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DIRTT ENVIRONMENTAL SOLUTIONS LTD (DRTTF)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $48.9M, down 4% year over year but up 13% sequentially; gross margin was 35.9% (down ~190 bps YoY) while Adjusted EBITDA rose to $5.5M and margin improved to 11.2% from 8.5% a year ago. Net income increased to $4.0M vs $1.0M in Q4 2023; diluted EPS was $0.02. Management maintained 2025 guidance despite tariff risks. Liquidity increased to $39.3M at year-end.
  • Management announced a 5% price increase effective March 18, 2025 to offset rising raw material costs, and extended the RBC facility to November 30, 2025 with an increased borrowing base to C$25M; 2025 capex is planned to be >50% higher than 2024.
  • Strategic initiatives progressed: Integrated Solutions channel expansion, ICE software modernization, and AI experiments for efficiency; healthcare product COVE gained awards and early traction.
  • Litigation update: U.S. case redirected to Canada; an eight-week Canadian trial begins February 2, 2026, with DIRTT pursuing damages potentially exceeding $50M.

What Went Well and What Went Wrong

What Went Well

  • Adjusted EBITDA improved to $5.5M (11.2% margin) from $4.3M (8.5%) YoY; net income increased to $4.0M, aided by lower operating expenses, FX gains, and reduced interest expense. “We are focused on continuing to strengthen our balance sheet and on increasing shareholder value.” — CFO Fareeha Khan.
  • Sequential revenue growth of 13% to $48.9M reflects pipeline conversion; year-end liquidity rose to $39.3M, unrestricted cash $29.3M, and long-term debt cut to $22.4M (~1.5x leverage).
  • Commercial and technology execution: ICE enhancements saved 50–75 designer hours/week; early AI use aims to write 25% of code and delivered ~200 hours of development savings via a freight quoting tool pilot.

What Went Wrong

  • Revenue declined 4% YoY on fewer large projects vs Q4 2023; gross margin compressed to 35.9% due to lower volumes and a $0.7M inventory obsolescence provision.
  • Tariff uncertainty escalated (potential 25% tariffs on Canadian imports and U.S. steel/aluminum), prompting a 5% price increase; management cautioned guidance may be impacted if significant tariff effects materialize.
  • Stock-based compensation rose to $1.1M vs $(0.2)M prior year, reflecting higher RSUs and share prices; adjusted gross margin also decreased YoY.

Financial Results

Consolidated P&L (Quarterly progression)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$41.201 $43.375 $48.890
Gross Profit ($USD Millions)$15.375 $16.813 $17.539
Gross Margin (%)37.3% 38.8% 35.9%
Net Income ($USD Millions)$0.596 $7.091 $4.038
Diluted EPS ($USD)$0.00 $0.03 $0.02
Adjusted EBITDA ($USD Millions)$3.166 $4.074 $5.499
Adjusted EBITDA Margin (%)7.7% 9.4% 11.2%

Q4 2024 YoY vs Estimates

MetricQ4 2023Q4 2024YoY Changevs Estimates
Revenue ($USD Millions)$50.933 $48.890 -4.0% N/A (S&P Global consensus unavailable due to limit)
Gross Margin (%)37.8% 35.9% -190 bps N/A (S&P Global consensus unavailable due to limit)
Net Income ($USD Millions)$0.955 $4.038 +$3.083 N/A (S&P Global consensus unavailable due to limit)
Diluted EPS ($USD)$0.01 $0.02 +$0.01 N/A (S&P Global consensus unavailable due to limit)
Adjusted EBITDA ($USD Millions)$4.338 $5.499 +$1.161 N/A (S&P Global consensus unavailable due to limit)

Note: S&P Global consensus estimates were not retrievable due to request limit; therefore, estimate comparisons are not included.

Segment Revenue Breakdown

Segment Revenue ($USD Millions)Q2 2024Q3 2024Q4 2024
Product Revenue$40.176 $42.475 $47.970
Service Revenue$1.025 $0.900 $0.920
Total Revenue$41.201 $43.375 $48.890

KPIs and Balance Sheet

KPIQ2 2024Q3 2024Q4 2024
Liquidity ($USD Millions)$50.1 $34.3 $39.3
Cash on Hand/Unrestricted Cash ($USD Millions)$39.5 $23.6 $29.3
12-Month Pipeline ($USD Millions)$263 (as of Jul 1, 2024) —$278 (as of Jan 1, 2025)
DSO (Days)——31
DPO (Days)——34
Long-Term Debt ($USD Millions)—$23.9 $22.4
Leverage (Debt/Adj. EBITDA)——~1.5x
OTIF (%)—99.2 (Q3) 99.1 (FY)
TRIF—0.63 (9M) 0.82 (FY)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2025$194–$209 (Q2/Q3 2024) $194–$209 (Q4 2024) Maintained
Adjusted EBITDA ($USD Millions)FY 2025$18–$25 (Q2/Q3 2024) $18–$25 (Q4 2024) Maintained
Capital ExpenditureFY 2025Not specified previously>50% increase vs 2024 Raised
Revenue ($USD Millions)FY 2024$165–$175 (Q2/Q3) Actual $174.3 (in line) Achieved in range

Management explicitly cautioned that 2025 guidance may not be realized if significant tariff impacts arise.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2, Q3)Current Period (Q4 2024)Trend
AI/Technology initiatives (ICE, AI)ICE Manager/Design Editor released; expanding catalogs; process automation gains ICE updates saved 50–75 hours/week; evaluating code-generative AI; aim for 25% code by AI; freight quoting tool pilot ~200 hours saved Expanding scope and measurable efficiency gains
Supply chain, tariffs, macroInflation easing; cautious CRE; optimistic pipeline; cost optimization 25% tariff risk (Canadian imports; U.S. steel/aluminum); price increase 5% effective Mar 18, 2025; guidance caution Risk increased; proactive pricing/action
Product performance (COVE, walls)COVE launched; awards; strong interest; other product releases COVE awarded Gold Touchstone; healthcare traction; curved solid corners seeing demand Positive momentum
Partner network & Integrated SolutionsAdded partners; diversified channels; support agreements; commercial strategy refinement Integrated Solutions scaling; advancing 15 partners to higher tier; geographic expansion focus Scaling coverage
Safety/operations excellenceOTIF 99.7% (Q2); TRIF well below industry; capacity headroom OTIF 99.1% (FY); TRIF 0.82 (FY); OSHA SHARP recognition for Savannah factory Sustained excellence
Litigation (Falkbuilt)Scheduling/trial path setup in Canada; U.S. discovery progress U.S. case redirected to Canada; 8-week trial set; pursuing damages possibly >$50M Proceeding toward trial

Management Commentary

  • “We believe the risk of tariffs and pressure on construction in North America further solidifies our value propositions and the reasons to build with DIRTT.” — CEO Benjamin Urban.
  • “Our annual revenue and Adjusted EBITDA results were on the higher end of the guidance range… During 2024, we decreased our long-term debt by over 50%; at December 31, 2024, our cash balances exceeded our long-term debt balance.” — CFO Fareeha Khan.
  • “We are also expanding our offering to include more estimating, pre-construction, and installation services, both directly and through Partners… Integrated Solutions aims to simplify our go-to-market strategy and increase access to DIRTT’s portfolio.” — CEO Benjamin Urban.
  • “DIRTT sources 92% of our raw materials from North America… We have multiple paths to mitigate the impact of tariffs, including material sourcing and manufacturing locations.” — CEO Benjamin Urban.
  • “ICE… itemized part pricing and automated casework plan details, saving DIRTT 50 to 75 hours per week in designer time.” — Company statement.

Q&A Highlights

  • The transcript provided contains prepared remarks; an analyst Q&A section was not included in the available transcript content.

Estimates Context

  • S&P Global consensus estimates for Q4 2024 revenue and EPS were unavailable due to data request limits; therefore, comparison to Wall Street consensus could not be provided for this quarter.
  • Given sequential revenue and margin improvement, estimates for 2025 may need to consider pricing actions (5% increase) and tariff risk, with potential implications for gross margin and volume assumptions.

Key Takeaways for Investors

  • Sequential top-line reacceleration: revenue +13% QoQ to $48.9M; Adjusted EBITDA margin improved to 11.2% — a positive operating momentum signal.
  • YoY softness driven by prior-year large projects and inventory provision; gross margin compression to 35.9% underscores sensitivity to volume/mix.
  • Balance sheet strengthening continues: liquidity at $39.3M; debt reduced to $22.4M (~1.5x leverage); supports flexibility amid tariff uncertainty.
  • Proactive pricing and dual-country manufacturing footprint help mitigate tariff exposure; however, management explicitly cautions guidance could be impacted by tariff outcomes.
  • Commercial initiatives and ICE/AI execution are driving efficiency gains and channel expansion; early healthcare traction (COVE) adds sector diversification.
  • 2025 guidance maintained ($194–$209M revenue; $18–$25M Adjusted EBITDA) with >50% capex lift focused on plant efficiencies, DXC footprint, and ICE — supports growth initiatives.
  • Litigation path clarifies with Canadian trial set for Feb 2026; potential damages could be material but timing remains beyond near-term trading horizon.