Dirtt Environmental Solutions Ltd Q4 2024 Update - $DRT.to

Quick update after Q4 2024

*Disclosure: I own shares in DRT. I am not a professional. Please do your own due diligence.

Price: $1.02

MC: 129 million CAD (this is after estimating share count with the acquisition of the NGEN shares announced on Feb 14)

EV: 127 million CAD (this is after estimating share count with the acquisition of the NGEN shares announced on Feb 14)

1 year performance: +54%

DRT reported last week and held a call. Results were ahead of my expectations. The shares are down about 10% since they announced results.

*all numbers in CAD unless stated otherwise

Quarter Recap

• Revenue came in at 48.9 million.

  • Down 4% yoy.

  • High volume of large projects completed in Q4 2023.

• EBITDA came in at 5.5 million vs 4.3 last year.

• They have increased their access to credit.

  • 15 million total borrowing base increased to 25 million.

• The Falkbuilt lawsuit has been directed to Canada.

  • Total potential damages of over 50 million.

• They announced the repurchase of the NGEN shares at $0.80 in February.

• They exceed the annual revenue guidance and came in at the high end of the EBITDA guide.

• They are planning on increasing their capital spend by 50% in 2025.

• Passed a 5% price increase on to customers.

Call Notes

• 12 month sales leads at 278 million. Up from 270 million Jan 1, 2024.

• They produce in Canada and US and import 92% of raw materials from North America.

  • They are proactively preparing some mitigation strategies to the proposed tariffs.

• The newish market approach through their Integrated Solutions was mentioned:

  • “This team provides sales, design, estimating and project delivery services with both DIRTT partners and DIRTT sales representatives. Integrated Solutions increases our sales network's capacity as well as targets revenues and channels without existing coverage. They focus on 3 key opportunity areas; diversify our customer profile, increased volume in smaller markets and expand into new sectors. Through these efforts, Integrated Solutions aims to simplify our go-to-market strategy and increase access to DIRTT's portfolio of products.”

• And some discussion around the ICE offering:

  • “We continue to advance our ICE offering, including the addition of several new features that streamline processes and reduce customer inquiries. In response to user feedback, we optimized the ICE Manager application to improve the interface and added an early access feature to allow beta testers and developers to access applications for further testing and improvement. ICE is also a key driver of our operational efficiency. A Q4 update introduced itemized part pricing and automated case work plan details, saving DIRTT 50 to 75 hours per week in designer time and improving efficiency for our customers.”

• Highest on time and full delivery in company history at 99.1%.

• Total recordable incident rate (TRIF) of 0.82.

Valuation

DRT is currently at about 6x EV/EBITDA using the midpoint of their guide.

Closing Thoughts

The potential for tariffs is a risk for DRT. They are exposed on both sides of the border, although they will be able to make some moves to mitigate the impact.

Taking a step back, their products will continue to gain share in 2025. The balance sheet is strong and they are a microcap being run by a sophisticated team. The pipeline is strong as we move into 2025.

And they have the potential lawsuit settlement as an added kicker from here.

This is one of my most comfortable holdings. I will look to add on weakness here.

Thanks for reading my work.

Dean

* long DRT.to