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DIRTT Environmental Solutions Ltd. (“DIRTT” or the “Company”) (TSX: DRT), an interior construction company that uses technology for client-driven design and manufacturing, today announced its financial results for the three and six months ended June 30, 2018. This news release contains references to Canadian dollars and United States dollars. Canadian dollars are referred to as “$” and United States dollars are referred to as “US$”.

Second Quarter 2018 Highlights

  • Revenue increased by $10.7 million or 15.2% to $80.7 million, over Q2 2017;
  • Gross profit increased by $2.9 million or 9.7% to $32.8 million, over Q2 2017;
  • Gross profit % decreased to 40.6% from 42.7% in Q2 2017;
  • Adjusted gross profit(1) increased to $34.7 million from $30.7 million in Q2 2017;
  • Adjusted gross profit %(1) was slightly lower at 43.0% compared to 43.9% in Q2 2017;
  • Adjusted EBITDA(1) increased to $8.2 million from $2.1 million in Q2 2017;
  • Adjusted EBITDA %(1) increased to 10.1% from 3.0% in Q2 2017; and
  • Net income and net income per share were $0.8 million and $0.01, respectively, compared to net loss and net loss per share of $2.9 million and $0.03, respectively, in Q2 2017.

Note: (1) see "Non-IFRS Measures".

Operational Highlights

  • First phase of leadership transition complete with permanent chief financial officer in place;
  • Revenue from healthcare industry increased from 18% to 20%; and
  • Hosted over 1,000 current and prospective clients at DIRTT Connext.

“We laid out a plan at the beginning of the year to focus on profitability, near term growth, and establishing a permanent leadership team,” says DIRTT interim CEO Michael Goldstein. “In the first half of 2018 we increased revenue growth by 19.5%, increased market penetration in the healthcare market, increased Adjusted EBITDA by 240%, completed a strategic review, and hired our chief financial officer.”

 “The fiscal discipline measures introduced in the first half of 2018 are proving effective with a significant impact on profitability,” says chief financial officer Geoff Krause. “Combined with previous investments and based on our sales pipeline as we move into what is traditionally the busier half of the fiscal year, we’re on track to meet our targets of adjusted EBITDA margins between 13% - 15%. DIRTT is well-positioned for profitable growth.”

Goldstein adds that looking ahead, finalizing the permanent management team is a priority. “DIRTT’s search for a permanent CEO is expected to successfully conclude in the third quarter of this year. Finding someone with the right mix of experience, track record and vision to lead this company is of paramount importance," says Goldstein, who will assist with the transition once the role has been filled.

Summary Financial Results


For the six months ended June 30,




($ thousands, except per share amounts)






Gross profit





Gross profit %





Adjusted gross profit (1)





Adjusted gross profit % (1)





Selling, general and administrative ("SG&A")





SG&A %





Adjusted SG&A (1)





Adjusted SG&A % (1)





Adjusted EBITDA (1)





Adjusted EBITDA % (1)





Income tax expense (recovery)





Net income (loss)





Net income (loss) per share - basic and diluted





Cash flows (used in) provided by operating activities





Cash flows provided by operating activities (1)

  before changes in non-cash working capital










As at



June 30, 2018
December 31, 2017






Cash and cash equivalents





Working capital





Long-term debt






Note: (1) See "Non-IFRS Measures".


Revenue for Q2 2018 increased by $10.7 million or 15.2%, over Q2 2017. The increase is attributable to a general increase in sales activity across a range of industry segments, partially offset by the weakening of the US dollar compared to the same quarter in 2017. Included in these segments is healthcare, which increased from 18% of total revenue in Q2 2017 to 20% in Q2 2018. Apart from acute healthcare solutions, DIRTT Solutions are industry agnostic. In addition, the Company recorded installations revenue in Q2 2018 of $2.1 million (Q2 2017 - $2.0 million).

Gross Profit / Adjusted Gross Profit / Gross Profit % / Adjusted Gross Profit %

Gross profit increased to $32.8 million in Q2 2018 from $29.9 million in Q2 2017, an increase of 9.7%. Gross profit % decreased to 40.6% from 42.7% in the same period. The decrease in gross profit % was due primarily to an increase in overall direct material costs of 0.5%, higher direct labour costs of 0.7%, higher depreciation and amortization expense relating to increased investment in manufacturing-related assets of 1.2% and partially offset by decreases in indirect costs of 0.4%. The increases in direct material and direct labour costs were due to changes in product/service revenue mix combined with greater volatility in the timing of monthly production volumes in Q2 2018.

Adjusted gross profit increased to $34.7 million in Q2 2018 from $30.7 million in Q2 2017, an increase of 13.0%. Adjusted gross profit % decreased to 43.0% from 43.9% in the same respective period for the reasons discussed above, excluding the impact from increased depreciation and amortization expense related to increased investment in manufacturing-related assets.

SG&A Expenses / Adjusted SG&A Expenses / SG&A % / Adjusted SG&A %

Selling, general and administrative (“SG&A”) expenses decreased to $31.0 million in Q2 2018 from $32.9 million in Q2 2017, a decrease of $1.9 million or 6.0%. SG&A % decreased from 47.0% in Q2 2017 to 38.4% in Q2 2018. SG&A in Q2 2018 reflects the new fiscal discipline implemented in the first half of 2018. The decrease in SG&A in Q2 2018 was due to the combined expense reduction in trade shows of $2.9 million, mostly relating to the restructuring of DIRTT Connext; travel, meals and entertainment and marketing of $1.4 million; depreciation and amortization of non-manufacturing-related assets of $0.6 million; and stock-based compensation expense of $0.7 million. These decreases were partially offset by increases in salaries, benefits and commissions of $0.9 million; reorganization costs of $1.0 million due to recent management changes; professional service fees of $1.2 million related to proxy defense costs; and other operating expenses of $0.6 million.

Adjusted SG&A expenses decreased to $26.6 million in Q2 2018 from $28.3 million in Q2 2017, a decrease of $1.7 million, or 6.0%. Adjusted SG&A % decreased from 40.4% to 33.0% in Q2 2018 compared with Q2 2017. The reason for the decrease is the same as discussed above with respect to SG&A, excluding the impact from decreased depreciation and amortization of non-manufacturing-related assets, decreased stock-based compensation expense incurred in the period and reorganization costs.

The impact of the weakening US dollar to Canadian dollar average exchange rates during the three and six months ended June 30, 2018 partially reduced the overall increase in SG&A and Adjusted SG&A expenses across the organization, as certain of these SG&A expenditures are denominated in US dollars.

Adjusted EBITDA / Adjusted EBITDA %

Adjusted EBITDA increased to $8.2 million in Q2 2018 from $2.1 million in Q2 2017, an increase of  $6.1 million or 282.8%. Adjusted EBITDA % for Q2 2018 increased from 3.0% in Q2 2017 to 10.1%. The increase was primarily due to higher adjusted gross profit of $4.0 million, lower adjusted SG&A expenses of $1.7 million and increase in foreign exchange gain of $0.4 million.

Liquidity and Capital Resources

At June 30, 2018, we had $59.9 million in cash and cash equivalents, compared to $79.6 million at December 31, 2017.

At June 30, 2018, we also had access to an undrawn US$18.0 million revolving credit facility.


Construction is a major global industry defined by building new structures, making additions and modifications to existing structures, as well as maintenance, repair and leasehold improvements on existing structures. The total US construction market was US$1.2 trillion in 2017, of which US$710 billion was attributable to non-residential building and US$523 billion was attributable to residential building [Source: US Census Bureau]. This includes both new building and renovation projects. Total US non-residential and residential construction spending is forecast to grow to US$820 billion and US$614 billion, respectively, in 2021 [Source: FMI Overview 2018].

DIRTT is a building process powered by technology. It is a comprehensive interior construction solution that addresses the challenges frequently associated with conventional interior building methods: cost overruns, labor shortages, inconsistent quality and time delays. DIRTT’s construction method and solutions offer a superior alternative to conventional interior construction. There is an immediate addressable North American market for DIRTT Solutions, of at least $50 billion. We expect to continue to pursue opportunities in our primary focus areas of commercial (which includes corporate, education, government and target areas in residential) and healthcare.

Our plan outlined at the beginning of the year focused on profitable growth, increasing market share, and establishing a permanent leadership team. We continue to make very good progress toward these objectives as discussed further below.

We are pleased with our progress in the first half of 2018, growing revenue by 19.5% over the same period of 2017. Based upon our sales pipeline and as we move into what is traditionally the busier half of the fiscal year, our outlook for the balance of 2018 remains positive and in line with our previous expectations.  We are currently delivering on several large orders that, while not material on a stand-alone basis, collectively provide a solid base for the latter half of 2018.

Our focus on fiscal discipline continues to show favorable results, with adjusted EBITDA increasing by 239.9% in the first half of the year over the same period of last year.  We remain on track to meet our target of adjusted EBITDA margins of between 13% - 15%.

During the first half of 2018 we experienced an increase in the energy industry, where revenue increased as a percentage of total revenue from 6% in YTD 2017 to 9% in YTD 2018. The healthcare sector continues to show promise as one of our key market segments, growing in absolute terms and as a percentage of our total revenue. Healthcare orders represented 16% of revenue in the first half of 2018 versus 14% in the first half of 2017. We are encouraged by ongoing discussions around upcoming projects, adding to the thousands of completed and referenceable DIRTT healthcare projects that evidence the unique advantages this comprehensive solution offers the healthcare market before, during and after construction.

DIRTT is finalizing its permanent management team.  A permanent chief financial officer commenced with the Company in June 2018 and the search for a permanent CEO is expected to be completed in the third quarter of 2018.

Non-IFRS Measures

Adjusted gross profit, Adjusted gross profit %, Adjusted SG&A, Adjusted SG&A %, Adjusted EBITDA, Adjusted EBITDA % and cash provided by operating activities before changes in non-cash working capital are non-IFRS measures. Non-IFRS measures 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 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. For a reconciliation of these non-IFRS measures as well as the rationale for management’s use of such measures, see the Company’s management’s discussion and analysis for the three and six months ended June 30, 2018, available at

Conference Call Details

A conference call and webcast for the investment community is scheduled for Thursday, August 9, 2018 at 10 a.m. ET (8 a.m. MT) to discuss the second quarter results in greater detail. The call and webcast will be hosted by DIRTT’s interim CEO Michael Goldstein, chief financial officer Geoff Krause, and the director of investor relations, Kim MacEachern.

To join by telephone, dial +1 877-479-7708 (toll-free in North America). Please dial in 10 minutes prior to the start time. To listen to the live webcast of the call (in listen-only mode), please go to

Investors are invited to submit questions by email before and during the call, to Supplemental information slides will be available at, prior to the start of the call and webcast.

A replay of the conference call will be available at +1 855.859.2056 by entering the passcode 1389209, from 1:00 p.m. (ET) Thursday, August 9, 2018 to 11:59 p.m. (ET) Thursday, August 16, 2018 at or on DIRTT’s website at


DIRTT is a building process powered by technology. The name stands for Doing It Right This Time. 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’s manufacturing facilities are located in Phoenix, Savannah, Kelowna and Calgary. DIRTT works with nearly 100 sales partners throughout North America, the United Kingdom, the Middle East and Asia. DIRTT trades on the Toronto Stock Exchange under the symbol "DRT." For more information visit

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 2018 and beyond; project timetables; its growth strategies and opportunities; its ability to meet working capital requirements and financial obligations; use and deployment of the Company’s capital; and its outlook for its operations and the Canadian, US and international economies, and in particular, the US and Canadian 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 currently or 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:

  • risks related to additional capital requirements;
  • fluctuations in commodity prices;
  • credit risks;
  • foreign exchange rate and fiscal matters;
  • operating results and financial condition fluctuations on a quarterly and annual basis;
  • history of losses;
  • ability to pay a dividend;
  • maintaining and managing growth;
  • risks related to new technology;
  • competition risks;
  • risks related to intellectual property;
  • customer base and market acceptance;
  • software and product defects and design risks;
  • availability of key supplies;
  • dependence of key personnel;
  • the effect of government regulation;
  • risks related to physical facilities;
  • legal risks;
  • risks related to future acquisitions;
  • reliance on third parties;
  • risks related to Forward-Looking Information; 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, 2017, all of which are available at

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.


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