DIRTT Environmental Solutions Ltd. (“DIRTT”, the “Company”, “we” or “us”) (Nasdaq: DRTT, TSX: DRT), an interior construction company that uses proprietary software to design, manufacture and install fully customizable environments, today announced its financial results for the three months ended September 30, 2021. All financial information in this news release is presented in U.S. dollars, unless otherwise stated.
Third Quarter 2021
- Revenue of $34.1 million
- Gross profit margin of 7.2%
- Adjusted Gross Profit Margin1 of 14.0%
- Net loss of $15.4 million
- Net loss margin of (45.2%)
- Adjusted EBITDA1 of ($13.3) million
- Adjusted EBITDA Margin1 of (39.1%)
- Unrestricted cash balance of $43.3 million
Note: (1) See “Non-GAAP Financial Measures”
“Third-quarter revenue fell short of our expectations as surging rates of Delta variant infections in August and September caused a broad deferral of return-to-office plans, reduced the sense of urgency to complete in-process projects and exacerbated labor shortages,” stated Kevin O’Meara, chief executive officer. “In addition, ongoing upstream supply chain issues, unrelated to DIRTT’s scope of work, negatively impacted job site readiness and shifted projects out to the fourth quarter and into 2022.
“We experienced significant inter-month volatility in activity during the third quarter which had an outsized impact on gross profit margin. Approximately 40% of the adjusted EBITDA loss for the quarter was driven by low revenues in September and the difficulty of adjusting manufacturing capacity down in response to short term reductions in activity. We have seen order activity and shipments in October improve from September and expect fourth-quarter revenue will recover to between $40 and $45 million, subject to the unpredictable and rapid impacts of the pandemic on construction activity.
“In early October, we held our Connext trade show in Chicago, hosting over 1,000 customers, contractors, architects, and designers both virtually and in-person. Development and expansion of our strategic account relationships has been ongoing including multiple in-person presentations during the quarter, with several strategic account representatives taking the time to attend Connext. In addition, our distribution partner network is demonstrating increased confidence, hiring over 75 DIRTT-focused positions since the start of 2021, of which more than 50% were added in the third quarter. These are all indications of a high level of customer and distribution partner engagement, which is crucial in building our pipeline of opportunities.
“Like many businesses, we have been experiencing increases in raw material prices, including aluminum, medium density fiberboard and glass, as well as transportation costs. In the third quarter, these increases exceeded our expectations and as a result we announced a price increase on our interior solutions plus an adjustment to our freight charges, resulting in an overall increase of approximately 6.5%, effective November 16, 2021. We believe that, despite the price increase, we remain highly cost competitive within the context of rising costs of conventional construction.”
Mr. O’Meara concluded, “When we unveiled our strategic plan in November 2019, we articulated financial targets to be achieved by the end of 2023. Two years into the execution of the plan, we are pleased with the steps we have taken to transform the company from both an operational and commercial perspective and continue to strongly believe that the targets, $450 million to $550 million in revenue with 18% - 22% adjusted EBITDA, remain achievable. However, the negative impact of the pandemic on construction activity, and on our ability to realize the benefits of our manufacturing improvements and commercial initiatives, has delayed our ability to achieve these targets. We expect to re-evaluate the timeline required to achieve the targets once the pandemic nears resolution. We continue to strongly believe that DIRTT’s value proposition will be as or even more relevant in the post-pandemic world.”
DIRTT is a building process powered by technology. We use our proprietary 3D software to help design, manufacture, and install fully customized interior environments. This same software provides clients with certainty around cost, schedule, and the final outcome. With modular components and a streamlined construction process, complete interior spaces are constructed faster, cleaner, and more sustainably. The Company works with over 70 partners throughout North America. DIRTT trades on Nasdaq under the symbol “DRTT” and on the Toronto Stock Exchange under the symbol “DRT”.
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