DIRTT Environmental Solutions Ltd. (“DIRTT” or the “Company”) (Nasdaq: DRTT, TSX: DRT), a global leader in industrialized construction, today announced its financial results for the three months ended June 30, 2022. All financial information in this news release is presented in U.S. dollars, unless otherwise stated.
Second Quarter 2022
Revenue of $44.7 million
Gross profit margin of 14.0%
Adjusted Gross Profit Margin1 of 18.9%
Net loss of $19.3 million
Net loss margin of (43.1%)
Adjusted EBITDA1 of ($9.4) million
Adjusted EBITDA Margin1 of (21.1%)
Total available liquidity of $31.0 million, including $19.7 million of unrestricted cash
Note: (1) See “Non-GAAP Financial Measures”
“The increased activity levels and growth, particularly in the commercial sector, that began late in the first quarter of 2022 are continuing” stated Benjamin Urban, CEO. “As a result, second quarter revenues of $44.7 million were within the expected guidance range and represented an increase of 16.8% and 8.8% over the first quarter of 2022 and the second quarter of 2021, respectively”.
“With demand continuing to increase, our immediate focus is to unlock manufacturing capacity, continue to improve revenues and profitability while accelerating our near-term progress towards breakeven and ultimately long-term profitability. Having experienced manufacturing capacity constraints during the second quarter, we increased our overall manufacturing headcount by 9% in the Calgary factory and we will continue to add, as necessary, in anticipation of higher activity in the third and fourth quarters. We also commenced operational improvements on our Reflect and Inspire product lines to increase overall productive capacity and improve lead times, with such improvements expected to be complete by mid third quarter 2022. DIRTT is realigning the organization, driving efficiency and actively reinvesting to focus on our strengths, including additional investments in the ICE team and investing to support the long-term success of our partners.”
“We have taken further steps to flatten our organizational structure to increase overall effectiveness and optimize our fixed salaried cost base. This resulted in the elimination of 36 salaried positions and additional annual cost reductions of approximately $5 million. In this process, the key objectives include breaking down interdepartmental silos, increasing cross functional communication and joint accountabilities, improving overall productivity across the organization and enhancing DIRTT’s overall approach to Construction Partner recruitment, onboarding, management and accountability.”
Geoffrey Krause, CFO, added “While revenues were in line with expectations and grew sequentially, cash usage remained high in the quarter primarily due to one-time reorganization costs and costs associated with the change of the Board of Directors, working capital build and ongoing inflationary pressures on raw materials and labor costs which weighed on gross margin. As a result, we are actively taking steps to recover DIRTT’s historic gross margin levels, and announced a further 10% price increase effective July 21, 2022, which is in addition to the 5% price increase effective June 1, 2022. Given these price increases along with our cost improvement efforts, we expect that as revenues improve, we can continue to progress toward an improvement in net loss, achieving the ultimate goal of Adjusted EBITDA breakeven and approaching cash flow breakeven in the fourth quarter of 2022.”
“Our 12-month forward pipeline, including leads, increased by 13% to $359 million from $318 million at April 1, 2022 and importantly, does not reflect the impacts of the aforementioned price increases. While the current 12-month forward pipeline is a positive indicator of the Company’s future revenue potential, in the context of continued global macroeconomic uncertainty and possible recession risks, our fiscal year 2022 revenue guidance remains unchanged at $175 to $185 million. The midpoint of our 2022 guidance represents an approximately 22% increase over actual 2021 revenue of $147.6 million.”
Mr. Urban concluded, “Today we also announced certain leadership changes as we continue to refocus our organization, including the departure of Charles Kraus, Senior Vice President and General Counsel and Colin Blehm, Vice President Product Development, and the promotion of Nandini Somayaji to Senior Vice President Talent, General Counsel and Corporate Secretary, and Trevor Didluck to Vice President Product Development. Geoffrey Krause, DIRTT’s current Chief Financial Officer, announced his intention to retire from the Company, effective September 30, 2022. A search for a successor is underway. I would like to thank them all for their service and dedication to the Company.”
DIRTT is a global leader in industrialized construction. Its system of physical products and digital tools empowers organizations, together with construction and design leaders, to build high-performing, adaptable, interior environments. Operating in the workplace, healthcare, education, and public sector markets, DIRTT’s system provides total design freedom, and greater certainty in cost, schedule, and outcomes. Headquartered in Calgary, AB Canada, DIRTT trades on Nasdaq under the symbol “DRTT” and on the Toronto Stock Exchange under the symbol “DRT”.
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