DRT.TO - Earnings call 2 2023 | Dirtt Environmental Solutions LTD

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Operator

Thank you for standing by. This is the conference operator. Welcome to the DIRTT Environmental Solutions Second Quarter 2023 Financial Results Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions].

to Corporate conference Affairs. like Mason, to now of Director would turn over the Shauna I Please ahead. go

Unknown Executive

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

be include page Joining the them are slides, forward-looking CFO; Fareeha presentation at applicable remarks Vice me Khan, please slides. of from intent, prepared website CEO; of on the are will of performance. They Today's meaning States accompanied call Today's or not will view company's and projections. within dirt. Finance. on of future President statements call Canadian this are security our the Brad webcast laws. Benjamin today based current United and To and Little, guarantees web These Urban, expectations statements the by these on access

with addition, will In and you for August and Please GAAP also available replay non-GAAP other be SEC excluding reference filed will of results. special is I XXXX, statements results remind and Form forward-looking the will results, Exchange with items. non-GAAP on and information this XX-Q recorded, the and Securities to webcast as tomorrow. or X, call being a SEC that our reference Commission filings this reconciliations regarding reports

Benjamin. turn to now I the call over

Benjamin Urban

Thank you, morning, good everyone. Shauna, and

and I I partners our end numerous of our begin, want members, customers. Before to start all by team thanking

of I'm company. and on first successful the partners DIRTT, this helped year proud all the have transform back of Looking completion my team who of efforts with our members full

more do. We have work to

with that QX of line sight proving better consistent out. to and have we growth profitability However, results

partners shared continues feedback from and positive our to grow. construction The customers

over NeoCon. DIRTT open connect, our of attendance coincides Chicago successful up last buzz with a is strong year. On XX% was that sentiment the our house The in back, heels most with

More as of and both an well attendee more architects as with mix attendees, customers first-time designers. importantly,

last in The within to provide results improved continues strategy quarter. revised organization the our commercial

new X received development from Connext, and positive team feedback customers During competitive unveiled our overwhelmingly which product product our solutions, partners. construction

additional out and second of We half the products the throughout enhancements will roll continue year. to

by a both and network. initiative objective, in successfully undertaken new additionally, In a and partner have this And has onboarded California in Alabama. strategic we strengthened grand aimed we DIRTT of our the X quarter our experience Florida broadening have at line partnerships partner and with Winnipeg, of alongside the with augmenting the X centers before Northern presence new more expanding last and openings year. in end

Calgary, feedback memory. making from opportunities. our a for in last first These our recent component to sales we first representatives a haven't and success May, been the commercial is we experience as converting in-person organization our The are conducted event years. master inaugural growing in centers sales In such critical X class representatives and by of leadership that sales aligned in our this the all

In specialist training, addition the also we'll the and year. to sales half roles a in last We care force X more the fill reps second our new and quarter, growing. X vertical health the sales is of sales added

commercial X the new a one for with purchasing to and the agreements strategic in a These expansion. magnesium our general third-party of agreements, X successfully We largest a program encompassed partnership States environments oxide exemplifying laboratory secured also contractors residential, multifamily the in manufacturing and commitment and integrators growth United manufacturer.

institutions. standardization X major X financial key added programs We accounts also with for

robustness underscoring some are wins, fruition During I large the ordering and they of witnessing earnings phase, those highlighted the projects previous progress pipeline. our call, into the of our we

order Bank and and which Maverick see like to will continue year. District, large project in this examples Resources our all wins School deliver Armstrong pipeline We grow with Natural CFG

a X extensive recordable Canadian excellence have world-class we list of been environments to ensuring leader XXXX the dedication achieve serve seen relentless safety as by safety and of they Notably, programs our in excellence, Awardees. who our in which and steadfast occupational the safety our organizations to a remain programs recognized performance. safety In pursuit journey and in as commitment commitment recognizes being our of health exceptional safety their operate. in have dozens and a employees, to The their and people demonstrated safety the they incidents excellence

Canada's X companies of are XX employer. We for [certifying] safest manufacturing

frequency benchmark. Standard frequency year-to-date June Bureau of incident DIRTT to total recordable X.X X.X. year-to-date Statistics DIRTT's 'XX of manufacturing TRIF Labor of industry peer is X.X. below the is Benchmark compared Our industry The our for is a and XX%

as to well. focus quality continue on We improvement

dollar X.XX had we major quarter, year. prior last quarter performance a quarter million XX%, on-time improvement from during was our a second XX% on-time XX% external per second revenue, second during the of defects the of performance the During year. Also, improvement from the

We update launched proprietary unique functions. ICE technology than a XX with significant to our platform more

them these safety, from importantly, driven were are most In for unwavering commitment to platform. we conclusion, profitability and future. greater development excellence innovation the to our and product partners improvements More that as the continue poised satisfaction. has we growth and foundation, prioritizing from in to this while direct value customer the construction achievements were develop of sustainable our feedback With

Brad? And over comment hand with to I'll that, Brad on it financials. to our

Bradley Little

good all. you, and Thank Benjamin, morning

million, driven quarter XXXX . Revenues patterns, from the same up period our our XX% press seasonal designed is My developments on our additional comments impacting on delayed website. presentation, posted quarter for initiatives As quarter analysis release color by sequential quarter for in and increase cash morning been a second and were last add XXXX. first commencement the amplified a now financial The provided quarter you to which projects. of of several we've second was our of the and update results combination results on discussing and key reminder, over the additional with normal quarters. $XX.X supplemental in liquidity we've by previously this a about issued flat have a discussing the shipping the are

points second between profit impact quarter margin which margin, reduction points to of XX.X% of second the in from gross margin due XXXX. of XXXX, projects. incentivize quarter X,XXX and XX.X% mix cost basis quarter depreciation, to March improved X,XXX executed improved XX% basis We is increased as year-over-year initiatives in the achieved of to increased to gross XXXX excludes and XXXX. This again XXXX significant Turning well to XX.X% profit. pricing from XXXX the product we in second Adjusted expansion. profit quarter continue solution of gross once margin second full to as the Compared the June as

also initiatives year, for reduction cost the XX% Manufacturing the and continue quarter $XX.X are has past which led further improve well our million, a over the second efficiencies spending. more period better in costs months in than over were Operating XXXX. cost prior expenses disciplined as implemented same decrease XX to track as from reduction the to discretionary margins. primarily The

a operating million described. improvement margin an in Adjusted a was $XX.X we proactively second million, of planned of quarter during by This the remove a company cost, XXXX. has or took reduced annualized second reduction improvement an XXXX, XXXX, June $XXX,XXX. has $X.X expenses driven million, XXXX by $X.X million additional from just in including EBITDA and the increase through From count reduction $X.X related of actions savings with termination the been XX%. quarter headcount or of approximately of January for benefits the gross XXX% quarter of second to loss During exclusive XXX of head profit

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

for $X.X of cash We with of XXXX. to consumed to $XX.X Turning quarter million from second the XXXX. in $X.X million the cash liquidity finished by the unrestricted of was and $XX.X during operations December million XX, by provided at operations quarter working quarter million $XX.X million capital. second compared Cash

June under facility have the of need June second that $X.X third and of the operations was million as draw the months XXXX. availability did in to of on of thus ended X facility to cash XXXX. million XXXX, the million $X.X our quarter generated had to months XXXX. from not ABL $XX.X cash Liquidity, in for June which not quarter includes X through credit consumed we million We And compared far of $XX.X flow ended

working up that and about end March quarter capital million increase million, and conversion agreement also working capital. with the investment Beyond working in I'll AWI the Net demand our been XXXX, the at was improve to overall cash from proceeds of seasonal initiatives the nondilutive $XX.X from talk hard lower an commensurate we've $X.X the primarily the pattern. due in to shortly, operating

days days December at has days XX to June XXXX sales Our XXXX. at from improved XX outstanding

XX By of as comparison, June days. sales days XXXX outstanding was

impacted has to Our of faster certain receivables. incentivize programs DSO payment been favorably by

X. and have improved, program flow have this profitability August discontinue cash decided As to effective we

margin higher collection While times this levels, projects discount. associated historical on eliminating applicable we achieve will the by return to the our will likely

our and been sales, inventory reduce through levels operational working We have also to improved planning actively processes. inventory

manage not to June purchasing our $X.X and million inventory improved the manage to or only or levels better allow core sales inventory obsolete us will This $XX.X materials. reduced identify our by our raw inventory we XXXX. serves of to slow-moving have Year-over-year, million forecasting XX% but at

offsetting We expect impact a that impact previously the providing XX, discussed. balance to positive DSO decrease cash flow by and December

have alluded, to position. designed been we initiatives I our cash nondilutive bolster As also have cash various executing

opportunities in quarter. software an an intellectual pay in Armstrong discussed and with used second the ICE which proceeds cash consideration A for the equipment we to of certain partnership leases. during World enhanced of previous into Industries entered portion we call, agreement of was As co-ownership earnings million, interest certain $XX off commercial our for property was DIRTT received

experience million. in with our of our that approximately construction Also savings X, subleased have Plano entered quarter, DIRTT specific April $X the second annualized one effective market we in of

in we June about in of cash May, the IRS $X.X million remainder receivable the of Lastly, contributing as tax XX, XXXX. received

have the to volatility concentrated especially conditions, with first months X regions we to XXXX, technology outlook. banking sectors. in sales of in and continued seen the Throughout economic Turning the

We've is various X have subsided beginning the some metrics the recession demand our in EBITDA, for inflation improved associated past aspects, products generated XX, improved months the macroeconomic the and adjusted eased. with From certain to and In period and gross XX.X%. same in an of mid-April. has May indications over total seen X in profit of million June $XX.X adjusted $X.X the revenue during XXXX, company million uncertainty

which we Visa, all begun million in order call, projects last awarded of million XXXX, to have are combined a discussed Apache to quarter Bechtel, and of revenue including deliver aggregated and expected X the in were XXXX. we several during second $XX our As to $XX during

in discussed, previously increase XX% between XXXX. achieved we second the As first and a revenue of quarter

quarter expect though sequential not a the quarter to over the third same second extent. the increase revenue We in of in XXXX,

project along to based continue with forward the up already taken in discussed, current expect a we initiatives growth pricing We cost to set the For continue cash structure believe to improve improved that margins low total and mid-single-digit the XX-month into reduce XXXX, trend to market respond from the of our we ever-changing combination XXXX, actions over XXXX revenue to on us conditions. to pipeline.

Before we matters. other up questions, open wanted it I to address for X

First, our compliance with NASDAQ requirements. stock

stock withdraw consistently not by and September is to reverse stock As our stock for exceeded the a perform this variety you than our months. stock price NASDAQ for from assuming trades the our exceed for previous it and price $X has of XX At not X, know, split. does trade counter time, our factors, over rather our to thinly the a NASDAQ $X intention

continuing I that trading future. since the Toronto the will been DRT remind ticker Stock XXXX. on symbol you Exchange on under absolutely We into the that intend we've

last and gratitude Working and the at express Directors released want been that team decision the heartfelt I leave experience, experienced here. to the incredibly comradery we an DIRTT. to entire as fulfilling and to has my have Lastly, of Board I for personal DIRTT support difficult night, very I've the deeply and made

also and a I going and want why leave I decided I'm share to where DIRTT take to moment have next.

telecom I've to I've time accepted at to a Chief remote Worth, With come after Sabre we work my In position Family and to Sabre personally me, Officer. markets, been DIRTT. my that the family at is utility to challenge and in And work I I'm I once a joining structured excited my also in long Industries market both team but closing, end Financial loved with largely is a transition. in its as finish leader be their need continued about to success for want here my mind, wish and being It's Industries realize memorable future. family truly I've importance Benjamin? and entire making Texas. commutes. DIRTT to the much DIRTT my team me. Firstly, the to for express I contemplation, time his that gratitude closer Fort most in engineered

Benjamin Urban

share to release. team yesterday's like I earnings announced additional to would Brad. we you, Thank leadership change some our thoughts also regarding in the that

us to moment been to the of people, . On DIRTT take has and step I I in Brad's partners contributions reestablish his to our entire Brad importantly, at position. want Firstly, most instrumental from Financial and Chief contributions down He DIRTT, Brad behalf acknowledge who dedication want Little, to been my credibility has helping leadership. thank to our clients. our and for Officer, express with gratitude his decided and team to many invaluable. have a

with demand Over able the operations models and costing we planning past and to market produce Brad revenue because efforts align for forecasting. structure opportunity. better accurate manufacturing were fixed led company-wide and foundational and improvements, our year, our sales mix of reduce and and product operational Largely improve more these several our to product cost

fuel leading helped over in liquidity. EBITDA growth significant expansion meaningful both actions have X of All to past margin quarters, the and these

CFO not thorough forecasting team only sales role tremendous ] and play planning. further understands strong leader mentor. and be strong cash our in but is and our and improve critical diligent has team He the more also in flow, built that [ stabilize business a revenue disciplined a lead operational Brad they helping a and finance must

leave, we respect decision. While we are Brad sad to and see understand fully his

that we them, great take a forward team just one that leading also missing a in on front I'll to will share in a have have behind We beat. more knowing solace moment. continue us without strong

on personally DIRTT the thanking influence to say call. to your your us. earnings your Brad future and words you've We in all want to positive for commitment and instilled But you first, family company of I our wish you your Would each well by close in you, endeavors. final a like few

Bradley Little

you, Thank those kind Benjamin, for words.

colleagues finance without and the We year, my support know happened focus have them expertise although positioned expansion. finance I'm I and broadly and A to It's our hard and dedicated the team that in have well been work, be sidelines And members DIRTT of distinct The everyone honor good accomplished hands. great past will and excited a over my financial begun, and here is company that what things to continue company DIRTT produce continues ensuring the new a so and margin specifically lead to prepared would we've growth very in year. on the shareholder remain all many not to Benjamin? past and now I personally, part watch embarking the to hope at DIRTT. over the the albeit each of I'm family forever. leaving of of I'm as day from first. final August at improved team journey XX,

Benjamin Urban

from I us. And our we've you've counsel aligned financial benefited and Thank team enhanced the With broader your joining you, personally motivated have financial our practices with strategy built, proud since stewardship, Brad. of and business objectives. management insight. strategic cultivated your our and steady I'm

role most Fareeha serving is has who will several an X as Fareeha you served as to the Now been for succeeding uniquely Officer, Fareeha recently be past at prepared I'd Vice President our has DIRTT the of part August Khan, for Brad Finance. stepping Financial the duties a team and of on to in XX. DIRT introduce additional key she roles Chief will CFO. like integral assume into the years, of

just on completed with Bachelor's Brad years University strong her for with at worked These profitability Zimbabwe, Accounting With experience, up and Deloitte her Fareeha finance South driving the where over in accountancy company. a Services initiatives are Africa. and not of grew chartered Firstly, of side-by-side results XX she of all Fareeha highlighted. has majority, finance and the our I the improved if initiatives obtained

studies, worked Houston United After to Fareeha moved completing her States at Fort Deloitte and in their offices. the and Lauderdale

later time joined a DIRTT Following and working Fareeha in at her Calgary joining XXXX. PricewaterhouseCoopers Deloitte, Pakistan in before in

financial audit, me ranks. personally, and due business, During within holds company. of with training, and the I Chartered of England her from respect the Zimbabwe. a and Accountants she because roles, of SEC including Institute Wales she has the understanding buy-side in Institute in that, and our and a and to the worked member comes the Fareeha public PricewaterhouseCoopers, importance Of Chartered with Fareeha advisory. tenure Fareeha Accountant private settlements various companies of diligence, is colleagues her deep of of And across in registrants know

Fareeha's I'm confident transition few in Fareeha, team lead with to say words? like a would ability to and a you ensure our seamless financial excellence.

Fareeha Khan

excited place about opportunity I by DIRTT, in as company have looking to continuing I'm time at Chief continues the Thank everyone. and our company role thoroughly honored Officer. the hello incredibly I'm the you, me. and to forward that enjoyed and trust serve to in this the my to Benjamin, Financial

past move of forward want for moment future also and both investors, capable more and to look am his clients. mentorship leadership is to him, we highly that calls the over strong As DIRTT. strength the I in the Benjamin? to integrity year. and talent committed the of a our the community collaborating finance I thank venture joining forward, Brad business. unified these also valued have and to prepared we we as I our upholding and Because with financial and take investment advance closely a

Benjamin Urban

Fareeha. you, Thank

CFO. have in to delighted new we are and excel that this role, have you no We as you doubt our

a with responsibilities the demonstrating strong our teamwork I Fareeha to graciously end, comradery support on that counsel transition also ongoing steps taking within during be have pass and ensure on organization. seamless remaining of the continued His provide Brad XX. CFO sense our QX. throughout we will team August handover are period, agreed We and to to highlight his this has to invaluable Brad a of smooth ensuring will transition. necessary to work all want closely To Fareeha this duties, also

Fareeha's set financial planned will this that believe a success, to for and future for approach and the carefully Fareeha team We under bright look up we entire DIRTT forward leadership.

line questions. open now will the We for

Operator

question, for from And first comes Eggerichs of from your it Craig-Hallum Danny Instructions] [Operator the Capital Group. line

Danny Eggerichs

Congrats moved overall, really feel into throughout the what's guess, guess it August, the trends on the demand quarter. continue early the guess I guys. sounds you really And for now? just I July? that just starting, we like good improved now seen have overall right as of market I results, kind

Bradley Little

Yes, sure.

demand, Easter that rapidly, indicated, a we combination of second QX QX, some started you that in which delays That QX. pace but projects improved had mentioned, quite there. in started after so As start bump got and a quarter were supposed to continued just we a into and also -- our we in bit generally of has pace

QX, So increase. experienced that little ] trend the going this better last year. a year, we We quarter a QX potentially [ of in to from XX% see continuing third

Danny Eggerichs

Yes. some stronger? maybe health a specialists. as that a then it. Was larger seemed health a like new spot hired looks positive it on quarter. of just in like come seeing Got whole you I care care announced, you you Are hitting? orders heard that based those vertical And this really back

guess market that seeing right this quarter? in now that strength So just I are you what

Bradley Little

and the X I'll projects. health and approach. Yes. hand We broadly in about or originally both X pushed large large start late was into X from more projects, a that Benjamin, X those quantitative Houston were in our Northeast scheduled to and standpoint fairly to that QX commence then talk in it care QX then had to

indicative normal, see will really just not what have in QX we lighter of we Benjamin? continue, than the So was our pipeline, trend but

Benjamin Urban

Yes, good right. Yes, commentary, you're Brad.

efforts for that we a now. quite and continues be growth and in The them times, provide industry versus we seeing growth to a that where commercial the have are previous change. projects that A the projects we seeing in nature, are upside tend those to XXXX. also years project. solutions rate and to health lead into are many large on tend of adoption Those traditional bit improve is And that longer cycle as is for XXXX due to large we part look the to the the We vertical. care in

Danny Eggerichs

well on that others above I That's many just it quick. what and Okay. gross if think Maybe Obviously, can we I hit margin came expecting. were good. in

in that July that hit you said August, You kind and of margin. XX.X%

I think basis. that adjusted was on an

we continue to modest to we guess Should I continue think Or as forward, that So expect to expansion? should how improve. going see about some volumes that?

Bradley Little

question, Great Danny.

the Canadian fairly quarter, it the think second when about dollar First dollar. half year relative So was in off, really are we to of first our is the the [indiscernible] of costs -- A lot Canada. and

little a tailwind the in on So quarter. we front that had second

good We the well product quarter. as have really mix in

that -- structure started on was of June XX% a the a and point. we of further by to as lot the that Now past cost we our call, driven past our that May achieved leverage we push discussed of combination fixed in breakeven significantly

very So I low also that had think volumes we the in XX.X% the April. reflects

I balance, per right is positioned, upper $XX be not are rate, on our rate get going forward. we But million feel I pushing well a as XXs well run into stated quarter margins past million now. like fair So run to to probably mid-XXs, consistent $XX that suggesting think

Danny Eggerichs

Okay. helpful. tell? it I'll on I that's Or question that progressed? brought new too AWI, still has of That's yet? just guess, early leads relationship Maybe now they just any completed. is Have here in kind to how end very

Benjamin Urban

organization the I some to have begun agreement relationship. that from question. a opportunities commercial say loose. early outcomes in Yes. that within bit see we I'll the will It's Danny, cutting take beneficial on some

and I to we're collaboration alongside accelerate addition think doing or that will some we with you that them. -- integration the in see be going of that, product will, to if

year. on in to Similarly be that touched half So commercial I we've as that future. in Q the the think well partnerships of to more other of the the as some the over there'll first see from

cycles XX of be many XX cycles sales can months. you to As our and know, lead

So of our to unfold pipeline. to you'll starting start into see what some I opportunities think those

as are research. that commercial early sales now, I will AWI beginning product stages as well all and together well, it's get forces is going the our and at But we say of to working aligned development the our For just agreement. it quite and

Operator

gentlemen, are participating Thank there program. questions [Operator no conference. and today's for further at time. this in you This concludes Instructions] the Ladies

have You disconnect, may and day. wonderful now a

Dirtt Environmental Solutions (DRTTF) 3 Aug 232023 Q2 Earnings call transcript