*Disclosure: I own shares in DRT. I am not a professional. Please do your own due diligence.
Price: $0.86 CAD / $0.60 USD
MC: 116 million USD
EV: 112 million USD
1 year performance: +7.5%
DRT reported yesterday after the close and held a call this morning. Results were in below my expectations and the stock is down 9-10% at time of writing.
*all numbers in USD unless stated otherwise
Quarter Recap
Revenue came in at 41.3 million or up 1%
EBITDA came in at 2.1 million
down from 2.7 million last year
Noted softening in leading indicators for the business
No significant cancellations at this put
Due to the uncertainty they are pulling guidance
Call Notes
Rev in line with expectations
EBITDA higher than expectations
Implemented measures due to increased prices that will start to show up in H2
Share purchases
4.6 million shares through private transaction and NCIB
NCIB expires December 2025
0.5 convertible shares NCIB
Convertibles NCIB expires Dec 2025
Increase in opex in 0.6 mil
Professional fees increased by 0.9 for share repurchase and litigation costs for Falkbuilt
0.5 lower compensation
Supply chain tariff impact
Aluminum - 25% tariff
aluminum is 10% of raw materials
looking to balance impact between the US and Canadian plants
145% on Chinese imports implemented after quarter end
They have 6% hardware for tariff
Q1 had higher costs of 0.6 million or 1.4% of revenue due to tariffs
They feel they will deliver positive adj ebitda this year despite guidance withdraw
Leading indicators
Above trend scheduling delays
Below trend signed awards
Unrelated to DRT specifically
No project cancellations or losses
Looking to apply Lean principles into back office
Integrated solutions team
Multiphase renovation in one of largest airports in US
5.2 million win as well
98.9% on time and full delivery
Valuation
I have them at about 10x EV/ttm EBITDA. I am not sure how the rest of the year plays out so I am hesitant to make many assumptions for 2025 numbers.
Closing Thoughts
The quarter was below my expectations. I was at some point expecting them to pull guidance given all the uncertainty with tariffs. The short term is cloudy for the business, so who knows how the shares will perform. I have a hard time seeing them catch a bid until we see some stability.
Having said that, the long term hasn’t changed for DRT and their value proposition. They are pulling the levers that they can to make their pre-fab solutions more competitive in the marketplace.
I think many investors are reluctant to own businesses where there will be a (potential) decline in profitability in the coming quarters. That is not the case for me.
Thanks for reading.
Dean
* long DRT.to