CALGARY, ALBERTA--(Marketwired - May 7, 2015) - DIRTT Environmental Solutions Ltd. ("DIRTT" or the "Company") (TSX:DRT), a leading technology-enabled designer, manufacturer and installer of fully customized, prefabricated interiors, today announced its financial results for the three months ended March 31, 2015. This news release contains references to Canadian dollars and United States dollars. Canadian dollars are referred to as "$" and United States dollars are referred to as "US$".
Selected Highlights
For the quarter ended March 31, 2015 the Company reported:
- Revenue increased by $16.2 million, or 40.0% over Q1 2014, to $56.7 million, a record for the first quarter;
- Trailing 12 month revenue was $203.5 million, a 35.7% increase over the prior 12-month period ($149.9 million);
- Adjusted EBITDA (see "Non-IFRS Measures") increased by $5.0 million over Q1 2014 to $8.7 million;
- Net cash flows provided by operating activities before changes in non-cash working capital was $10.1 million, an increase of $6.1 million over Q1 2014; and
- DIRTT entered into a strategic collaboration with Corning Incorporated to bring Corning® Willow® Glass to DIRTT's suite of interior construction solutions.
"We were very pleased with our financial performance this quarter as contributions from both large projects and our core small and medium-sized enterprise customers helped drive record first quarter revenue," said Scott Jenkins, President of DIRTT. "Looking ahead we expect to build momentum across all industries with the exception of the energy sector. A good mix of smaller and larger projects along with opportunities in new industry verticals, both in North America and internationally, should generate continued growth as we approach the second half of the year and move into 2016."
"Top-line growth continues to reflect solid improvements in our numbers and demonstrate the strength and scalability of our business model," said Derek Payne, CFO of DIRTT. "While we haven't seen any slowdown or disruptions from our energy clients, we do recognize this segment of our business could be impacted going forward. We are, however, confident in the long-term prospects for all other industry segments and geographic markets where DIRTT is becoming the new standard for interior construction."
| Summary Financial Results |
| |
| |
Three months ended March 31, |
|
| |
2015 |
|
|
2014 |
|
| |
($ thousands, except per share amounts) |
|
| Revenue |
56,701 |
|
|
40,515 |
|
| Gross profit |
23,801 |
|
|
17,090 |
|
| Gross profit % |
42.0 |
% |
|
42.2 |
% |
| Adjusted gross profit (1) |
24,511 |
|
|
17,623 |
|
| Adjusted gross profit % (1) |
43.2 |
% |
|
43.5 |
% |
| Selling, general and administrative ("SG&A") |
20,071 |
|
|
16,092 |
|
| Adjusted SG&A (1) |
17,428 |
|
|
14,093 |
|
| Adjusted SG&A as a % of revenue (1) |
30.7 |
% |
|
34.8 |
% |
| Operating income |
3,730 |
|
|
998 |
|
| Adjusted EBITDA (1) |
8,689 |
|
|
3,715 |
|
| Income tax expense |
222 |
|
|
294 |
|
| Net income (loss) |
4,682 |
|
|
(70 |
) |
| Net income (loss) per basic share |
0.06 |
|
|
(0.00 |
) |
| Net income (loss) per diluted share |
0.06 |
|
|
(0.00 |
) |
| Cash flows provided by operating activities (1) before changes in non-cash working capital |
10,129 |
|
|
4,067 |
|
| As at |
March 31, 2015 |
|
|
December 31, 2014 |
|
| |
|
|
|
|
|
| Cash and cash equivalents |
44,829 |
|
|
39,836 |
|
| Working capital |
58,406 |
|
|
50,434 |
|
| Long-term debt |
11,960 |
|
|
9,852 |
|
| Note: (1) See "Non-IFRS Measures". |
|
|
|
|
|
Revenue
Revenue increased by $16.2 million or 40.0% in the three months ended March 31, 2015 compared with the same period in 2014. Strong market activity throughout North America, combined with a strengthening US dollar, resulted in solid year-over-year growth. Ongoing revenue contribution from the previously announced large project in Houston, Texas also supported the strong quarter.
Adjusted Gross Profit
Adjusted gross profit as a percentage of revenue decreased slightly from 43.5% to 43.2% in the three months ended March 31, 2015 compared with the same period in 2014. Adjusted gross profit can vary from period to period depending on the design and types of DIRTT solutions delivered to clients and the mix of commercial, education, healthcare and government projects. Healthcare projects tend to generate higher gross profit because of their greater complexity. For the three months ended March 31, 2015, healthcare represented 12% of total revenue compared with 22% for the same period in 2014, contributing to the decline in adjusted gross profit percentage.
The stronger US dollar partially offset some of the decline in adjusted gross profit in the three months ended March 31, 2015 as the positive impact on US dollar revenue exceeded the negative impact on US dollar-based production costs.
Adjusted SG&A Expenses
Adjusted SG&A is SG&A before deductions for non-cash depreciation and amortization of non-manufacturing related assets and stock-based compensation expenses. Adjusted SG&A expenses increased by $3.3 million or 23.7% in the three months ended March 31, 2015 compared with the same period in 2014. Adjusted SG&A as a percentage of revenue decreased by 4.1% from 34.8% to 30.7% in the three months ended March 31, 2015 compared with the same period in 2014. The most significant change can be attributed directly to sales-related efforts as salaries and benefits increased by $1.0 million, and commission expense for our internal sales representatives and industry specific experts increased by $0.9 million. These costs reflect personnel additions focused on generating and supporting higher business volumes. Higher commission costs are in line with the greater revenue volumes in the current quarter. Other increases in adjusted SG&A in the current quarter included travel and marketing costs of $0.7 million, rent expense of $0.2 million, professional services of $0.2 million and $0.3 million in other miscellaneous items. The stronger US dollar contributed to the overall increase in adjusted SG&A across the organization in the current quarter.
Adjusted EBITDA
Adjusted EBITDA increased by $5.0 million in the three months ended March 31, 2015 compared with the same period in 2014. The increase was mainly due to the $16.2 million increase in revenue and the resulting increase in adjusted gross profit of $6.9 million. These amounts were partially offset by adjusted SG&A increase of $3.3 million for the reasons discussed above.
Outlook
The Company's growth strategy consists of five key initiatives: (1) increasing penetration of existing markets by providing continued support and increased investment to existing DPs throughout North America; (2) expanding into new geographies, such as the Middle East and Singapore, by capitalizing on recent and continued investment alongside new international DPs; (3) penetrating new industries such as the hospitality and residential sectors; (4) continuing to invest in ICE and new innovative interior construction solutions such as the Enzo Approach; and (5) partnering with industry leaders to monetize innovative solutions - a recent example is the Corning® Willow® Glass initiative signed in February 2015.
The American Institute of Architects' (AIA) Architecture Billings Index (ABI) can be a useful leading economic indicator of how non-residential billing activity could trend. The most recent March billing and inquiries numbers continued to show growth, building on an improving trend following poor weather in the first two months of this year. Billing activity also continued to grow across all four reported regions and was especially strong in the South, Midwest and West. DIRTT and the AIA believe these numbers point to improved fundamentals that could support growth across all segments of the building industry for the next nine to 12 months.
DIRTT anticipates seeing a relatively regular revenue contribution through the majority of 2015 from the gross US$30.0 million contract announced in mid-2014 that began delivery late last year.
To date the Company has not seen any significant contracts in hand from energy industry clients either delayed or cancelled. Management believes that continued softness in global commodity pricing could result in weakness for this particular industry segment.
Liquidity and Capital Resources
At March 31, 2015, DIRTT had $44.8 million in cash and cash equivalents compared with $39.8 million at December 31, 2014. At March 31, 2015, the Company had an undrawn US$18.0 million revolving operating facility.
Non-IFRS Measures
Adjusted gross profit, adjusted gross profit %, adjusted SG&A, adjusted SG&A as a percentage of revenue, EBITDA, adjusted EBITDA, and cash provided by operating activities before changes in non-cash working capital are non-IFRS measures used by management to assess the Company's performance and financial condition. Consequently, they do not have a standard meaning as prescribed by IFRS, and are therefore unlikely to be comparable to similar measures presented and calculated by other companies. DIRTT believes the non-IFRS measures are useful supplemental measures that may assist investors in assessing the financial performance and the cash anticipated to be generated by DIRTT's business. The non-IFRS measures should not be considered as the sole measure of the Company's performance and should not be considered in isolation from, or as a substitute for, analysis of its financial statements.
Conference Call Details
DIRTT will host a conference call and webcast on Friday, May 8, 2015 at 9 a.m. ET, 7 a.m. MT to discuss its first quarter results in greater detail. President Scott Jenkins and CFO Derek Payne will host the call.
To access the conference call by telephone dial +1 647.427.7450 (Toronto and international callers) or 1.888.231.8191 (toll-free in North America). Please call 10 minutes prior to the start of the call. In addition, a live webcast (listen only mode) of the conference call will be available at:
http://event.on24.com/r.htm?e=987914&s=1&k=272619809A085F223747F8B496810209
Investors are invited to submit questions by email before and during the conference call. Please send them to ir@dirtt.net.
A replay of the conference call will be available at +1 416.849.0833 or 1.855.859.2056 by entering the passcode 36405480, from noon (ET) Friday, May 8, 2015 to midnight (ET) Friday, May 15, 2015 or through the webcast archives at http://www.newswire.ca or on DIRTT's website at ir.dirtt.net/.
About DIRTT
DIRTT Environmental Solutions (Doing it Right This Time) uses its proprietary 3D software to design, manufacture and install fully customized prefabricated interiors. The Company's customers in the corporate, government, education and healthcare sectors benefit from DIRTT's precise design and costing; rapid lead times with the highest levels of customization and flexibility; and faster, cleaner construction.
DIRTT's manufacturing facilities are in Phoenix, Savannah, Kelowna and Calgary. DIRTT's team supports 98 DPs throughout North America, the Middle East and Asia. DIRTT trades on the Toronto Stock Exchange under the symbol "DRT." For more information visit www.dirtt.net.
Forward-Looking Statements
Certain information and statements contained in this news release constitute "forward-looking information" and "forward-looking statements" (collectively, "Forward-Looking Information") as defined under applicable Canadian securities laws and the Company hereby cautions investors about important factors that could cause the Company's actual results or outcomes to differ materially from those projected in any Forward-Looking Information contained in this news release. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as "will likely result", "are expected to", "will continue", "is anticipated", "believes", "estimated", "intends", "plans", "projection" and "outlook"), are not historical facts and may be forward-looking and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such Forward-Looking Information.
In particular and without limitation, this news release contains Forward-Looking Information pertaining to the following: comments with respect to the Company's revenue, objectives and priorities for 2015 and beyond; project timetables; and its outlook for its operations and the Canadian, US and international economies, and in particular, the US construction industry.
With respect to Forward-Looking Information contained in this news release, assumptions have been made regarding the Company, among other things:
- its ability to manage its growth;
- competition in its industry;
- its ability to enhance current products and develop and introduce new products;
- its ability to obtain components and products from suppliers on a timely basis and on favorable terms;
- its ability to obtain qualified staff and equipment in a timely and cost-efficient manner;
- the regulatory framework governing taxes in Canada and the US and any other jurisdictions in which the Company may conduct its business in the future;
- future development plans for its assets unfolding as currently envisioned;
- future capital expenditures to be made by the Company;
- future sources of funding for its capital program;
- the impact of increasing competition on the Company; and
- its success in identifying risks to its business and managing the risks mentioned below.
The Company's actual results or outcomes could differ materially from those expressed in the Forward-Looking Information as a result of the risks normally encountered in its industry such as:
- maintaining and managing growth;
- history of losses;
- risks related to global financial crises;
- risks related to new technology;
- competition risks;
- operating results and financial condition fluctuations on a quarterly and annual basis;
- risks related to intellectual property;
- risks related to additional capital requirements;
- customer base and market acceptance;
- software and product defects and design risks;
- availability of key supplies;
- dependence on key personnel;
- commodity price risk;
- risks related to restricted covenants;
- credit risk;
- the effect of government regulation;
- risks related to international expansion;
- risks related to physical facilities;
- legal risks;
- foreign currency and fiscal matters;
- risks related to future acquisitions;
- risks related to Forward-Looking Information;
- reliance on third parties; and
- conflicts of interest.
Since actual results or outcomes could differ materially from those expressed in the Forward-Looking Information provided by or on behalf of the Company, investors and others should not place undue reliance on any such Forward- Looking Information.
DIRTT cautions that the foregoing lists of factors are not exhaustive. Further, Forward-Looking Information is made as of the date hereof, and the Company undertakes no obligation to update Forward-Looking Information to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events, except as required by applicable Canadian securities laws. New factors emerge from time to time, and it is not possible for DIRTT's management to predict all of these factors and to assess in advance the impact of each such factor on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in Forward-Looking Information. No assurance can be given that these expectations will prove to be correct and such Forward-Looking Information contained in this news release should not be unduly relied upon. In addition, this news release may contain Forward-Looking Information attributed to third party industry sources.
For a detailed description of the risks and uncertainties facing the Company and its business and affairs, readers should refer to the Company's annual financial statements, management's discussion and analysis and annual information form for the year ended December 31, 2014, all of which are available at http://www.sedar.com.
Market and Industry Data
Certain market and industry data contained in this news release is based upon information from government or other third party publications, reports and websites or based on estimates derived from such publications, reports and websites. Government and other third party publications and reports do not guarantee the accuracy or completeness of their information. While the Company believes this data to be reliable, market and industry data is subject to variations and cannot be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data-gathering process and other limitations and uncertainties inherent in any statistical survey. Accordingly, the accuracy, currency and completeness of this information cannot be guaranteed. DIRTT has not independently verified any of the data from government or other third party sources referred to in this press release or ascertained the underlying assumptions relied upon by such sources.