DIRTT Environmental Solutions Ltd. (TSX:DRT)(OTC:DRTTF) Management Update


DIRTT Environmental Solutions Ltd.
President: Scott Jenkins



WSA:  Good day from Wall Street.  This is Juan Costello, Senior Analyst with the Wall Street Analyzer.  Joining us today is Scott Jenkins, the President of DIRTT Environmental Solutions Ltd, the company trades on the Toronto Stock Exchange; ticker symbol is DRT.  Thanks for joining us today again, Scott.

Scott Jenkins:  Well, thanks for having us Juan, we appreciate it.

WSA:  Certainly, so, yeah, for some of our listeners that may have not caught our past interviews can you give us a history and overview of the company?

Scott Jenkins:  Sure, so DIRTT Environmental Solution in that DIRTT stands for “Doing It Right This Time.”  It’s our reminder of past successes and challenges in our previous companies and trying to make sure we learn from all of those.  DIRTT was founded 11 years ago. We are a technology company operating in construction.  We manufacture interior construction solutions such as walls, power, and data.  I believe the proprietary technology called ICE, which allows us to provide solutions for our clients on rapid lead time with cost certainty, completely customized and they are beautiful and they are also flexible for the future allowing you to move or make changes very quickly and seamlessly.  So it is really thinking, rethinking I guess, interior construction using technology to bring all the benefits to our clients.

WSA:  Great, please talk about your most recent results, including the record Q3 there?

Scott Jenkins:  Sure, so yeah we are really proud of our resulting Q3 and especially actually the momentum going into Q4 as well and in the 2016; yeah we are very happy with things, not just on a quarterly basis, but trailing 12 months and what we see in the future.  DIRTT went public 23 months ago we are still fairly a new public company where it went public as you mentioned on the Toronto Stock Exchange and since that time we’ve seen tremendous growth.  We’re seeing a lot of momentum and recently last week when we announced our Q3 results we were able to demonstrate record quarterly revenue, but probably more importantly, record gross margin and Record EBITDA Margin.  So we are demonstrating the leverage in our business model and this has been something that we’ve been talking to investors, potential investors about for a long time and this is probably the third out of four quarters that we’ve demonstrated improving results on all three of those metrics, so top line growth margin then EBITDA margins.

WSA:  Right, so the recent quarter increased by over 33% year over year, what were some of the key drivers behind that?

Scott Jenkins:  Well, for us what was really interesting and what we’re seeing is we are really proud and we’re seeing tremendous momentum throughout North America and also in the strategic international market where we operate, which is largely the Middle East right now.  No single geographic market or large contract has resulted in our record Q3 results.  It’s really day-to-day bread and butter projects and just, I believe growing brand recognition of DIRTT, clients coming back to us for projects. {We are] well diversified across our industry segments, so we’re seeing a momentum in healthcare, which is very important to us.  We are seeing a lot of momentum in education, both higher Ed and K-12 are new offerings, what we call DIRTT For Life or DIRTT Residential are starting to gain a lot of interest and then our bread and butter commercial projects for all of our commercial clients.  So there is no real single thing I can point to other than DIRTT is becoming more recognized.  Our brand is becoming stronger and I think our value proposition is being recognized by all our clients, both large and small.

WSA:  Well, good and can you elaborate on DIRTT Connext and some of the new offerings there?

Scott Jenkins:  Sure, so in June of this year at DIRTT Connext, which is our largest industry event held in Chicago every year, we saw a lot of momentum, we saw probably about a 30% increase in traffic to our green learning center or showroom if you will and we unveiled DIRTT For Life, DIRTT Residential, we unveiled DIRTT Timber Frame, a sustainable rapid construction that’s beautiful, again utilizing our ICE software to allow our clients to have a fly through their space, but also decrease lead times and increase the manufacturing quality.  We also focused on both healthcare and education at DIRTT Connext showcasing you know, the hospital room of the future, classroom of the future, integration with technology.  If you think about- I’ll speak to education here for a second, if you think about it Juan, when you and I went to school there was the front of the classroom and chalkboards and we always knew what the front of the classroom was and there was a specific room for every subject.  Well, nowadays learning is all about collaborative learning and technology and where the front of the classroom is nobody knows.  Is it actually a classroom or is it a common area for group work or interaction, you know everybody has their smartphone and their tablets and their laptops and there really is a changing environment and I think our solutions really helps make that changing environment more powerful and we’re actually seeing some of our clients talk to us about success factors what we are contributing to those success factors in education.

WSA:  Certainly, and can you talk about the recent collaboration with Corning Inc. and can we look forward to similar deals in the future?

Scott Jenkins:  Actually that’s a good point.  I should chat about that, Corning and DIRTT, we entered into a partnership earlier this year.  So DIRTT has an exclusive partnership with Corning for willow glass.  Willow glass is a very thin flexible glass.  It’s a cousin of Gorilla glass, which is on a lot of our Smartphones and Tablets, it’s an innovation and solution that Corning has had for a long time, but I think they were looking for ways to commercialize it and they came to us.  I think that’s important.  They have been a fantastic partner to deal with both our research and development teams and their R&D teams have been working on new innovations with willow glass.  We see it for both, healthcare and the education market and probably for DIRTT for Life as a tremendous product.  If you think about healthcare where infection control is a big issue, you can now have glass with graphics that is matched to a substrate that is very cleanable.  We can use bleach or traditional cleaning products that really degrade conventional walls, conventional dry wall, but with willow glass obviously there is a much higher performance space there.  So we are in further discussions with Corning to see where else this relationship could go.  I am not sure where that takes us, but they really have been a pleasure to work with and yeah we’re working closely with them as we roll out willow glass and potentially other products.

WSA:  And what are some of the key, goals and milestones that you are hoping to accomplish over the next 6 to 12 months?

Scott Jenkins:  Well, I think actually maybe I will talk on Q3 because Q3 was the first quarter for us where we achieved growth margins above 45% and that’s a milestone that we’ve been really focused on getting to for probably since the IPO, the last18 months and so we hit it.  So I want to keep driving; we as a team wants to keep driving to get that 45% growth margin target for a trailing 12 month period next.  We’re now expanding and really we’re starting to invest.  We have this year and going forward, we are going to be investing further in our sales and marketing teams, our business development efforts that will include; we’ll be attending Arab Health again this year in Dubai, one of the world’s largest healthcare shows.  We will be increasing our investments there by probably a factor of three.  We are opening our very first international green learning center.  So DIRTT’s first international green learning center in London UK, we have the States, we’re going to be focusing there on both DIRTT for Life Healthcare, we’ll also have a small education components and we are going to be looking at the UK market where we’ve done one project now, but we think there is a tremendous opportunity.  We’ve already added a couple of team members, they are actually with us this week at headquarters doing some training and getting up to speed, so that’s exciting.  And then I also believe we’ll be looking at expanding our solutions to areas like DIRTT Timber Frame, which excites me in terms of real sustainable solution that matches perfectly well with DIRTT interior solutions and we believe as you see some of these challenges for the American healthcare where there is really a focus now on maybe smaller clinics outreach.  There is a challenge to building up schools and we think we can help build beautiful sustainable rapid lead-time, high integration with technology facilities for clients.

WSA:  And so as far as investors and the financial community are concerned, Scott, what are some of the key value drivers that you wish investors better understood about the company?

Scott Jenkins: Really quickly I think there is a tremendous amount of leverage in our business model, we leverage the power of our ICE technology, we just talked about, we leveraged the power of our team.  We’re a client-focused company, really proud of all of our DIRTT bags and ice cubes and what we have accomplished so far and we have all these efficiencies that we are going to continue to drive.  So what that means for an investor is that means the leverage in our business model and I think you can see it now in our EBITDA Margins improving, improving rapidly, obviously the Q3.  We’re going to continue to drive that leverage, which will generate greater, not just greater EBITDA on an absolute dollar basis, but increasing EBITDA Margins that is the focus of our business and that’s the power of technology, quite frankly.

WSA:  Certainly, so once again joining us today is Scott Jenkins President of DIRTT Environmental Solution Ltd. which trades on the Toronto Stock Exchange ticker symbol DRT; currently trading at 7.49 Canadian and market cap is about 624 million Canadian and so before we conclude here, to rehash some of your key points; why do you believe investors should consider the company or continue to consider the company as a good investment opportunity today?

Scott Jenkins:  To really summarize Juan, I think we’ve demonstrated our business model has a tremendous amount of leverage in it.  We expect to continue to demonstrate that, we believe construction as one of the oldest and probably most antiquated industries in the world.  It’s also one of the largest.  We are but 0.01% of the US Interior Construction Market right now.  So we have a lot of runway ahead of us.  We are now demonstrating after 11 years and only being public really for 23 months.  We’re demonstrating the power of the DIRTT value proposition, which is delivering accustomed, beautiful, cost competitive, flexible interior construction environment to commercial clients, healthcare clients, education and soon residential.  So we think there is a tremendous opportunity ahead of us and we are doing it all based on a platform of innovative proprietary technology, which we call ICE and I think that’s important for investors to know.  This is proprietary to DIRTT with significant IP around it.

WSA:  Well, great and so DIRTT also trades in US, ticker symbol DRTTS and on the Frankfurt Exchange D13 and we’d like to thank you for taking the time to join us again today Scott and update our investor audience on DRT, its always good to have you on.

Scott Jenkins:  Well, thanks Juan, I appreciate your time today as well and we appreciate the chance to get in front of your listeners and your readers.

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