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spk08: Welcome to the DIRT Environmental Solutions 2022 Q1 Financial Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Kim McCochran, Director of Investor Relations. Please go ahead.
spk07: Thank you, Operator, and good morning, everyone. Welcome to today's call to discuss DIRT's first quarter 2022 results. Joining me on the call today are Ken Sanders, DIRT's newly appointed board chair, and DIRT's co-interim CEOs, Jeff Krause and Jeff Calkins. Today's prepared remarks 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, expectation, 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 10-Q as filed on May 4, 2022, with the Securities and Exchange Commission, or SEC, and other reports in the 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 would now like to turn the call over to Jeff Krause.
spk05: Thank you, operator and Kim, and good morning, everyone. Today, we are holding our first conference call with the newly appointed board of directors. Joining me today is our board chair, Ken Sanders, who will start off the call with his remarks. Also joining me today is Jeff Calkins, our chief operating officer and interim co-CEO. It is my pleasure to now turn the call over to Ken Sanders.
spk06: Hey, thank you, Jeff, and welcome everyone. It is a pleasure to join you today as chair of DIRT's newly elected board. As a former managing principal and board member at Gensler, I've been a follower and advocate of DIRT since the company launched its first products in 2005. And I don't think I need to tell you that technology-enabled prefabrication, industrialized construction, and mass customization are being embraced by more and more real estate developers, owners, tenants, designers, and builders than ever before. Reducing embodied carbon in the built environment is also an increasingly urgent global imperative. I think DIRT is well positioned for both, and when I had the opportunity to become involved, I didn't hesitate. My first and most important message today is to say thank you to the amazing people at DIRT. Most of our board spent time last week in Calgary, meeting with our executive team, our partners, as well as participating in a town hall with our people there. We also toured our impressive factory in Calgary. And I got to tell you, the talent, loyalty, and passion of the people we met were truly inspiring. They have been through so much over the past several years, not only COVID and the recent proxy contest, but also multiple CEOs and a board of directors whom I believe did not serve them very well. Through all of that, DIRT's people have persevered and stayed hard at work on behalf of our partners and our clients. So I'd like to repeat on this call what I wrote in a letter last week to everyone at DIRT, that our new board is extraordinarily grateful for their continued commitment to the company. I also want to say thank you to our partners They too have been patiently waiting for the outcome of this proxy contest, along with everyone else. Our partners are more important to DIRT than ever, and we call them partners for a reason. I've met many of them over the past week. I loved learning about their businesses, as well as the relationships that we share across the industry. And I look forward to meeting many more of them in the weeks and months to come. The three individuals on the call with me today also deserve special acknowledgement and thanks. The first two are Jeff Krause and Jeff Calkins, our interim co-CEOs. While neither is a candidate for the permanent CEO position, we are fortunate to have at the table their commitment, leadership, and detailed knowledge of our business, all of which are providing important continuity for the company at this time. I also want to thank and acknowledge Kim, I met all three of my new colleagues for the first time at the shareholders meeting last Tuesday, and I cannot thank them enough for the professionalism, personal integrity, and their ongoing commitment to DIRT. Right now, our board is 100% focused on governing this company. And as I mentioned in the company's press release on April 26, our intention is simple, to unlock the potential that we believe already exists at DIRT promote its growth and financial performance as a public company. So nine days in, I'd like to outline the priorities we are focused on. And if you want to turn to slide four, our highest priority is our search for a permanent CEO. We have picked up the search process already underway and have accelerated it, including additional insight from our new board. We are also collaborating closely with the company's leadership team to ensure the process is both inclusive and and successful for the long term. From the board's perspective, we are seeking a market-facing, sales-oriented leader with deep industry knowledge who can harness and amplify the incredible talent, energy, and passion of the employees and the partners of DIRT. Our secondary focus is manufacturing. We are now facing a supply-constrained environment rather than the demand-constrained one we've seen over the past several years. Jeff Calkins will speak about that later in the call. And third, we're focused on improving the financial health of the business. Jeff Krause will talk about that in more detail coming up. But before I hand it back to Jeff, I'd also like to briefly comment on the ongoing litigation between DIRT and Falkbilt, Mogan Smed, Barry Loberg, and others. I will refer to you to our press release of March 4th, which may have been lost in the noise of the proxy contest, our submitted affidavit to the Queen's Bench of Alberta is now part of the public record, including sworn testimony from Mogens. And to be clear, you know, many of us, including myself, have enormous respect for Mogens as a visionary founder of three companies, including DIRT. And in general, I believe litigation should be a last resort in resolving disputes. But we also believe, in both business and in life, that you have to keep your promises, especially when those promises are memorialized in signed legal agreements. And based on the evidence the company has already shared publicly, and everyone is welcome to read our submitted affidavit, as I have, we believe we have a strong case. We believe DIRT has been damaged by the actions and conduct of Mogens and others that were contrary to their signed agreements. So that litigation will continue. Our board has a fiduciary responsibility to protect the interests of our shareholders, as well as our partners and employees, and we will do so vigorously. So in conclusion, speaking on behalf of DIRT's new board, we are grateful for the opportunity to serve this innovative company and all of its stakeholders. And with that, I would now like to turn the call back over to Jeff Krause.
spk05: Thanks, Ken. First, I'd like to start by saying that Mr. Calkins and I are humbled by the vote of confidence of our new board, our leadership team, and our employees as we take our new positions. We are both highly committed to and believe in the success of JIRT through not only this interim period, but as we onboard our new CEO in hopefully short order. I'm also pleased to announce the appointment of Jeff Metcalf as Interim Chief Financial Officer, effective Monday, May 9th. so it's allowed to allow me to better focus on my new responsibilities. So congratulations, Jeff. Turning to slide five now, let's shift our attention to the business at hand. I'm going to start by providing a little color on the overall sales environment and activity levels, including outlook for the year, after which Jeff Calkins will discuss our current operations and related impacts. I'll close out the commentary with a review of our financial results for the quarter. Broadly speaking, our first quarter revenue reflected what was happening with the pandemic in North America as it transitions to endemic, with the broad easing of health restrictions, including work-from-home mandates in Canada and the US. While the resurgence of COVID-19 infections due to the Omicron variant at the beginning of the year temporarily sent many employees back to their home offices and delayed return dates, DIRT and its partners experienced an uptick in planning activity and opportunities growth which began to translate into orders in March 22. Almost half of our Q1 revenue was generated in March, 46% to be exact. This marked the highest revenue month for the company since October of 2020, and the second highest since the beginning of the pandemic, driven largely from our commercial vertical. We are seeing these activity levels continue into the second quarter, and our partners are telling us that they are busier than ever. At the same time, Tours within our DXCs, both physical and virtual, in Q1 exceeded those in Q3 and Q4 last year. Our 12-month forward pipeline, including leads, also increased by 5% to $318 million from $302 million at January 1, 2022. This has led us to our Q2 guidance of between $43 and $47 million, representing sequential growth of between 13% to 24%. We also increased our full-year targets to be between $175 million and $185 million and now expect improvements in cash usage as 2022 progresses as a result of sequential improvements in revenue and a lower fixed cost base approaching monthly cash flow breakeven in the third or fourth quarter of 2022. As Ken noted, we remain highly committed to our partner network and have been taking steps to improve our relationships broaden our effectiveness, and enhance our communication. The first step was the establishment of a partner advisory council to elevate partner feedback within our organization and to provide further insight to support our commercial and operational decision-making. This council, comprised of 17 of our partners, providing geographic and vertical representation across North America, met for the first time on March 28, 2022, where it established the overall objectives and cadence as well as provided initial feedback that we have been extensively evaluating. We, along with our chairman and certain of our other directors, will be meeting with the Council again next week as we continue to advance this critically important initiative. From a strategic account perspective, in the first quarter we refined our targets to 48 from 55 as a result of headcount reductions in February and to increase our overall focus. During the quarter, sales to strategic accounts totaled $6 million, or 16% of revenue, with product delivered to 22 of the 48 accounts. For the remainder of 2022, we have identified and continue to develop opportunities with 32 of the 48 accounts. I'll now turn it over to Jeff Calkins to provide comments on our operations and related activities.
spk01: Thank you very much, Jeff, and good morning. Moving to slide six, I'd like to pick up on Ken and Jeff's comments and provide some additional comments on the operational side. In April, we completed our final shift at the Phoenix aluminum manufacturing facility and commenced decommissioning activities. This included the redeployment of certain pieces of manufacturing equipment to Calgary and Rock Hill, shipping and rationalization of aluminum inventory to other aluminum frame plants, and subletting of the space. Decommissioning is expected to be complete by the end of the second quarter of 2022, and we anticipate the sublease to be completed shortly thereafter. When we decided to move ahead with the closure of the Phoenix plant, we accounted for having to expand our aluminum production in Calgary and Savannah. We have successfully increased our staffing in Calgary, but have faced more challenges in Savannah. In order to accommodate the sales pipeline and increased activity, we are accelerating the hiring timeline in Savannah. This is to both accommodate sales volume and also to be able to handle order timing fluctuations. As we discussed in our recent filing during the first quarter, we saw 46% of our revenue hit in March. Completing the expansion of the workforce in Savannah will allow us to flex up our manufacturing volume in instances where revenue is not evenly distributed throughout the quarter and to meet our delivery commitments. As part of our manufacturing plan, we are enhancing our capabilities in Rock Hill to include backpainted glass and thermofoil panels. We anticipate first production out of that facility by the end of the second quarter. As a result, we will be able to ship chroma coat, back painted glass, and thermal foil panels from Rock Hill as well as Calgary, greatly reducing the shipping distance, cost, and time to our customers in the East and Midwest, and increasing our utilization of that facility by the end of the second quarter. I'd like to address supply chain from two perspectives, physical supply and inflationary pressures. We are continuing to experience supply constraints and rising costs for both aluminum extrusions and medium density fiberboard. We are working with existing and new suppliers of both commodities to ensure adequate supply and inventory to meet rising demand. I do note that we proactively increased our overall aluminum inventory on hand in the first quarter when we identified that aluminum supply could be constrained. and we are currently in good position with adequate quantities on hand. While hardware is a small part of our overall input costs, in response to sharp increases in ocean shipping costs and lead times, we are pursuing North American sourcing for hardware items currently sourced in China. We continue to experience upward price pressure on all of our raw material costs, In the near to midterm, we expect inflationary pressures to continue, driven by both increased energy prices and the impact of global tensions on supply, as well as trucking labor shortages. We will continue to assess and implement mitigation strategies where appropriate. I'd now like to turn the call back over to Jeff Krause to go through the financials.
spk05: Thanks, Jeff. Turning to slide 7, revenue for the first quarter was $38.3 million, consistent with our expectations, and an increase of $8.8 million or 30% from the first quarter of 2021. Revenue throughout the quarter was unevenly distributed, as I had mentioned previously, as we saw a slow start to the year and a marked increase in activity in March relative to January and February. Turning to slide 8, gross profit margin for the quarter decreased to 8.6% from 11.4% for the same period in 2021, and similarly, adjusted gross profit margin declined to 17.7% from 24.3% for the same period in 2021. As we've discussed in prior quarters, we've experienced a significant increase in the realized cost of raw materials, transportation, and packaging, largely driven by the effects of the pandemic. with much of the increases experienced in the second half of 2021. During the first quarter, gross profit was negatively impacted as materials, transportation, and packaging costs, which increased as a percentage of revenue by approximately 9%. In response to this dynamic, effective November 16, 2021, we increased prices on new orders by approximately 6.5%. As a result of honoring price quotes for projects in process, however, only 75% of first quarter revenue reflected that price increase. We expect that the November price increase should be reflected in the higher percentage of orders in Q2, and the second price increase, which was an additional 5% effective June 1st, should begin to impact revenue recognized in Q3. Further impacting gross profit margin, were the incremental fixed costs of our South Carolina facility that was open last year and increased appreciation and amortization due to a revision to the useful lives of assets, including the Phoenix facility, partially offset by improved fixed cost leverage as compared to the prior period as a result of higher activity. Looking at a breakdown of operating expenses on slide 9, sales and marketing expenses increased by $0.6 million to $7.2 million for the three months ended March 31, 2022, which was largely related to an increase of $0.4 million in travel, meals, and entertainment expenses as business activity has increased and restrictions on travels have eased, a $0.3 million increase in commissions due to higher sales volumes and increased facility costs related to the Dallas DxC which opened in the third quarter of 2021. These were offset by a decrease in salaries and benefits costs, primarily related to the headcount reductions announced in February. General and administrative expenses increased 0.8 million to 8 million for the three months ended March 31st, 22, which reflects 1.5 million of incremental professional fees related to the contested election of directors, offset by a $0.7 million decrease in salaries and benefit costs, also due to decreased headcount as announced in February. Operation support expenses increased by $0.2 million to $2.5 million for the three months ended March 31, 2022. The increase was due to lower costs capitalized to internal projects with the completion of the Rock Hill Manufacturing Facility and Dallas DXC last year. Technology and development expenses increased by 0.2 million to 2.1 million for the three months ended March 31st, 22, primarily related to a decrease in capitalized software development costs. For clarity and transparency, I'd like to call up both the non-recurring costs related to the contested director election, which are included in operational expenses, and the separately categorized reorganization expenses. The total cost of the contested director election incurred to date is expected to be about $2.9 million, of which $0.9 million was incurred in 2021, $1.5 million incurred in the first quarter of 2022, and $0.5 million incurred to date in the second quarter of 2022. Note that these costs exclude approximately $0.6 million of cash payments for deferred share units to our former directors and our before any reimbursements of costs to our shareholders. As expected, we incurred reorganization costs from the various initiatives we announced in February, including closure of the Phoenix facility. In the first quarter, we recognized $3.7 million. In the second quarter, we anticipate an additional $1.3 million. In addition, in April, we incurred an additional $3.1 million charge for incremental insurance on change of control of the board on April 26, 2022, which we will categorize as reorganization costs. On slide 10, adjusted EBITDA and adjusted EBITDA margin for the quarter decreased to a $12 million loss or negative 31.2% from $11.4 million loss or negative 38.6% in the same period of 2021. which primarily reflects a $0.4 million decrease in adjusted gross profit, a $1.5 million of incremental professional fees related to the contested election of directors, $0.4 million reduction in capitalized costs due to fewer internal projects, $0.4 million increase in sales, travel, and entertainment costs, $0.3 million of higher commission expense due to increased activity offset by $1.8 million of costs of underused capacity in the first quarter of 2021, which did not reoccur, and lower salaries and benefit costs due to headcount reductions. As a reminder, we've excluded the $3.7 million in reorganization costs from the calculation of adjusted EBITDA. On slide 11, net loss for the quarter increased to $23 million, or $0.27 net loss per share in the three months ended March 31, 2022, from a net loss of $12.5 million, or $0.15 net loss per share for the three months ended March 31, 2021. The increased loss is primarily the result of a 0.1 million decrease in gross profit, a $5.6 million increase in operating expense, including $3.7 million of reorganization costs, and 1.5 million of incremental professional fees as described previously. A 0.8 million increase in interest expense, a $0.6 million increase in foreign exchange loss, and a $3.5 million decrease in government subsidies. Turning to slide 12, we finished the quarter with $38.9 million of unrestricted cash compared to $60.3 million at December 31, 2021. Net working capital at the end of the quarter was $49.3 million. Cash used in operation was $19 million. I note that this included non-cash working capital usage of $2.7 million, driven by the increased activity levels at the end of the quarter, combined with about $5.2 million of one-time contested director election costs and restructuring costs. We expect cash usage to improve throughout the year due to sequentially improving revenues, a lower fixed cost base, and reduced one-time costs. Day sales outstanding net of deposits and income taxes receivable was 32 days, higher than normal due to the disproportionately higher March sales. Networking capital at March 31st, 2022 was $49.3 million and includes $38.9 million in restricted cash balance and $3.2 million of restricted cash as per the terms of our undrawn credit facility. Our current ratio at March 31 was 2.2 times compared to 2.8 times at December 31. To reiterate my previous comments, as we look forward to the second quarter, we have confirmed an expected revenue range of $43 to $47 million. For the full year 2022, we are anticipating revenue to be between $175 and $185 million. As we conclude the closure of our Phoenix facility and account for the final reorganization costs of the reduction of workforce and other initiatives we announced in February, we expect to see improving adjusted EBITDA loss, net loss, and cash usage through the balance of 2022, approaching monthly cash flow breakeven in Q3 or Q4. In conclusion, we faced a challenging quarter with a lot of distraction that we are very happy to have behind us. We believe the second quarter guidance is a beginning of what we hope to be a recovery in our revenues with a corresponding improvement in cash usage and adjusted EBITDA loss. On behalf of myself and Jeff Calkins, we are thrilled to be working with the new board of directors. During their short tenure, there has been a resurgence of energy within the company and a fresh perspective on moving forward to capitalize on the tremendous opportunity in front of us. Operator, we can now open the call for questions.
spk08: Thank you. We will now begin the question and answer session. To join the question queue, you may press star, then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. We will pause for a moment as callers join the queue. The first question comes from Greg Palm with Craig Hallam Capital Group. Please go ahead.
spk02: Hey, guys. This is Danny Agerich on for Greg today. Thanks for taking the questions. Morning, Danny. How are you? Good. I guess to start off, I appreciate the color on kind of the March and April demand trends. I guess the quick math kind of implies about $17.5 million in March. Um, and then with April remaining at, at kind of very similar levels. So I guess if, if my math's right, based on the Q2 guide, that kind of implies a step down in, in May and June. Is that how we should be thinking about that? Or maybe just some color there? Sure.
spk05: Obviously that's, that's, uh, uh, your, your number for March was bang on. Um, uh, What it does, it's actually exactly the opposite. We came out of March pre-closure of our Phoenix facility. Moving into April, we found ourselves slightly labor constrained in April. and we're forced to shift some of that production into May and June. We are seeing increases in the revenues in May and June, which results in a lower revenue number than three times what you would have seen in March. As Jeff noted, we are actively addressing the labor in Savannah and accelerating that, as well as accelerating in Calgary. so that we have the capacity for what we are seeing as an uptick in activity moving forward. So a little bit of a bump between the closure of Phoenix and the uptick of activity, but we are all over it and we are seeing good things moving forward.
spk02: Got it. So that commentary on similar April activity to March isn't necessarily apples to apples on a revenue basis.
spk05: That's correct. It's on the sales side and order side of the equation, which gave us the confidence to continue to drive the increased labor levels within our facilities.
spk02: Okay. That makes sense. Maybe if I could just hit on the strategic accounts real quick. I think it looked like 6 million of revenue in the quarter from strategic accounts. Are these new orders from strategic or are these repeat? What can you tell us about those?
spk05: It's a combination of both. We had a very large order, which is currently going through our facility and large being greater than 2 million. which we are servicing in first quarter and second quarter. It is also part of the ongoing service to those strategic accounts. So where we've served in the past smaller orders that are going through as we continue to serve those clients. So it's a combination of the two. In general, as we're looking at our strategic accounts, They provide an excellent foundation for our business because they're a much larger footprint, and they do provide an ongoing stream as we continue to service them.
spk02: Yeah, and then just remind us, what exactly defines a strategic account? Is it number of locations? Is it potential revenue that it drives? And maybe a little bit of rationale on the reduction from... 55 to 48?
spk05: For sure. So a strategic account is really an entity that is very large in nature, has a footprint which crosses multiple jurisdictions in North America, typically within the Fortune 500, that type of range, although there are some in there that are smaller than that. but it really relates to the size and breadth of their footprint, the size of their organization from kind of a financial perspective, and their ability or their general management of their real estate across a large footprint. We call them strategic accounts so that we can drive our projects to partners within various regions. The reduction to 48 from 52, as part of the headcount reductions that we did, we did reduce some smaller headcounts. We did reduce some headcount within that area. I think a more important part of this is making sure that we have focus within that group to be truly effective within that group. be highly engaged with the strategic accounts that we have. So sometimes more is not better. This is a case where we are focusing ourselves a little bit more.
spk02: Okay. And then maybe one last one from me, I guess, at a high level. I don't know, maybe this is more of a question for Ken here. I guess with the full new board and all the proxy stuff behind us, I mean, what were a couple of the main focus areas or pain points where you saw a need for the change or improvement?
spk06: Yeah, sure. That's a great question. And I think I sort of outlined our top three priorities, including the urgency of getting a permanent CEO on board. I could add a little bit more color to that. You know, I think Three characteristics are really important. As I mentioned, deep industry knowledge is at the top of the list. The building design and construction business is a complicated business, and we need a leader who understands its nature. And, again, the importance of partnerships and collaboration and delivering innovation and value. And I think, again, someone who is market-facing and sales-oriented who can build strong relationships with their sales team, our partners, and our clients, And also, I think, you know, someone who can be a cultural cheerleader for our people for all the amazing employees at the company. So those are sort of three characteristics that are important related to the CEO search. And as a board, I think, you know, to put it simply, we want to be more client friendly, more partner friendly, and more shareholder friendly. And we want to continue to innovate in ways that create differentiated value for our clients, we do I believe we have a great foundation in place at DIRT, and that's something we want to continue to nourish and strengthen going forward.
spk02: All right. Thanks for taking the questions.
spk08: Thanks, Danny.
spk03: Sure. Thank you.
spk08: The next question comes from Rupert Mayer with National Bank Financial. Please go ahead.
spk03: Good morning, everyone. Hi, Rupert. So Jeff, you've talked about the impact of inflation on the business and you do have a few price increases you've put through. Have you put through enough on the price increase side or should you be expecting more of those as the year progresses? And what's the net impact to margins that we should expect over the next couple of quarters?
spk05: So we're continuing to monitor the situation. Clearly, like everyone else, prices of our raw material commodities are moving upward. If they continue to move upward, I think it would be fair to expect that we will look to capture that with price increases as we move along. So this is certainly an ongoing and fluid situation. The price increases as we have moving forward will pull back the cost of our raw materials as a percentage of revenue. Historically, that number has been about 32%. I expect it will run higher, slightly higher than that as we move forward. and then to a better equilibrium as inflation settles out and as our pricing catches up to it. So I think that's where we sit on it. You know, I think a key part for us is we have put price increases forward. I think our partners have expected price increases coming forward. A key part for us is that we do this providing enough notice to our partners and working with our partners in a collaborative basis such that we can do this in a manner that's not disruptive to their business and not disruptive to ours.
spk03: Great, thank you. And then related to that, with the price increases you've put through and with some of the supply chain challenges you have, how do you feel your value proposition is evolving relative to the competition or the incumbents in construction? Do you think your inflation, how does your inflation compare to the industry and how do your supply chain issues compare to the industry? Is it making the situation better or worse for dirt?
spk05: I think there's actually three things that are making it better for dirt. And it's not just the inflationary pressure. As I said, everyone is experiencing inflationary pressure, be it ourselves, be it other competitors in the modular space, and be it conventional construction, which remains the primary competitor. We need to be competitive in that front, but I don't think right now price is the only factor in the equation, which is having our customers buy. In fact, I think it's one of the lower factors that our customers are looking for and customers are looking for. The other two key parts here is construction schedules are getting squeezed as a result of onsite construction delays. Commercial construction and other places are seeing supply constraints hit them, which is pushing out their occupancy dates and their construction times, which are costly to the end customer. And you are seeing the movement back into office spaces, back into healthcare spaces in an uncertain time, which means that customers are looking for flexibility in what's coming at them. As I take that into the world of DIRT, From a cost perspective, the key parts where we can provide cost certainty on order, given what we do and given how ice interacts with the plants and the bombs and all those things that we've talked about previously, creates a dynamic which is very different than conventional, where you see change orders, delays, all those sorts of things coming at you. The second piece is our lead times are incredibly important. Our customers have told them they're important. Our partners have told us they're important. And so for us, we can deliver product far faster than anyone else. And because our product is an integrated product, it can stand up and you can be in your space far faster than anyone else because you aren't relying on subs. That's holding true. I think the third part of our value prop is that our spaces are very flexible. And the flexibility of our space means you don't have to design for what you think tomorrow is going to be. You can design for today and you can change it for later. I think that's becoming much more important as we enter the new normal of what COVID looks like, what hybrid workspaces look like, all those sorts of things. And as people go back to work and the occupancies or rates are going up, which we're seeing in overall indexes, I think that definitely is tailwinds in our favor. And that's translating to the uptick in activity that we're seeing in our sales side.
spk03: Great. Thank you all. I'll leave it there. Thanks, Nicola. Thank you.
spk08: The next question comes from Neil Linsdale with IA Capital Markets. Please go ahead.
spk04: Yeah, thanks. Good morning, guys. I'm just wondering if you can provide a little bit more insight or color into the sales mix. I'm thinking about existing customers versus new customers that you're serving and really any kind of industry or geographic location of the customers which you're seeing, and especially if anything's different than what we've seen in previous years.
spk05: Yeah, thanks, Neil. So we are seeing, even over the last week, we are seeing a bunch of new customers come into our business, both in the healthcare side as well as the tech and manufacturing side. We are getting more traction now with new customers. I think there's a lot of customers out there that have been watching and waiting to invest, and we are seeing them invest. Part of that is also a result of some of the new partners that we have brought into our ecosystem, who have access to a different customer base, who have been very proactive, and who are helping to drive some of that activity. As it relates to where we're seeing it, Right now, the biggest uptick in the near term has been on the commercial side of the equation. That is with people going back to work. Year over year, our commercial revenues were up 49% relative to prior. Now, the comp is pretty easy, but we're up that amount, and we are seeing that continue. That is consistent with return to work and those sorts of things. My understanding is is most of the Fortune 500s have their people coming back now. So I think you are seeing the impacts of that and those sorts of investments moving on. In terms of geographics, I think that the key indicator here from a geographic perspective is where the restrictions have started to ease and have eased. We hit a low point Canada-US type of revenue where we were as low as just above 10% in Canada and 89 points, whatever the percentage was in the US. That shifted now to 1585%. I think the jurisdictions are going to open up differently, but I know in Canada, the Canadian jurisdiction is starting to open up a lot more. And I think the pockets of the US depending on the areas, are improving. Southern U.S. really didn't fully close down. Northeast is starting to come back, those sorts of things. I think the last thing I would talk to you is it relates to healthcare. Healthcare is a long lead-type play, and we're seeing things more so in 23 versus 22, apart from the... the strategic account pieces that we have in normal play. So I would expect the mix to, in the near term, to revert back to our historical mix, but then start driving more into some of the verticals that we're focusing on, such as healthcare and stuff like that.
spk04: Okay, fair enough. And I'm just wondering, as the new board, you've done your meetings this week, you're getting to know, you've taken a look at what the company has been doing. Is there anything specifically on that go-to-market or on that strategy that the board is looking at maybe revising or enhancing somewhere?
spk05: I'm going to throw that to Ken.
spk06: Yeah, thanks, Chip. Yeah, this is Ken. I think something we are... focused on and i'm personally focused on given my background again is engaging our partners in a much stronger and more collaborative way um you know i think creating the partner advisory council was a great first step um but we want to double down on that we have a meeting coming up next week in dallas i'm personally reaching out to many of them and again i mentioned this before we call them partners for a reason and it's not us directing them. It's us collaborating with them, learning from them, cooperating with them, and together servicing the client and creating value. So I think that's a big change. I think, frankly, that's an area that the company underinvested in over the past couple years, didn't really engage the partners in the way that we should. And so that's one of the things that, as a board, we are focused on and something that I'm personally very focused on right now.
spk04: Okay, and maybe just one kind of question to wrap it up. I'm looking at different companies, different people, industries that we deal with, and I'm trying to figure out as you do see this migration back to the workforce or back to the office, and as you see the offices kind of change and the hybrid models and everything like that, Are you seeing a lot of urgency? And again, is it kind of different in the different geographies that you mentioned before as far as revamping the workspace where it is now? Or do people have more space than they currently need and there's not a lot of urgency to actually get any kind of remodeling done? I'm trying to get a feeling on what you guys are seeing.
spk06: Yeah, this is Ken again. Let me take a shot at that. I think Jeff spoke to this earlier. But as people return to work in companies in North America and around the world, there's still some uncertainty. What's the right balance? Where can work be accomplished best in the office versus at home versus remote? And all these companies are going to continue to be figuring that out. They're not coming back to the office with a clear, exact understanding. And in that regard, I think this whole idea of flexibility and adaptability is in the workplace that they deploy is really, really important. And Jeff touched on that. I also briefly mentioned in my earliest comments this whole issue of embodied carbon. And I think, you know, DIRT is very well positioned for that. If you look at, you know, the major real estate owners and investors, the largest architecture design firms in North America, all of them are on top of this. And they understand as buildings have become much more energy efficient and are approaching net zero, the biggest impact that's left over in the built environment is really embodied carbon. All the energy that's invested in manufacturing, assembling, transporting, putting something in place, and so forth, it's getting a ton of attention. And I think DIRT's business model is really set up well in that regard in terms of eliminating waste, in terms of the efficiencies of factories, Uh, and on and on and on. And so, and I think we're going to continue to, um, make sure that our partners and our clients understand that commitment and that we're really delivering value in that regard. Um, I think part of your question dealt with the fact that look, um, as people return to work in a variety of hybrid arrangements from a macro level, what's going on with commercial real estate. And that's a fair question, and we'll have to watch and listen and see how that develops. But again, in terms of the real estate that people are returning to, or I'd say also in the healthcare markets where you're servicing patients and doctors and so forth, again, this notion of flexibility is really essential. So there's still, regardless of what happens in the macro environment with real estate, that's a huge pie there. We want to grow our market share in and participate in. So we're still very bullish about our position long term and how we can participate in that market. Is that helpful?
spk04: No, that's great. I appreciate it.
spk00: Good.
spk08: This concludes the question and answer session. I would like to turn the conference back over to Jeff Krause for any closing remarks.
spk05: Thanks very much. On behalf of Ken and Jeff and the board, we want to extend our gratitude and thanks to our employees, our partners, and our shareholders as we turn the page to start a new chapter. The buzz in the office last week was a long time coming. It was truly infectious and I believe a harbinger of the great things that lie ahead of us. And we look forward to updating all of you as we progress. Thank you very much and have a great day.
spk08: This concludes today's conference call. you may disconnect your lines. Thank you for participating and have a pleasant day.
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