CALGARY, Alberta, March 20, 2019 (GLOBE NEWSWIRE) -- DIRTT Environmental Solutions Ltd. (“DIRTT” or the “Company”) (DRT.TO), an interior construction company that uses technology for client-driven design and manufacturing, today announced its financial results for the three and twelve months ended December 31, 2018. All financial information in this news release is in Canadian dollars, unless otherwise stated.
- Revenue increased by 22% from $293.4 million in 2017 to $356.7 million in 2018 as a result of increased sales activity in Canada and the US, including increased penetration into the healthcare market, as well as the benefits of project delays from the fourth quarter of 2017 into the first half of 2018 due to the effects of hurricanes in the US. Fourth quarter revenue increased 33% from $74.3 million in 2017 to $98.7 million in 2018 for the same reasons as the year;
- Adjusted EBITDA1 increased from $15.8 million (5.4% of revenue) in 2017 to $56.2 million (15.7% of revenue) in 2018 due to increased sales activity and the associated gross profit in both periods with reductions in Adjusted Operating Expenses1. Fourth quarter Adjusted EBITDA1 increased from a $1.0 million loss (-1.4% of revenue) in 2017 to $17.5 million (17.7% of revenue) in 2018 for the same reasons as the year;
- Net income increased from a $7.4 million loss ($0.09 loss per share) in 2017 to $3.0 million income ($0.04 per share) in 2018 with the current year including the impact of $20.0 million in impairment charges and $9.6 million of reorganization expenses (2017 - $1.5 million). Fourth quarter net income increased from a $7.3 million loss ($0.09 loss per share) in 2017 to $3.5 million income ($0.04 per share) in 2018 with the current year including the impact of $5.1 million of impairment charges and $3.6 million of reorganization expenses (2017 - $1.5 million);
- Following the appointments of a new chief executive officer (“CEO”) and chief financial officer (“CFO”) in 2018, the Company strengthened its management team in the first quarter of 2019, adding a chief operating officer (“COO”), a senior vice president and general counsel and a senior vice president of talent, and internally promoting a director of innovation, a senior vice president of software development and a vice president of sales. Also, during the third quarter of 2018 and the first quarter of 2019, the executive chair, former interim CEO, COO, and vice president of software development departed the Company.
Note: 1 See "Non-IFRS Measures".
“Our success to date is a testament to the talent, efforts, vision and dedication of DIRTT’s team of people and our distribution partners,” said Kevin O’Meara, chief executive officer. “We’ve built a track record serving a range of clients, from small start-ups to blue chips. Combined with a continuing shortage of jobsite labor and increasing interest in prefabricated construction, we’re now at an inflection point in terms of growth potential.
“2019 is the transformational year when we set the foundation to scale the Company,” continued O’Meara “It began with making sure we have the right leadership team in place and we are close to successfully completing this phase of the transition. The next steps are to enhance our approach to sales and marketing and improve our operations, which are the key focus areas for the balance of 2019. We expect that as we make progress on these fronts, we’ll be even better positioned to capture the incredible growth opportunity in front of us."
SUMMARY FINANCIAL RESULTS
|($ thousands, except per share amounts)||Q4 2018||Q4 2017||2018||2017|
|Gross profit %||40.2||%||40.1||%||42.0||%||41.8||%|
|Adjusted gross profit1||41,354||31,522||157,263||127,716|
|Adjusted gross profit %1||41.9||%||42.4||%||44.1||%||43.5||%|
|Operating Expenses %||40.0||%||50.5||%||41.6||%||43.7||%|
|Adjusted Operating Expenses1||27,389||32,585||105,113||110,921|
|Adjusted Operating Expenses %1||27.8||%||43.8||%||29.5||%||37.8||%|
|Adjusted EBITDA %1||17.7||%||(1.4||%)||15.7||%||5.4||%|
|Income tax (recovery) expense||(230||)||(507||)||1,518||1,504|
|Net income (loss)||3,524||(7,316||)||2,997||(7,409||)|
|Net income (loss) per share - basic and diluted||0.04||(0.09||)||0.04||(0.09||)|
|Cash flows provided by operating activities||24,741||19,004||15,976||29,107|
|Cash flows provided by (used in) operating activities before changes in non-cash working capital1||12,588||(4,672||)||42,105||10,497|
|As at||December 31, 2018||December 31, 2017|
|Cash and cash equivalents||72,865||79,641|
1 See "Non-IFRS Measures".
Beginning in 2018 and continuing into the first quarter of 2019, DIRTT commenced a comprehensive review of all aspects of the business, including: DIRTT’s executive leadership requirements, addressable markets, commercial effectiveness, go-to-market strategy, manufacturing efficiency and effectiveness, safety, software development, talent acquisition and development and related corporate infrastructure requirements, processes and internal controls. As a result of this review, management decided to exit its DIRTT for Life residential service line, to reduce the capacity of its DIRTT Timber line to match the needs of the business, and to cease certain other activities. This resulted in impairment charges totaling $20.0 million and reorganization charges totaling $9.6 million during 2018. Management anticipates approximately $3 million of additional reorganization charges in the first quarter of 2019 relating to this review.
On January 15, 2019, DIRTT announced enhancements to the senior leadership team to allow the Company to scale for sustained, profitable growth. This included the appointment of Jeffrey Calkins as acting COO, Krista Pell as senior vice president of talent, Joseph Zirkman as senior vice president and general counsel, and the creation of a chief commercial officer role (“CCO”), a position which is currently unfilled. In the COO role, Jeffrey Calkins moved from acting to permanent on February 21, 2019. As part of DIRTT’s commitment to continued innovation, Geoffrey Gosling was named director of innovation and Mark Greffen was promoted to senior vice president of software development.
These new roles and promotions, in combination with the CEO and CFO named in 2018, are critical to developing and executing strategies, disciplines and processes necessary for DIRTT to meet near- and long-term objectives. The incremental cost of these management changes and promotions is expected to be absorbed by cost savings initiatives undertaken and executed in the fourth quarter of 2018. While the search for a CCO continues, management continues to refine DIRTT’s marketing and sales management, with the benefits expected in late 2019 and beyond.
Management believes the leadership of the new COO will continue to improve the Company’s manufacturing effectiveness and cost position. DIRTT currently operates five manufacturing facilities, comprised of an aluminum frame facility in each of Calgary, Savannah and Phoenix, along with a tile production facility and a millwork facility in Calgary. Management believes it has adequate capacity to meet demand in the near- and mid-term through anticipated efficiency gains as well as the introduction of a second production shift, if necessary.
Product innovation and the continuous development of ICE® software remain core to DIRTT’s success. Management believes a strategic approach to gathering market and end client intelligence, combined with manufacturing improvements, will drive further innovation.
With respect to liquidity and capital resources, it is expected that ongoing improvements in working capital efficiency combined with cost disciplines will result in continued financial strength and cash generation. Management continues to proceed with the listing of DIRTT’s common shares on a U.S. exchange, which is expected to enhance the marketability of DIRTT’s common shares and improve the Company’s ability to access capital markets if and when necessary.
In 2019, management believes DIRTT will continue to demonstrate the strength of its business model to deliver profitability. Management’s focus for the year is to establish the foundation required to achieve aggressive growth in future years, while maintaining ongoing cost control discipline with respect to operating expenses. With the benefits of these actions expected to commence in 2020, revenue in 2019 is anticipated to grow at a more moderate rate of between 5 – 10%, with corresponding increases in net income and Adjusted EBITDA. As in prior years, revenue distribution is expected to be weighted marginally toward the second half of the year.
Adjusted Gross Profit, Adjusted Gross Profit %, Adjusted Operating Expenses, Adjusted Operating Expenses %, Adjusted EBITDA, Adjusted EBITDA % and cash provided by operating activities before changes in non-cash working capital are non-IFRS measures. Non-IFRS measures do not have a standard meaning as prescribed by IFRS, and are therefore unlikely to be comparable to similar measures presented and calculated by other companies. DIRTT believes the non-IFRS measures are useful supplemental measures that may assist investors in assessing DIRTT’s business. The non-IFRS measures should not be considered as the sole measure of the Company’s performance and should not be considered in isolation from, or as a substitute for, analysis of its financial statements. For a reconciliation of these non-IFRS measures as well as the rationale for management’s use of such measures, see the Company’s management’s discussion and analysis for the three and twelve months ended December 31, 2018, available at http://www.sedar.com.
Conference Call and Webcast Details
To discuss the results in greater detail, a conference call and webcast for the investment community is scheduled for Thursday, March 21, 2019 at 10:00 a.m. ET (8:00 a.m. MT). The call and webcast will be hosted by Kevin O’Meara, chief executive officer; Geoff Krause, chief financial officer; and Kim MacEachern, director of investor relations.
To join by telephone, dial +1-877-479-7708 (toll-free in North America) or +1-647-427-2478 (international). Please dial in 10 minutes prior to the start time. For the live webcast (in listen-only mode) visit https://edge.media-server.com/m6/p/yehejbww.
Investors are invited to submit questions to email@example.com before and during the call. Supplemental information slides will be available with the webcast and at dirtt.net/investors, prior to the call start.
A replay of the call and webcast will be available from 1:00 p.m. ET (11:00 a.m. MT) on March 21, 2019 until 11:59 p.m. ET (9:59 p.m. MT) on March 28, 2019:
- By phone at +1-855-859-2056 with passcode 4193622;
- Online at https://edge.media-server.com/m6/p/yehejbww; and
- On DIRTT’s website at dirtt.net/financial-reports.
DIRTT is a building process powered by technology. The name stands for Doing It Right This Time. The company uses its proprietary ICE® software to design, manufacture and install fully customized interior environments. The technology drives DIRTT’s advanced manufacturing and provides certainty on cost, schedule and the final result. Complete interior spaces are constructed faster, cleaner and more sustainably. DIRTT’s manufacturing facilities are located in Phoenix, Savannah, and Calgary. DIRTT works with nearly 100 sales partners globally. DIRTT trades on the Toronto Stock Exchange under the symbol "DRT." For more information visit dirtt.net/investors.
Special Note Regarding Forward-Looking Statements
Certain information and statements contained in this news release constitute “forward-looking information” and “forward-looking statements” (collectively, “Forward-Looking Information”) as defined under applicable Canadian securities laws and the Company hereby cautions investors about important factors that could cause the Company’s actual results or outcomes to differ materially from those projected in any Forward-Looking Information contained in this news release. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result”, “are expected to”, “will continue”, “is anticipated”, “believes”, “estimated”, “intends”, “plans”, “projection” and “outlook”), are not historical facts and may be forward-looking and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such Forward-Looking Information.
In particular and without limitation, this news release contains Forward-Looking Information pertaining to the following: comments with respect to the Company's revenue, objectives and priorities for 2019 and beyond; project timetables; its growth strategies and opportunities; its ability to meet working capital requirements and financial obligations; use and deployment of the Company’s capital; and its outlook for its operations and the Canadian, US and international economies, and in particular, the US and Canadian construction industry.
With respect to Forward-Looking Information contained in this news release, assumptions have been made regarding the Company, among other things:
- its ability to manage its growth;
- comments about revenue, financial performance objectives and priorities for 2019 and beyond;
- competition in its industry;
- its ability to enhance current products and develop and introduce new products;
- its ability to obtain raw materials, components and products from suppliers on a timely basis and on favorable terms;
- its ability to obtain qualified staff and equipment in a timely and cost-efficient manner;
- the regulatory framework governing taxes in Canada and the US and any other jurisdictions in which the Company currently or may conduct its business in the future;
- future development plans for its assets unfolding as currently envisioned;
- the level of capital expenditures required to support the business;
- future sources of funding for its capital program;
- its ability to list on an accredited US exchange;
- the impact of increasing competition on the Company; and
- its success in identifying risks to its business and managing the risks mentioned below.
The Company’s actual results or outcomes could differ materially from those expressed in the Forward-Looking Information as a result of the risks normally encountered in its industry such as:
- risks related to additional capital requirements;
- fluctuations in commodity prices;
- credit risks;
- foreign exchange rate and fiscal matters;
- operating results and financial condition fluctuations on a quarterly and annual basis;
- history of losses;
- maintaining and managing growth;
- risks related to new technology;
- competition risks;
- risks related to intellectual property;
- customer base and market acceptance;
- software and product defects and design risks;
- availability of key supplies;
- dependence of key personnel;
- the effect of government regulation;
- risks related to physical facilities;
- legal risks;
- risks related to future acquisitions;
- reliance on third parties;
- risks related to Forward-Looking Information; and
- conflicts of interest.
Since actual results or outcomes could differ materially from those expressed in the Forward-Looking Information provided by or on behalf of the Company, investors and others should not place undue reliance on any such Forward-Looking Information.
DIRTT cautions that the foregoing lists of factors are not exhaustive. Further, Forward-Looking Information is made as of the date hereof, and the Company undertakes no obligation to update Forward-Looking Information to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events, except as required by applicable Canadian securities laws. New factors emerge from time to time, and it is not possible for DIRTT’s management to predict all of these factors and to assess in advance the impact of each such factor on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in Forward-Looking Information. No assurance can be given that these expectations will prove to be correct and such Forward-Looking Information contained in this news release should not be unduly relied upon. In addition, this news release may contain Forward-Looking Information attributed to third party industry sources.
For a detailed description of the risks and uncertainties facing the Company and its business and affairs, readers should refer to the Company's annual financial statements, management’s discussion and analysis and annual information form for the year ended December 31, 2018, all of which are available at http://www.sedar.com.
Market and Industry Data
Certain market and industry data contained in this news release is based upon information from government or other third-party publications, reports and websites or based on estimates derived from such publications, reports and websites. Government and other third-party publications and reports do not guarantee the accuracy or completeness of their information. While the Company believes this data to be reliable, market and industry data is subject to variations and cannot be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data-gathering process and other limitations and uncertainties inherent in any statistical survey.
For further information, please contact:
Investor Relations, DIRTT