DIRTT Releases Fourth Quarter and Full Year 2020 Financial Results
DIRTT Environmental Solutions Ltd. (Nasdaq: DRTT) reported its financial results for Q4 and the full year 2020, revealing a 21% decline in Q4 revenue to $42.2 million and a 31% drop in full-year revenue to $171.5 million due to COVID-19 impacts. Despite a net loss of $4.2 million in Q4, both gross profit and adjusted gross profit margins improved. The company maintains a cash balance of $45.8 million as of year-end 2020. The management anticipates market recovery in commercial construction starting in H2 2021, although uncertainty remains due to ongoing pandemic effects.
- Improved gross profit margin in Q4 2020 at 27.4%, up from 25.3% in Q4 2019.
- Cash balance of $45.8 million at year-end 2020 provides liquidity for ongoing operations.
- Q4 2020 revenue declined by 21% compared to the same period in 2019.
- Full year 2020 revenue decreased by $76.2 million or 31% compared to 2019.
- Net loss for 2020 increased to $11.3 million from $4.4 million in 2019.
CALGARY, Alberta, Feb. 24, 2021 (GLOBE NEWSWIRE) -- DIRTT Environmental Solutions Ltd. (“DIRTT”, the “Company”, “we” or “us”) (Nasdaq: DRTT, TSX: DRT), an interior construction company that uses proprietary software to design, manufacture and install fully customizable environments, today announced its financial results for the three and twelve months ended December 31, 2020. All financial information in this news release is presented in U.S. dollars, unless otherwise stated.
Fourth Quarter 2020
- Revenue of
$42.2 million - Gross profit margin of
27.4% - Adjusted Gross Profit Margin1 of
32.0% - Net loss of
$4.2 million - Net loss margin of (
9.9% ) - Adjusted EBITDA1 of (
$2.9) million - Adjusted EBITDA Margin1 of (
6.8% )
Fiscal 2020
- Revenue of
$171.5 million - Gross profit margin of
31.1% - Adjusted Gross Profit Margin1 of
37.0% - Net loss of
$11.3 million - Net loss margin of (
6.6% ) - Adjusted EBITDA1 of (
$7.2) million - Adjusted EBITDA Margin1 of (
4.2% ) $45.8 million cash balance at December 31, 2020
Note: (1) See “Non-GAAP Financial Measures”. We have revised our calculations of Adjusted Gross Profit Margin and Adjusted EBITDA for the periods presented.
Management Commentary
“The COVID-19 pandemic brought swift and severe changes to the construction industry in 2020 and DIRTT was not immune to the resulting contraction in commercial construction activity,” stated Kevin O’Meara, chief executive officer. “We benefited throughout most of the year from the completion of projects that were underway at the beginning of the pandemic. However, with continued lack of clarity on how COVID-19 and associated restrictions will evolve, end customers remain reluctant to make firm commitments on new projects. This dynamic began to impact our activity levels in the fourth quarter of 2020 and has continued into 2021.”
“Nevertheless, industry forecasts are predicting commercial construction starts to recover slightly this year and conversations with distribution partners and end customers support the view of strengthening market demand beginning slowly in the second half of 2021. The pace of the recovery may be dependent on the success of vaccination programs and the ensuing confidence of end customers to move forward with projects. Longer term, we continue to believe the pandemic has brought greater attention to how organizations design and build, and we see evidence that it has heightened the need for the type of flexible and adaptable spaces that DIRTT provides.”
“Despite these challenges, we have continued to transform DIRTT through the prudent execution of our strategic plan. This included significant progress towards our objective to develop a robust commercial organization, attain the continuous improvement phase of our operations, and innovate advances in our ICE® technology and solutions suite. Further, in January of 2021 we secured additional liquidity through an oversubscribed offering of
Mr. O’Meara concluded, “Our focus in 2021 is to continue building out our commercial team and to leverage the organizational strength we have developed to drive sales execution and increase market penetration. We remain confident in the strength of our business model and approach to interior construction and resolute in the execution of our strategic plan to drive the Company to achieve its full potential.”
Fourth Quarter Financial Review
Revenue for the fourth quarter of 2020 was
Correspondingly, gross profit for the fourth quarter of 2020 declined to
Adjusted Gross Profit Margin in the fourth quarter of 2020 decreased to
Sales and marketing expenses in the fourth quarter of 2020 were
General and administrative expenses were
Operations support expenses were
Technology and development expenses were
Net loss for the fourth quarter of 2020 was
Adjusted EBITDA and Adjusted EBITDA Margin for the fourth quarter of 2020 were a
Full Year Financial Review
Revenues for the year ended December 31, 2020 were
Correspondingly, gross profit for the year ended December 31, 2020 was
Sales and marketing expenses decreased
General and administrative expenses decreased
Operations support expenses decreased
Technology and development expenses increased by
Net loss for the year ended December 31, 2020 was
Adjusted EBITDA and Adjusted EBITDA Margin for the year ended December 31, 2020 was a
Conference Call and Webcast Details
A conference call and webcast for the investment community is scheduled for Thursday, February 25, 2021 at 8:00 a.m. MST (10:00 a.m. EST). The call and webcast will be hosted by Kevin O’Meara, chief executive officer, Geoff Krause, chief financial officer, and Kim MacEachern, director of investor relations.
The conference call will be broadcast live in listen-only mode available through the Company’s website at dirtt.com/investors. Alternatively, click here to listen to the live webcast.
To join by telephone, dial +1-877-479-7708 (toll-free in North America) or +1-647-427-2478 (international). Please dial in a minimum of 15 minutes prior to the start time to ensure a timely connection to the call.
Investors are invited to submit questions to ir@dirtt.com before and during the call. Supplemental information slides will be available within the webcast.
A replay of the webcast will be available online and on DIRTT’s website.
| Statement of Operations | ||||||||||||
| (Unaudited – Stated in thousands of U.S. dollars) | ||||||||||||
| Three months ended December 31, | For the Year Ended December 31, | |||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Product revenue | 40,904 | 52,222 | 166,689 | 240,659 | ||||||||
| Service revenue | 1,288 | 976 | 4,818 | 7,076 | ||||||||
| Total revenue | 42,192 | 53,198 | 171,507 | 247,735 | ||||||||
| Product cost of sales | 30,043 | 37,011 | 113,445 | 153,128 | ||||||||
| Costs of under-utilized capacity | - | 2,240 | 2,010 | 2,240 | ||||||||
| Service cost of sales | 609 | 482 | 2,769 | 5,943 | ||||||||
| Total cost of sales | 30,652 | 39,733 | 118,224 | 161,311 | ||||||||
| Gross profit | 11,540 | 13,465 | 53,283 | 86,424 | ||||||||
| Expenses | ||||||||||||
| Sales and marketing | 7,531 | 8,041 | 28,049 | 33,939 | ||||||||
| General and administrative | 5,741 | 6,612 | 26,663 | 27,645 | ||||||||
| Operations support | 2,251 | 3,266 | 9,381 | 11,037 | ||||||||
| Technology and development | 1,905 | 1,937 | 8,111 | 7,818 | ||||||||
| Stock-based compensation | 751 | 1,473 | 2,351 | 3,876 | ||||||||
| Reorganization | - | 1,921 | - | 4,560 | ||||||||
| Total operating expenses | 18,179 | 23,250 | 74,555 | 88,875 | ||||||||
| Operating loss | (6,639 | ) | (9,785 | ) | (21,272 | ) | (2,451 | ) | ||||
| Government subsidies | 3,918 | - | 12,721 | - | ||||||||
| Foreign exchange loss | (1,450 | ) | (562 | ) | (576 | ) | (1,324 | ) | ||||
| Interest income | 16 | 209 | 238 | 529 | ||||||||
| Interest expense | (109 | ) | (54 | ) | (305 | ) | (131 | ) | ||||
| 2,375 | (407 | ) | 12,078 | (926 | ) | |||||||
| Income loss before tax | (4,264 | ) | (10,192 | ) | (9,194 | ) | (3,377 | ) | ||||
| Income taxes | ||||||||||||
| Current tax expense (recovery) | (2,353 | ) | (842 | ) | (3,521 | ) | 1,064 | |||||
| Deferred tax expense (recovery) | 2,267 | (1,806 | ) | 5,625 | (45 | ) | ||||||
| (86 | ) | (2,648 | ) | 2,104 | 1,019 | |||||||
| Net loss | (4,178 | ) | (7,544 | ) | (11,298 | ) | (4,396 | ) | ||||
| Loss per share | ||||||||||||
| Basic and diluted loss per share | (0.05 | ) | (0.09 | ) | (0.13 | ) | (0.05 | ) | ||||
Non-GAAP Financial Measures
Our consolidated financial statements are prepared in accordance with GAAP. These GAAP financial statements include non-cash charges and other charges and benefits that we believe are unusual or infrequent in nature or that we believe may make comparisons to our prior or future performance difficult.
As a result, we also provide financial information in this news release that is not prepared in accordance with GAAP and should not be considered as an alternative to the information prepared in accordance with GAAP. Management uses these non-GAAP financial measures in its review and evaluation of the financial performance of the Company. We believe that these non-GAAP financial measures also provide additional insight to investors and securities analysts as supplemental information to our GAAP results and as a basis to compare our financial performance from period-over-period and to compare our financial performance with that of other companies. We believe that these non-GAAP financial measures facilitate comparisons of our core operating results from period to period and to other companies by removing the effects of our capital structure (net interest income on cash deposits, interest expense on outstanding debt and debt facilities, or foreign exchange movements), asset base (depreciation and amortization), the impact of under-utilized capacity on gross profit, tax consequences and stock-based compensation. In addition, management bases certain forward-looking estimates and budgets on non-GAAP financial measures, primarily Adjusted EBITDA.
In the fourth quarter of 2019, we removed the impact of all foreign exchange from Adjusted EBITDA. Foreign exchange gains and losses can vary significantly period-on-period due to the impact of changes in the U.S. and Canadian dollar exchange rates on foreign currency denominated monetary items on the balance sheet and are not reflective of the underlying operations of the Company. We have presented a reconciliation to our prior calculation of Adjusted EBITDA for all years presented. Additionally, in the fourth quarter of 2019, we have excluded from Adjusted Gross Profit costs associated with under-utilized capacity. Fixed production overheads are allocated to inventory on the basis of normal capacity of the production facilities. In periods where production levels are abnormally low, unallocated overheads are recognized as an expense in the period in which they are incurred.
Reorganization expenses, impairment expenses, government subsidies, depreciation and amortization, stock-based compensation, and foreign exchange are excluded from our non-GAAP financial measures because management considers them to be outside of the Company’s core operating results, even though some of those expenses may recur, and because management believes that each of these items can distort the trends associated with the Company’s ongoing performance. We believe that excluding these expenses provides investors and management with greater visibility into the underlying performance of the business operations, enhances consistency and comparativeness with results in prior periods that do not, or future periods that may not, include such items, and facilitates comparison with the results of other companies in our industry.
The following non-GAAP financial measures are presented in this news release, and a description of the calculation for each measure is included.
| Adjusted Gross Profit, as previously presented | Gross profit before deductions for depreciation and amortization |
| Adjusted Gross Profit | Gross profit before deductions for costs of under-utilized capacity, depreciation and amortization |
| Adjusted Gross Profit Margin | Adjusted Gross Profit divided by revenue |
| EBITDA | Net income before interest, taxes, depreciation and amortization |
| Adjusted EBITDA, as previously presented | EBITDA adjusted for non-cash foreign exchange gains or losses on debt revaluation; impairment expenses; stock-based compensation expense; government subsidies; reorganization expenses; and any other non-core gains or losses |
| Adjusted EBITDA | EBITDA adjusted for foreign exchange gains or losses; impairment expenses; stock- based compensation expense; government subsidies; reorganization expenses; and any other non-core gains or losses |
| Adjusted EBITDA Margin | Adjusted EBITDA divided by revenue |
You should carefully evaluate these non-GAAP financial measures, the adjustments included in them, and the reasons we consider them appropriate for analysis supplemental to our GAAP information. Each of these non-GAAP financial measures has important limitations as an analytical tool due to exclusion of some but not all items that affect the most directly comparable GAAP financial measures. You should not consider any of these non-GAAP financial measures in isolation or as substitutes for an analysis of our results as reported under GAAP. You should also be aware that we may recognize income or incur expenses in the future that are the same as, or similar to some of the adjustments in these non-GAAP financial measures. Because these non-GAAP financial measures may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
The following table presents a reconciliation for the three months and full year ended December 31, 2020 and 2019 of EBITDA and Adjusted EBITDA to our net income (loss), which is the most directly comparable GAAP measure for the periods presented:
(Stated in thousands of U.S. dollars)
| Three months ended December 31, | For the Year Ended December 31, | |||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Net loss for the year | (4,178 | ) | (7,544 | ) | (11,298 | ) | (4,396 | ) | ||||
| Add back (deduct): | ||||||||||||
| Interest Expense | 109 | 54 | 305 | 131 | ||||||||
| Interest Income | (16 | ) | (209 | ) | (238 | ) | (529 | ) | ||||
| Income Tax Expense (Recovery) | (86 | ) | (2,648 | ) | 2,104 | 1,019 | ||||||
| Depreciation and Amortization | 3,033 | 2,982 | 11,706 | 12,242 | ||||||||
| EBITDA | (1,138 | ) | (7,365 | ) | 2,579 | 8,467 | ||||||
| Stock-based Compensation | 751 | 1,473 | 2,351 | 3,876 | ||||||||
| Non-cash Foreign Exchange Gain on Debt Revaluation | - | - | - | (211 | ) | |||||||
| Government Subsidies | (3,918 | ) | - | (12,721 | ) | - | ||||||
| Reorganization Expense | - | 1,921 | - | 4,560 | ||||||||
| Adjusted EBITDA, as previously presented(1) | (4,305 | ) | (3,971 | ) | (7,791 | ) | 16,692 | |||||
| Other Foreign Exchange Losses | 1,450 | 562 | 576 | 1,535 | ||||||||
| Adjusted EBITDA | (2,855 | ) | (3,409 | ) | (7,215 | ) | 18,227 | |||||
| Net Income (Loss) Margin(2) | (9.9 | )% | (14.2 | )% | (6.6 | )% | (1.8 | )% | ||||
| Adjusted EBITDA Margin, as previously presented(1) | (10.2 | )% | (7.5 | )% | (4.5 | )% | 6.7 | % | ||||
| Adjusted EBITDA Margin | (6.8 | )% | (6.4 | )% | (4.2 | )% | 7.4 | % | ||||
(1) As discussed previously, in prior filings, only foreign exchange movements on debt revaluation was included in Adjusted EBITDA.
(2) Net income (loss) divided by revenue.
The following table presents a reconciliation for the three months and full years ended December 31, 2020 and 2019 of Adjusted Gross Profit to our gross profit, which is the most directly comparable GAAP measure for the periods presented:
(Stated in thousands of U.S. dollars)
| Three months ended December 31, | For the Year Ended December 31, | |||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Gross profit | 11,540 | 13,465 | 53,283 | 86,424 | ||||||||
| Gross profit margin | 27.4 | % | 25.3 | % | 31.1 | % | 34.9 | % | ||||
| Add: Depreciation and amortization expense | 1,982 | 2,081 | 8,110 | 9,195 | ||||||||
| Adjusted Gross Profit, as previously presented | 13,522 | 15,546 | 61,393 | 95,619 | ||||||||
| Add: Costs of under-utilized capacity | - | 2,240 | 2,010 | 2,240 | ||||||||
| Adjusted Gross Profit | 13,522 | 17,786 | 63,403 | 97,859 | ||||||||
| Adjusted Gross Profit Margin, as previously presented | 32.0 | % | 29.2 | % | 35.8 | % | 38.6 | % | ||||
| Adjusted Gross Profit Margin | 32.0 | % | 33.4 | % | 37.0 | % | 39.5 | % | ||||
Special Note Regarding Forward-Looking Statements
Certain statements contained in this news release are “forward-looking statements” within the meaning of “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934 and “forward-looking information” within the meaning of applicable Canadian securities laws. All statements, other than statements of historical fact included in this news release, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this news release, the words “anticipate,” “believe,” “expect,” “estimate,” “intend,” “plan,” “project,” “outlook,” “may,” “will,” “should,” “would,” “could,” “can,” the negatives thereof, variations thereon and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. In particular and without limitation, this news release contains forward-looking information pertaining to the effect of our strategic priorities on increasing value creation, and on our financial condition and results of operations; the recovery of commercial construction starts and the strengthening of market demand during 2021; and the impact of the COVID-19 pandemic on our business. Forward-looking statements are based on certain estimates, beliefs, expectations and assumptions made in light of management’s experience and perception of historical trends, current conditions and expected future developments, as well as other factors that may be appropriate.
Forward-looking statements necessarily involve unknown risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed or implied in such statements. Due to the risks, uncertainties and assumptions inherent in forward-looking information, you should not place undue reliance on forward-looking statements. Factors that could have a material adverse effect on our business, financial condition, results of operations and growth prospects include, but are not limited to: the severity and duration of the COVID-19 pandemic and related economic repercussions; global economic, political and social conditions and financial markets; competition in the interior construction industry; our reliance on our network of distribution partners for sales, marketing and installation of our solutions; our ability to implement our strategic plans and to maintain and manage growth effectively; our ability to introduce new designs, solutions and technology and gain client and market acceptance; product liability, product defects and warranty claims brought against us; defects in our designing and manufacturing software; infringement on our patents and other intellectual property; cyber-attacks and other security breaches of our information and technology systems; material fluctuations of commodity prices, including raw materials; shortages of supplies of certain key components and materials; our exposure to currency exchange rate, tax rate and other fluctuations that result from general economic conditions and changes in laws; legal and regulatory proceedings brought against us; the availability of capital or financing on acceptable terms, which may impair our ability to make investments in the business; and other risks described under the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the U.S. Securities and Exchange Commission and applicable securities commissions or similar regulatory authorities in Canada.
Our past results of operations are not necessarily indicative of our future results. You should not rely on any forward-looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. We undertake no obligation to update these forward-looking statements, even though circumstances may change in the future, except as required under applicable securities laws. We qualify all of our forward-looking statements by these cautionary statements.
About DIRTT
DIRTT is a building process powered by technology. The Company uses its proprietary ICE® software to design, manufacture and install fully customized interior environments. The technology drives DIRTT’s advanced manufacturing and provides certainty on cost, schedule, and the final result. Complete interior spaces are constructed faster, cleaner, and more sustainably. DIRTT has manufacturing facilities in Phoenix, Savannah and Calgary. The Company works with over 70 partners throughout North America. DIRTT trades on Nasdaq under the symbol “DRTT” and on the Toronto Stock Exchange under the symbol “DRT”.
FAQ
What are DIRTT's financial results for Q4 2020?
How did DIRTT perform in the fiscal year 2020?
What is DIRTT's outlook for recovery in 2021?
What were the gross profit margins for DIRTT in 2020?
