Black Diamond Group Aktie

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. [Operator Instructions]

I will now turn the call over to Emma Covenden, VP, Investor and Stakeholder Relations.

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.

This quarter's MD&A, financial statements and press release may be found on the company's website at www.blackdiamondgroup.com and also on the SEDAR+ website at www.sedarplus.ca. Dollar amounts discussed in today's call are expressed in Canadian dollars, unless noted otherwise, and may be rounded.

The format for today will be similar to prior 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, and then we will open the line for Q&A.

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

[indiscernible] 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 $129.2 million increased by 23%, driven by strength in recurring rental and lodging revenue streams, contributing to adjusted EBITDA of $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 Camp, 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.

Consolidated rental revenue increased 17% year-over-year to $45 million, and contracted future rental revenue remained healthy at $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 multiyear project for us. And moving forward, it positions the business well for scalable growth as opportunities across the platform accelerate. And 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, we completed on time and on budget. And 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 $24.9 million, down 23% from the comparative quarter, while capital commitments of $34.2 million at quarter-end increased 24% and 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. 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 United States and Australia, while 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. Combine that with our long-standing 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.

While 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 $2 billion of formal bids outstanding in Canada alone, across more than 20 active projects, representing more than 2x 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.

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.

And 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 USD 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 remained very strong. And 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 that the business is 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.

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 2 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.

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 $0.01 was down from $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 PC sales tax [ assessments ] was $0.09, down from $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 count 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 pipeline.

With respect to the adjustments to EPS, I'd like to focus on the 2 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 BC sales tax assessment 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 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. And currently, we are invoicing our customers in order to recover the additional tax that the BC government has imposed. We have recorded a $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 nonrecurring 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 $72.2 million increased 55% and adjusted EBITDA of $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 nonrental revenue increased 34% compared to the prior year.

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 $2 billion as these projects move into their construction phase.

MSS generated rental revenue of $28.6 million, up 8%, and adjusted EBITDA of $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 customer sales as a result of typical sales activity variability and funding uncertainty within the education center sector. 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 of -- 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 $43.5 million, while net revenue increased 64 million -- or 64% to $5.4 million. Travel segment 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.

Turning to cash flow and capital allocation. Free cash flow for the quarter was $14.6 million and funds from operations totaled $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 $351 million, with net debt to trailing 12-month adjusted leverage EBITDA of 2.4x, comfortably within our target range of 2 to 3x. During the quarter, we completed the expansion of our ABL facility to $550 million, increasing available liquidity to nearly $200 million and providing significant flexibility to support future growth opportunities.

Overall, we are pleased with the performance of the business. The 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.

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

[Operator Instructions] Your first question comes from the line of Kyle McPhee from ATB Cormark.

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? And then also, 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.

Yes, Kyle. I appreciate the question. CapEx, as you suggest, is primarily committed to MSS at this point in terms growth CapEx. We haven't seen that significant an inflation rate year-over-year. I think we're 3% to 4% inflation on MSS buildings. And so there's not a significant adjustment you need to make in terms of sort of fleet growth or the dollar amount of CapEx committed. And roughly 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. So there's your inflation.

We don't have very much CapEx focused on WFS at this point. 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 of smaller format accommodation units, which are actually, from a utilization perspective, quite tight, if you think of the Montney, for instance. And also in Australia, we've been running fairly high utilization on our workforce fleet. So as we're picking up contracts, we're typically adding some incremental square footage.

So we do have some growth in WFS. And of course, we have our maintenance capital across all parts of the business, and modest amount of corporate capital. So the bulk of what we've disclosed for Q1 and our outstanding commitments at quarter-end are for MSS growth. And again, we typically have line of sight with customer contracts, so it's pretty low-risk deployment.

Okay. And then your comments also call for acceleration of organic investment in 2026 and '27. So 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?

The acceleration, we do quarterly capital allocation. And 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 a 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 BOXX 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, Jon, 5,300 to 5,500 beds of capacity available to match up with demand. And so we'll absorb that obviously before we spend capital to increase bed capacity.

The next question comes from the line of Matthew Lee from Canaccord.

First I want to congratulate Ted on his career. [ Wish him ] great times. So congrats, man. Hope you have fun.

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

Yes, you'd have to go back many years to -- in our [indiscernible] that we can run in the 90-plus percentage range, and we did for many years. The sales cycle for WFS is such that we have longer visibility of forward demand. And so you can run a little bit higher in utilization, if we do, in fact, get there. Mike, pass to you.

Yes. Just a couple of other points around utilization. Firstly, all these projects are not going to go away. So it's not going to be 6,000 beds now 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 tied to other projects along the way. We view, from time to time, use third parties to subcontract assets through, so we'll explore those avenues as well. And if we can get good term and good return, we'll certainly look at deploying capital to grow our asset base further.

Yes. That makes sense to me. Maybe we can talk about the $2 billion in bids then in Workforce Solutions. I mean how long are those contracts generally? Like is it like 3 or 4 year contracts? Or are these like 10-year-plus contracts?

Well, it's 2 different numbers there. There's a typical length of time the customer will keep the assets in terms of how long it takes on [indiscernible] site. But a typical time line is usually 36 months as an average. Jon, you're very close to this.

I would say on the infrastructure -- pipeline infrastructure projects, you're looking at a maybe 3 to 4-year time frame from start of the project to end of the project. Within that 3 to 4 years, we'll 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 3 years of construction leading into operations that mines 20-plus years.

But in terms of the specific bid pipeline, the projects and the quantification of that is based on a roughly 3-year average term in the bids.

Yes.

Okay. That's helpful. So some of these products might have extensions as well then.

Our next question comes from John Gibson from BMO Capital Markets.

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's going to happen due to supply crunch and potentially [indiscernible] equipment ahead of the flurry of activity? Or is it just primarily sort of FID dependent on winning this work?

Yes, it's interesting. I think there is a growing sense of competition for limited services and assets. Again, John, you're very close to these conversations.

Yes. We are definitely getting calls to get a sense of the whole industry from certain points that we're close to, and 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. So there's definitely phone calls that are happening.

We do have many customers who have secured assets on rent in advance -- well in advance, when their project is going to start off. And I think that's entirely, Jon, because they're concerned the assets won't be there...

100%.

When the project kicks in.

Yes.

Quick to point out, John, that's a limited set that are doing that yet. But thematically, it's coming through. Sorry. Go ahead.

Yes. Got it. I appreciate that. Just second one from me, how can we think about demand strengthening across the MSS platform? Obviously, you gave us the numbers you are bidding on for workforces. 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?

Yes, MSS, one of the great things about the platform is that 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 these big projects also need project offices, training facilities, security, laboratories and lunch rooms. So there is 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?

Yes. Our backlog, because the projects we've won is ahead of where it was last year at this time, so we have a larger backlog, that we mentioned out earlier. Also when you look at our proposals in progress and proposal delivered, both of those are above where we were at this time last year.

And in addition to the big nation-building projects, we have a lot of, I would call them more industrial type projects, so petrochemical projects, data center projects in both Canada and the U.S. that are well underway and that we have units on those sites. And we expect as those sites continue to ramp up, we'll have more units on it. So that's what's driving the firm backlog that we have today, is existing rentals. And then we know that the customers are going to have additional rental demand over the next 12 months as they ramp their projects up.

So it's both kind of our normal industrial education, commercial type business, in addition to -- there's definitely a pull through from the nation-building projects that we're expecting.

And where we also see the impact of that is increasing utilization, and 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. And so we expect on more of a lagging basis, we start to see that going through our results in coming quarters as well.

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?

It's a tough comparison, John, because of inflation 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, bid rates have come up. They're probably up easily 50% from trough 2-plus years ago. But we still need to increase, probably doubled from where we are now to justify CapEx on brand-new camp gear. But again, we're dealing with day to day. Jon?

Yes, definitely, the cost of the dorm has gone up considerably. So 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 our of these bids.

Yes. I'll turn it back, but congrats on the return, and you've put the MSS business in a pretty good position here.

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

Absolutely.

Our next question comes from Razi Hasan from Paradigm Capital.

My first one, just a follow-up on John's, did you say bid rates are up 15% from the trough, 15, did I get that number right?

5-0.

5-0, okay. Great. And 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 -- or was there anything else to stick out in terms of an elevated cost?

Gross margins down. Toby?

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

Okay. That's helpful. And then 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.

Well, there's 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 predict. So we have that. And Ted has some great visibility on that. We can talk about it 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. So that's also down on a year-over-year or a multiyear basis in our Workforce business.

However, let's switch back to MSS, which is where we -- this is a recurring business line for us. Ted, what are we seeing?

Yes. The sales are up and down over the comparable quarter. So Q2 2025, we had high sales. Q2 2026 was more of, like if you go back over the last 6 Q2's, it's kind of in the middle of the range. So wasn't a terrible quarter, just it's against a tough comparable. As we said, the education sales were a bit softer, so that was kind of where that came from. But when we look forward, the backlog is good. So Q3 and 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. So this is going to hit in Q3, it's going to hit in Q4. 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.

But solid pipeline there. And on the Canadian side, we've been trying to grow that custom sales and diversify into more end markets. And 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 like some temporary softness in education due to government funding in the U.S.

Okay. That's helpful. And if I could just get one more in. Just on the bid pipeline in Workforce Solutions, is there -- 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 pipeline?

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. And it isn't just Canada. We're seeing it in all 3 countries.

So 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 -- or maybe you're older than me, I don't know.

I think I have a few years on you. Yes, it's -- I mean I've been in [ the city ] for 30 years, and this is the strongest active pipeline that I've seen in my time. So it's super exciting for us. And to Trevor's point, it isn't from just one specific area or industry, and geographically. It's across Canada, it's into the U.S. And we also have a really strong and active pipeline in Australia.

So we're super excited what the future is going to bring for us. And a lot of this, if you go back to our core strategy, 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.

The positioning.

Yes. 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. So it's every industry.

It's super interesting. We just want to get going at the field level. We're ready.

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

I think you're going to see 2 things happening here. Currently, the smaller projects seems to be getting out of the gate. And so sort of a gradual utilization improvement. I think, Mike, Jon would be aligned on that over the next couple of quarters. And then step changes where the bigger projects, FID, you've got everything from LNG Canada Phase 2, also GasLink compression expansion, the Prince Rupert Gas Transmission line with the Ksi Lisims. These are the big ones that the announcement would -- 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 2 or 3-quarter time horizon.

So it's a little bit of both right now. Smaller components are beginning to mobilize and then we'll start having those step change utilization moves. That's the way I think it's going to happen.

Our next question comes from the line of Frederic Bastien Raymond James.

First question I've got is on the MSS side. Rental revenue growth for the quarter came in stronger than what we were expecting, but 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? Or just wondering if you could provide a bit more color, please?

Ted, why don't you take that?

It's due to steady CapEx spend on like good opportunities where we've got good visibility on demand, and then a bunch of that is what we call [ bid set], which is projects that we're bidding on that if we -- we only buy the assets if we win the project. So that would be the majority.

VAPS growth has been significant. I don't know the exact percentage, but the majority would be from the CapEx deployment, and then the VAPS is kind of gravy on top of that. Both of those have very healthy margins. But we're investing capital, obviously, so we expect healthy margins.

Okay. Cool. And Ted, while we're at it, you're commenting on the value-added products, it was up 35%, and it's high margin. So 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?

In the past, we've said our target is mid-teens. So I think still have that mid-teens target. So 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. So we've got -- there's a whole number of initiatives around the VAPS. So the quoting activity continues to indicate that we'll see VAPS growth.

It can be a bit lumpy from quarter-to-quarter because if we get a big unit comes off a project that had a lot of VAPS in it, then the VAPS goes down. But on average, we've obviously been adding a lot more VAPS than have been coming back. You just you got to kind of look at it more like a year-long trend, not a quarter-to-quarter trend.

Thanks, Ted, and again, congrats on your upcoming retirement, and all the best. I do have one more, however, on LodgeLink, delivered exceptional growth during the quarter. And 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?

Frederic, we're excited to talk about LodgeLink, so thank you for the question. Quick to point out that the current performance is before the new software is in market. The new software is just moving into testing next week. And so we think the firepower of the tool, the platform itself, is going to have a step-change improvement by the end of the year. So 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. But at the same time, our retention of our Tier 1 and Tier 2 customers is very high. And in fact, we're increasing share of wallet for travel with key customers. So the team is doing a fantastic job from a commercial perspective. And then with the steady automation of the platform, we're seeing gross margin expansion for LodgeLink itself, and comfortably generating positive EBITDA at this point.

So 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 on to 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.

And then 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. So we expect to be showing good growth trends over the foreseeable future for this company.

And can you please remind me through which revenue line item it goes through under WFS? Is it nonrental?

Yes. We primarily see that in nonrental, Frederic.

Our next question comes from Trevor Reynolds from Acumen Capital.

Maybe just going back to the bid pipeline and kind of the timing that you expect to be able to announce some of these projects and when you kind of see them actually being [ deployed ]. Obviously, you've provided some color, but anything else you're able to provide on that would be helpful.

Trevor, needless to say, these are complicated projects in terms of project engineering, planning, take-off agreements, supply agreements and financing. So for us, to say we've got any particular insight of where these big projects are in getting to the finish line, it's a little bit outside of our fairway. What we can tell you engaging with these type of projects over a whole career is they're certainly well advanced, I would say, Mike and Jon, in terms of where we are at in engagement and sort of negotiating key terms, et cetera. And you just get a sense of when these projects are tipped to a bias to proceeding. And I would I would say, Jon, there's a number that would fall into that category. So we think it's...

Yes. Definitely moving forward. The clarifications are coming. There's 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.

Intensity, urgency.

Oh, yes, there's definitely urgency. Got a text right now saying "Call me at 10:00. So it's definitely moving along.

We should have set up for one of our phones to ring. But 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. And our win rate percentage, we can get to near fully utilized without every major project going ahead. So a fraction of them with our market share and we're in good shape.

So we feel this is actually coming to fruition, but there are more complicated macros involved as well, we're quick to point out.

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

There's probably math where there's enough of the small to midsized projects that they could absorb all of our spare capacity. So 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. And 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. And then also the way that these projects ramp through a manpower curve, you can move assets between projects as they time through their project cycle.

And so there's a lot of factors that come into matching up our capacity to projects. So we can certainly take on more than our current inventory based on those factors, is, I guess, the way to say it.

Great. And then lastly, 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.

There's good read-through from the other -- 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?

Yes. I think the last 3 quarters various companies talk about it. So it's not a huge trough. But 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. So still lots of rentals going on, lots of school sales. It's just not at kind of the peak it was in COVID and some of the Biden and early Trump infrastructure incentive programs encouraged probably higher than normal sales. So maybe another way to say it is we're closer to normal. But as the funding uncertainty changes...

It might be helpful 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.

Right. I mean 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. So there's lots of events 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.

And 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 6 years. It's not a peak for last year. So that might continue. Hopefully answered that question, but...

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

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

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.

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. So we look forward to updating you on the next quarter, and we believe that the thematic will roll forward in a favorable way.

And then 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. So wish you well in retirement.

And to everybody on the line, thank you. Have a great day.

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

Welcome to the Annual Meeting of Shareholders of Black Diamond Group Limited. I am Trevor Haynes, the Chairman of the Board of Directors and Chief Executive Officer of the company.

At this time, I would like to introduce the other directors and senior officers of Black Diamond present at the meeting today. The following members of our Board of Directors, Brian Hedges, Robert Herdman, Edward Kernaghan, Leilani Latimer, Steven Stein and Robert Wagemakers. And the following senior officers: Toby Labrie, our Executive Vice President and Chief Financial Officer; Ted Redmond, our Executive Vice President and Chief Operating Officer, Modular Space Solutions; and Mike Ridley, our Executive Vice President and Chief Operating Officer, Workforce Solutions.

With this virtual meeting format, only registered shareholders and duly appointed proxy holders who have signed into this online webcast will be able to vote on the resolutions tabled at this meeting. As this meeting is being held virtually via live webcast, I would like to set out a few rules for the orderly conduct of the meeting.

First, questions in respect of a motion can be submitted by any registered shareholder or duly appointed proxy holder using the instant messaging service of the virtual interface. Second, questions will be forwarded to me shortly after they are submitted, but will only be addressed if they relate to procedural matters or relate directly to the motions before the meeting.

Third, for the purposes of the meeting today, voting on all matters will be conducted by electronic ballot. The polls have been opened by our scrutineers and registered shareholders and duly appointed proxy holders, who have not already voted, or who wish to change their votes are able to do so on each business item until polls are closed following the presentation of the business items. If we encounter any technical difficulties with the webcast during the meeting, please remain logged on, and we will resume as soon as possible.

The meeting will now come to order. I will be the Chairman of the meeting. I will ask Scott Cochlan, our Corporate Secretary, to act as Secretary of the meeting and representatives of Odyssey Trust Company to act as scrutineers. In order to ensure that the meeting covers all of the business for which it was convened within a reasonable period of time, we have prearranged with a number of persons attending to move and second certain motions. This procedure is not an attempt to discourage participation, but merely a way to expedite proceedings.

As mentioned, the polls are now open, and at this time, all registered shareholders and duly appointed proxy holders who have properly logged in with their control numbers or user name and wish to vote will be able to see on the screen all motions being brought forth at this meeting. Please register your votes by selecting the For or Withhold button next to each item to be voted on. If a registered shareholder or a proxy holder has already voted on all matters, there is no need to vote again unless you wish to change your vote on a matter.

I have received confirmation from Odyssey Trust Company that all materials in respect of the meeting were mailed to shareholders in compliance with applicable securities requirements. I direct that the affidavit, together with copies of the documents mailed to the shareholders be kept by the secretary with the minutes of this meeting. The reading of the notice of meeting will be dispensed with.

I have advised the scrutineers that there is a quorum present -- I have been advised by the scrutineers that there is a quorum present at this meeting. Accordingly, I declare that this meeting is regularly called and properly constituted for the transaction of business. I direct that the scrutineers' report be kept by the Secretary with the minutes of this meeting.

To my knowledge, the decision of the meeting will be in favor of each resolution to be considered, and all resolutions will be voted on by electronic ballot through the online portal. The scrutineer will compile a report regarding the voting results once all votes have been conducted.

The first item of business is to table the audited consolidated financial statements of the company for the year ended December 31, 2025, together with the report of the auditors thereon, A copy of these materials has been mailed to each registered shareholder who elected to receive such materials. It is not proposed to ask shareholders to approve the financial statements, which have been placed before the meeting.

The next item of business is the election of the directors of the company. The Board of Directors have fixed the number of directors to be elected at this meeting at 7. As noted in the information circular, the Board of Directors has adopted an advanced notice bylaw, which provides a procedure to be followed by the -- for the nomination of directors at shareholders meetings. There were no other nominations received within the requirements of the advance notice bylaw. Therefore, the only individuals entitled to be nominated as directors at this meeting are the persons named as nominees in the information circular as directed by the Board.

Therefore, Trevor Haynes, Brian Hedges, Robert Herdman, Edward Kernaghan, Leilani Latimer, Steven Stein and Robert Wagemakers are hereby nominated to act as directors of Black Diamond until the next annual election of Directors or until their successors are elected or appointed, subject to the provisions of the Alberta Business Corporations Act and the bylaws of the company.

In accordance with the company's majority voting policy, we will conduct the election on an individual basis for each director. As a result, the decision of this meeting on the election of directors will be conducted by way of a ballot, allowing registered shareholders and proxy holders to register votes for or to be withheld for each individual director. I will ask registered shareholders or duly appointed proxy holders, who have not already done so, to cast their votes through the online portal.

[Voting]

The next and final item of business is the appointment of the company's auditors. May I have a motion for this item.

I move a motion that the firm of Ernst & Young LLP, Chartered Professional Accountants, be appointed auditors of the company until the next Annual Meeting of Shareholders or until their successors are appointed and that the directors of the company be authorized to fix the remuneration as such.

I second the motion.

Thank you, Ms. Covenden. Thank you, Mr. Mullins. I will ask registered shareholders or duly appointed proxy holders who have not already done so to cast their votes through the online portal. We will provide registered shareholders and duly appointed proxy holders a few more moments to complete the electronic ballots. Once the electronic balloting closes, the voting page will disappear and your votes will automatically be submitted.

[Voting]

Odyssey, please close the polls. I would ask that the scrutineer compile the report regarding the results of voting on all business matters.

I have been advised by the scrutineers that the ballots and proxies deposited for the meeting have been voted in favor of the resolutions. Accordingly, I declare all motions carried. I direct that the results of the poll be included with the minutes of this meeting, and the results of the voting will be announced in a press release in accordance with the policies of the TSX and filed on SEDAR+.

As there is no further business to come before the meeting, I declare the formal part of the meeting to be concluded. We thank you all for your attendance at this Annual Shareholder Meeting and wish you all the best. Goodbye.

Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Black Diamond Group First Quarter 2026 Results Conference Call. [Operator Instructions] I would now like to turn the call over to Emma Covenden, VP, Investor and Stakeholder Relations. Please go ahead.

Thank you. Good morning, and welcome to Black Diamond Group's first quarter 2026 results conference call. With me this morning we have Chief Executive Officer, Trevor Haynes; Chief Financial Officer, Toby Labrie. Chief Operating Officer of Modular Space Solutions, Ted Redmond, Chief Operating Officer of Workforce Solutions, Mike Ridley; and President of Royal Camp Services, Jon Warren. Please be reminded that our discussion today may include forward-looking statements regarding Black Diamond's future results and that such statements are subject to a number of risks and uncertainties. Actual financial and operational results may differ materially from these forward-looking expectations. Management may also make reference to various non-GAAP financial measures in today's call such as adjusted EBITDA or net debt.

For more information on these terms and others, please review the sections of Black Diamond's first quarter 2026 management discussion and analysis entitled Forward-Looking statements, Risks and Uncertainties and non-GAAP financial measures. This quarter's MD&A, financial statements and press release may be found on the company's website at www.blackdiamondgroup.com and also on the SEDAR+ website at www.sedarplus.ca. Dollar amounts discussed in today's call are expressed in Canadian dollars, unless noted otherwise and may be rounded. The format for today will be similar to prior calls. Trevor will start with a high-level overview of the company's performance and highlights from the quarter, including our view of the current and forward-looking operating environment. Trevor will then pass the call over to Toby for a more in-depth summary of the financials, including details of the quarter, and then we will open the line for question and answer. With that, I'll turn the call over to Trevor.

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

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

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

Looking ahead, our outlook remains constructive, with convexity of optionality across the business. We continue to see stable baseline performance across all our operating businesses underpinned by high-margin recurring rental revenue and generally healthy end market dynamics across Canada, United States and Australia. For WFS, the breadth and volume of opportunities in our pipeline suggests that nation-building thematic in Canada is indeed a substance and the pending impact of asset deployment on fleet utilization is a matter of timing. We remain bullish on our ability to unlock the significant operating leverage in this area of the business, but caution a realistic assumption on the timing of this scenario.

MSS remains a resilient cash-generative business with clear runway for growth, underpinned by strong fundamentals and tailwinds in the infrastructure and construction verticals. While U.S. public sector education funding uncertainty has impacted the cadence of new sales, we expect this to stabilize moving forward. Finally, we are encouraged by the exponential growth trends we're seeing in LodgeLink. This performance reinforces its accretive potential which we expect to compound as the platform moves toward general availability of its new generation 3.0 product as we exit 2026.

To summarize, we are pleased with the results of the company in the first quarter and expect similar steady near-term performance to carry through the first half of the year with the potential for a more pronounced acceleration in the back quarters with strong financial flexibility, disciplined capital allocation, best-in-class operational execution and a growing base of high-margin rental revenue, we are well positioned to continue compounding value through 2026 and beyond. With that, I'll now turn the call over to Toby.

Thanks, Trevor, and good morning, everyone. I'll focus today on the results of our segments, margins and balance sheet. First, I'll address earnings per share for the quarter while EPS declined $0.06 from the comparative quarter, the decrease was due to several circumstantial factors versus any indication of eroding business performance beyond its typical episodic nature as shown through our growing consolidated revenue, EBITDA and cash flow.

First, the impact of depreciation and amortization related to the acquired Royal Camp business had a $0.075 impact on EPS. EPS was also impacted by shares issued in conjunction with the bought deal and acquisition of Royal Camp services last year, higher stock-based compensation due to the increased share price and moderated activity in the company's legacy WFS operations due to the prepayments of a large U.S. contract in Q4 2025, partially offset by meaningful contributions from Royal Camp and stable performance from MSS.

With respect to specific business unit performance, I'll begin with Workforce Solutions, where revenue of $81.5 million increased 54% and adjusted EBITDA of $18.9 million was up 48% from the comparative quarter, driven primarily by large services growth and contributions from Royal Camp services. Utilization for the segment was 56.5%, leaving meaningful available fleet capacity as we look to significant opportunities on the horizon. MSS generated rental revenue of $26.8 million, up 5%, with adjusted EBITDA of $19.4 million, consistent year-over-year.

Utilization remained within the optimal range at 77.7% and average monthly rates increased 3% on a constant currency basis. We continue to see strength in our value-added products and services with VAPS revenue increasing 35%, driving VAPS as a percentage of rental revenue to 10.8% which continues to be an important focus and driver of margin expansion.

LodgeLink delivered a strong quarter with total trade value of $32.7 million, an increase of 52% generating net revenue of $3.7 million, up 37% and total travel segments increasing 15% to 154,979 from the comparative quarter. From a balance sheet perspective, net debt at quarter end was $330.7 million, with net debt to trailing 12-month adjusted leverage EBITDA of 2.1x remaining at the low end of our target leverage range.

Liquidity at quarter end was $93.3 million prior to the $125 million expansion of the ABL facility, providing flexibility to support further growth. The average interest rate paid on debt during the quarter was 4.21%, which was 62 basis points lower than the comparative quarter as benchmark interest rates are lower year-over-year.

Business' ability to generate stable and growing free cash flow supported by a strong balance sheet remains a defining characteristic of Black Diamond. In the first quarter of 2026, we generated $17.8 million of free cash flow, representing a 5% increase from the comparative quarter. We also continue to make progress on the ERP implementation. Total investment to date is approximately $9.3 million with roughly $2.6 million remaining.

Project is on schedule with this phase of MSS and corporate scheduled to go live in the current quarter. To reiterate Trevor's comments, we remain confident in the performance of the business. The near-term outlook is steady from these first quarter results with meaningful improvements expected in the second half of 2026 due to seasonal education and construction sector related activity.

We continue to gain confidence in a further potential positive inflection point beginning as early as late 2026 aligned with progress on major nation building, infrastructure and resource projects in Canada. While the timing of large-scale construction project starts often extends beyond initial expectations, their extended duration once underway, has historically provided durable multiyear demand that we believe we are well positioned to capture over time. With that, operator, I'll ask you to open the call for questions.

[Operator Instructions] Your first question comes from the line of Kyle McPhee from ATB Cormark.

I just want to start on the workforce demand wave on the way here. I'm hoping you can help us quantify some of the upside potential here. Do you expect to be able to start utilizing all of your unutilized camp fleet assets over the midterm? Is the demand coming down the pipe enough to soak up all of your excess suite notably when you layer in your odds of winning a chunk of this business on the way.

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

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

Yes. I mean, if and when these go, whether FID is later this year or early next year, Trevor's point with some of our partnerships that we have in Western Canada, in particular, we're very well positioned and poised to win our fair share of work. And even beyond these nation-building projects, the sales pipeline in all of our markets right now is very, very active. When you look at mining in Eastern Canada, for example, even in the West, construction, government spend, disaster relief, homelessness, oil and gas in the Duvernay and Montney is also very active. And then moving down into the U.S., solid oil and gas sector, construction, everybody's talking about data centers these days and what they bring and benefiting potentially for Black Diamond, not only our workforce business, but we're very active with our MSS business on data centers as well.

And then over in Australia, again, a really strong resource sector, construction, government, education. So yes, I would agree with Trevor's comments around -- I've been in the industry since '97. And in terms of what the sales pipeline looks like it's as strong as I've ever seen it.

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

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

Yes, definitely. The timing is the key thing. Even with some starting what's coming off and how do those roll into the other projects, I think that will be a big part of it. So -- and then as far as the operational side goes, ramping up for that, I think we have good opportunity to roll the operations into those different projects as they come on.

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

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

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

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

Certainly. I think it's a scenario if all of these large projects go ahead, most of the existing beds, you can decide who wins prime contracts, et cetera, and how we organize amongst the industry. But pretty much everything existing will be needed to go out. And then we get into a question of been a long time since any meaningful capacity has been built for remote accommodation in Canada. So what is the capacity of the supply chain, and it's sort of an open question. But what we want to focus on currently is making sure we're positioned to service our customers on the immediate opportunity, and we've got a reasonable amount of capacity to match with that. And as we work through it, we'll start taking up -- the question of how to strategically add capacity if that's what's needed.

And do you expect this type of demand to benefit your MSS segment as well. I mean you just briefly mentioned the U.S. data centers might benefit both segments. But all these big infrastructure projects across Canada. Is that WFS beneficiary only? Or do you expect it to be meaningful for MSS?

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

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

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

There's almost $1 trillion of Canadian infrastructure projects, all the ones Trevor mentioned. And we're strong in the Ontario market. We're already working on a number of those infrastructure projects and bidding on the ones that are coming forward.

Your network question comes from the line of Frederic Bastien from Raymond James.

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

The integration until we've done close to 35 acquisitions, many great outcomes. I would say so far with Royal, it's probably the quickest and most seamless integration from a people perspective. Really great alignment. The Royal team are really good solid group of professionals, and it's fit in well with our team. So we're already working in concert on the commercial side. And looking at all the assets as one asset pool as we match up against opportunities. So from that perspective, it's gone well. Some of the synergies, I think, Mike and Jon we've replaced external caterers with Royal to a really positive effect and picked up an element of margin in operated facilities. And it takes a bit longer on the system side for switchover of ERP, et cetera. But I would say, from integration, that's the work that's left to do, but a big risk of whether or not the businesses have good social fit, I think, is pretty low. Jon, maybe you can.

Yes. I honestly couldn't see it pulling any better. The 6 months has just flown by. It seems like it was yesterday, but it seems like it was so far back. The teams just came together in every department very well. Our IT is fully integrated now. We're on the Black Diamond platform doing very well. The catering operations at Sunset Prairie. We're getting great accolades there, as you mentioned, now we're getting that margin. So we moved into a couple of drill counts as well, and we're working together on that. And then the cross-marketing the platforms, Trevor was speaking about and how we can bring MSS into workforce, and we've got several units that are in place in different locations. Very happy with that.

I think the exciting part is being able to bring the full turnkey across the Black Diamond platform and the asset platform to the Royal platform. The upside is in the new revenues we should be able to capture that would be more difficult on our own. Hopefully, that addresses your question, Frederic.

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

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

At some of the open camps, we do have the drilling rigs that do quiet down for pretty much the month of April. But it's also the start of turnaround season. So -- but we lost in drilling, we gained a turnaround and right behind that international.

Turnaround at the oil sands.

Yes, the oil sand side of things. So -- and we're starting to see the rig starting to come back in May. So it was a very short break up. It's not like it was 10 years ago or 15 years ago, where it would be a 3-month season, it was very quiet so.

Quick to point out a lot of the Royal revenue comes from long-term operating cams, where Royal is providing the turnkey service, a good deal of that is mining related.

And mining very, yes, constant. It doesn't really have a season where it slows up.

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

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

Awesome. And one more for me, please. MSS, obviously, you have grown this business through acquisition in the past. You were busy on the workforce side last year. You also did an acquisition in LodgeLink. How's the M&A landscape looking for that particular space rentals business?

Yes, we maintain healthy pipeline, as you know, ebbs and flows, the number of platforms that are looking to sell. Also, we have competition. So we start to predict when and whether we're able to complete something, but we're always working on it. And I think we've got a pretty good reputation in our industries as good buyers. I would point out on the MSS side, the industry is more and more consolidated. And so there's just fewer pieces out there. And so our first means of growth is organic and where we have strong end market demand. We're leaning in, it's a lower risk, actually higher return debt way to grow. And if we can augment that with some tuck-ins, we'd be very happy. I don't know if there's anything you would add there, Ted.

Well, we're putting out a significant amount of capital over the last 5 years. And our target is to have good, strong organic growth. So we've got a whole series of growth strategies we're working on around that. And we're definitely looking for opportunities in all of our markets where we've got high utilization by customer demand, and we just -- we try to make sure that we have the fleet available to meet that customer demand.

We've got the dry powder to transact. So for all the analysts on the call, maybe not your investment bankers to bring us some fantastic ideas.

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

Maybe just one on the gross margin. Could you maybe give us some indication on how you see gross margin levels through the remainder of the year?

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

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

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

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

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

That isn't exactly a 1% increment, they do go out in blocks. And so you're going to see these sort of staircase step changes in utilization as we progress to a higher utilization run. So I'm not sure if that's a very precise answer for you, but that's the way we think about what happens over the next 3, 4, 5 quarters here.

The next question comes from the line of John Gibson from BMO Capital Markets.

When we think about unused capacity out there for workforce, you and your peers report in the mid-50s utilization, but based on increasing work in labor housing requirements is most of this equipment able to go back to work or could we reach a point where we maybe need new build workforce holding more quickly than expected?

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

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

Yes. I guess what I was -- that answered my question mostly. I just was wondering like, are we seeing a higher level of customization now that may require some new build equipment if not in your existing fleet more quicker than expected?

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

And it's also because we're essentially fully utilized with those managers that were more streaming in the Montney.

Yes. And with that, we're seeing reimprovement in that particular area as well. So yes. The base large-format fleet though is ready to go.

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

The private watch format.

Yes. In combination of Black Diamond and Royal's fleet just mention it as well.

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

Yes. Interestingly, we've been spending time building relationships with Canadian military and government procurement staff, say, 4 years Emma and also handles our government relations. So we've positioned ourselves quite well with our security clearances and certifications, et cetera, we did create a new corporate entity called Black Diamond Defense Services based in Ottawa with the skill sets for being able to effectively interact and those customers on the specifics of what they need.

And so when we think about that, it's opportunity for all 3 businesses and assess WFS as well as LodgeLink. And with various partners to take on expanded scope to provide larger turnkey contract outcomes for Canadian military. We're running in parallel or some opportunities that are moving forward quite quickly. And so I think, like Jon, we're going to see project deployment of some magnitude, likely over the next 6 months will show revenue from military.

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

Infrastructure build and it should be 5, 6, 7 years. So short answer, we've been working on it for a while. We're positioning as best we can, and we've got real opportunities in that vertical.

Okay. Great. Appreciate that. Last one for me. I'm not sure if you can answer this. But what percentage of your U.S. business would be data center levered now? And where does this get to over the next few years?

I'm not sure we have that on hand, Ted, but maybe you do.

Yes. I don't have an exact number for you. I think it's increasing part of our business. Our business is very diversified. We're in many of the major markets in the U.S. Southwest and the U.S. East, those cities have a lot of different projects going on them, data centers, are not uniformly distributed. There are some states where there's more data centers like Texas, and we've got significant data center activity in Texas. Other states are less data center friendly. So it is a much less than 50% of our construction activity in construction. If you look at our MD&A, you can see is only a portion of our total revenue. So it's a meaningful but and growing segment of our business.

Your next question comes from the line of Vritti Munjal from Canaccord Genuity.

I'm filling in for Matt. You've indicated LodgeLink 3.0 is progressing towards general availability. Could you give us some color on the time line? And how should we expect the economics of the new platform relative to the current platform? Kind of more specifically, does it improve revenue margin structurally? Or do you see like more volume-driven benefits?

Yes. Thank you for the question. We're really excited about what's happening at LodgeLink. We've done a lot of work in positioning LodgeLink for its next phase, and we've been working at that as we've talked about 3.0 for the better part of 15, 16 months now. The new product, which is sort of a much more integrated, more dynamic type of workforce travel solution, it is really compelling. We're in -- we're just moving from pilot phase to advanced pilot. We expect to have the product in beta this summer and at a certain point this fall, I don't have an exact date yet. We'll see how beta goes. We expect to have general availability or GA. As we get there, there'll be a maturing of the revenue model that we anticipate will bring in a new type of user or revenue to add to the margins that we enjoy on the supply and through our intermediary partners.

At the same time, our customer sign-ups, even prior to 3.0 availability have been really quite strong and retention of our largest long-term customers continues to be high 90s to 100%. So we've got lots of validation points that what we're doing is adding value in the ecosystem of demand and supply. And really, what we're doing here is really complicated itineraries moving large groups of people around. So we're really excited. We think we'll get to GA later this year.

Quickly, the inflection point will show. Certainly, our KPIs will give a strong indication, but it is business-to-business sale and business to business sort of operational behavior will change for our customers' teams. And so there's an element of transition time line there. But we hope to have some really good data points to indicate whether the market -- product is hitting the market or the target market by late this year.

Nothing has changed in our view about how large this addressable market is. We've got good traction in Australia, and we're looking more broadly at Asia Pacific and we just think this is going to be a tremendous part of our business as we continue to move through the next phase. So thank you for asking.

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

The blended margin. If we look at the business without the Spencer revenues added, we actually had slight margin improvement that we would ascribe to elements of economy of scale as we're just handling more and more volume. When we blend in the more traditional travel management revenue streams, the margins are lower, but it's a profitable small business part of our LodgeLink platform. Mostly the intent was to get infrastructure, the IATA licenses, et cetera, to be able to grow our LodgeLink business in Australia.

So why do I point that out? Because we anticipate seeing significant growth on the LodgeLink side, moderate growth on the traditional travel management. And so the margins even on a blended basis will increasingly be influenced by the LodgeLink side. So you should see gradual improvement as that mix changes based on the different growth levels of the 2 types of revenue stream. Hopefully, that makes sense to you. I don't know, Toby, if I explained that well enough.

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

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

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

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

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to the Black Diamond Fourth Quarter and Year-End 2025 Results Conference Call. [Operator Instructions] Thank you.

I would now like to turn the conference over to Emma Covenden, Vice President, Investor and Stakeholder Relations. Emma, please go ahead.

Thank you. Good morning, and welcome to Black Diamond Group's Fourth Quarter and Full Year 2025 Results Conference Call. With me this morning, we have Chief Executive Officer, Trevor Haynes; Chief Financial Officer, Toby LaBrie; Chief Operating Officer of Modular Space Solutions, Ted Redmond; Chief Operating Officer of Workforce Solutions, Mike Ridley; and President of Royal Camp Services, Jon Warren.

Please be reminded that our discussions today may include forward-looking statements regarding Black Diamond's future results and that such statements are subject to a number of risks and uncertainties. Actual financial and operational results may differ materially from these forward-looking expectations.

Management may also make reference to various non-GAAP financial measures in today's call such as adjusted EBITDA or net debt. For more information on these terms and others, please review the sections of Black Diamond's Fourth Quarter 2025 Management Discussion and Analysis entitled Forward-Looking Statements, Risks and Uncertainties and non-GAAP financial measures. This quarter's MD&A, financial statements and press release may be found on the company's website at www.blackdiamondgroup.com, and also on the SEDAR+ website at www.sedarplus.ca. Dollar amounts discussed in today's call are expressed in Canadian dollars, unless noted otherwise and may be rounded.

The format for today will be similar to prior conference calls. Trevor will start with a high-level overview of the company's performance and highlights from the full year, 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, and then we'll open the line for Q&A.

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

Thank you, Emma. We appreciate everyone joining this morning for our fourth quarter and full year 2025 results conference call. First and foremost, I'd like to thank and recognize the exceptional team here at Black Diamond Group for delivering another highly successful year and continuing an impressive track record of performance.

Before turning to the results, I want to acknowledge the team's unwavering commitment and focus to safety across the business, which resulted in a year-end TRIF of 0.47 and 0 lost time claims. Safety is a non-negotiable here at Black Diamond and everything we do, comes second to ensuring our employees and all those in our network return home safely at the end of each day.

2025 was another strong year for Black Diamond marked by the completion of 2 strategic acquisitions and oversubscribed equity financing, the expansion and extension of our asset-based credit facility and disciplined execution resulting in compounding growth across the company. Our annual consolidated revenue of $456.9 million increased by 13% and consolidated rental revenue reaching $162.2 million, up 10% from the prior year.

Full year adjusted EBITDA of $126.4 million also increased by 12%. This performance has resulted in strong 5-year compound annual growth rates of 20% for consolidated revenue, 20% for consolidated rental revenue and 26% for adjusted EBITDA.

Our growth strategies are backed by disciplined capital allocation, and we continue to prudently allocate capital informed by long-term asset return data and customer demand to maximize returns over the life cycle of our fleets.

2025 capital expenditures of $105 million was generally in line with the prior year, with the majority of capital going to contract-backed assets and strategic growth initiatives. So far this year, capital commitments are approximately $31 million, further underscoring the depth of opportunities across the business for continued investment and compounding growth.

As of December 31, the company had $149.3 million of future contracted rental revenue, a modest decrease of 6% from the prior year, yet still robust and a leading indicator informing our stable outlook for the business over the coming quarters. All areas of the business produced strong results in 2025.

MSS, again, generated record rental revenue of $107 million, up 14% from the prior year, contributing to adjusted EBITDA of $82.9 million, up 7% from the prior year, and average rental rates increased by 7%. WFS delivered total revenue of $233.1 million, up 30% from the prior year, contributing to adjusted EBITDA of $67.4 million, up 16%, which includes approximately 1.5 months of contribution from Royal Camp services, with that transaction having closed November 12, 2025.

And LodgeLink progressed through its year of transformation and continue to scale as total trade value of $114.9 million, increased 21% from the prior year, generating record net revenue of $14.2 million, up 25% from the prior year. Looking back over a longer time frame, the performance from each area of the business is just as impressive with 5-year compound annual growth rates or CAGRs of 22% for MSS consolidated rental revenue, 22% for WFS consolidated revenue and 45% for LodgeLink Total Trade Value or TTV.

These results highlight the effectiveness of our long-term growth strategies, best-in-class operational excellence practices and underscores the resilience in our platform given our distinct business units, comprehensive product and service offerings, diversified end markets and broad geographic footprint. While these metrics indeed showcase the success from last year, an immense amount of hard work took place across the business to bring these numbers to fruition. And it's this, I'd like to spend a bit of time on next.

In 2025, there were several big wins that moved the business forward in a meaningful way. For the first time in over 8 years, Black Diamond completed an oversubscribed bought deal public offering of shares in late June, issuing approximately 4.7 million common shares at $9.10 for gross proceeds of approximately $42 million. We also completed the extension and expansion of our asset-based credit facility from $325 million to $425 million for 5 years at attractive terms and attractive borrowing costs. Both the bought deal and ABL expansion enabled us to later acquire Royal Camp Services for $165 million. The acquisition brings additional scale and enhanced service offering with integrated hospitality and catering and many long-term indigenous partnerships that complement our many partnerships across Canada.

Since then, we have been working at integrating this high-quality business that's proving to have both values and cultural alignment with Black Diamond, perhaps even more so than initially thought. Our commercial and operations teams are collaborating closely on the breadth of bid opportunities in the pipeline and projects on the horizon. And we've begun the process of replacing third-party catering providers with Royal Camp's quality catering and hospitality services as it makes sense to do so, which has been well received by our customers so far.

And we also complement -- we also completed a small tuck-in acquisition with Spencer Corporate Travel in Australia that's positioned us well to serve customers in that region and expand our offering into the Greater Asia Pacific.

By nearly every measure, Black Diamond had a brilliant year, progressing our growth and operational strategies, serving our customers, collaborating with our partners, making a positive impact in the communities where we live and work and ultimately delivering significant value to our shareholders. As we look ahead to the first half of 2026, we'll continue to build on this foundation with steady operating conditions and supportive macro tailwinds anticipated in core end markets across North America and Australia.

While correlating stable demand is expected across the platform, a degree of near-term variability exists when narrowing in on certain areas of the business. MSS will continue showing rental revenue stability with moderate growth in concert with organic fleet additions and modest average rev rate increases in line with inflation. Fleet utilization remains within our optimal range underpinned by stable customer activity across our diversified end markets including strength in construction and major infrastructure verticals, slightly offset by delays in the education pipeline, which we believe is as a result of shifts in public sector funding. Overall, the fundamentals of this area of the business remain healthy and the current demand we're seeing is conducive to further disciplined capital allocation to expand the fleet and our operations.

Turning to WFS. Recent strong performance highlights the somewhat episodic nature of this area of the business. Given several onetime occurrences within the fourth quarter, including rental revenue from an early contract termination for a U.S. project and high sales revenue. In the near-term performance of WFS is expected to be steady, although the contract termination will impact rental run rate and utilization in the region as assets are gradually redeployed on new projects.

Q1 2026 will be the first full quarter of contribution from Royal to the WFS division, which will form the new baseline for the combined entity. Over the next several quarters, we expect results for the base business to remain reasonably consistent, excluding periodic project and sales revenues, which remain hard to predict in terms of timing and opportunities.

While elevated bidding activity and customer project planning associated with prospective nation building projects in Canada continues, this activity won't translate into meaningful growth or step changes that would materially increase utilization until late in 2026 or early 2027, as sales cycles in this area of the business are inherently long. That said, the outlook for WFS is brighter than it has been in several years, with significant catalysts on the horizon, which we are very well positioned to respond to.

LodgeLink is set for accelerated growth as the completion of a substantial new suite of software Tools and Services is set to become available to the market later this year, which in turn will help to expand our customer base, increase wallet share among current customers and drive travel segment volumes, particularly in the U.S. and Australia, Asia Pacific. We continue to advance our software functionality to complement existing capabilities, providing customers with increased efficiencies, further differentiating our offerings to the market.

Overall, we are pleased with our performance in 2025 and are confident in the company's stability in the near term. Our core rental platform and the recurring aspects of the WFS business are running well. Yet project-oriented or variable revenue streams related to sales is expected to be uneven in the first few quarters. When we look ahead at the full year, we are confident in our growth expectations, strength in the fundamentals of the business, including high-margin rental revenue growth, attractive returns on capital, consistent free cash flow generation and healthy operating leverage inform this view. Black Diamond has all the tool -- all the necessary tools required to continue to compound long-term growth and shareholder value.

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

Thanks, Trevor, and good morning. I'm pleased to provide additional context on the results. Building on what Trevor covered, I'll provide some specifics around our fourth quarter, fleet utilization and performance, our balance sheet position and then open the line for questions and answers.

With respect to the fourth quarter results, consolidated revenue of $144 million grew 9% and adjusted EBITDA of $38.9 million, increased 5% from the comparative quarter. Consolidated rental revenue of $44.5 million increased 16% from the comparative quarter due to increasing fleet size and rental rates, partially offset by a decrease in utilization by 460 basis points to 72.2% for the quarter.

While MSS total revenue for the quarter of $53.7 million was down 26% from the comparative quarter, this is primarily driven by the typical variability seen in sales revenue, which decreased by 50% to $14.3 million. This was because of the unusually high levels in Q4 2024 as sales that had delayed earlier in the year were recognized within that quarter. Non-rental revenue in MSS was $12.4 million, down 32%, primarily due to lower installation revenue from reduced sales activity.

Q4 MSS utilization of 77.6% was down 480 basis points. Despite this decline, the core of the MSS business, which we consider the stable recurring rental revenue increased by 4% to $27 million, driven by a 4% increase in fleet and a 3% increase in average monthly rental rate. The MSS business continues to focus on growing VAPS revenue to increase the value of our product and service offering to our customers and to improve the overall return on assets. VAPS revenue increased substantially from the comparative quarter by 30% to $2.6 million.

WFS had a robust quarter, driven by stability in the base business, contribution from Royal and several onetime occurrences. WFS revenue of $90.3 million increased 51% from the comparative quarter, driven by increases in non-rental, large services and rental revenue of 122%, 108% and 39%, respectively. Rental revenue was impacted by the previously mentioned early contract termination in the U.S., contribution from Royal and modest growth in Canada and Australia. Sales revenue during the quarter was $23.8 million, down 3% or $0.8 million from the comparative quarter due to lower custom sales in Australia and the U.S. but still at relatively high levels due to custom sales in Canada. WFS utilization of 56.8% was down 630 basis points, leaving ample spare capacity for us to deploy assets as projects materialize from our very active bid pipeline.

In 2025, net profit for the company increased 35% to $34.8 million. While increasing profit in the year is indeed indicative of our commitment to profitable growth, it must be noted that a portion of the profits in 2025 are from the receipt of insurance proceeds earlier in the year. Our year-end net debt was $328 million, up from $223.6 million at the end of 2024, largely due to the acquisition of Royal Camp that was funded by $150 million of cash drawn against the company's credit facility. With liquidity of over $96 million, we remain well positioned to fund growth opportunities, organic and inorganic as they arise.

Currently, our net debt to trailing 12-month adjusted leverage EBITDA ratio is at 2.0x, which is at the low end of our target range of 2 to 3x. This provides us with significant flexibility given the continued strength of our balance sheet following the acquisition.

The average interest rate paid on debt during the quarter was 4.35%, which was 101 basis points lower than the comparative quarter as benchmark interest rates continue to decline. Business' ability to generate stable and growing free cash flow supported by a strong balance sheet remains a defining characteristic of Black Diamond. In the fourth quarter, we generated $28.9 million of free cash flow, representing a modest 12% decline from the comparative quarter due to changes in noncash working capital. For the full year, free cash flow totaled $88 million, an increase of 10% from the prior year.

Finally, we continue to progress through the ERP upgrade, which is expected to improve operational efficiency and support the company's long-term growth objectives. We are nearing the completion of this long and complex project and because of the continued efforts of our dedicated and skilled project team, it remains on schedule and on budget. To date, we have invested approximately $7.7 million with roughly $4.2 million remaining from the original budget.

We anticipate the current phase from MSS and corporate will go live in Q2 2026.

To reiterate Trevor's commentary, we remain confident in the performance of the business and the resulting continuation of our annual growth trends. The near-term outlook is balanced with a likely positive inflection point in later 2026, in line with progress around major nation building, infrastructure and resource projects in Canada.

Our teams remain committed to rigorous safety and operating standards, and we'll continue delivering innovative solutions that meet and exceed our customers' expectations, which is ultimately how we sustain our aggressive growth trajectory.

With that, operator, please open the call for questions.

[Operator Instructions] And your first question comes from Kyle McPhee with ATB.

This is Hamzah on for Kyle. Starting off with MSS. For the modular space side of your business, your commentary suggests ongoing growth CapEx will be sunk into modular space fleet expansion. Can you help us understand budget levels. Will the growth CapEx for the segment be similar to the approximate $60 million in 2025? Or is the budget falling based on what you see with demand trends?

A little bit of trouble hearing you, but I think you're asking growth capital within MSS, if it will be -- how it would compare with last year's roughly $65 million. What we're seeing right now, and keep in mind, our CapEx for capital allocation is continuous. We don't work on an annual budget. So we're responding to demand through our system on a quarterly basis. So currently, we're at the end of December, we had over $30 million of committed capital. The majority of that is for organic fleet additions through our manufacturers. And with that visibility, I would suggest, Ted, that we're seeing steady demand, and so the absorption rate would be in line or perhaps slightly higher based on our larger footprint this year.

Yes, I think that's right. We're seeing similar demand to last year. We look at our asset classes that are highly utilized and have good return on assets, and that's where we allocate our capital. So -- we're always purposing those opportunities. And I think the cadence that we're seeing this year is similar to last year.

Okay. Got it. And can you help me understand the optics around modular space fleet utilization, which has been directionally falling in recent quarters versus your messaging that you'll continue to spend on modular space fleet expansion, maybe your utilization is not actually falling in terms of units on rent versus the book value-based utilization metrics you report in your financials?

Yes. So a little bit more color on MSS utilization vis-a-vis the continued fleet additions. It really comes down to product line and region. But Ted, some color to what's happening there.

Yes. So we did have a few large construction and education projects come off rent in Q4. So that's what drove that decline. We expect those units are going to go back on rent over the next few quarters on both education and construction projects. We -- a lot of our capital is allocated, what we call bid set projects. So up on projects that we're quoting on. And if we win the quote, it's -- we're buying the capital to fulfill a specific contract, so it's not on spec. And we only do spec CapEx where we have a high demand, high utilization asset that we have excess demand for. So that's how we manage our utilization.

Okay. Got it. And then last one for me. On the WFS segment. For the workforce side of your business, can you provide more color on the reason for the early contract termination you called out? And also when was the original contract maturity? What was the expected maturity on this contract? It would also help if you could quantify how much rental revenue or large services revenue will disappear in Q1 on the back of this contract termination before we see the next big demand wave start to materialize later in this year?

Yes. The nature of our projects is not uncommon for a client to complete a project before the contracted term is up, and they'll pay us out remaining rent, which is the terms of how our contracts work. But Mike, in this situation provide a bit of color on how we feel about the ability to reabsorb and...

You bet, and in fact, in this particular case, this contract was actually renewed a couple of times over the better part of the last 5 years. So it's been a really nice contract for us. The fact that we had contracted on the extension to get basically rent paid is really good. The ability to get these assets out to work over the course of the year, I think, is really, really solid. Our pipeline is very active in the U.S. be it construction, oil and gas, mining, gold at $5,000 an ounce at Gold for Canada for that matter as well. So data centers are a big thing now that probably an industry we didn't talk much about a year ago. And all of a sudden, they're sprouting up everywhere. So there's opportunities unquestionably to get these assets back to work over the course of the year.

Important to point out the quantum of this acceleration of rent is not material in the terms of Black Diamond, but it did bolster the Q4 modestly. And then correspondingly, we don't have the run rate going into '26. That being said, Mike, that contract was coming to termination within about 6 months, within '26 anyways.

Your next question comes from the line of Matthew Lee with Canaccord Genuity.

Maybe another one on the Workforce Solutions side. U.S. utilization now is above 50%. Can you just talk about how you're going to deploy those units? Is there an opportunity to start selling a couple of those in the U.S. market? Can they be brought to Canada? Like what can we do with that capacity?

Good question. Mike?

Yes, again, quite confident that we'll be able to get our utilization growing over the course of the year with the pipelines. Very active. There's lots of major projects, data centers, as I've noted. Oil and gas sector is fairly healthy as well. So we'll be deploying a lot of into Texas. As it pertains to the ability to bring those into Canada, they're coated for the U.S., so not really suited for the Canadian market. But conversely to that, sometimes there is the ability to send Canadian assets down to the U.S. market, but you can get variations from local municipalities and states, et cetera. So -- but -- and confident that these will get out over the course of the year.

Generally speaking, Matt, our view is we're not interested in selling our rental assets, and that's informed by what we're seeing in the activity in our active bid pipelines, et cetera. So we're much more confident that we're going to see our fleet going to work and generating cash for us, which we're more interested in right now than selling the assets.

Right. I totally agree with that. If I'm thinking about a successful year in 2026, what would Workforce Solutions utilization look like by the end of the year?

That's a good question. With the combination of Royal, we've got about 6,000 -- we've got 12,000 rooms of capacity and somewhere around 6,000 of spare capacity, which positions us exceptionally well when you think about the number of projects, variety of projects and the scale of projects that we're looking at in North America and in particular, in Canada. What becomes difficult even though we're very active with these projects, they're complicated in terms of timing, permitting, contracting, et cetera, et cetera, which is why we caution that we've got visibility and demand, but what's difficult to forecast is the exact timing. And at the outset of these projects, there is a requirement to move assets into place or even before that, preparing the site, where the camp is going to go, mobilizing the assets, assembling them. And then we usually see sort of a ramp-up curve as the projects begin populating their complement of trades, et cetera. So we could very well or just ask what success looks like?

Success would be translating a very active bid pipeline with highly prospective and being able to show that that's converted into some limited notice to proceed, some early works in preparation of sites and then beginning to show that operational revenue coming in and having visibility that there will be occupancy-related full turnkey rental and catering revenue under contract as we exit '26 into '27 on some of these larger projects. And so we don't look for sort of an incremental 1% of utilization at a time. This is going to move in chunks. We could be 15% step changes as larger TAMs get contracted and start mobilizing. So I'm not giving you an exact number because it's not an exact science, but that's what we anticipate happening over the next 6 to 9 months. And Mike, Jon, feel free to make additional.

Yes. When I look at our base of business in Eastern Canada, we're expecting to see utilization growth in the East. There's a lot of mining activity, as I mentioned, $5,000 gold, mining companies are wanting to move real quickly to get to work and most of those projects have a camp requirement. So you have that, you have construction, you have data centers, like the pipeline is fairly active. And again, I'll go back 5, 6 years ago to our strategy of diversification. And while maybe some of these nation building projects may be a little bit slow off the hop, our strategy is -- continues to be very, very sound. And confident that we'll see utilization improvement over the course of the year.

That's really helpful. 4 projects, 10 percentage points each at 95% utilization. So I'll just use that. Kidding.

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

Question on balance sheet strength and your capacity and willingness to deploy that capital on future M&A? I think fair to say that before the excitement around workforce accommodation, we were really focusing or paying a lot of attention to what you might be doing on the space rental side. How do you feel about your capacity or your ability to deploy capital this year versus where you were maybe 12, 18 months ago?

I would say, if anything, we've got more firepower. We've got very strong free cash flow. The growth that we anticipate on the workforce platform will not require incremental capital in the near term because of the operating leverage of the current unutilized fleet capacity. And that leaves us strategically able to focus inorganic growth around our MSS platform. We love the fact that there's a lot of interest in the camp business again. I think it's a fantastic business. We've added, in our view, the best piece in the industry with Royal Camp as far as full turnkey catering goes. But our strategy has not changed. The core recurring stable revenue streams that we can generate with high returns on asset, on the MSS platform and what it does in terms of stabilizing our overall platform is super important to us, and we've got the balance sheet, Toby, to support pursuit in a very disciplined way, but looking to continue to organically grow MSS. And then if the opportunities present themselves to pursue inorganic growth to continue two things: One, building our business and showing how great this asset class is for long-term value creation. But also looking at the overall portfolio balance of Black Diamond, we would like all of our businesses to grow, but we need to accelerate our MSS business here. So I think we've got all the tools, Toby.

Yes. And I think with our free cash flow of $88 million in 2025, expecting that to continue to grow in 2026. It gives us a lot of free cash from the business that we expect to be able to redeploy into the -- into growth of the business through organic and potentially inorganic growth. And as needed as well, we've shown that with strategic acquisitions in the past, we've been able to increase our facility sizes with those acquisitions as needed. So I think that ability is still there. So we're confident in our ability to continue to grow pursuing our strategy of organic and inorganic growth.

Net cash flow -- free cash flow from last year, you need to augment that with Royal. And so when we think about the cash we'll be generating to invest in the business, there is a step change there that occurred with the acquisition of Royal, which doesn't consume capital so much as it produces free cash flow. And Ted, we think there's a lot of white space for BOXX Modular in the U.S. There are some areas in Canada. We're still trying to get to economic size in those markets like Quebec and Eastern Canada, but the U.S. is a big focus, and we see great opportunity there.

Yes. Our market share in the U.S. is still relatively low. So there's opportunities in the markets we're already in. And then there's lots of adjacent markets to our existing markets where the fairly low risk we can open up satellite yards, hire salespeople to cover additional adjacent markets. So on the organic side, there's definitely opportunities for growth there. And Trevor is always on the outlook for acquisitions.

You're definitely open for business on the M&A side, but -- do you have a feel for how your potential targets are -- is there an appetite for that now? Are they -- are the prices coming down? Just want to -- hoping to get some color on that, please.

Yes and no. I mean there's been a lot of consolidation in the MSS space in North America. And you could look at the other large public U.S. platforms, and you can see the evidence of that. We think multiples have perhaps come off because the public platforms of the traded platforms have come off their peak multiples. And that plus some other factors from a U.S. perspective with regard to concentration for competitive purposes from a regulatory perspective, also open up room for the smaller third or fourth market share platform, which we would be -- to grow more quickly with little resistant or less resistance. So then what you're pointing to is, and we find these platforms that are complementary and meet our quality expectations and come to a reasonable valuation, which would be accretive for us. I'm confident we can, but I wouldn't mislead anybody to suggest that it's easy. But I think you can look at our track record. I think we're pretty disciplined and we're well known in our industry. So the opportunities are there for sure. Very hard to predict when and what. So that's the difficulty in giving any sort of outlook or guidance with regard to M&A.

And that concludes our question-and-answer session. I will now turn it back to Trevor for closing comments.

Thank you. Thank you all for joining and listening today and your interest in Black Diamond. And in closing, I once again thank our fantastic team across all of the Black Diamond platform for their good work and keeping each other safe. Thank you. Have a great day.

Ladies and gentlemen, that does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Thank you for standing by. This is the conference operator. Welcome to the Black Diamond Group Third Quarter 2025 Results Conference Call. [Operator Instructions]

I would now like to turn the conference over to Emma Covenden, Vice President, Investor and Stakeholder Relations. Please go ahead.

Good morning, and welcome to Black Diamond Group's Third Quarter 2025 Results Conference Call. With me this morning is Chief Executive Officer, Trevor Haynes; and Chief Financial Officer, Toby Labrie; as well as Chief Operating Officer of Modular Space Solutions, Ted Redmond; and Chief Operating Officer of Workforce Solutions, Mike Ridley.

Please be reminded that our discussions today may include forward-looking statements regarding Black Diamond's future results and that such statements are subject to a number of risks and uncertainties. Actual financial and operational results may differ materially from these forward-looking expectations. Management may also make reference to various non-GAAP financial measures in today's call such as adjusted EBITDA or net debt. For more information on these terms and others, please review the sections of Black Diamond's Third Quarter 2025 Management Discussion and Analysis entitled Forward-Looking Statements, Risks and Uncertainties and non-GAAP financial measures. This quarter's MD&A, financial statements and press release may be found on the company's website at www.blackdiamondgroup.com and also on the SEDAR website at www.sedarplus.ca. Dollar amounts discussed in today's call are expressed in Canadian dollars, unless noted otherwise, and may be rounded.

The format for today will be similar to prior conference calls. Trevor will start with a high-level overview of the company's performance and highlights from the third quarter and year-to-date results, 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, and then we will open the line for question and answer.

I will now turn the call over to Trevor.

Thank you, Emma. We appreciate everyone joining this morning for our third quarter 2025 results conference call. Following the solid performance of the company in the first half of the year, we are pleased with our third quarter results and very appreciative of the hard work being done by our high-performing teams across the platform.

Consolidated quarterly revenue of $105.3 million increased 4% from the comparative quarter, contributing to adjusted EBITDA of $31.8 million, 10% above the comparative quarter. Profit for the third quarter increased 65% to $12.2 million, pushing basic EPS up 58% to $0.19 per share. Rental revenue, which we consider the core of our business reached $41.3 million on a consolidated basis, a 9% increase from the comparative quarter as we continue to see the positive impact of capital investment in the fleet assets and a constructive operating environment underpinned by customer activity in our primary industry verticals of construction, major infrastructure, energy and education.

Our growth strategies are backed by organic capital allocation and operational excellence, and our approach has not changed. We continue to focus on databased prudent capital allocation methodologies to maximize returns over the life of our assets. Capital expenditures within the quarter were $19.6 million, down 18% from the comparative quarter of $23.8 million, with year-to-date capital expenditures of $69.3 million, down 6% from the same period last year when excluding the $20.5 million for the onetime acquisition of a fleet of 329 space rental units in British Columbia. Capital commitments of $39.5 million at the end of the quarter were up 124% from the comparative quarter, with 75% of this per capital allocated to project-specific fleet units backed by long-term contracts driving our stable recurring rental revenue and the balance of the CapEx was for real estate investment and sustaining maintenance. This underscores the volume of opportunities across the business to continue investing shareholder capital and compounding growth at high rates of return.

As of September 30, the company had $159 million of future contracted rental revenue at a decrease of 3% from the comparative period, but an increase of 4% on a sequential basis underpinning our confidence in a stable outlook for rental run rate into the future. Based on the recent performance trends of the business, combined with continued multiyear growth we've announced an increase to the dividend of 29% to $0.045 per share or $0.18 annually, starting with the fourth quarter of this year. This marks the fifth consecutive annual dividend increase since its reinstatement in 2021. What stands out in this and recent quarters is the consistency from all areas of the business. While variability in certain revenue streams and market activity or customer and project delays are always factors that we monitor closely, the strength and stability of our core rental platform, the benefits of diversification by geography, customer and product lines and the nonspeculative nature of our growth CapEx position us well for sustained growth.

Strength of our Modular Space Solutions business unit continued with yet another quarterly rental revenue record, reaching $28.1 million, up 15% from the comparative quarter. Rental revenue has grown at a 23% compound annual growth rate from Q3 2020 to Q3 2025. A clear indication of the successful execution of our growth and operating strategies for this area of the business. Contracted future rental revenue for MSS remains healthy at $129.8 million, an increase of 2% from the comparative quarter. As we look ahead, we expect rental revenue stability with moderate growth in concert with organic fleet additions. There is always a degree of variability in the MSS sales and nonrental revenue streams, which may impact quarterly comparisons. However, utilization of the fleet is within the optimal range and customer activity across key end market verticals, including construction, major infrastructure and education remains steady.

Shifting focus to our Workforce Solutions business unit. We are seeing a degree of stability in this area of our business. We consider primary revenue against our fleet assets as a combination of both rental revenue and lodge services revenue, which generated $21.5 million in the quarter, in line with the comparative. Consolidated WFS revenue increased by 12% to $43.2 million, driving a 7% increase in EBITDA to $14.2 million. Although we are currently seeing increased bidding activity and customer project planning, stemming from prospective nation building projects in Canada, we do not anticipate meaningful growth correlating with this activity earlier than the latter half of next year. Therefore, as we look ahead to the next several quarters, we anticipate reasonably consistent to slightly elevated results for the WFS business unit.

Within the quarter, we announced the definitive share purchase agreement to acquire all of the issued and outstanding shares of Royal Camp Services and continue to expect that acquisition will close by the end of 2025, pending clearance under the Competition Act Canada. On combination, we will effectively double the size of Black Diamond's Canadian workforce accommodation fleet and expand our capabilities to service our customers and their large-scale projects with the inclusion of self-performed hospitality and catering services. At Black Diamond, we have a strong track record of successfully integrating high-quality businesses to further our growth strategies, better service our customers and deliver compounding shareholder returns. And we look forward to welcoming everyone from the Royal and Summit teams to our company very soon.

Switching to LodgeLink. It also had a solid third quarter as room night bookings reached over 148,000 driving gross bookings to $35.7 million, up 31% from the comparative quarter. This resulted in net revenue of $4.3 million, up 26% from the comparative quarter. As this platform scales and we realize the benefits from both the Spencer Group of Companies acquisition that closed in the quarter and the accelerated investment in product development. The expectation is for accelerating growth as we focus expansion efforts in the United States and now also in the Asia Pacific region.

Looking further ahead, we are confident in Black Diamond's performance and expect to see stable compounding rental revenue growth given our rate of organic investment in the business and our long-term prudent approach to capital allocation. We're also well attuned to the growing market tailwinds, specifically in Canada and are of the view that should those come to fruition, it will be a significant benefit to our company. We look forward to the successful close of our acquisition of Royal Camp Services and remain highly optimistic that this will occur by the end of the year. We will continue to focus on profitable, sustainable growth and diversification as we scale our portfolio of specialty rental accommodation and workforce travel management businesses, generating positive returns and compounding shareholder value.

Overall, we are very pleased with the results of the company in the first 9 months of the year, which were in line with internal expectations and provide the free cash flow to fuel future growth. We have confidence in Black Diamond stability through to year-end and are optimistic about the numerous sizable opportunities as we look forward into 2026 and beyond.

With that, I'll now turn the call over to Toby to provide some more specifics. Toby?

Thanks, Trevor, and good morning, everyone. I'm pleased to provide additional context on the results, review free cash flow and net debt position and provide an update on our ERP implementation project and then open the call for questions and answers.

During the third quarter, consolidated fleet utilization was 75.8%, flat with the comparative quarter. Breaking that down further, MSS utilization of 80.3% was unchanged year-over-year and is at the high end of our optimal range, while WFS had a small pullback of 130 basis points to 62.2%, leaving ample spare capacity for us to bid on large scale projects as they materialize in our pipeline of opportunities. Looking beyond the 9% increase in consolidated rental revenue, WFS non-rental revenue improved 28% to $16.2 million, mainly from increased installation activity on major projects which signals increasing recurring rental revenues ahead. WFS sales revenue of $5.5 million was up 28% from the comparative quarter, driven by higher used fleet sales in Australia, which was offset by decreased used fleet sales in Canada and custom fleet sales in the United States.

While there is growing demand for asset sales in the market, we continue to prioritize rental and lodging opportunities over sales of fleet assets to position WFS to meet expected future demand, particularly in Canada. MSS non-rental revenue of $18.2 million was down 17% from a strong comparative quarter. Sales revenue of $15.8 million was down 3% from the prior year due to lower custom sales, which will remain variable depending on the number and timing of projects. While increasing profit in the first half of the year is indeed indicative of our commitment to profitable growth, it must be noted that the sizable increase of 65% in the quarter is due in part to insurance proceeds and the related write-off of a small number of assets destroyed by wildfires in Northern B.C. earlier this year and a wildfire that occurred in Northern Alberta in 2024.

As a result of these events, the company recorded a gain of $6 million and $8.8 million for the 3 and 9 months ended September 30, 2025. Partially offsetting this income were $1.5 million of expenses in the quarter related to the acquisition of Royal Camp. Business' ability to generate stable and growing free cash flow backed by a strong balance sheet is a defining characteristic of Black Diamond. Third quarter free cash flow of $23 million, up 17% from the comparative quarter was driven by higher revenue and declines in maintenance capital and interest costs. At quarter's end, net debt was $197.1 million, down $34.9 million from Q2 2025 as proceeds from the bought deal were used to repay debt. With liquidity of nearly $230 million, we are well positioned to fund the acquisition of Royal Camp, which is expected to close before the end of the year. We expect that the acquisition of Royal will further bolster our free cash flow generation, which, combined with our debt capacity will enable us to continue to pursue our organic and inorganic growth strategies.

Currently, our net debt to trailing 12-month adjusted leverage EBITDA ratio is at 1.6x, but we anticipate this will fall into the low end of our target range of 2 to 3x upon the close of the Royal Camp's acquisition. This provides us with significant flexibility given the continued strength of our balance sheet pro forma the acquisition. The average interest rate paid on debt during the quarter was 4.55% and 146 basis points lower than the comparative quarter as benchmark interest rates have continued to decline. Lastly, we continue to work through the ERP upgrade, which is expected to improve operational efficiency and be supportive of the company's long-term growth objectives. We have passed the halfway point of this long and complex project. But thanks to the hard work of our team, it continues to progress on time and on budget towards the scheduled go-live of this phase of the project in the first half of 2026. At the present time, we have invested $6.3 million and approximately $5.6 million remains from the initial budget.

To reiterate Trevor's commentary, we are confident in the stability of the business performance over the next few quarters with the potential for a positive inflection point as early as the second half of 2026, pending progress of major nation building projects in Canada. Our team is committed to rigorous safety and operating standards and is ready to continue our strong track record of delivering innovative solutions and exceeding our customers' high expectations. On the anticipated close of the acquisition of Royal Camp Services and Summit Camps, we raised that bar even further in combining the strengths of both our platforms to better serve our customers and stakeholders including our indigenous partners and the communities in which we operate.

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

[Operator Instructions] Our first question is from Matthew Lee with Canaccord Genuity.

Maybe starting one with the nation building bids that you're currently involved in. How confident are you in Black Diamond's ability to win a fair share of those contracts? And has there been any increase in visibility around those projects has given you confidence to share the H2 '26 revenue expectation at this point? Or maybe the logic behind that?

Thanks, Matt. What gives us confidence in providing whatever you want to call it, an outlook to second half of '26 is mostly rooted in the activity that we're seeing in our bid pipeline with regard to engagement with numerous projects around pricing and logistics planning, et cetera. We have confidence of our positioning with regard to everything from availability of assets, quality and positioning of assets, quality of solution and then strategic partnerships with indigenous communities around certain of these projects. So we have a reasonable degree of confidence from all of those contributing factors. Some of the remaining variables have more to do with decision-making in and around permit approvals for these projects as well as with the project proponents themselves securing their internal FIDs. And so that's where we continue to talk in terms of having some degree of caution.

But thematically and the volume of bidding activity and sort of the level of detail that we're seeing around the bidding process with a number of large projects that are reasonably well known but there's also a fairly significant number of projects that don't quite hit the sort of national news cycle that we're also seeing being moved forward. So reasonably high confidence, but there's still variables out there.

And would you say that activity has maybe increased since we talked last in the last quarter call?

Certainly, the activity has been steadily increasing since March, April of this year, a significant step change. And I think it mirrors public policy changes, et cetera, along with the strength of commodity prices and demand in world markets for our customers' goods, et cetera.

So yes, I would say, over the last 90 days since we last held our conference call after Q2, the level of detail and activity around these projects and the bidding process has continued to build. So I think we have more visibility on the breadth and scope of what could occur over the next several years. But there's still a number of key hurdles that these projects need to clear before we anticipate receiving any contracts and notice to proceed, et cetera, from a camp. And keeping in mind, these projects also require space rentals type of assets, which would engage our MSS businesses.

Okay. That's helpful. And then you guys mentioned inorganic growth a couple of times on this call already. Just given the fact that you're still digesting your Royal acquisition, is there appetite to do more M&A right now or in the medium term? Or is the Royal integration kind of the focus for you right now?

Our intent is to ensure that we do a very good job in transition and integration of the acquisitions that we've made. However, when assets come to market and they're a good strategic fit for our platform, we will certainly be in the market and assessing those opportunities. And we continue to have a very active pipeline of opportunities. So I think the answer to your question is, Yes, we want to be very focused and do a great job of bringing the Royal assets and the team into our platform. We're very excited by that, and that's our first priority. But there continues to be a number of interesting opportunities that fit well into our fairway that we'll be looking at as well.

The next question is from Kyle McPhee with Cormark Securities.

I just want to drill in a little bit more on derisking of this big WFS demand wave. Thanks for the comments on when we might see the kind of momentum start to increase in the back half of next year. But when should we see big new rental contracts start to snowball in the backlog for your report, I think you call it contracted future rental revenue. Will that start to snowball well before the utilization ramp starts? Or is it kind of in the same quarter, we're all going to see that stuff? Just looking for kind of color on some leading indicators we can watch for.

It's a good question and something to touch on here is that when we deploy large camp facilities, there's a reasonably long front-end period for positioning of assets. The logistics are often quite complicated and even sequencing amongst the sort of early service providers, everything from building roads to clearing sites in preparation for camp access to go in. And so it can be quite complicated. And there's a high likelihood we'll have secured contracts and have visibility on forward revenue, but there will be a reasonable ramp-up certainly, operations revenue where under our scope, we're doing some of that logistics work of positioning assets and assembling assets. We'll see some revenue there.

But for the real sort of bulk of the contract being the asset rental. And with Royal, we fully anticipate that we'll be handling full turnkey operations, which will substantially increase the size and value of these contracts. There will certainly be a delay from securing contract to the full revenue streams coming online. So I think to your point, we'll see the add to our future contracted revenue and then a bit of a gap until the utilization and the cash flow starts rolling.

Got it. And when you secure a contract, is that one that's going to show up in your backlog that contract the future rental revenue as soon as it's signed and secured?

Yes. Yes. We do have that on the workforce side. We do track only the rental component of that committed contract in the numbers we report. But yes, on the workforce side, once we have that contract secured, we log that in our backlog.

Got it. Okay. And we keep talking about the bigger kind of nation building project as one of the big demand drivers in WFS. But should we see any utilization ramp up before those bigger things start to contribute in the back half of next year? I think you guys have a lot of other pockets of demand that are growing as well, for instance, the mining sector across multiple commodities projects being built, projects being expanded. Can we expect any utilization ramp up kind of before the back half of next year from that stuff?

Yes. What we're seeing is more broad-based than just the nation building projects that are talked about through the major projects office that's been created by the current government and across different verticals. And perhaps, Mike Ridley, you can sort of give some color around sort of the breadth of what we're seeing what we -- within reason, what we expect over the next little while.

Yes, you bet. Thanks for the question, Kyle. I mean a lot of what we're doing and what we see ahead outside of these nation building projects is just kind of a continuation of our strategy. The mining pipeline across Canada is quite active right now with commodity prices to where they're at. And we have numerous projects right now in Canada tied to disaster relief housing both workers and residents. Going over to Australia, we anticipate seeing utilization growth in that market in the year ahead for sure. And in the U.S., while not a big part of our business, it's been a really nice add-on and expect to see kind of stabilized utilization in that market.

So all in all, I think we'll see an improvement over the first half of the year and then if and when these nation building projects get contracted, that's where I think you'll really see the dramatic upside kind of out the tail part of next year, the mid- to the tail part of next year.

Okay. And then just last one for me on your -- the total company growth CapEx budgets. Can you comment on the budgets for this year, if it's changed at all since what you last told us and what the budget is shaping up for next year, again, just on the growth CapEx side? And how that kind of should be splitting up into MSS and WFS?

Yes. We switched just in the last couple of years to a different methodology where we use a rolling capital allocation framework, which allows us to adjust according to the cash generation of the business. And then we're looking at not pushing capital but matching where we see demand in our system and ensuring that it meets our return on investment at the asset level hurdles.

And so what you're seeing through our system is sort of the true demand from our customer verticals aside from a couple of small branches where we're greenfielding into new areas for ourselves. And what we're looking at is when you normalize for the one acquisition we did in '24, we're looking at fairly consistent numbers for this year.

We had expanded, as we said, about $69 million through to the end of Q3. We've got a fairly sizable, I mean on the CapEx committed, contracted through our manufacturers, et cetera, which leads us to believe that we'll catch up to last year over Q4 here. And then we've already committed capital that supports projects where assets will come into our system in Q1, which is probably earlier, I think, Ted, than we've seen in previous years. So we've got pretty good visibility of capital going out. Typically, we've got contracts in hand before we've ordered the equipment. So we've got good comfort that we're going to generate commensurate rental streams for that -- those capital adds. So we're pretty comfortable we'll be a similar cadence of net CapEx this year to last year and that continues on into the first half of next year.

Okay. I suspect a lot of this growth CapEx is weighted to MSS. Correct me if I'm wrong. But if that's the case, I see some of your MSS peers out in the market kind of pulling back on growth CapEx, not spending much anymore, just given utilization rates are softening a bit. But you guys seem to have visible growth still. I mean what's the explanation there on why you guys seem to be facing more organic growth opportunities and therefore, thinking growth CapEx versus what some of the peers are saying right now?

Yes. To your first point, we are expanding CapEx -- capital in each of the businesses. There are certain asset classes in our Workforce business that are very highly utilized, and we've been adding capital, which is a bit of a change versus the last several years, but the bulk is going into our MSS business. And I think that in terms of we're seeing a little bit asymmetric where we're seeing demand.

Yes. So we -- as Toby said, our utilization is flat and right in our optimal range. So -- and as Trevor said, we allocate capital based on demand. A significant amount of that is actually based on customer bids that we've done and if we win the bid, then we allocate the capital for a specific bid, and those are typically long-term 2 to 5 years, but more on the long end of that. So those -- that's a real demand and that increases utilization when we get those projects.

And then every market we're in, we have strategies or what equipment does that market need, what do customers need? So any speculative capital we do is to address specific needs with a high level of confidence those assets are going to go to work. So we're trying to match capital with the demand. And unlike maybe other competitors that are building -- maybe must be building more spec fleet if their utilization is dropping.

The next question is from Frederic Bastien with Raymond James.

There's been a fair amount of discussion around utilization on the workforce side. And I'm curious about pricing. Is there enough cheaper Black Diamond to kind of benefit longer term from the same kind of dynamics that you have enjoyed on the MSS side for the last couple of years with seeing very good rates of -- good rental rate increases.

We truly believe that will be the dynamic we'll experience as utilization picks up. A key difference, though, Frederic, is when we deploy assets around our workforce business, they tend to go out in larger packets of assets. And so we will see more of a step change in pricing as opposed to a gradual iterative change like we were able to demonstrate with our MSS business, where assets tend to go out at least on a percentage of the fleet basis in smaller packets. And so you can adjust your rental rates as you see utilization gradually climbing.

And so it will be interesting to see how the industry addresses this fact as projects start to absorb the spare capacity. Even at this point in time, we're seeing a little bit of strengthening on rates of assets that are going up right now, which is encouraging. But yes, absolutely, as utilization rises on Workforce platform, we will see rental rates increase. And we're well aware that the replacement value or the cost for incremental square footage on the cap side of the business requires rates to be pretty much 3x what the trailing average rate has been. And so I believe the aggregate demand we're looking at will require incremental capacity to be added to the consolidated Canadian camp fleet. We've not seen that in over a decade. And to warrant that type of CapEx, we're going to -- we need commensurate rates and commitment on term. But I think we're seeing the dynamics that will probably get us there over the next couple of years.

Great. I got stuck on one of the comments you made around LodgeLink is seeing good growth opportunities in Australia. And also you mentioned Asia. Would you mind just elaborating on that, please?

We mentioned Asia Pacific. What we're finding with our Australian customers and prospective customers, especially around the resource sector is that they look regionally. As some would be aware, the Australian miners are also active in places like Papua New Guinea and areas of Indonesia, the Trans-Tasman sort of travel concept that includes New Zealand, et cetera, and so as we bring on Spencer Corporate Travel and we began scaling the LodgeLink offering into that part of the world, more positioning to be able to service a regional territory Australia as the base.

So we're just generally calling it Asia Pacific. I know APAC is actually a much bigger region than what we're talking about here, but we're finding travel in Asia Pacific is really quite interesting in that it's quite a bit more balkanized, so to speak, or many more participants, which means more complexity and even more value to what LodgeLink brings to our corporate customers moving workforce. So we think what we're doing is very prospective for that part of the world.

And then lastly for me on the -- you mentioned a little bit of hesitation on the education side in the U.S. Does that mainly pertain to custom sales?

It certainly shows up predominantly, Ted, in custom sales in the near term. But I think there's a correlation to rental as well. And we think there's a base explanation of why we've seen this in this year, particularly, but maybe Ted can give some more color.

Yes. In any given year, the mix between sales and rentals and education can change depending on government funding primarily and then school board budgets, I guess in times of less government capital, they're switching to rental because they still -- it's the demographics that are driving the student demand, and we see steady population growth in most of the markets that we're in. So this year, we've seen more rentals and less capital. And then overall, there is some uncertainty around government funding as those of you that follow the news in the U.S. know. So we think that's kind of immediate type of headwind.

But over time, we expect that to be resolved and we haven't really seen a big overall impact in our business, but has generated a bit of volatility in the sales this year.

The next question is from John Gibson with BMO Capital Markets.

Congrats on another solid quarter here. I just wanted to dive in a little bit on WFS pricing ahead of these nation-building projects. I know you talked about it with Frederic's question, but wondering if early pricing terms could look like? Would it -- if things tighten, is there an opportunity to increase pricing with the first wave or maybe you have to wait until things tighten closer to full capacity to really move the needle?

Thanks, John. This is a very good question, and it's something where we're trying to answer internally here. Certainly, the first projects to go out. I think the industry, the camp industry, are offering probably the best rates that any of these projects we'll see over the next few years because we do have spare capacity of almost 50% in terms of rooms or bed count. And so even at current rates or slightly higher than average ratio over the last few years, it's still incremental value in terms of cash generation.

So I do believe the first projects and keeping in mind that these -- a number of these projects have been running competitive pricing processes for a couple of years now, even before the discussion of nation building, et cetera. So some of this is already active and various degrees of commitments in terms of pricing offers already out there. So I think it's the subsequent ones. The other thing we're looking at, when we look at offering on a turnkey basis with the Royal capabilities is looking at pricing into a full, what's referred to as mandate rate. So that's including all catering services plus the return on the asset itself, which becomes a much more sophisticated way of pricing versus fair rent against assets. And I think we'll see those type of rates show a step change in the asset rate when it's blended together. And so it will be really interesting once we've closed on Royal and are approaching the market in a different way than we traditionally have.

So I think you could see what's attributable to the asset growing more incrementally than step changes on base rent. So we're playing around with all kinds of pricing models, price discovery. Clearly, we're working with our customers, and we're well aware of the project pressures on costs, et cetera. So there's a lot going on.

Okay. Got it. Last one for me. Just in the U.S., MSS revenue was down a little bit year-over-year. Are there -- and we're seeing that -- we're seeing some pressure from some of your peers as well. Is this specific to certain regions or end markets? And do you see this recovering or kind of staying flat here over the next few quarters?

Toby or Ted?

Yes. Again, this is total revenue. So this would include sales and rentals. So I think it reflects probably primarily the lower education sales we already talked about. Toby?

Yes. Yes, exactly. I think this kind of comes back to the question we were discussing earlier around the lower sales in U.S. education and how Ted was describing that dynamic. We continue to see revenue -- rental revenue increases in the U.S. And so -- and fundamentally, we don't think that, that decrease in sales revenue is a longer-term phenomenon. So we do continue to see strength in the U.S. market despite some of these near-term pullbacks in certain revenue categories, but the core rental revenue remains healthy.

And that's just Q3. If you look at year-to-date, we're up 13%. So again, this is any quarter are non-rental and sales revenues can fluctuate.

For sure. I've just seen some of your peers express a little bit of weakness in cost, some end markets. I'm just wondering if you haven't seen that, I guess, it doesn't seem to be the case.

This concludes the question-and-answer session. I'd like to turn the conference back over to Trevor Haynes for any closing remarks.

Thank you. Thank you, everybody, for joining us today and for your interest in Black Diamond. We're very pleased with the performance of the business at this point in the year, and we're optimistic with regards to performance going forward and what we're seeing in our end markets and look forward to updating you again after the next quarter. Thank you, and have a great day.

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

Thank you for standing by. This is the conference operator. Welcome to Black Diamond's Conference Call. [Operator Instructions] The conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Emma Covenden, VP, Investor and Stakeholder Relations. Please go ahead.

Thank you, and welcome to Black Diamond Group's conference call about our recently announced acquisition of Royal Camp Services. Before we begin, 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 also may make reference to various non-GAAP financial measures in today's call, such as adjusted EBITDA. For more information on these terms and others, please review the sections of Black Diamond's Management's Discussion and Analysis entitled Forward-Looking Statements, Risks and Uncertainties and non-GAAP Financial Measures.

The press release outlining key information and financial highlights surrounding the transaction announced today as well as our annual and quarterly filings may be found on the company's website at www.blackdiamondgroup.com and also on the SEDAR+ website at www.sedarplus.ca. We have also uploaded a short presentation about this acquisition on our website in the Investor Center under Presentations and Events.

Dollar amounts discussed in today's call are expressed in Canadian dollars, unless noted otherwise and may be rounded. With me on today's call is Chief Executive Officer, Trevor Haynes; Chief Financial Officer, Toby Labrie as well as Chief Operating Officer of Workforce Solutions, Mike Ridley. I will now turn the call over to Trevor.

Thank you, Emma. Hello, everyone, and thank you for joining us on short notice. Following this morning's announcement, we are very excited to provide additional details about our definitive agreement to acquire Royal Camp Services for $165 million. I'll begin by providing a few high-level remarks about the transaction and deal rationale before passing the call over to Toby for additional detail through a financial lens and then to Mike for final remarks on how this move aligns with our growth objectives for our Workforce Solutions business and how it positions us to respond to current market dynamics, following which we'll open the call for Q&A.

Operating under 3 principal brands, Royal Camp Services, Summit Camps and Primco Dene Royal Camps. This business is an industry-leading remote workforce accommodation and hospitality business, primarily servicing oil and gas, mining and construction industries across Western and Northern Canada with an exceptional reputation. Headquartered in Edmonton, Alberta, the business has been successfully operating for over 34 years.

Its proven track record is supported by a loyal customer base, strong indigenous partnerships, expert and long-tenured leaders and approximately 580 dedicated employees, all of whom will be retained and welcomed to our Black Diamond team, including their top notch leaders. At Black Diamond, we have a strong track record of successfully acquiring and integrating high-quality businesses to further our growth strategies, better service our customers and deliver compounding shareholder returns, and this transaction is no exception.

This best-in-class operator is highly complementary to our Black Diamond Workforce Solutions platform in Canada in terms of service offering, end market verticals and geographies served. On combination, the business becomes a premier integrated workforce accommodations and hospitality provider, including catering services. It is a compelling amalgamation that we believe will create substantial value for all stakeholders, including both Black Diamond and Royals customers, the communities we operate in and our indigenous partners, employees and shareholders.

The acquisition is expected to be highly accretive to Black Diamond's cash flow per share and earnings per share, given it has been financed primarily with low-cost debt and the fact that the fleet has low sustaining capital requirements. While I've highlighted some of the rationale leading to our enthusiasm about this deal from the values and counterfeit of the team to Royal's leading brand reputation and strong relationships with customers and partners, another factor worth noting is the opportune timing of this deal.

Now is the right time to combine the strengths of these 2 distinct businesses. Currently, the nation-building thematic in Canada is leading to strong market tailwinds related to accelerated development approvals through Bill C5 and other government-led initiatives, which is expected to drive increased remote development activity over the coming months and years. As a result, the bid pipelines of both Black Diamond and Royal are very active with a breadth of opportunities across multiple industry verticals, including mining, energy, infrastructure and construction from all corners of the country.

Further, the federal government's renewed focus on defense and military spending presents the opportunity to use our relocatable accommodations assets in a unique application. And having a larger combined platform and capabilities allows us to better meet the needs of these customers and large projects. Combine the 2 platforms, current unutilized fleet capacity is between 40% and 50%, representing a meaningful amount of operating leverage to be unlocked. While that represents opportunity for future growth, let me reiterate that even at this juncture, both businesses are stable, profitable and performing well.

To summarize, we are excited about this deal and the opportunity to add approximately 6,500 rooms of capacity, 3 open camps, 4 operating locations and offices, key indigenous partnerships, and most importantly, welcome Royal's employees to our Black Diamond team. With that, I'll pass the call over to Toby.

Thanks, Trevor, and hello to everyone joining us on the call today. As Trevor just said, we are really excited about the combination of these businesses and believe Royal's alignment to our operating ethos will deliver long-term value creation as we strive to support our customers and drive profitable growth.

We have agreed to acquire Royal for $165 million with consideration made up of a combination of cash and up to an aggregate of 4 million common shares of Black Diamond at a deemed price of $12.08. We believe this is an attractive value for Royal for which its 3-year adjusted EBITDA range was from $31 million to $41 million, excluding anticipated synergies, making the acquisition highly accretive.

Before considering the upside potential of nation-building projects, we believe the business will continue to operate near the midpoint of this adjusted EBITDA range. The valuation is attractive, not only from the perspective of a multiple of earnings, but also from an asset value as we note that our estimates of the fair market value of tangible net assets of Royal is approximately equivalent to the purchase price.

Thus, despite the fact that we're leveraging the positive impacts of this acquisition through the use of debt as the primary consideration, the acquisition itself maintains strength of our balance sheet going forward. Cash portion of the purchase price will be drawn from our ABL, under which we currently have over $230 million of available liquidity. Pro forma the acquisition, we expect to be at a leverage ratio of approximately 2.1x to 2.2x, which is at the low end of our target range of 2x to 3x.

Further, we estimate available liquidity of approximately $80 million following the transaction, leaving plenty of flexibility to fund continued growth across all areas of the business. With this efficient use of debt, the acquisition of Royal is highly accretive to Black Diamond. Finally, this acquisition is subject to clearance under the Competition Act Canada, which we anticipate receiving and subsequently closing the deal by the end of 2025.

Upon close, we'll begin integrating the businesses following our proven approach, which is to preserve the quality and culture of the company that we acquired. With that, let me pass the call over to Mike for his comments on how this move aligns with our growth objectives for our Workforce Solutions business and positions us to respond to current market dynamics, Mike?

Thanks, Toby. To build on what's already been said, this transaction is transformational to our Canadian workforce accommodations business and enables us to leverage the combined skill set of both teams, Black Diamond and Royal to serve our customers and grow the business. Royal's high-quality fleet of assets consists primarily of private format dormitories, kitchen and rec complexes and is currently approximately 53% utilized.

Together, the combined business will have nearly 12,000 rooms of capacity across Canada, positioning us to respond to increasing market demand as Canada focuses its effort on expediting major nation-building projects, as Trevor alluded to earlier, and the addition of top-tier catering and hospitality services gives us the opportunity to serve our customers through a full turnkey offering.

Further, Royal's 3 open camps strategically placed in Northeastern B.C. support current activity in the region, which is expected to grow with the build-out of LNG facilities, pipelines and increased resource development. Royal has a long and successful history of being an effective and respectful partner with indigenous communities similar to our approach of fostering structured and long-term engagement to deliver positive economic results for all parties.

Through this acquisition, we have the opportunity to combine and expand our already highly effective indigenous engagement strategies to the shared benefit of our customers and partners. At Black Diamond, we know what sets us apart is our dedication to solving our clients' unique challenges and delivering on our promises. It is clear Royal holds the same belief and will serve our customers and partners through shared values and a commitment to providing unparalleled quality and service.

I know I speak for everyone here at Black Diamond, when I say we look forward to welcoming the Royal team and are excited about the value that we will create together. With that, operator, let's open the call for questions.

[Operator Instructions] Our first question today will come from Kyle McPhee of Cormark Securities.

First question from me. You disclosed the Royal Camp EBITDA over the last few years, $31 million to $41 million. Can you tell us the margin profile attached to that EBITDA so we can better understand revenue? And is this all pro forma external client revenue? Or in other words, was Black Diamond's Workforce segment a client of Royal Camp for the catering side of the business that I think you guys currently outsource?

I can answer the second part of that first, which is no, Royal is not a supplier currently or recently to Black Diamond on the catering side. I think for the margin question, perhaps, Toby, you can take that.

Yes, happy to. Thanks for the question, Kyle. Yes, with Royal's complexion, the business has a strong rental component as our business does. But as we've talked about, has a strong catering and lodging component as well. And so with that mix of revenue, a little bit of a different EBITDA margin complexion of about 25% on the business is typically where we see it.

Got it. Okay. And then, I mean you've more than doubled your Canadian workforce fleet assets with this acquisition, essentially, you've acquired fleet capacity, among other things. But do you still need to be thinking workforce fleet organic CapEx near and medium term? Or does this acquisition kind of diminish the need for that organic CapEx that you've been talking about for your Workforce segment?

Thanks, Kyle. It substantially reduces the need for any meaningful capital for our workforce business in Canada. Obviously, we would want to absorb the unutilized fleet in the first instance. However, there are some asset classes that are in short supply in Western Canada, specifically around our small format. And then over time, there's sustaining capital required. So our anticipation would be continued deployment, but it would be fairly minimal, sustaining capital on these businesses is somewhere in the $3 million to $6 million on a combined basis to maintain the fleet on a capital requirement.

And then occasional add-ins of certain fleet types. So when you look at the cash being generated on the combined Workforce businesses, Royal and Black Diamond, and what's required for sustaining or opportunity-driven capital, there's -- we anticipate a substantial amount of cash being generated beyond the reinvestment. And I think that will be for the foreseeable future.

Got it. And is there anything we need to know about -- as the utilization of this acquired fleet ramps up, is it deployable without a big upfront maintenance spend? Or is it all in pretty good condition. Can you speak to that?

Yes. We do a really intensive due diligence on assets. We've essentially touched all of the 2,000 pieces and graded based on quality and looking for maintenance deficit. And I think, Mike, you can give a bit of color of the quality of this particular fleet we're acquiring.

Yes. The quality is exceptional. And in most cases, requires little capital to get things out and rentable. In some cases, a little more work, but all fall ow with him Trevor's, what he had mentioned around maintenance cap. So we're excited about that. They have Royal has been very diligent and had a very good preventative maintenance program over the years in terms of how they've maintained their fleet. So very short order, these assets can go to work immediately.

Our next question will come from John Gibson of BMO Capital Markets.

Congrats on the acquisition. Just wondering if you could talk about utilization across the asset base. Has it been fairly stable over the last 3 years? I mean there's a fairly large delta in the adjusted EBITDA numbers. But just wondering how you could talk -- or if you could talk to utilization across the previous 3 years for these assets?

Yes. When we look farther out, the Royal platform participated on the large pipeline builds in Western Canada, just as Black Diamond and most of the camp companies did. So when we look at Coastal GasLink having come to completion on construction and the construction camps having been demobilized, that would have been in their profile a couple of years ago. Since then, however, they've had good project work through the 3 years.

And so that midpoint we're looking at is supported by what we would call sustaining recurring activity within the business. And there's always a bit of a project-related flavor to workforce. However, because of their catering business, they also have long-term contracts where the customer is operating their facility as opposed to being in construction phase, and that gives a baseline of recurring revenue over long periods of time. And so that's one of the part of the complexion of what we like about the cash flows represented there.

So a good baseline, I would say, John, of recurring or predictable EBITDA generation with the upside potential of the more project work or as the Royal team calls it episodic revenue. So when we look in combination, we based valuation off of the baseline and that leaves us upside potential as they pick up various types of project work. And certainly, as the bigger thematic projects come on, we think there's plenty of upside there.

Okay. Great. No, that's very helpful. And then just last one for me. Can you break down the industry exposure of Royal and maybe how it compares to your existing workforce business?

The breakdown of industry served by revenue? Is that what you're asking?

Yes, exactly.

Yes, Mike or Toby, maybe you've got that on hand.

Yes. As we've talked about, generally, there's good exposure to the primary industries would be oil and gas, mining and construction. And so the -- I don't have the specific split, but especially those first 2 industries would be the -- where the primary industry split is going for revenue.

Just to add to that as well, the Summit Camps, which falls under Royal is positioned extremely well in sort of Central Northern BC to focus on mining projects. They have good indigenous relationships in that area, which further to that has led to mining camp opportunities and projects that are currently underway. So when you sort of combine Royal, which is mostly sort of a Western-based oil and gas mining.

With Black Diamond in terms of what we've been really focused on the last few years is sort of product and geographic diversification with focusing on disaster relief, for example, or at-risk housing, still keeping focused, of course, on oil and gas and mining. And then geographically, when we look to the North and the opportunities with defense and then what we're doing in Eastern Canada with a focus on mining projects, it's a really good fit for us when it's all said and done.

Okay. Great. I actually might sneak one more in. Just wondering more broadly what is the level of bidding activity for workforce housing right now? I mean, obviously, we've seen all the headlines with the push towards [ BILT5 ]. But can you speak to maybe -- is it at the highest level in the last decade? Or I guess, how excited are you about that -- the business or the potential for it to see utilization rise over the next few years?

Yes. We take a view that there is a tangible aspect to the thematic in Canada, and that is through the activity in our bid pipeline or our sales funnels. Some of that would be projects updating all of their pricing and planning in anticipation or in hopes of becoming identified as a nation building project. But overall, the quantum of bids is up substantially over the last several months with a handful of very large projects that we think are close to going into execution mode, which informs our view of and timing of why we would invest in our workforce business at this point in time.

But quick to point out, these are large projects, sort of the front end scale up time lines from when FID happens, et cetera, a lot of complexity in mobilization. And so even where we may see FID on key projects and hopefully, Black Diamond and Royal are selected as service providers. There's still a time line that everybody needs to be aware of a ramp up over a number of months or several quarters to get to the higher operating levels that we anticipate will occur over the next year to 2 years. So yes, excitement, but just a word of caution of how complex and how the logistics take some time to move everything into the field and be up and operating.

Our next question will come from Sean Jack of Raymond James Limited.

Just wondering if you can describe what the revenue split is for Royal between what WFS would call lodging revenue versus classic rental revenue?

Yes, it's a good question. I'll pass it to Toby to give the data there and maybe Mike for a bit of color, Toby?

Yes. Sure. Thanks, Trevor. So as far as the total revenue split, we have about 20% is on the rental side. And then the -- there's about a 40-40 split typically depends on the given year, but between lodging and non-rental being similar to our business on primarily install and dismantle services. So that would make up the primary revenue split there, Sean.

Okay. Perfect. That's great color. And then wondering kind of back to what Kyle asked originally, but wondering if we should expect Royal support staff to replace existing subcontractors at BDI's existing camps?

Mike, do you want to respond there?

Sure. Yes. So while we're going through sort of the Competition Bureau from sort of immediate, there'll be very little. We have to work through that. But over time, we'll look at that as an opportunity perhaps to integrate them into some of our current camps and operations.

[Operator Instructions] The next question today is a follow-up from Kyle McPhee of Cormark Securities.

Just hoping you can maybe unpack a bit more the rationale for wanting to get into the catering services, internalize that function? Is that a primary motivation for this deal? Or is it kind of secondary to just having more workforce fleet capacity?

I would say it's both, Kyle. We have been looking at our Workforce business for the last few years in terms of positioning in the marketplace, et cetera. And with the prospect of higher activity levels, our positioning to be successful in securing projects. And we've concluded that on an integrated basis, we have the opportunity to work in the first place or to be at the table in the first place with the project owners themselves versus being behind a large caterer, et cetera.

We've also seen a lot of change in our industry where there just aren't as many sort of good quality, midsized caterers who aren't interested in being in the equipment business. Those were traditionally our key partners in putting services -- a turnkey package together for our customers. And so this positions us in light of those changes, positions us well as an industry participant. And then I guess, lastly, there's elements of the long-term operations of our customers' facilities after they build these projects, where we've tried in various ways to provide services of value to them through building maintenance, the sale of modular assets for operating camps, et cetera.

But this aspect of Royal and Summit where they can provide the catering hospitality services for longer periods of time sort of opens up that area of the industry in terms of revenue opportunity for us and to stay close to these customers on more of a daily basis, if you will, for when their next project needs come up. So we think strategically that, that's of strategic interest to us as we look at our marketplace. So there's a number of factors that led us to the conclusion that switching our model would be value creating.

And then our view was we wanted to buy if it were possible to buy the highest quality piece in the marketplace, and we certainly think that's where Royal sits. And so we're quite excited from that perspective, and it fits into sort of this revised strategic view of the marketplace and where we wanted to sit.

Okay. Appreciate all that explanation. One last quick thing for me. Just what impacts whether or not the 4 million Black Diamond shares are issued to the sellers? Like why is the purchase price consideration mix not already kind of known and locked in?

Yes. It's interesting with the Competition Bureau process, having to occur before close. But maybe, Toby, you can simply explain how that works and what we're thinking there?

Sure. Yes, a big piece of the equity component was being able to provide a lot of the current ownership is the management and employee base of the company. And so we wanted them to have the opportunity to roll those shares into Black Diamond shares and create some good alignment with the company going forward. And so we have a portion of that consideration known, but there's a portion of that base of employees, shareholder employees that will need to be determined before close.

And so we -- at this point, given what we know, we don't expect it to be at that $4 million cap, probably closer to 1.5 million shares is what we anticipate for final consideration.

This concludes our question-and-answer session. I would like to turn the conference back over to Trevor Haynes for any closing remarks.

Thank you, operator. Thanks, everybody, for joining. Hopefully, you can tell after our conversation here that this is a great addition to the Black Diamond platform, high-quality well-built, well-operated business with a great team and solid partnerships, et cetera. We think in combination and in the macro we're looking at, this positions us extremely well. So we're quite excited. Thank you again, and have a great day.

The conference has now concluded. We thank you for attending today's presentation, and you may now disconnect your lines.