. But a high degree of confidence of how this business operates over an extended period based on what’s happening.

Mike Ridley (Chief Operating Officer of Workforce Solutions)

Thanks, that’s helpful. Maybe one for Toby, could you maybe just touch on operating leverage in the business and how we should think about modeling EBITDA margin for Q4 given that we’re one month into the quarter? I know there’s variability from quarter to quarter, but any thoughts on how we should model it?

Toby Labrie (Chief Financial Officer)

Yeah, Q4 with some of the sales being delayed from Q3 and MSS into Q4, we expect sales to be a little bit higher than we would typically see, but otherwise a fairly comparable quarter to what we would have seen in previous years. So expect margins to be revenue mix and resulting margins to be relatively comparable as a result.

Mike Ridley (Chief Operating Officer of Workforce Solutions)

Okay, great. And last one for me just on the workforce side, sales revenue up, you know, healthy. Can you point to any attribution or what can you see that led to that growth in the sales side in workforce,

Toby Labrie (Chief Financial Officer)

The custom sales? I think a good part of that went through the US and Australian operation, Mike. Yeah, I mean when we have customer opportunities within our business, it isn’t always straight rental. We’re not as a manager that can come in all shapes and forms, but sales is a part of what we do and it could be new factory-built assets, which is what Trevor’s alluding to down in the US and the same in Australia. It’s a good part of our business and we continue to take on those opportunities.

We should see over the first few quarters of ’27, we should see some continued sales in Australia especially.

Mike Ridley (Chief Operating Officer of Workforce Solutions)

Thanks very much. New sales as opposed to rentals. Thank you. Okay, thanks a lot. I’ll pass along.

OPERATOR (Moderator)

Your next question comes from the line of John Gibson with BMO Capital Markets. Your line is open.

John Gibson (Analyst)

Morning all. Thanks for taking my questions. Just wondering if we could talk about pricing on the bids outstanding. I guess could you frame are they higher than current levels and so how much if you could potentially disclose that.

Trevor Haynes (Chief Executive Officer)

If we look at the different business units starting with WFS, if you think of an asset that was deployed in the last couple of years and working and compare it to where quotes are today, rates are up significantly, and what’s happening in the industry is the anticipation that new capacity is going to have to be built to match what’s happening on the customer side of things. And so rates are moving towards what would justify or support return on the cost of new assets, dorms, kitchens, et cetera, John, and so yes, they are stronger.

You know, we think of value to our customer where the customer needs or will need to commit to a new asset because that’s what the next availability is for them. We need to ensure that we can get a reasonable return on the cost of those assets. So what you’d add there, Jeff?

Jeff

Yeah, along with that almost a year ago bought a good catering company, so we’re collecting that margin. So we’re not passing that on to a third party. So I think in comparison to the last run of these big projects a few years back, that component’s going to play into it. It’s fully integrated. Our margins or our pricing on catering, hospitality services haven’t changed all that much. What we’re looking at is what’s required as return on the asset side of things.

And so that part of our pricing stack has been moving and for those reasons I would also note that our small format business is also seeing price improvement in both Canada and the US as that market tightens up as well.

John Gibson (Analyst)

Okay, great. I’m going to follow on to that one then. So utilization in Canada is at 57%. The majority of their WFS fleet is here in country. Like in a blue sky scenario with pricing increases you get to 100% utilization. Could we see WFS revenue double from here.

Trevor Haynes (Chief Executive Officer)

If we solely looked at the asset side of the business, that’s a possibility. When you blend the revenues with these full turnkey catering contracts, etc. Well, I guess you’re providing that over incremental demand, so yeah, certainly in the realm of possibility, I guess. Toby?

Toby Labrie (Chief Financial Officer)

Yeah, yeah, I think, and as John mentioned earlier, that path to full utilization could take some time as some of these projects do ramp up over time with their capacity, even within a project. But yeah, at full capacity, I think where you were going, Trevor, is the different components of revenue, rental and lodging certainly could double. Non-rental revenue is going to vary based on the timing of mobilizations and so that could spike revenue at the outset of those larger projects.

John Gibson (Analyst)

Okay, I won’t hold you to it, but I appreciate the color there. Last one on lodgings, I mean, it’s EBITDA positive now. Are you getting to the point where discussions are happening in terms of monetizing the platform or potentially spinning it out to grow it further? I know you’ve sort of touched on in the past that this could be the level where it happens and just wondering what your thoughts are there.

Trevor Haynes (Chief Executive Officer)

As we think about it scaling further, our focus is on building and showing that this is a very valuable asset in terms of its ability to generate cash. Profitability steadily grow at a high pace and that’s what the team has been focused on. That said, we’re always looking at how we ensure that the value of the pieces of the Black Diamond Gr are properly valued into the overall share price, et cetera. And that’s where we continue to evaluate any number of scenarios with regard to LodgeLink.

And it’s also why Jason has moved over to LodgeLink to work with us as CFO there, as we feel this platform, even in its current form, it’s much more valuable than what’s ascribed to a share of Black Diamond Gr today.

Jason Zhang (Chief Financial Officer of LodgeLink)

Yes, selfishly, John, my view is that you probably get LodgeLink for free when you buy a share of Black Diamond Gr today. And perhaps that’s the fact that we’re sort of this tech platform embedded in this big industrial services company. I think the beauty of being EBITDA positive now is that we’re not sort of acting as a drag on the broader Black Diamond Gr valuation platform. And we’re growing really quickly. And so from that perspective, as we have conversations with whether it’s a prospective PE or what have you, all the various metrics sort of show us as being quite top tier, whether you’re thinking about retention or net revenue growth or ARR or gross margins. So I think the point there is there’s a lot of options in front of us with how we want to grow and take this, and we have the benefit of having a good, patient sort of backer in the broader Black Diamond Gr parent company.

Trevor Haynes (Chief Executive Officer)

Another thing to point to, John, which is interesting to us right now, as our customers are ramping up their manpower. They’re also looking at the complexity of moving people from farther and farther away. And so something that’s been occurring very recently is LodgeLink and our WFS business putting integrated solutions in front of customers. And I think we’re actually going to begin our first integrated where LodgeLink encompassed in a WFS solution is providing the movement of the workforce to and from where we’re providing a camp and catering solution.

So when we think about the potential of the businesses driving value into each other, our view of how this works as part of the overall Black Diamond Gr platform is gradually changing. So just another perspective on how LodgeLink fits into the Black Diamond Gr platform.

John Gibson (Analyst)

Appreciate that. We are definitely going to need people to build these things. Thanks. I’ll turn it back. Thanks, John.

OPERATOR (Moderator)

Your next question comes from Zachary Evershed with National Bank. Your line is open.

Zachary Evershed (Analyst)

Good morning everybody. Congrats on the quarter and thanks for taking my question. Just looking at that pipeline that exceeds available capacity and in the context of your answer to John’s question about pricing in the WFS space, could you maybe comment on the potential return profiles of new equipment versus refurbished?

Trevor Haynes (Chief Executive Officer)

Sure. Thanks, Zach. Thanks for joining us. Thanks for the question. You want to take that, Toby?

Toby Labrie (Chief Financial Officer)

Yeah, sure. On the WFS side, we do anticipate some maintenance capital going into assets, but we don’t actually require a ton of refurbishment to get those assets to work. And so the way we think about those assets, as Trevor mentioned before, is pricing should be increasing as utilization increases to approach the rates required to justify investment on a new asset. And then on a new asset, we need to earn our target hurdle rate returns. And so that factors into the pricing requirement that or how we would price those new assets.

But we don’t really see that inflection point in the near term. We think we need to get our existing assets to work before we start deploying meaningful capital. On the, on the WFS side, on the refurb part of the question, we’ve been refurbing and repurposing assets for a number of years, especially into our small format. We don’t have a lot of our inventory that requires much true refurb to get it out into the market.

Zachary Evershed (Analyst)

Great color. Thanks. I’ll turn it over. Thank you.

OPERATOR (Moderator)

And our last question comes from Kyle McPhee with ATB Core. Mark, your line is open.

Kyle McPhee (Analyst)

Hey Toby, just to confirm something you just kind of alluded to. So you don’t expect to be spending growth CapEx for WFS next year given the size of your excess fleet like that. That’s not in the cards yet. Fleet expansion for WFS,

Toby Labrie (Chief Financial Officer)

There are a couple.

Trevor Haynes (Chief Executive Officer)

Sorry, I’ll take that, Toby. Where we are expending capital for our WFS fleet has to do with the US and Australia. The bulk of the capital that we anticipate and we see our CapEx increasing, the bulk of that is still going to MSS as we mentioned earlier, with inflection. Until we get meaningful absorption of spare capacity in WFS, there won’t be a meaningful end up where there isn’t a need for a meaningful investment. We’re starting to think about it and how that would work and what manufacturing supply looks like, et cetera.

But you’re correct. Near term our CapEx is WFS, Australia and US and then predominantly MSS.

Kyle McPhee (Analyst)

Okay. And then on MSS, you know, you’ve alluded to you have deployments coming up. You know, you’re doing the preparatory spend. Now you have the CapEx budget to expand the fleet. What does the pricing look like on this round of MSS deployments you have on the way? Is pricing inflating versus current level.

Trevor Haynes (Chief Executive Officer)

Pricing for MSS has been tracking the cost of new assets. You know, our paybacks are probably strengthening slightly, but we feel that the increase annually in the cost of a new asset is quickly absorbed into our rates across the MSS fleet and continues to be the case as we, as we add capital. So we’re getting a very, you know, an attractive, but it’s consistent, attractive return on capital. But it’s consistent with where we’ve been at for the better part of the last six, seven years.

Kyle McPhee (Analyst)

Okay, so on the pricing front for MSS though, it sounds like nothing abnormal, just kind of normal course, low mid single digit price inflation on all these new contracts you’re deploying into. Is that accurate?

Trevor Haynes (Chief Executive Officer)

Yeah. Where we’re trying to push is increased penetration of apps. That helps us expand our margins beyond sort of the annual inflation and the cost of a new asset. So when you take them together, we’re getting reasonable growth, both revenue and contribution on MSS, but the base rental rates are, are essentially tracking the rate of inflation.

Kyle McPhee (Analyst)

Got it. Okay. And then last one I promised this time, the MSS CapEx budget, like how should we be thinking about the size of that into next year? Are you going to be spending even more on fleet expansion than you are right now or a similar level? Where does it tail off?

Trevor Haynes (Chief Executive Officer)

We anticipate spending more. Manufacturing line space in Canada and the US for both MSS and WFS is extremely tight, which is indicative, we think, of the base strength of this industry segment and so in anticipation we we’ve ensured we’ve got good security of supply, we’ve got good correlation with contracting and advanced bids with key customers. So with that we anticipate a stronger CapEx year next year than this year and it’s reflected, I think, in the outstanding CapEx of 50 million at the end of Q3 and as we move through next year I think every quarter we’ll continue to have the opportunity to deploy on a fairly low risk basis as our customers need more capacity.

Kyle McPhee (Analyst)

Okay, thank you. That’s it for me.

OPERATOR (Moderator)

And with no further questions in queue I’d like to turn the conference over to Trevor Haynes for closing remarks.

Trevor Haynes (Chief Executive Officer)

Thank you. Thank you everybody for joining. Thanks again to the Black Diamond Gr team for the fantastic work and we appreciate everybody’s interest in the Black Diamond Gr story and look forward to updating you in coming quarters. Hope you have a great day.

OPERATOR (Moderator)

This concludes today’s conference call. You may now disconnect.

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