DRT.TO - Earnings call 4 2022 | Dirtt Environmental Solutions LTD

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Operator

Thank you for standing by. This is the conference operator. Welcome to DIRTT Environmental Solutions' Fourth Quarter 2022 Financial Results Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] I would now like to turn the call over to [ Shana Mason ], Director [indiscernible]. ahead. go Please

Unknown Executive

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

the Little, our dirtt.com. remarks web page Joining CEO; website slides, please slides. at on call this from Benjamin the are me the them Urban, To and access Brad accompanied webcast CFO. are prepared of view Today's by presentation today DIRTT's or on

the are meaning securities Today's on of Canadian performance. statements call will intent, States statements include and They guarantees current laws. company's within These projections. are based forward-looking the United and of applicable expectations not future

or addition, our and filings and non-GAAP the Form results. reference results, non-GAAP other XX, statements SEC call filed with reference GAAP for to as of Commission, Please February on reconciliations items. Securities SEC, In XX-K the this results XXXX, and reports excluding regarding will forward-looking information with special Exchange and

also will recorded, this remind to Benjamin. webcast I tomorrow. that the over being turn available now be is you call will replay a and I

Benjamin Urban

I us been support and change has want to team, and year of to a of our a of thank for our entire Shana joining and ], be It XXXX, It my this our fourth everyone. is continuing and people, my personally year very the closing for morning, of year key volatility of good to productive leadership quarter, out transition. particularly partners challenging [ to a behalf a stakeholders. today pleasure highlights On turnover, and through you market you, share challenging you disruption. great Thank all

some full quarter, made observations the fourth quarters over talk on my about Before I critical want X the I've to company. with first the I of reflect

construction of placed that innovation customers success the we partners participation in over role play place played solutions to our and had Innovation historically where the the are from gotten is the an innovation on. and back is emphasis in we and a importance very we relies much the have getting of DIRTT. active sport, has clear away it a our on it ecosystem our First, years,

the most Second, have the ones been adaptability, are and with over key were decisions decisions if spirit the the the back created. in in from construction. that that look of several DIRTT past made customization successful spirit have years, which was DIRTT the I been at flexibility, removing risk was created that made

way. continue ourselves holds, rapidly through In principle, one education retrospect, We care provide future in And we we this a pride decisions strategy. in their and changing core No to made changing will our but to lessons a landscape. we and end supporting future decisions support some the what solutions health comes users that workplace, knows learned the tough lesson from service a and not those learned to that. were apply of whatever

my and the challenges. is vision maybe remained resiliency people. DIRTT so and of observation our have greatest founding our loyal Lastly, to through changes and many They patient

we continue Our are resource years improve be reason as to biggest will and are single people we valuable successful for most come. to the our

the and improvements quarter. the fourth we fourth exactly results financial we line indicated is On improved that flow our the what business call, XXXX quarter and EBITDA that we off adjusted sight The breakeven and during quarter, happened. to of our Turning earlier performance. during cash to made last paid in had during

XXXX. first outline, time flow increase quarter since we EBITDA achieved will for the operations cash and from Brad As during adjusted a an positive in

organization around commitment about incident frequency hours. from This X million amazed record the at have continued recordable world-class I with our equates rate X.X. every total We the a quarter, been year keeping safe. working fourth team during to our with recordable finishing the incidents incident X safety the reportable everyone members of in X

side sales and our strategy. partners and refining are On further both expanding go-to-market the we the and construction commercial business, channels new added have of

continue companies Texas, see many We of Visa, to the Frost of recognizable like and adoption of among Bank and others. Google our some most prestigious solutions within

strategic in collaboration is through healthier with and We a are sales our advantages both gaining and innovation partners pipeline. construction in resulting efficiency, this

see We organization that. directly growth great for and to in our XXXX channeling do beyond, and are at commercial order opportunity resources we in

that We vein of certain communication to changes end responsibilities partners time customers. urgency construction order in have and that announced our It essence. are the with recognize a of staffing and that and maximize high people, sense realigned operating is and direct we to efficiency is

will I growth. experience help line veterans with I involved am our even success actively we team been have as role bolster DIRTT commercial successful partner that in active also my more our personally to to that an top continue also drive and leveraging intimately. our group be on business taking with organization know

and and efficiencies are Savannah against while during From improving supply rates at an quarter. fourth costs our overtime Calgary team production both rising work hard members operations and quality the chain mitigating standpoint, in

about over is their from past it the the Our is performance pricing year. as much as gross improved margin actions taken

XXXX. not at Rock facility supports Hill, aspect actively We critical believe of and growth. restarted operations we are and have expansion continue demand in monitoring that levels facility we a that XXXX to While maintain future and this

to approach ESG our the our Magazine better ESG commitments. nomination small our and We reporting by our This ESG to IR for help celebrate proactive to factors we cap award. measuring line. and on We second we our commitments. strive their that bottom leveraging to best and by sustainability our annual journey solutions publish a build a We reporting establishing, as report, remain through both world, customers and achieve transparent impacts ESG our third sustainability know our year, our committed products

it areas refinement never With alternatively aided observe safety, like QX, it additional to profitability. full in has required our with would further or we of changes investment. emphasize made I illuminating the satisfied quarter performance, measure our or to are optimization that a in be and effects for

our already of have and move changes the at to beginning Directors. these with alignment in Board precision of of XXXX implemented been we QX tight as continue Some haste with

the in continued quarter, The investment positive growth. continue balance our the that as as reaching further with factors direct strategic efficiency cost, investment drive well our adjusted additional Even cash and pipeline further and EBITDA in flow be for relentless understanding underlying improve in resources. to our we to increase operating of initiatives with sheet provide

and planned implement initiatives. the our strategic financial excited XXXX and of organic drive platform credibility stability to than performance to provides increased for customers More our future solid us opportunities so am of employees. with front in build This operating about trust and a both I continuing partners, construction with is results, our DIRTT growth us. and renewed the

our financial in it now I'll greater detail. to Brad over turn results discuss to

Bradley Little

and all. you, Benjamin, good Thank morning

now As supplemental have analysis we is presentation, for additional our which update add press discussed website. we in this color provided and on the is various liquidity last issued progress to My initiatives release the a discussing the quarter you additional customary, have designed results comments quarter. morning a financial fourth our and our results posted on of quarter are on

$XX.X million, for fourth year. in prior with Revenues quarter line the were

months. muted the and XXXX increases from reduction pricing. XXXX, This of the in primarily price avoid early around fourth previous due year. by major of shipments is Canada last in fiscal favorable the customers pattern to of the during X quarter to the during third slowing motivated compared of of of of offset volume impact quarter in was Revenue impact accelerate pace the order holidays quarter the XX price U.S. normal the reflects have announced volume, by declined to the our increases. fourth revenue increases a The expected, over to delivery which implemented X% we and XXXX, the materials all weeks seasonal decrease in virtually result As the driven a

Turning to gross profit.

XX% Compared gross to X,XXX to the in XX.X% fourth quarter quarter increased adjusted XXXX, points quarter points margin XXXX. meaningful gross margin profit XX% to the see impact XXXX quarter of points fourth XX.X% third Similarly, basis which to fourth fourth fourth XXX XX.X% to of Compared XXXX. the to the of of XXXX, in the quarter increased gross margin, continue excludes profit in profit of XXXX. XXX from expansion of increased XX.X% gross the quarter the from We basis from margin. of depreciation, basis in profit in

during quarter the Adjusted XX.X% third in gross XXXX. executed to the the profit and increases cost in initiatives quarters. second fourth of and third discussed realization The the to quarter of XX% price due just increased margin from margin reduction is the improved

Additionally, we are of to volumes lower quarter during efficiencies the manufacturing despite improvement see quarter sequential fourth XXXX. in continuing

to company XXX the implemented more line by cost or all XXXX again, operating of our through throughout has normal but also discretionary reduced XXXX, XXXX, and we due mostly saw, production the Regarding From back-office items, headcount spending. G&A across initiatives overhead January reduction from January expenses, disciplined XX%. operating expense decreases

profitability the previously, third a driven mentioned reduction in while quarter margin short The million achieved the loss in of Benjamin the XXXX. third period time first fourth EBITDA improved since As we quarter $X.X loss to for million XXXX quarter for from EBITDA during of the Adjusted the a $XXX,XXX of adjusted described, gross in our by has volumes historical in expenses all lower the lead still of XXXX both and at operating profit delivering been improvements despite comparable just and periods. approximately improved XX% times. $X.X

our in website. as presentation, further on supplemental again our detail on is find financial information which other well You can published these as

strategic Turning than flow. the improved $X number cash $X.X to XX, and $XX.X of balance I XXXX. When from liquidity. cash, September no there in to implementing year million sheet larger finished at was with I strengthening priority million up financial results board, our on million drive unrestricted indicated through a We improved came initiatives

was cash driven November announced in of quarter by operations flow million during XXXX. increased $XX.X of in the $X.X the working rigor the in have management we quarter The million the cash the This marks XXXX compared time XXXX. fourth by was operations since from during XXXX first of of proceeds of the placement cash consumed September improved from Cash profitability, our from for provided operations improvement combination quarter program. private capital and around sequential quarter a third fourth to third delivered improvement by from the cash and consumed million operations quarter $X.X offering

September and December increased or is XXXX, Liquidity, seasonal particularly XX, from which credit includes as a facility, up was at period XXXX, XXXX. working at shift improved under with $XXX,XXX X% XX, The liquidity we December availability cash $XX.X and important cash requirements. into our capital ABL million our

first end did quarter had quarter. in facility that Net not quarter $X.X end fourth capital need Availability the was of the not thus have million the million XXXX. our the the ABL at at of working of XXXX. September or on We under draw $XX.X far even with quarter facility to the was in to and

earlier note, XXXX. under working in volumes million $X an with and we of Also invest as improve. revenues facility us Availability range terms, of $XX during completed as this through we February XXXX expect flexibility this similar between and million extension in the month, to expected giving is facility to capital

I I initiatives you call. to you discussed cash third also our the quarter on with wanted update during

during revenue discounts receivables. for early fourth ability by standing, for customer-friendly while to certain an $XX,XXX. quarter the in million we in advantage contributed fourth implemented First, only to payment incentives our customers impacting of program good modest including quarter, take This incremental the approximately $X cash those of

States. of the December United the This Employee we to Second, at in expect XXXX, XXXX. receive in of third a Tax and Credit program quarter this associated $X.X with XX, receivable accrued remains we Retention million the recognized tax during

evaluate one them company-owned and date on to standpoint. certain or a We properties on meaningful or leaseback have sale such of sublease as X to from continuing resolution expect progress early March. are as to both properties We made

do a they vacate value proposition. aspect these of not reminder, critical As serve we intend as premises to a our still

long-term initiatives DIRTT's we are around platform. ICE the vision multiple to strategic continuing Lastly, evaluate to advance

also have cash these completed during meaningful as during the flow the to made on evaluation Collectively, We expect generate quarter. early expect initiative initiatives quarter within days. as second XXXX progress this to be we and the our fourth XX next

XXXX. to Turning

of year-over-year XXXX, X, increasing during higher, XX% by about projects to January growth at and XXXX, at higher volume. in likelihood $XXX or $XXX million we particular, pipeline compared January expected In the X, sales the at cycle, sales combination of was stages forward XX-month seen the year. Our million have in ordering price a driven

challenged and complex pipeline growth, engineering encouraged pace supply and quarterly the to While design we associated and and be forecasting by our pushout and time are rates projects. revenue chain high order with continues by large longer-than-normal

comprise We monitoring our are underlying structure, products. the closely materials cost including that our

States United the aluminum near-term and the effects insulated commodity labor in Canada is or largely that recession from to have potential started, pricing, of somewhat are from already susceptible are inflationary impact we a we comprised as Although the and wood. of pipeline our projects particularly

taken months planned the associated our these not actions reductions a by overhead were response annualized In additional that $X support to cost and the to restructuring risks cost to related streamlining $X reduce we to will have million over with program. pursuant items, office our million. operational back past X functions, efficiencies and These

XXXX. will from in also inflation volatility will set pricing taken instruments are well that We pipeline, us reduced of hedge and in believe during adjusted margin combination with our evaluating certain the revenue, gross that against up We associated primary our year-over-year cost and the to and already actions the margins improved growth structure materials. EBITDA growth deliver sales

your the now call And open questions. Operator? we'll for

Operator

is with from Palm first [Operator Greg Instructions] question our Craig-Hallum. And

Greg Palm

quite Congrats since It's on been long profitable talking we've quarter. results. been time a a the about

you So guys. to kudos

Benjamin Urban

Greg. Thanks,

Bradley Little

you, Greg. Thank

Greg Palm

My a revenue EBITDA rate was what around that. I than achieved profitability lower you expecting. I much just is mean first question run on

guess, this sustaining I do a how So about year is sense thinking going now this point? to profitability revenue approximation you and of a breakeven trying forward. on a think just get level I'm of better you're that

Bradley Little

Well, the for. here -- I'll what in. then certainly what looking let not No, and we're start of are Benjamin kick we level not is revenue

our structure. think we've price chain in discounting where an I able increases, the and operations, to we're our this and starting inflection see was to been the our and efficiencies supply implement pricing point

are And cycle. within pipeline mix the XX%. it's that along products mix higher has the pipeline Our of a projects has gone further up in and year-over-year the

think -- commensurate we But do we up do for we XXXX. with revenue generation. So see want... in going growth the Benjamin, see don't the you costs

Benjamin Urban

conversion in ships we what the for to capacity and Yes, additional comments, increase of there to additional sure. us break I continue rates to and revenue opportunity handle growth numbers, ability representative is these we organically Greg, more it's to if even add that think add yes, retooling, it's means adding can around as that to at the just very whatnot Brad's pipeline, further isn't that. satisfy the that that around

top pipeline last year So on is then the to we're over point, Brad's increased and expecting. anything that of what organic

Greg Palm

it. Got

what in bump no reason shouldn't I mean in to expecting revenue just you're reported year of relative be you QX, So if just sort little levels to a this a EBITDA in you bump see clear, bit similar what relative there's you to of a why the just reported.

sure Just clear. that want to that's make

Bradley Little

is cost that's the out. right. issue leverage we've from that Yes, And think our structure larger I taken the

that I think very revenue feel in see better fixed revenues cost to pricing without standpoint, our clearly, investment increase. as a we volumes will improve our pricing, structure of start and meaningful from as and you in structure confident leverage

Greg Palm

Yes.

I pipeline, new like maybe to at any supply know, of today's me Okay, I on makes do I makeup drivers kind that? a tailwinds world. and big picture, sort know, sense. there's or in of emerging proposition bit post you maybe it of pretty mean little the I of some mean pipeline behind just mean you the world. chain your the thoughts, getting of the on a stronger more mess post-COVID, some, have that don't alluded I don't growth just are the of just on to the value year-over-year. touch solution solid feels least

Benjamin Urban

Yes, sure, Greg.

health education. pipeline X of right, but ways, where over the one help You're bolster to commercial, it you as seeing year-over-year is growth not think absolutely months. well just different government XX we're unpack pipeline -- the Those next be the I verticals, diversification care if XX from as and that in the

DIRTT probably your been value thing comments if that, that's it will, change. embraced in plan what's and that, there before do is on it construction. of pandemic, the more be much is general to the being value right? and knowing circling post-COVID, be the wasn't to higher-level is come that some that around I painful we able discussion DIRTT And We've full every everything DIRTT provides are for basically out it the additionally price amplified. enough of has that times, lead with So think be derisking unknown, there that's circle, not it biggest proposition all of coming using kind ability in the that certainty, of to you support do, values But direct now to

Greg Palm

in Do new they you you've Or change pipeline. stuff this if worked some of with looking any to is how world? in before? sort evidence procure they I what's don't that? how description stuff at it that it the of activity like is post-COVID customers really customers mostly know have pipeline directly Is that attributable the of are a got you

Benjamin Urban

Greg, that continue many Yes, that can customers, is One accounts return that times on. so construction of clearly, be as DIRTT, larger we value and some I tends twofold. they with think depend the and utilize that have we us national customers to of repeat it's a the understand And to solution.

further that, is looked the have solution the not full that for what's companies only the reasons conversion us maybe interesting DIRTT to at I'd acoustic or aesthetic may But and say pipeline within provides. that from maybe

just cetera. through our to that flooring, raised partitions, with understand or invest Now essentially with okay, DIRTT. or those in with we've because solid power, And now product they associated are we're have going reconfigure solution full $XXX,XXX more entertaining in, et that speaking lived having we now uncertainty, rhetorically, may to have investing a modular $XXX,XXX been, projects them

Greg Palm

Interesting.

trajectory long-term next idea about the X, on give aspirational it's growth, too have early Just this us power? anyways. going you goals, thinking you're I of earnings years. to some about over the try Do revenue X, Maybe business how to whether targets, any that's around I'm Okay. more. I'll ask talk but couple a maybe long-term just X thoughts know

Bradley Little

Yes. kind in Benjamin, from profitability want can to I a aspirational, standpoint. do of what to would that you a on financial the start mean layer as overture and

Benjamin Urban

Yes, we're great. some applying operational pipeline, add side. towards regular Yes, demand on it the Clearly, touched scope have. but conversion increase we on a the little beginning that we the We've growth Greg, resources long-term redirection back strategically on on how got of satisfy that good we've the from from a We're at I bit do longer-term do handle the of do really organization. a perspective, call, the touched we around commercial of sufficient we how within we growth those in coming projects can increase and times. growth. got lead the capacity, that's how and top line rates to we

applied lot A growth, that that that we've $XXX by year-over-year of that million say our going been we're top I'd to for internally, do able affect construction some and not also opening which proven that partners we the in. previously, we, be diversifying but that entertained we revenue there were had fast, actually that not previously revenue to right? in participate strategic channels in growth past, with to up can markets that been we've even And additional saying is things so under-serviced but at adding also weren't line before, windows have, is

manufacturing distribution So sustainable that's if long-term will top things alone just us and revenue with help standard that on some X where each those the have X side. growth capacity on the then you other some additional layer to channels base also on of you assist layer those partner to us, model growth construction through

Bradley Little

helped strong has what alongside a the get me road. the is really of in Yes. company being I would the being first blessed with X onto really And say Benjamin, team out finance months at

really to of understanding it's a end And our opportunities at as deep that better levels to our reconnecting, that the there. we level. and with important going trust with So stakeholders. the we've revenue very community partners, people that we've and the imperative been we're clear what We're rebuild return that generation doing engaging demonstrated say previously, it's and we partner it's and key we're our very we And do. partners customers really users

a XX% standpoint, levels If delivering of the structure we and levels generated from overhead, a of overhead. we the capable in to supply are can our once simply EBITDA certainly place, indirect those production chain pricing, leverage, to to we a both -- and cost from structure the of from optimal XX% cost the return are the revenue you gross the -- while structure delivering were in that level. we XX% volume have margins now higher range, previously than margins get

Benjamin Urban

one thing question. more Greg, -- that thing one yes, I to add to wanted

is interested valuable so software we've our part other to a with increased of The our prove proposition in to continuing as ICE portfolio platform thing be technology as our other is actual adoption that of it. the that seen manufacturers well value

Greg Palm

Yes.

guess litigation give Okay. question. update But all us color. that I any you a more I appreciate last with of just on Falk? one, can housekeeping the

Benjamin Urban

I'll take one. Yes, sure, that

in as a abuse you summary The court know, judgment order we a last we court process the filed judgment our In application in lawsuit. good which Earlier there. duplicative it a of application to the performing, month, filed the summary November, application to by submit be the process. year. So to cross-examination, making Falkbuilt Falkbuilt finding them it, an general are for struck progress strike of this dismissed

justice application date a that And And will will this chambers the at tendered believe claims. summary available hearing court directed supporting this be summary the we'll our optimistic -- strong succeed. the the judgment that be we've summer has scheduled after in judgment evidence The XX we application of first for we're hearing year. June

Greg Palm

I Got my it. allotment. Well, I'm over probably think

So I there. luck Best going of it will leave forward.

Bradley Little

Thanks a lot, Greg.

Benjamin Urban

Greg. Thanks,

Operator

like now closing back would to the conference Urban remarks. to turn Benjamin I for

Benjamin Urban

to committed you like strongly organization our to I'd all team, believe joining we forward for On of Thank behalf and than to thank us this today. move continuing more XXX-person of are call. on next days road next of look forward again -- earnings us. our the to at or best either or with you We ahead are quarterly our that talking you. Thank our you.

Operator

you Thank for participating. today's And call. this concludes conference

disconnect. You may now

Dirtt Environmental Solutions (DRTTF) 23 Feb 232022 Q4 Earnings call transcript