DIRTT Environmental Solutions Ltd.

Thank you for standing by and welcome to DIRT's 2021 Q1 Financial Results Conference Call. All lines are currently in a listen-only mode. After the speaker's presentation, there will be a question and answer session. If you would like to ask a question at that time, you may do so by pressing star and the number one on your telephone keypad. It is now my pleasure to hand the conference over to Ms. Kim McEachern. Please go ahead.

Thank you, Operator, and good morning, everyone. Welcome to today's call to discuss DIRT's first quarter 2021 results. Joining me on the call are DIRT's Chief Executive Officer, Kevin O'Meara, and Chief Financial Officer, Jeff Krause. Management's prepared remarks today are accompanied by presentation slides. To access the slides, please view them from the webpage of this webcast or on our website. Today's call will include forward-looking statements within the meaning of applicable Canadian and United States securities laws. These statements are based on the company's current intent, expectations, and projections. They are not guarantees of future performance. In addition, this call will reference non-GAAP results, excluding special items. Please reference our Form 10Q as filed on May 5, 2021, with the Securities and Exchange Commission, or SEC, and other reports and filings with the SEC for information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results. I will also remind you that this webcast is being recorded, and a replay will be available today at approximately 1 p.m. Eastern time. I now turn the call over to Kevin.

Thank you, Kim, and thank you to everyone joining us today. Getting on slide four, as we discussed in February when we released our year-end results, we expected the slowdown in the first half of 2021 compared to the fourth quarter of 2020. Projects that were in flight when the pandemic commenced were largely completed in 2020, and as a result, sales in the first quarter of 2021 bore the full brunt of the COVID-induced downturn in North American non-residential construction activity. We believe this quarter's revenue of $29.5 million represents our low point in the pandemic-impacted operating environment. It should be noticed this $29.5 million does not include approximately $2 million from the COVID vaccination trailers we sold in February, an order we discussed on our last quarterly call and which were delivered in April. We are reasonably confident revenues in the second quarter will be at or near the quarterly revenue range we experienced in the first half of 2020. We also remain cautiously optimistic that robust government stimulus plans across North America and the growing success of vaccination rollouts will increase business confidence and drive a recovery in the second half of 2021. The specific timing and magnitude of this recovery remains uncertain, and thus our results are still subject to the effects of the pandemic. Additional waves of infections, such as the one Canada is currently experiencing due to the prevalence of COVID-19 variants, can create individual project delays and uncertainties. thereby impacting the timing of sales. In addition, supply chain delays with other billing trades that come before us in the construction process can delay projects and thus our sales. Similar to what we experienced with the vaccination trailers, a few days' movement in the shipping of an order around the end of a reporting period can shift revenue from one quarter to another. Despite the onset of COVID-19 last year, our commitment to the prudent execution of our strategic plan has been relentless. including our approach to creating a commercial organization capable of driving the aggressive sales growth and market penetration I believe to be possible when I join DIRT in 2018. This commitment positions us to take advantage of a resumption of normalized activity and non-residential construction to grow sales. We encourage by the growing customer engagement we see to increase demand for tours, both virtual and in-person, at our DIRT experience centers and an ongoing high level of project quoting activities. While we're unable to quantify quoting activity into a reported backlog, we see ample anecdotal evidence that our new commercial capabilities are working synergistically to allow us to speak to a broad range of prospective clients in a more coherent, coordinated, and thoughtful manner than ever before. This is evident across all three focus areas within our sales force, which includes our territory sales reps, our segment sales specialists, including healthcare specialists, and our strategic accounts team. To support all these areas in our distribution partners, our strategic marketing team has been working closely with both our product development group and our sales team to strengthen how we convey our value proposition. They've developed sales tools to illustrate the breadth of our unique capabilities while also conveying the depth and specificity of our offering in some of the more technical aspects of construction, including acoustics and power network integration. The strategic marketing team also continues to evolve our brand awareness, strengthening our voice in the market as a thought leader and generate a growing pool of sales leads. Our total cost of ownership, or TCO tool, is beginning to generate results. With the use of the tool to guide the conversation, we recently won a project working with a preeminent architectural firm. Although they were historically reluctant to embrace dirt, the detailed articulation of our value proposition over the life of a project won them over and empowered them to deploy their newfound knowledge of dirt to convince their client to build with dirt. Moreover, it helped transform was initially a $50,000 glass front project into a full solution sale, many orders of magnitude larger. Simply said, the TCO tool makes it easier to compare and contrast the conventional construction process with the DIRT project, as well as quantify the day-one economics and long-term value DIRT brings. We're optimistic the clarity it brings to the sales conversation is resulting in deeper understanding, support, and enthusiasm for DIRT. Organizationally, our regional sales directors have now been in place for over a year and are working well with our partner network to leverage their relationships into sales opportunities. Our strategic accounts team is increasing the relationships in development, which now stand at 40 versus 35 at year end. The culmination of this work is that we are seeing opportunities compete for projects of all sizes and are doing so more confidently and with a clear articulation of our value proposition. As construction activity picks up and building programs resume at a more normalized pace, The groundwork we've relayed in establishing our organizational capabilities, developing relationships, and actively pursuing early stage sales conversations will put us in a competitive position to win projects. Further increasing our competitiveness in these new sales opportunities is our Rock Hill, South Carolina facility, which began producing saleable tiles during the month of April with full commissioning on track for early June 2021. As a reminder, this new facility, which is highly automated, operates with approximately one sixth of the labor required for similar production capacity in our Calgary plant, reduces single plant risk, and increases our total tile capacity. Physical proximity to customers located on the East Coast results in an improvement of up to four days in shipping time with commensurate reductions in freight costs for the end customer. Adding this facility to our existing operations ensures we have ample manufacturing capacity to compete for large projects. From a broader market perspective, we monitor conventional construction closely, as we believe that is our biggest competitor and where we have the greatest opportunity to gain market share. In conventional construction, we are observing increases in the price of steel and wallboard, as well as shortages of some raw materials. This is negatively impacting project budgets and, in some cases, delaying project schedules. As dirt is installed in the final stages of a project, any pre-installation schedule delays risk negatively impacting the timing of a dirt project delivery, However, we ultimately believe the current challenges facing conventional construction have the potential to drive demand for dirt due to the increasing price competitiveness of our solutions, as well as our ability to help preserve project schedules with our short lead times. Dirt's two largest raw material inputs are medium density fiberboard and aluminum. While they've experienced some price increases, it has not been nearly to the same extent as steel and wallboard. We've largely been able to mitigate these increases through efficiency improvements in our manufacturing process to date, and we've not experienced any major raw material shortages. We further believe that increased activity, partially driven by the resulting price competitiveness between our solution and conventional construction, will further allow us to absorb commodity price inflation by leveraging plant fixed costs. That said, this is something we are watching, and if we see inflation outside the bounds of which we believe we can reasonably absorb, we will take action. We also provide an update on our fault-built litigation in our most recent form 10Q. As you will see, we've been very actively prosecuting our multiple lawsuits against our founders and their new venture, aggressively taking the fight to them. As an example, we recently defeated an application for partial summary dismissal that sought to have the restrictive covenants that we believe were clearly violated, declared unenforceable. The Alberta court sided with us and dismissed their application. And that decision was upheld on appeal. In addition, we have been busy questioning defendants and witnesses in the Canadian case with more to come over the next few months. As we said in our 10Q, we believe the results of the question give strong support to our allegations and we intend to continue to pursue the case vigorously. Before concluding, I'd like to provide a quick update on our commitment to our first formal ESG report. As I mentioned last quarter, sustainability is one of the founding pillars of DIRT. The fundamental design advantage of our solution prolongs the useful life of a built space, allowing reconfiguration and ongoing adaptability rather than creating landfill waste by demolishing and replacing conventionally built spaces. Our proprietary ice software and deployment of lead manufacturing techniques in our plants allows us to minimize the waste generated in producing our solutions. But our commitment goes beyond that. We operate with sustainability in mind throughout our business and we recognize the importance of transparency in all of our efforts. As a result, I am pleased to confirm that we expect to release our sustainability report later this quarter. In conclusion, while activity levels this quarter were slow and we are not out of the woods yet in terms of the effects of COVID-19 on our business, we are confident in the progress we have made in our strategic plan. We see a market that is demanding flexibility and adaptability in their physical spaces, and this is no longer unique to a discussion of return to work initiatives, but is more pervasively being considered in all projects. Our ability to empower people to build sustainably for the future with cost certainty and our accelerated schedule is unique in the industry, and we are better positioned than ever before to execute on that exciting opportunity. With that, I will turn the call over to Jeff for a review of the financials.