DIRTT Environmental Solutions Ltd. (“DIRTT” or the “Company”) (DRT.TO), an interior construction company that uses technology for client-driven design and manufacturing, today announced an update to the fiscal 2019 revenue guidance provided in its management discussion and analysis on July 30, 2019.
It is now anticipated that the Company’s full-year 2019 revenue will be comparable to its 2018 total revenue. In previous guidance, management anticipated fiscal 2019 revenue growth at the lower end of 5% to 10% as compared to fiscal 2018.
Several factors have impacted revenue outlook for the second half of 2019, including revised timing of various projects from 2019 into 2020 and the loss of certain expected projects. These factors reinforce management’s belief that sales in 2019 have been affected more than previously thought by an immature go-to-market approach and an inadequately supported sales force working on a long sales cycle.
With revenue expected to be comparable to 2018, the Company anticipates that Adjusted EBITDA for 2019 will be lower than in 2018. This decrease reflects the impact of expected one-time costs, lower Gross Profit % and foreign exchange losses in 2019 versus foreign exchange gains in 2018. These reductions will be partially offset by the adoption of a new accounting standard for operating leases.
The expected one-time costs — anticipated to be completed by the end of the third quarter —consist of approximately $2.6 million relating to third-party sales and marketing consulting fees, approximately $2.0 million of costs associated with the intended listing of DIRTT’s common shares on the Nasdaq stock exchange, and other operational consultant costs. Of these costs, $1.7 million, $1.4 million and $1.4 million, respectively, had been incurred as at June 30, 2019.
Adjusted Gross Profit % is expected to be lower than 2018 Adjusted Gross Profit % as a combined result of costs associated with the now resolved tile warping issue and labour additions made in the second half of 2018.
“We view 2019 as a transition year while we make the necessary changes to develop and strengthen DIRTT’s commercial function, which is core to our strategic plan,” commented Kevin O’Meara, CEO. “We created the chief commercial officer role and hired an executive for that position, established a national accounts function, and we’re implementing an appropriate sales organization with key processes, systems and metrics. These initiatives are integral to improving how we operate from a commercial perspective and we expect to realize incremental benefits as they take hold. I remain confident in the long-term growth potential of DIRTT.”