Ladies and gentlemen, welcome to the Black Diamond Group Third Quarter 2026 Results. All lines have been placed on mute to prevent any background noise, and after the speaker's remarks, we will conduct a question-and-answer session. If you would like to ask a question at that time, please press star then the number one on your telephone keypad to raise your hand and enter the queue. If you would like to withdraw your question at any time, please press star one again. I will now turn the call over to Emma Covenden. You may begin.
Good morning, and welcome to Black Diamond Group's Third Quarter 2026 Results Conference Call. With me this morning, we have Chief Executive Officer Trevor Haynes, Chief Financial Officer Toby LaBrie, Chief Operating Officer of Workforce Solutions Mike Ridley, President of Royal Camp Services Jon Warren, and Chief Financial Officer of LodgeLink Jason Zhang. 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 reference various non-GAAP financial measures in today's call, such as Adjusted EBITDA, Adjusted EPS, or net debt. For more information on these terms and others, please review the sections of Black Diamond's Third Quarter 2026 Management's Discussion and Analysis entitled Forward-Looking Statements, Risks and Uncertainties, and Non-GAAP Financial Measures.
This quarter's MD&A, financial statements, and press release may be found on the company's website and also on the SEDAR+ website. Dollar amounts discussed in today's call are expressed in CAD unless noted otherwise and may be rounded. The format for today will be similar to prior conference calls. Trevor will start with a high-level overview of the company's performance and highlights from the quarter, including commentary on current market conditions. Trevor will then pass the call over to Toby for a more detailed review of our financial performance before we open the line for questions. With that, I'll turn the call over to Trevor.
Thank you, Emma, and good morning, everyone. We appreciate you taking the time to join us today. Yesterday, we reported strong third quarter results, reflecting continued growth across the platform and building momentum as we head into the final quarter of the year and look ahead to 2027. Revenue reached an all-time quarterly record of CAD 159.9 million, an increase of 52% from the comparative quarter, while Adjusted EBITDA increased 33% to CAD 42.3 million. Record rental revenue of CAD 48.9 million was up 18% from the comparative quarter, while contracted future rental revenue remained robust at CAD 152.3 million at quarter end, down 4% from the comparative quarter.
Based on our continued growth, strong free cash flow generation, and confidence in the long-term outlook for the business, we announced a 22% increase in our quarterly dividend to CAD 0.055 per share, marking the sixth increase since reinstating the dividend in 2021.
This reflects our commitment to rewarding shareholders. Even with the increase, the dividend still maintains a relatively low percentage of free cash flow, allowing financial flexibility to reinvest in the business and drive future growth. All three areas of the business, WFS, MSS, and LodgeLink, contributed to our strong Q3 performance, which is the result of our focus on execution against our long-range strategic framework, including the growth initiatives undertaken over the past several years. As we look ahead, we are bullish about the macro backdrop and the opportunities that are developing across our operating regions. From our perspective, the combination of project volume and the breadth of activity across end markets is unprecedented. Demand in Canada continues to build across resource development, pipelines, data centers, mining, defense, and remote infrastructure, with the opportunity being particularly strong in Western Canada, creating opportunities to deploy existing capacity along with incremental CapEx.
In the U.S., activity associated with data centers and the related infrastructure build-out across the Gulf Coast and Southeast is expanding. In Australia, market conditions are also positive, with mining, defense, and remote infrastructure activity creating tangible opportunities. Our elevated bid pipelines across the company are highly prospective, indicative of considerable opportunity ahead. In Canada alone, WFS has more than CAD 2.3 billion of formal bids outstanding, representing well over twice the capacity of our current fleet, with several projects now in advanced stages of contract negotiation. Within WFS, our expanded accommodations platform gives us greater scale and capability to support major projects, backed by a growing network of customer relationships and a strong network of Indigenous partnerships. Within MSS, our strategy remains straightforward.
We'll continue to invest in the fleet, grow recurring rental revenue, maintain strong utilization, and ensure capital is deployed prudently, in line with customer demand and where we see attractive returns. Based on the growing customer demand, the cadence of capital investment is increasing and will continue to accelerate in the coming quarters. Taken together, we believe our asset-based businesses are very well-positioned to capitalize on the strong macro environment and the existence of opportunities across our markets. Beyond our asset-based businesses, we are also very excited about the momentum at LodgeLink. LodgeLink achieved another record quarter and continues to demonstrate the value and scalability of its sophisticated two-sided marketplace. Customer retention remains very high, while customer acquisition continues to accelerate, with expansion in the U.S. currently outpacing Canada by nearly double.
LodgeLink will continue to be an increasingly important part of Black Diamond's portfolio, providing exposure to workforce mobility across multiple industries and geographies through a capital-light platform business model. We believe the platform will continue to scale for the foreseeable future. Before Toby gets into the details of our operating results, I want to recognize and thank our people across Black Diamond. The results we reported yesterday are the culmination of the hard work and commitment of our teams across our branches, camps, lodges, project sites, and offices. Nothing is more important than doing that work safely. Ensuring our people, our partners, and everyone working alongside us goes home safely at the end of each day remains our most important responsibility. Overall, we are very pleased with our third-quarter performance, and more importantly, with the current momentum and with how the business is positioned.
We have a diversified platform, meaningful operating leverage, a healthy balance sheet, and a strong team executing against a clear vision. We believe that combination positions Black Diamond very well to continue compounding growth and creating long-term value for our shareholders. With that, I'll turn the call over to Toby.
Thanks, Trevor, and good morning, everyone. As Trevor highlighted, the company delivered record revenue during the quarter, translating to Adjusted EPS of CAD 0.19, up from CAD 0.16 in the comparative quarter. Despite record rental revenue, Adjusted EBITDA margin was 26.5% during the quarter, compared to 30.2% in the comparative period. Margins are influenced by revenue mix and may vary from period to period, with the moderation in margin primarily a result of the increased contribution from lodge services revenue, which increased significantly due to the Royal acquisition and relates to catering and hospitality services that transact at lower margins than the core rental business. In MSS, lower margins were driven primarily by elevated repair and maintenance and transportation costs in preparation for asset deployment on projects. Looking at the individual divisions and beginning with Workforce Solutions, the business continued to deliver strong growth across all revenue streams.
Total revenue increased 127% to CAD 97.9 million, while Adjusted EBITDA increased 99% to CAD 28.2 million. The acquisition of Royal Camp is one of the key year-over-year growth drivers, contributing to strong performance across the segment's revenue streams. Rental revenue increased 43% to CAD 18.9 million, reflecting the addition of Royal Camp as well as modest organic growth in Canada and Australia. Lodge services revenue increased 389% to CAD 40.6 million. WFS sales revenue increased 140% to CAD 13.2 million, driven by higher custom sales activity in the U.S. and Australia. Non-rental revenue increased 56% to CAD 25.2 million, supported by increased transportation activity in the U.S. and contributions from LodgeLink. WFS utilization improved modestly to 58% from 55% in Q2 2026, leaving ample spare fleet capacity to deploy on projects within the bid pipeline.
Turning to MSS, this segment generated total revenue of CAD 62 million during the quarter, which is in line with the comparable quarter, and Adjusted EBITDA of CAD 21.2 million was down 7%. The recurring rental business continues to compound and perform well, with rental revenue increasing 7% to CAD 30 million. Sales revenue was down 18% to CAD 13 million from CAD 15.8 million in the comparative quarter, with permitting delays shifting project deployment timing, which offset growth in rental and non-rental revenue streams. Utilization remained healthy at 77.1%, while average monthly rental rates increased 3% compared to the third quarter of 2025. A continued area of focus within MSS is value-added products and services as a means of further expanding our revenue generation opportunity and providing our customers with convenient package solutions. VAPS revenue increased 25% to CAD 3.5 million and represented 12.7% of rental revenue.
Finally, LodgeLink delivered another strong quarter and continued to deliver profitable growth due to strong retention of existing customers, new customer acquisition, and increased share of wallet of existing customers. Total Trade Value reached a record CAD 51.5 million during the quarter, up 44% from the comparative quarter. Net revenue increased by 51% from the comparative quarter and reached CAD 6.5 million. Now, turning to cash flow and capital allocation, Funds from Operations for the quarter increased 32% to CAD 43.6 million, while free cash flow increased 47% to CAD 33.8 million. CapEx in the quarter totaled CAD 26.8 million, an increase of 37% from the prior year. In addition to this investment, capital commitments increased to CAD 49.7 million, up 26% from the comparative quarter, reflecting the meaningful customer demand and contract backlog.
Consistent with our approach in previous quarters, capital deployment remains focused on opportunities that support long-term rental revenue growth and meet our return thresholds. Investment decisions continue to be evaluated across the portfolio, with consideration given to investment returns, market demand for fleet, and available existing capacity. As for the balance sheet, we ended the quarter with net debt of CAD 355.7 million. Net debt to trailing 12-month Adjusted EBITDA was 2.4 x at quarter end, which remains within our target range of two to three times. Maintaining a strong balance sheet and financial flexibility remains important to our capital allocation framework. Earlier this year, we completed the expansion of our asset-based lending facility to CAD 550 million, increasing our available borrowing capacity and supporting future growth opportunities.
Overall, our third quarter results demonstrated the strength of our diversified business and our ability to generate meaningful cash flow while investing in future growth opportunities and increasing shareholder returns. With that, operator, I'd like to turn the line over for questions.
Thank you. We will now begin the question-and-answer session. Again, if you would like to ask a question, please press star then the number 1 on your telephone keypad to raise your hand and enter the queue. If you'd like to withdraw your question at any time, you can press star 1 again. We'll pause just for a moment to compile the roster. Your first question comes from Kyle McPhee with ATB Cormark. Your line is open.
Hi, everyone. First one for me
Go ahead.
Just regarding your modular space Adjusted EBITDA margin. As you pointed out, a bit soft, you were spending money on fleet repairs and maintenance ahead of new deployments. Can you help me understand the read-through here? Is there a meaningful modular space utilization boost on the near term? If so, what's driving it, and can you help us quantify the timing?
Yeah. Thanks, Kyle. I think something that may not be entirely obvious is how complementary our business units are and how we have an overlap in terms of customer projects. If you think about what's happening in terms of resource remote infrastructure, especially in Western Canada right now, where we're talking about the need for camp beds and WFS services, there's, in many cases, an equally significant demand for space at those work sites. All the different complements of buildings, whether that's for lunchrooms, project offices, security rooms, training rooms, all that kind of stuff, all of that building requirement comes through our MSS business. When we look at what's happening in Western Canada, we see a very steep demand wall, and some of that is contracting already and in advance of WFS completing negotiation on the big camps.
What we're encountering in terms of upfront costs is getting those assets ready. In many cases, we're moving them between branches and incurring the cost of that to get them positioned to then mobilize. I think you'll see the outcome of this fairly quickly over the next few quarters as MSS is accelerating along with the project activity in Canada. That's the primary impact. We're seeing something similar in many of our branches in the U.S. as the acceleration in demand around data centers for large project complexes, et cetera, has been accelerating, and our branch service teams have been busy getting assets ready. Again, we'll see the corresponding rental revenue increase for MSS over the next few quarters.
Then lastly, Kyle, I would point to our CapEx outstanding at the end of the quarter of just under CAD 50 million, which is up significantly year-over-year. Almost all of that is related to MSS fleet build, another data point showing how the MSS business is accelerating into the same macro theme that we've been talking about for our workforce business. So, those costs and the pressure on the margins are in advance of an acceleration and a fleet expansion that's underway with MSS.
Okay. So, it sounds like you're actually expecting an MSS demand wave to start ahead of it translating into your WFS segment. It's leading the WFS demand. Is that accurate? We'll see a utilization boost for MSS first?
They run somewhat in parallel, but not all of the projects require camps. A lot of the data centers here in Canada are mobilizing large complements of modular buildings, but they don't require camps. So, we have some of that going on, and then even where we have both MSS and WFS assets mobilizing to project sites, the MSS buildings can mobilize more quickly or in smaller tranches of buildings going out. We fully expect that you'll see the ramp-up on rental related to MSS a little bit more quickly than you'll see the operating revenue coming in on the camp side, just a longer mobilization upfront.
I would add to that. Sorry, Kyle. Toby here. I would add to that at 77%, we have nearly full utilization with MSS. As Trevor mentioned, we are deploying additional capital there to meet demand. So, we expect we should see modest improvements in utilization over the coming quarters, but we wouldn't expect large step changes, where we run into a situation where our utilization could become too high.
Got it. Okay. I got one quick follow-up on MSS. The contract duration, I think 44 weeks now, that's down from where it's typically been residing in the 50-week range. Is something going on with mix, or can you help me understand this?
It has to do with mix. We've talked about a softness around the education vertical. Our education customers typically contract our MSS assets longer than our other customer verticals, typically 60 - 84 months. When we've seen a moderation in the demand for incremental capacity around education, we just have fewer new buildings going out on those very long contracts. So, if you look at how that impacts the mix as existing contracts run off, we're seeing an adjustment to average length of contract term. I don't believe we've seen a change in the average time that our customers are keeping assets on site, but we're certainly, because of the mix of education, as a reminder, the education vertical for us is fairly significant in our MSS mix, so you can see that average contract term changing with the complexion of the education market.
Got it. Okay. Appreciate it. I'll pass the line. Thanks.
Thanks, Kyle McPhee.
Your next question comes from Frederic Bastien from Raymond James. Your line is open.
Hi. Good morning, everybody. You guys exited the quarter with over CAD 2 billion bid in Canada alone. Obviously, that's an impressive number, but I'd like to better understand what's behind it. Can you give us some color on the composition of that pipeline, specifically how it breaks down geographically across end markets and client types, as well as perhaps a distribution of contract sizes, basically? Are we talking about a handful of large opportunities driving that figure, or a broader collection of projects? Thanks.
Thank you, Frederic. The composition of the CAD 2.3 billion, there are some large, sizable projects in there, which would be familiar from Canadian headlines. That being said, what's interesting to us in this macro is how broad by industry and broad by geography that list is. So, you have a couple of projects that make up larger, chunkier percentages of that. But as we look across our 10- 12 significant projects, all of them have significant scale. In terms of the types of projects, Jon, that are in there, maybe quickly give some color on it.
Like you say, it spreads across Canada and across several different industries. LNG is obviously one that's in the headlines right now, there's some FIDs on some of those projects, hopefully future positive FIDs are coming on others. But then we get into some of the mining, now data centers are requiring camps. Those are new opportunities above and beyond what's in the pipeline.
Large military-related as well.
Yeah. Military and infrastructure is within that, it's very diverse.
Frederic, even if you took out the couple of large LNG-related projects, we still have a significant amount of that CAD 2.3 billion. When you line it up against our available capacity, we could absorb existing capacity, I think, Jon, even if the LNG projects were delayed and didn't go ahead in the near term.
Yeah. Just thinking on a geographic basis, I mean, really, we have projects from Nova Scotia to the far West Coast in Prince Rupert, so it is really exciting to see.
North.
Yeah, right up north, so definitely.
What markets are moving faster? Is it all coming at once?
Well, right now, the one that's been given a positive FID, I'm going to say it's the closest right now. We're expecting some activity in the final negotiations on that project. There's a team working on it daily. The other ones in the mining industry, it's a little bit slower getting through the regulatory, but there's a few that are right at the goal line, so waiting on some final negotiations on those projects.
Real quick to point out, the 2.3, we typically take a fairly conservative approach, and so those are true formal- submitted advanced bids, but the pipeline we're working with and the funnel of opportunities-
Yeah
exceeds that amount.
Yeah, just excuse me, just to add one other point, Frederic. One market that is new is data centers, and the opportunities, there seems to be a new one a week that creates opportunities for not only the camp business, but the space rentals business, as Trevor Haynes was alluding to earlier. So that's become a growing part of our business. Not just in Canada, but in the U.S. It's massive down there, massive opportunity down there. We're also seeing it over in Australia. So, yeah, the pipeline, when you have a look at today, very healthy, but there's new projects coming on stream, day after day, week after week. It's pretty exciting.
Magnitude of what we're looking at in Canada sort of overshadows the other two countries, but maybe quickly touch on, we're stocked out in the U.S. right now.
Yeah. We've landed some nice contracts in the U.S. recently that we'll see improving results down there in the near future. It's tied to data centers and a solid oil and gas sector in the U.S., and similarly in Australia. Great pipeline of activity with the workforce business in particular, but also strengthening space rentals business, classroom business in Australia. So, all three markets, Canada, the U.S., and Australia, have very healthy pipelines. Super exciting.
Everything, everywhere, all at once.
Everything, everywhere. Good. Turning to LodgeLink, how far are you along with the rollout of LodgeLink 3.0? You're obviously got great traction, revenue growth, and is that contributing at all, or do you expect incremental growth to come out of that rollout? Just wanted to get a quick update on how things are progressing. Thanks.
Yeah, it's a good question. Our technology team has done a fantastic job. The new product has reached general availability, but we have a tactical plan to converge it with the marketplace. Nothing we're seeing right now, Jason, in the performance of LodgeLink yet has to do with the strength and innovation of the new software coming in.
Yeah. Yeah, Frederic. As Trevor mentioned, the growth we've been seeing is on the existing platform. We reached general availability, and we're working on a plan to roll over into the new product platform, which we think will not only accelerate our various revenue streams, but on the gross margin side as well. We think 2027 is going to be a really interesting year for LodgeLink.
Okay. So you expect that rollout to occur over the coming quarters or throughout 2027?
Yeah, I'd say Q1 2027 is probably a good timeframe for a more accelerated launch.
Okay. Sweet.
The bridge between the existing platform, which is performing really well and continuing to grow, and the bridge allowing our existing customers to access the new software from the base platform is what's being done right now and moving very quickly. We think the characteristics you're seeing in terms of acceleration of market share capture with new logos joining, the retention of logos, Jason, we have retention greater than 100% because our existing customers are growing as well as retaining. All of the characteristics that we're trying to inform in this business seem to be clicking right now, and then we're really excited about the new capabilities of the software. It should position us with a greater differentiation, and it may take a couple of quarters to be able to show it, but it should accelerate our market share capture.
As a reminder, we're facing an extremely large addressable market in terms of companies that move workforce travel-wise for work.
Great. Thanks for your time, guys.
Thank you.
Thank you.
Your next question comes from the line of Razi Hasan with Paradigm Capital. Your line is open.
Good morning. Thanks for taking my questions. Just following up on the CAD 2.3 billion in opportunities. Given what you mentioned, are you still expecting a step function in the utilization rate for Workforce Solutions into the back half of 2027?
If you talk about back half of 2027 versus today, yes, that would be our expectation. We are quick to point out that the mobilization phase of these larger projects, we generate operations revenues of preparing sites and moving and assembling these large assets, and then the rental and hospitality services revenue begins to ramp after that. So I think, Jon, we think of this quarter versus this time next year based on what we are seeing.
Yeah, we will be expectation, and I think we can get more information on these projects and their histograms as we look at their
their front-end work and then going up into construction, all the projects that kind of stack on top of each other and their timeline through multiple years. I would expect that that front work will happen Q2, Q3, Q4, and then grow into construction with that.
So, it is a
There's a multi-
steady progression through this.
Yeah.
Probably Q2, Q3 into 2028.
That's the larger pipeline jobs. The other construction-type jobs are a little more flatter. They ramp up pretty steady, straight through.
Ramp up quickly and then they get to
Yeah, exactly. They have a constant flow through the years. They are a little smaller jobs, but stacked on top of each other, they add up significantly.
Okay, fair enough. Maybe just on that, is there a discrepancy between larger and smaller jobs, or are you seeing more smaller jobs in the short term and larger jobs long term? I guess that is the way to think about it, or?
There are a couple of components. We have smaller format camp assets, rapid deployment, which we are essentially at 100% utilized, and we have been adding capacity there, and we expect that continues. Then you have smaller deployments of larger camp assets that can move more quickly. Then we have operated open camps, and then we have catering-only contracts. So, if you look through the four lenses, we have different timelines and different drivers. We are seeing all four very active, right, Jon?
Yeah, definitely. On the base business, the catering side of things and lodging, as we've been preparing on large projects that are coming, we're seeing that area ramp up, and it really correlates to the rig count, oil and gas activity in your conventional areas, and then the oil sands area as well. It's all ramping up.
Yeah, I think that's an important point. The results from Workforce Solutions that we see in Q3, the increase from the first half of the year is largely around lodge loading in a lot of our open camps. Not only do we see increased revenue with the activity in the areas, primarily in the Montney, but we also see higher margins as we get higher occupancy in those camps. That's primarily what's driven the near-term performance without a lot of utilization improvement. As we start seeing that utilization, we expect that to continue to grow, but it's another element of growth that we have available within the WFS segment.
It's not really in the CAD 2.3 billion. Those are mostly large infrastructure projects that provide egress in the oil and gas industry. When you switch and think about the upstream, where we provide accommodation or hospitality services, open camps, or even the small format, we're already seeing our customers get significantly busier as they continue to develop their resource to be able to fill the infrastructure that those large projects represent. As Toby mentioned, we're seeing manpower increase upstream, and it doesn't require mobilization of large blocks of assets the way the infrastructure build does. It's a really healthy complexion when we think about our platform, because we participate in the upstream operating side. Even if you switch over to mining, once mines are completed and on production, now we have the opportunity to provide catering hospitality services throughout the operating life of those mines.
Our long-term base business is also growing in behind these big infrastructure projects, which helps you understand why we try to temper our excitement of what's going on, but we've got a high degree of confidence of how this business operates over an extended period based on what's happening.
Thanks. That is helpful. Maybe one for Toby. Could you maybe just touch on operating leverage in the business and how we should think about modeling Adjusted EBITDA margin for Q4, given that we are one month into the quarter? I know there is variability from quarter to quarter, but any thoughts on how we should model it?
Yeah. Q4, with some of the sales being delayed from Q3 in MSS into Q4, we expect sales to be a little bit higher than we would typically see, but otherwise, a fairly comparable quarter to what we would have seen in previous years. So, expect margins to be, well, revenue mix and resulting margins to be relatively comparable as a result.
Okay, great. Last one from me, just on the Workforce Solutions side, sales revenue up healthy. Can you point to any attribution, or what can you see that led to that growth in the sales side in Workforce Solutions?
Well, the custom sales, I think a good part of that went through the U.S. and Australian operation, Mike.
Yeah, I mean, when we have customer opportunities within our business, it isn't always straight rental. We're an asset manager, and that can come in all shapes and forms, but sales is a part of what we do. It could be new factory-built assets, which is what Trevor Haynes was alluding to down in the U.S., and the same in Australia. It's a good part of our business, and we continue to take on those opportunities.
We should see over the first few quarters of 2027, we should see some continued sales.
Yeah.
In Australia, especially.
Yeah.
Thanks very much.
Custom new sales as opposed to used sales.
Thank you. Okay, thanks a lot. I will pass the line.
Your next question comes from the line of John Gibson with BMO Capital Markets. Your line is open.
Morning, all. Thanks for taking my questions. Just wondering if we could talk about pricing on the bids outstanding. I guess, could you frame, are they higher than current levels? And if so, how much, if you could potentially disclose that?
If we look at the different business units, starting with WFS, if you think of an asset that was deployed in the last couple of years and working, and compare it to where quotes are today, rates are up significantly. What is happening in the industry is the anticipation that new capacity is going to have to be built to match what is happening on the customer side of things. Rates are moving towards what would justify or support return on the cost of new assets, dorms, kitchens, et cetera, John. Yes, they are stronger. We think of value to our customer, where the customer needs or will need to commit to a new asset, because that is what the next availability is for them. We need to ensure that we can get a reasonable return on the cost of those assets.
What you would add there, Jon?
Yeah. Along with that, almost a year ago, we bought a good catering company, so we are collecting that margin. We are not passing that on to a third party. I think in comparison to the last run of these big projects a few years back, that component is going to play into it. It is fully integrated.
Our margins or our pricing on catering hospitality services haven't changed all that much. What we are looking at is what is required as return on the asset side of things. That part of our pricing stack has been moving, and for those reasons.
I would also note that our small format business is also seeing price improvement in both Canada and the U.S., as that market tightens up as well.
Okay, great. I am going to follow onto that one then. So, fleet utilization in Canada is at, what, 57%? The majority of your WFS fleet is here in country. In a blue-sky scenario with pricing increases, you get to 100% utilization. Could we see WFS revenue double from here?
If we solely looked at the asset side of the business, that is a possibility. When you blend the revenues with these full turnkey catering contracts, et cetera, well, I guess you are providing that over incremental demand. So, yeah, certainly in the realm of possibility, I guess, Toby.
Yeah. Yeah, I think, and as Jon mentioned earlier, that path to full utilization could take some time, as some of these projects do ramp up over time with their capacity, even within a project. But yeah, at full capacity, I think where you were going, Trevor, is the different components of revenue, rental, and lodging certainly could double. Non-rental revenue is going to vary based on the timing of mobilizations, and so that could spike revenue at the outset of those larger projects.
Okay, great. I won't hold you to it, but I appreciate the color there. Last one on LodgeLink. I mean, it's EBITDA positive now. Are you getting to the point where discussions are happening in terms of monetizing the platform or potentially spinning it out to grow it further? I know you've touched on in the past that this could be the level where it happens, and just wondering what your thoughts are there, as we think about it scaling further.
Our focus is on building and showing that this is a very valuable asset in terms of its ability to generate cash profitability, steadily grow at a high pace, and that's what the team has been focused on. That said, we're always looking at how we ensure that the value of the pieces of the Black Diamond Group are properly valued into the overall share price, et cetera. That's where we continue to evaluate any number of scenarios with regard to LodgeLink. It's also why Jason Zhang has moved over to LodgeLink to work with us as CFO there, as we feel this platform, even in its current form, it's much more valuable than what's ascribed to a share of Black Diamond today.
Yes. Selfishly, John, my view is that you probably get LodgeLink for free when you buy a share of Black Diamond today. Perhaps that's the fact that we're this tech platform embedded in this big industrial services company. I think the beauty of being EBITDA positive now is that we're not acting as a drag on the broader Black Diamond valuation platform. We're growing really quickly. From that perspective, as we have conversations with, whether it's a prospective PE or what have you, all the various metrics show us as being quite top tier, whether you're thinking about retention or net revenue growth or ARR or gross margins. So I think the point there is, there's a lot of options in front of us with how we want to grow and take this.
We have the benefit of having a good patient backer in the broader Black Diamond parent company.
Another thing to point to, John, which is interesting to us right now, as our customers are ramping up their manpower, they are also looking at the complexity of moving people from farther and farther away. Something that has been occurring very recently is LodgeLink and our WFS business putting integrated solutions in front of customers. I think we are actually going to begin our first integrated, where LodgeLink encompassed in a WFS solution is providing the movement of the workforce to and from where we are providing a camp and catering solution. When we think about the potential of the businesses driving value into each other, our view of how this works as part of the overall Black Diamond platform is gradually changing. Just another perspective on how LodgeLink fits into the Black Diamond platform.
Appreciate that. We are definitely going to need people to build these things. Thanks. I will turn it back.
Thanks, John.
Your next question comes from Zachary Evershed with National Bank. Your line is open.
Good morning, everybody. Congrats on the quarter, and thanks for taking my question. Just looking at that pipeline that exceeds available capacity, and in the context of your answer to John's question about pricing in the WFS space, could you maybe comment on the potential return profiles of new equipment versus refurbished?
Sure. Thanks, Zach. Thanks for joining us. Thanks for the question. Do you want to take that, Toby?
Yeah, sure. On the WFS side, we do anticipate some maintenance capital going into assets, but we don't actually require a ton of refurbishment to get those assets to work. The way we think about those assets, as Trevor mentioned before, is pricing should be increasing as utilization increases to approach the rates required to justify investment on a new asset. On a new asset, we need to earn our target hurdle rate returns, and so that factors into the pricing requirement or how we price those new assets. But we don't really see that inflection point in the near term. We think we need to get our existing assets to work before we start deploying meaningful capital on the WFS side.
On the refurb part of the question, we've been refurbing and repurposing assets for a number of years, especially into our small format. We don't have a lot of our inventory that requires much true refurb to get it out into the market.
Great color, thanks. I will turn it over.
Thank you.
Our last question comes from Kyle McPhee with ATB Cormark. Your line is open.
Hey, Toby. Just to confirm something you just alluded to. You do not expect to be spending growth CapEx for WFS next year, given the size of your excess fleet? That is not in the cards yet, fleet expansion for WFS?
There are a couple. Oh, sorry. Hold on. I'll take that, Toby. Where we are expending capital for our WFS fleet has to do with the U.S. and Australia. The bulk of the capital that we anticipate, and we see our CapEx increasing, the bulk of that is still going to MSS, as we mentioned earlier with inflection. Until we get meaningful absorption of spare capacity in WFS, there won't be a meaningful induct, or there isn't a need for a meaningful investment. We're starting to think about it and how that would work and what manufacturing supply looks like, et cetera. You're correct. Near term, our CapEx is WFS Australia and U.S., and then predominantly MSS.
Okay. On MSS, you've alluded to, you have deployments coming up. You're doing the preparatory spend now. You have the CapEx budget to expand the fleet. What does the pricing look like on this round of the MSS deployments you have on the way? Is pricing inflating versus current levels?
The pricing for MSS has been tracking the cost of new assets. Our paybacks are probably strengthening slightly, but we feel that the increase annually in the cost of a new asset is quickly absorbed into our rates across the MSS fleet, and continues to be the case as we add capital. So we're getting a very attractive, but it's consistent, attractive return on capital, but it's consistent with where we've been at for the better part of the last six, seven years.
Okay. On the pricing front for MSS, though, it sounds like nothing abnormal, just kind of normal core, slow, mid-single-digit price inflation on all these new contracts you're deploying into. Is that accurate?
Yeah. Where we're trying to push is increased penetration of VAPS that helps us expand our margins beyond sort of the annual inflation and the cost of a new asset. So when you take them together, we're getting reasonable growth, both revenue and contribution on MSS, but the base rental rates are essentially tracking the rate of inflation.
Got it. Okay. Last one, I promise this time. The MSS CapEx budget, how should we be thinking about the size of that into next year? Are you going to be spending even more on fleet expansion than you are right now, or a similar level? Where does it tail off?
We anticipate spending more. Manufacturing line space in Canada and the U.S. for both MSS and WFS is extremely tight, which is indicative, we think, of the base strength of this industry segment. So with that, in anticipation, we've ensured we've got good security of supply. We've got good correlation with contracting and advanced bids with key customers. So with that, we anticipate a stronger CapEx year next year than this year. It's reflected, I think, in the outstanding CapEx of CAD 50 million at the end of Q3. As we move through next year, I think every quarter we'll continue to have the opportunity to deploy on a fairly low-risk basis as our customers need more capacity.
Okay. Thank you. That's it from me.
Thank you.
With no further questions in queue, I'd like to turn the conference over to Trevor Haynes for closing remarks.
Thank you. Thank you, everybody, for joining. Thanks again to the Black Diamond team for the fantastic work, and we appreciate everybody's interest in the Black Diamond story and look forward to updating you in coming quarters. Hope you have a great day.
This concludes today's conference call. You may now disconnect.