DRTT - DIRTT Drops Over 30 Percent Following Poor Earnings
DIRTT Environmental Solutions (TSX:DRT,NASDAQ:DRTT) is seeing a significant slide in value as it grapples with poor year-end results.
The Alberta-based tech interior construction company issued its Q4 and full fiscal year earnings report late on Tuesday (February 26), leading to a quick drop at the start of the next day’s trading session.
In Toronto and New York the company had seen share price reductions of over 30 percent by 10:30 a.m. EST. It saw a similarly dramatic drop in value of over 30 percent back in November of last year.
DIRTT, a building firm that uses its proprietary ICE software as the basis of its business, officially recorded revenue of US$53.2 million for Q4 — a decline of over US$20 million from the same period the previous year — resulting in a year-end revenue amount of US$247.7 million. For the entire year, the company reported a total net loss of US$4.4 million.
The management team at DIRTT has placed the blame for these drops on “significant management changes during 2018 on a long sales cycle combined with the immature and transitional state of our sales and marketing function.”
The company also said its net loss for the year was primarily due to a US$20.6 million decrease in its gross profit margin alongside a total sum of US$5.7 million for one time costs, including a charge related to its NASDAQ listing. DIRTT also cited a one time sales and marketing expense worth US$2 million.
In both Tuesday’s press release and a call with investors and analysts to discuss the results, Kevin O’Meara, CEO of DIRTT, didn’t shy away from the challenges of 2019, saying the company still places itself at a growth stage of development.
Due to a slow start for its 2020 operating numbers, the firm is already warning investors that its next full-year results may be even lower than the disappointing numbers from 2019.
“Although it remains too early to quantify the impact that our progress will have on revenues for 2020, we are intently focused on exiting the year with the organizational foundation in place to support our strategic plan and achieve our financial targets for 2023,” O’Meara said.
The executive added that this year revenue could be US$450 million to US$550 million, alongside an adjusted earnings before interest, tax, depreciation and amortization margin of 18 to 22 percent.
The company reassured investors that it is confident in the path ahead thanks in large part to a set of roles it is intent on filling. These roles are allocated to the sales and marketing departments at DIRTT. In its presentation sheet, the company confirmed it’s looking for a vice president of commercial operations and a vice president of strategic marketing, which it called “critical roles.”
Before DIRTT’s latest earnings results, Raymond James analyst Joshua Wilson held his “buy” rating, alongside a price target of C$4, according to analyst data site aggregator TipRanks.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.