DRTT - Earnings call transcript Q4 2021 | Dirtt Environmental Solutions LTD

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Operator

Good day, and thank you for standing by. Welcome to the Q4 DIRTT 2021 Q4 Year-end Financial Results Conference Call. [Operator Instructions] after the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] It is now my pleasure to turn the conference over to your speaker today, Kim MacEachern. Ma'am, please go ahead.

Kim MacEachern

good and operator, you, morning, everyone. Thank today's year-end XXXX to call to and quarter fourth DIRTT's results. discuss Welcome

Joining me the Krause on Officer, the please presentation call are DIRTT's the access and today accompanied current slides, Financial slides. remarks To securities this Todd them Interim intent, Chief Officer, future page prepared Geoff on applicable from Canadian of management's webcast. view are by Web the Lillibridge; Chief within meaning based they projections, Today's of and performance. are United expectations call laws. States are statements the of statements will company's include forward-looking guarantees These Executive and not

be Exchange In statements filings and is X:XX special to for filed Commission, now this results turn items. and forward-looking addition, other over and XX-K with Todd. excluding information a reconciliations XXXX, as you regarding results, remind of the on Form like reference will Please results. will February that the reference and today with also non-GAAP I I SEC being call or would reports recorded, Eastern non-GAAP SEC, will Time. available and to our at XX, Securities webcast to GAAP the replay p.m. approximately

Todd Lillibridge

week, call CEO. you can participate tell to my you, I'm lot this as that And month on happened a Kim. this timeframe. role. has DIRTT over Thank during pleased since from It a a announcement first as DIRTT little in here been quarterly interim has I earlier a took our

so working result leadership of we are Board that market more which some be more advantage our call, strategic believe plan in dynamics. changes profitable We a are focused, are through make and will detail strategic some this us team, at the changes DIRTT of ultimately, and changes, discussing more positioned we The company. entire take better modification comprehensive of I to meaningful very a will management, the in making our and that

to announced going quarter I expected I'm our we For ask the Then today's Geoff this DIRTT. have to speak impact is results earlier and fourth call, first. initiatives review will week the on to about that

call that I'd like the Geoff that, We Krause. to to following analysts. Geoff? open to over will the call turn With

Geoff Krause

good was and the which by was million, our X. expectations consistent everyone. Slide quarter, showing impacted Revenue improvement third Todd, for Starting Delta fourth Thanks, over on the $XX.X morning, and variance. a XX% quarter the adversely with

XX% The related occurred in XXXX, be in impact project the the third first the Delta continue For year, of majority from of pandemic. revenue we with full variance. experienced $XXX.X declined to levels, decrease the in quarter challenged of in when the uncertainty and was market contraction and to activity as resurgence the again XXXX of million XXXX the deferrals with full of quarter the construction the

the profit Turning but to period, improvement XX.X%, was year quarter prior XX.X% a from Slide Gross a sequential third X. quarter. decline the the from for for significant

revenue again, year fixed in cost X% was approximately the the higher the related XX.X%, in costs, gross to decline ended of to a XXXX, as XX.X% versus transportation incremental year, XX.X% full profit difference XXXX. the of reduced packaging and profit X% profit gross the for Of For negative full leverage, showing the X% Canadian inefficiency at from percentage material, timber of sequential year was XXXX revenue gross X% a to and Adjusted period, for provision but the inherent the quarter. third related from cost fixed from balance in decline and the labor with to prior facility XX.X%, Carolina strong improvement quarter a South the low stronger year reversals. XX% dollar levels

from XX% declined gross adjusted For the to year, profit XX.X% XXXX. in full

action margins several in gross taken ways. on pressure to reverse have We the downward

optimization the Phoenix expense going will plant, decision production manufacturing both reductions the of our variable reduce capacity and As are forward. to on, our reduce anticipated close to all fixed overhead process to elaborate order Todd and production standby headcount

our Specifically, respectively, of onetime the and and Phoenix $X.X closure to $X.X result headcount annualized approximately in excluding production plant million costs. overhead reductions million, expected cost savings are

pricing approximately implemented we a On transportations price June raw side, announced on inflationary to X.X% the address XXXX November X% materials, increase in of effective increase X. and have just and impacts further of a

last at X. Slide by expenses for Looking million the increased marketing same on a quarter operating the expenses breakdown quarter Sales and year. over of $X.X

and as marketing Chicago increases expenses For largely million expenses the $X depreciation XXXX. over and marketing Dallas completed and entertainment increased our investment expense, and related support travel, that higher travel we were as will We travel, efforts. increased by anticipate eased. increased and have our and wage sales increased and on full and year, The continue expenses meals we DXCs, entertainment to restrictions operating sales as salary meals

headcount a release and our annualized Tuesday, XXXX organization-wide incremental or reduce fourth increased salary quarter. anticipate expenses same Increases as million As finalized were including increased press yesterday as on over to we fees, of over the as restructuring million the services administrative higher quarter sales expenses result incurred professional $X.X by into account, administrative Taking we by XX%. costs marketing an quarter million in well the $X.X General and of in that severance the reduction and in salaries, for approximately and $X.X full stated million in this attributable prior General the last our we $X benefits on for positions overall year. expenses saving have year an our year. the workforce.

the for to expenses a severance $X.X the support expenses administrative in a $X.X which Canadian-based the quarter support by operations were our net former last $X.X workforce gross annualized an development year, quarter XXXX. quarter and in quarter a expense $X technology savings $X of Similar reduction The XXXX. initiatives reduction one support year. with anticipate expenses approximately the remained in we increased and claim expenses our approximately the both over cost result same initiatives, million an of expense over year expenses also Canadian loss, marketing credit to reduction and were same last addition, million. other of for general sales as reduction impacted an operating both in the million of result repeated in dollar provision and Similar included operation an annualized and founders $X.X million to for million XXXX. adjusted $X cost are development the expenses and a basis, of annualized On In of ended and technology development expenses reduction in and technology to Operations by the and and of increased XXXX, in stronger December relating annual XX, not in expected fourth consistent quarter on operating a million. million reversal profit,

despite decreased in and full expenses margin described and negative higher at adjusted quarter Looking adjusted for quarter year, decrease reflects million last the million transportation the This inflationary operating previously levels. impacted we on adjusted negative and the a about million. year $X.X loss estimate the impact or that loss EBITDA to revenue discussed. material, XXXX slightly a X.X% pressures XX.X% by packaging profit earlier, increased same or in EBITDA be also largely gross $X.X Slide X, On to $X.X versus

gross primarily million in loss adjusted a million $X.X result adjusted in income expenses, margin million XXXX. the $XX.X $X.X including million million and interest XX.X% and a as last foreign of or This October as adjusted X, to impairment from $X.X decrease in increase $XX.X million expenses, wage a the in decrease for of Canadian the is in XXXX. increased a in expense, subsidies debenture a These a in year, the exchange increases million net the a for loss. decrease profit, a and loss increased $X.X in share gross the $X.XX $X.X reflects of in million convertible Slide in to expense For $X.X a loss quarter subsidy full EBITDA due negative or decrease This loss increase quarter year. decreased offset result loss net million tax decrease operating emergency expense On previously year, by quarter a the were per for decrease EBITDA net $XX.X or $X.X million $X.X discussed. profits same of by net and million goodwill issuances $XX of an government million per a the to share $X.XX suspension operating

stock-based $X.X million XXXX, or unsecured a loss of operating in compensation leasing million of compared $XX.X a share the For expense, $X.X The XX, result to full December loss and or and impairments, per a goodwill a ended in issuances million expense subordinated decrease a million $X.X including our draws debenture on in increase largely as are loss the million in share increase convertible year driven interest XX, net foreign $X.XX results government net the expense tax year, $X.X expenses, year by net increased gross $XX.X decreases $X.X and profit, a a negative to million decrease facilities, net for a decrease and a a income $XX.X increase $X.XX These $X.XX million were December losses. million partially in offset $X.X subsidies. ended exchange decrease million by for $XX.X of the million in loss or in per XXXX.

cash and at leasing offering net net were income of $XX.X from the the in million of approximately quarter receivables $XX.X million includes cash December and of and XXXX. year million $X.X run credit undrawn compared facility. in Slide December million cash days. per at an capital of to usage under subsidies at working XX, taxes XX, was million. debenture and to to the our third $XX.X of the September operations while XXXX, million Net finished from cash of capital our used the $X.X balance XX, of XX $XX.X under Turning We XXXX, million unrestricted sales of $X.X as with completed million, Cash million. December XXXX, restricted facilities unrestricted deposits, outstanding, repayments $XX.X government debt compared and continue Days $XX million was at improvement $XX.X were to reflects terms convertible X. million $X expenditures This proceeds

to XX Our and we summary, compared currently $XX forward was 'XX million. million look X.Xx $XX we revenues X.Xx In ratio last first at between be to anticipate as to current December quarter year. XXXX,

project X, pipeline based $XXX at a December annual are We million of at -- This budgeting January XXXX revenues is $XXX XXXX, between for million. and on $XXX million.

transparency are stages to our and pipeline rate expect conversion contracts. negotiations XX-month development of rate seen the of bidding average stage team an this pipeline into is on increasing a Historically, is to disclose awarded annual in at We opportunities our that This and from each visibility XX%. early projects various are quarter. we've around pipeline and a forward-looking which our around chasing

license be the and costs, revenue service relates Our to we considering which the related second will loss potential on and revenues, transportation with revenues net our demonstrate and and significant a to only of exclude the budgeted Pipeline first on to and and year loss Tuesday, corresponding incurred EBITDA which levels XXXX Based shift expect EBITDA announced levels $X to restructuring we loss. total million, to net onetime approximately annual numbers. XXXX positive quarter are product annual in during in and adjusted and from anticipate incremental that and excluding these and initiatives a improvement we this adjusted decrease

Todd. turn Let to back me things

Todd Lillibridge

outlook this directly to announced like Slide on speak those the earlier beginning Geoff's and changes more I Geoff. referenced XX. to we Thanks, some would of week,

over what from XX Let interim begin, observations me some has days little on as been CEO. the with a job though,

of that overstate to over the to leadership become surfaced guide cannot past to commitment us to initiatives we ultimately will growth. also profitability, priorities enable I actionable, They ideas team serve here and capabilities at have to days will plan and the and and modifications DIRTT. have our which that announced our strategic our the return First, the return reset well-fought

I've had partners. to to many fortune good of speak the our Second,

growing I'm see DIRTT's of In system. succeed. fact, business, to can love And construction a and I've of Board hearing very period time. doing be DIRTT consistent us them became that they want I believe should They been and from been part since Chair. this their They over what has

While we limited competition works have competitors, to verticals. our there full-scale which across multiple is solution,

this start and this regarding where online Council. with for group a overwhelming partners chat. forum answering Earlier representatives to a chance council a announced. us action with take insights. announce have next roughly the session XXX was questions and joined team be I partner changes new be There Advisory telling opportunities need to their we close April be have others. person overcome better that It partner connected a meeting with us in work For a will partner successful, we to fireside based will pursue collaboration The support X, leverage and very valuable our come at to our can listen, but gave need our to challenges. out who in This recently week, initiative was week will again large and We learn us. than an I upon a

They on the to necessary concerns expressed quarter greater make over biggest of financial strength. our result initiatives better to financial want get several to However, a the they changes clearly as and months me have urgency us been is we results. have that have taken making us footing. The on third

strategic to team. our years we ideas job been started management became their got to position, new drive Board efforts, with week to am this and to and are those been I the has plan. for combined thanks there, While last optimization operationalize Board month our year. my last The adapt I've several to chair And the plan the along where thoughtful our management with we over on

So let through run some of we have key announced. changes the me

turn both we that West. East capabilities a such have you manufacturing plan the in to is and Slide our If master structured XX, facility robust

will process affecting current Phoenix customers' our using and manufacturing to us Calgary plans. in future Savannah. our from our facility, and these gains aluminum allow close needs to positions. have XX possible expand it made We will approximately Productivity This support improvement

should closing of end will occur million, We quarter. the savings the $X.X of annualized second cost and realize the by approximately Phoenix our

again, building. annual as announcement, elimination these include equipment our other will and support. and time glass. changes panels including back-painted of to of Hill an are and cost Phoenix. from workforce our in impact move affecting will no done will see scheduling. be Rock anticipate with this Thermofoil longer to on up in capabilities with can capital This expand we XX% on the will transfer material with reduce forecasting of remain The We shipping salaried existing costs. efficiency, from located inflationary facilities, we on ability partners capacity, referenced road fluctuations widely XXX visibility. production panels we and for term, Thermofoil mid-term a material that restructuring to Slide outlined a in that price reduce In instead can factory response May Geoff automation stand-alone meet customers be customers. retained impacting have entry, can the standby ability continued without earlier by our we Midwest. are million accommodate profitability, $XXX and greater capacity can X% revenues. that our compelling to we This and to current on our in Phoenix. order increase organizational-wide a base works can At thereby to are greater is we order production protection clients reducing shipment approximately our payment in our sufficient a our our production our these identifying areas We our be which in in referenced includes those the of where to altering effective single the individuals, that Reducing eliminate same expenses of order. This And our will on of product believe as requirements both more Headwalls, capacity critical we of our risk. placement, products this reflect By in and close of to time, improve physical demand pricing responsive and it XX% XX, facilitate to harmony capture East those growth. overall the aggressive separating encourage and done to including needs X, state-of-art we standard we wall for changes, Applied Hill After terms cost order we Rock By inspired share. to standby continued step we we believe leverages market reduction Furthermore, deposit glass manufacturing revenue is the to labor kinds the lines process improving

DIRTT Turning cut we are our elevating We as on we and that opportunities, way A and enabler with launch so launch their better reposition clients will growth. an simply the is To emphasis new will rebrand their to the projects XX. restart Slide to seen cannot outcomes to already rebrand but system. with they later taking new use formal ones. shape the or as customers as in ability positioning delayed DIRTT QX, capture construction

let So few examples. a me illustrate

their underway We campuses. have That in been X global working of reconfiguring got leading with technology XXXX. company on work a

to delayed now were than one is banking as of and to financial the This XXXX a significant Xx the this ongoing win of make this work in in client. brands, institutions larger downsize They pandemic. the has us into pipeline the use this with ones our financial scope projects spaces have multiple more finding from potential change and for a However, expansion. level year, firm and need now own. has better build because global with are currently additional There of for shifted led they smaller services year

closer a speed presence the their they solution ambulatory of several to health patients in the We us shift and working community In DIRTT's care considerable of both home to has regional are business over to also to to seeing to branches all expand inpatient design from opened continued access with as for door we care, are the setting. types next This be or and interest is through health market regional the care. organizations national allows treatment X outpatient to bank grow a which years. standardization. proving

throughout care scale. exposure is work the work to helped Premier our in that through a organization broader much a us underscore health larger group which important GPO, at purchasing care our is U.S. health We or in as market are national further a with gives It

with examples and to footprint, to I multiple leveraging of health encouraging which we our could improvement. you talk once systems, multistate growing in will effectively working through major locations. get and government about the additional are points there selling And are well, signs in to are a pull We our systems we where all successful of clients' if it education as very are

team role years. past of establishing many these Our the strategic in organizations relationships X critical accounts has played a over with

clients getting DIRTT's benefits on they realize longer, these the some larger of While greatest take value proposition. of board

will growth. For pipeline expected sales and drive profitable are considerable sales to profitability. and increasingly initiatives scale offer and contribute us, to help they to us new Two our improve also

is it allows and their Our to them partners and clients critical envision to our as ICE design spaces. software

have to new product products include well core and introducing support and with and only reflect We and that our work will always predictability core easier continued that on leadership complex Slide our these make product are team we of to and changes what are of see announced accomplished see. higher-margin more the a It is new necessary investments XX. our be a delivered. development filter to and to want and they to to customers in as and team. an Concluding have The partners ease Many want ability difficult as a use. act improve a with management want schedules their effort. and products, can its drives and we costs focus sales They balancing Board on changes

the believe ago, our multidisciplinary my them this plan in with next seeing allow we within coupled signs will on CEO process our have puts momentum And operating a dynamics started this excluding plan. role combined market the Management charge their taking into stepping that we approximately months. drives an directors at is of They months the advantage efforts, these result changes We experience our which and profitability of marketplace, we job team the execute in changes. rich XX%. gives has business. week, a in interim XX to expenses, Rightsizing onetime taking of the been organization us that leadership we operate and track have to through unleash and in DIRTT. our encouraging and the technology here costs us to several announced verticals are overall in need changing annualized we that the the reduction Our

I this you. up open is Please to the place stop. Thank a think for questions. good call

Operator

[Operator first Instructions] line And of Palm your the Craig-Hallum. comes from question Greg from

Greg Palm

you numbers kind bit start I guidance. a wanted out past visibility. little with some that Frankly, there of surprised put just given to

talk pipeline like weeks to decision And maybe of maybe months. about or seen a sort But can of appreciate sort the in seems then out of this little curious the there? guidance more there what terms So is quoting. you recent to put in bit accelerating certainly sort some of back commentary. else office specific out It

you some see maybe of So to confidence months come. that quarters here gives just the we growth kind what in curious the might and

Geoff Krause

to of the that I'll question, it throw Todd over and take second part I'll the first for part.

to from for been a things. received very and X.X provide shareholders We've CRM hard years overall goes I what As with place are in in long visibility that of our those sorts we've that seeing system, joined tracking around guidance, we along yourself like the quite since relates those processes improve analysts questions and it to to improving pipeline. but pipeline putting that. a we been into have accountability also ever the process, includes these numerous And working That ago, tracking time. improve

over with Todd as shifting. we the that, pieces. other XX-month terms a And to pipeline our or at, looking not We of in the XX-month associated better investors out of kind whether and can this forward a and looking in year looking believe it base is we there where factors fair good by the moving think But we're view it's moved have at what's that of also show I'll turn are pipeline, that at pandemic, come on are we we that going reporting as and to As With that. with it incremental business. that how into feel I forward growing level. we

Todd Lillibridge

more hit think and importantly, we're comments I would on what I of And that couple as probably pipeline it seeing. a to relates

to that XX on the last days, number kind portion from again, reaching the last of a out the I of but good in X-plus mentioned a probably kind following directly partners in back certainly of I've my relative been to And where over just remarks, with think are having days. activity. the I I say to now to they're work. external there's job would And seeing had months, no think XX for pickup, XX calls intel the that's over our I the we partners of As having doubt include a last reality of the

no there's be as a fashion, will learning we percentage areas substantial offices true in in collaborative that be that and think be technology feel I to would though, I and embrace huddle then a model. environment think like, space, will hybrid doubt, of fact will embedded of conference like clearly fairly in look will back-to-work parcel will form are rooms, part the model, or private In that. say, that I -- some what hybrid all

but seeing don't white again, I seeing it's also market a And a expansion get overall. take facilities is think gain our of deposits. of clients as institutions marketing the pickup, consumer, the of then is patient. That's strategy. into put seen I are in of trend. financial of levels to And to the that in But couple that. market I health is It in earlier, commented that care well I talking time think, the who of back to I've as a seen they, a beginning number of think fill the fortune a what which fair are necessity too, that again, to And in to also amount we consumerism I health a occurring we've that But But think combination have a the I again, my speaking exercise. mandates of of So extremely need business care, is is positive think as the as care. we're these health face both do positioned the organizations with really of the huge growing think all the throughout pick banking community verticals. obviously, up that And And from, impact. DIRTT but again, growing the the a care spent their XX-some-odd our the side years mandates that lifting future. out level, institutions. much the U.S., as obviously throughout X signs with just other the I of position rush activity our think not only percent kind there. it's DIRTT in directly in their branch seeing are teams, again, strategic on I XX space and into gold comes And I've the we closer yet, with are to of financial of much positive days good go partners, out internal the a also accounts how the my for that in had and share through at

Greg Palm

didn't. willing activity been I how if to daily But don't in know saw I you're missed year-to-date versus or what or disclose. quarter-to-date QX? it Maybe is Geoff, if average order I you

Geoff Krause

given did what revenue what for disclosed haven't looking is consistent the reasonably first it, We quarter relative QX. to in I'd guidance at we've it's but we say that the

Greg Palm

question. my to up backing just Todd, And

I to relates well? in you a do the this obviously, alluding of period I to this, has workplace. changed think as you as it lot last the sort years think has changed DIRTT's mean over but how value were proposition few

Todd Lillibridge

has Well, I think changed. proposition value necessarily don't the

corporate traditional clearly changed the all have and I is clearly, the and think, a is through create of to and for a days collaborate touch stay, what we is is days. full a offices that in isn't market has the but X have traditionally solution environments brighter in reality market a I because to to has place whether come glass necessity a what really sit model. full the the employees way willing are bunch suitable that the their have that's for pursuit wall to to of which a focus, to to solutions and to to necessity only There X day, to therefore, for the seeing hybrid that days done. is very they to from network, the back, some or days, think private America as think remain, over. is interact. offer, X offer better down, we we And have It's office not I The with of. X come not into It now connection between to what come

to time. You office into need and an private to sit come have don't

the creates You clients need us conference the is out of spaces collaborate looking get talking rooms that and rooms, of workforce the that gives believe are least and very and DIRTT mind, But consistent look said, the we're others. our business. we're vertical workforce, I well. Therefore, seeing with rooms, will Keeping in And XX%, which environment. sector to we come encouraging that as And that therefore, and XX% what for. it the huddle also to our a activity optimism forward almost of and to about good recover. as our with other obviously, that's we all is extremely in at verticals,

Greg Palm

of that in it the housekeeping. the $XX dismissals is guess just forward not savings, may million more relates to be a going does that some I include last you cost the fees But lawsuits? as And of one of legal incurring

Geoff Krause

that of Yes. well. There's portion a as

Greg Palm

addition? be That's would included in or that

Geoff Krause

No, it's included in part savings. is included. that Yes, cost of

Operator

of line next the National from Bank. [Luca comes from Your question Madhu]

Unidentified Analyst

until cash My your were be burn question is fund sufficient XXXX. turn in some the cash to going Do you is in you think that to balance expecting operations XXXX? cash to you're your positive, related current rate

Geoff Krause

you in that The of a monies that issuance seen. increased overall would December brought balance, result debenture X the in cash we as certainly our increased -- we did have which incremental

efforts fairly is it the these combined think QX. announced costs, costs to both an cash significant timing of a fair see and are result burn we been of when a have with profitability, reduces and that then that optimization amount environment cash significantly. the the as occurring, restructuring driven will those also with of it I say in burn removed But and improving

We've back Rock when did note completed very I million is piece think completed $X significantly expenditures. the our that $XX year, DXC. other we program plant. we've the look Chicago We've you capital the Dallas given about that successful to pulled of to million this Hill 'XX, and DXC at

is say more would from 'XX, I maintenance mode. a so a of perspective, CapEx And

Unidentified Analyst

as just from terms? follow-up, new the being on rather the at cash now And deposits required should how on than the look we payment a So order. drag shipping

Geoff Krause

a about $X.X impact Remember, to talking of this period. only only -- is capital onetime about it's million. figure we're We probably X-week $X working million a

to X So weeks order X moving on -- ship. weeks X from weeks to

a not that's it's where very So long moving. period

we're unable the second are get of, is from agencies. situations those say, I we course The government them had in have, waive guess, circumstances, where over to to would willing or deposits I where eternity, piece we

move. a it's about across It onetime portion single every not million orders, order. of across be million, a $X So is $X.X to would which but it's

Unidentified Analyst

if one, one And may. I last

is investments software? rebranding CapEx? your to You mentioned that million for the and Or Does $X in your we include expenses new program your in CapEx see those ICE XXXX. should addition as

Todd Lillibridge

are investments where ICE. continuing It although in and that, those ongoing and And rebranding accelerate in now. stages are we evaluate to development right include we and new approaches websites includes things. does those can early of our different sorts It

Operator

at [Operator questions back And for closing further remarks. further no I'll are Instructions] over it this And time. there hand there any at this Todd to are questions time.

Todd Lillibridge

you for Thank this And have of have In so are profitability. ever to discussed to but us several much. in closing, as be for lies in for ahead necessary today it opportunity changes to time remain like Again, as months, as the the would to us. taking today. with thank I you making I we a they and confident complex return again us been the path

Operator

Ladies call. your Thank and this participation. you today's for gentlemen, concludes conference

disconnect. now may You

Dirtt Environmental Solutions (DRTTF) 26 Feb 222021 Q4 Earnings call transcript