DIRTT Environmental Solutions Ltd.

Good day, and thank you for standing by. Welcome to DIRT's second quarter 2022 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kim McCachran, Director of Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Welcome to today's call to discuss DIRT's second quarter 2022 results. Joining me on the call today are Benjamin Urban, DIRT's newly appointed CEO, and Jeff Krause, CFO. 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, expectations, and projections. They are not guaranteed to future performance. In addition, this call will reference non-GAAP results, excluding special items. Please reference Form 10Q filed on July 27, 2022 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 would now like to turn the call over to Benjamin.

Thank you, Kim. Good morning, everyone. Beginning on slide four, it is my pleasure to be joining you for the first time today as DIRT's CEO. It has been an exhilarating first few weeks, and as to be expected, I hit the ground running. In a short period of time, I've worked with the board and management to execute on some crucial short-term actions while we develop our long-term plan. As you know, I come to this position with a great deal of first-hand knowledge of DIRT, having worked as a DIRT partner for over 14 years. I believe for many years and more strongly now than ever that the growth opportunity for DIRT, as it was for me as a distribution partner, is significant. There is no one in the market that can do what we can do. I've seen how impressed clients are by their completed projects and know this is displacing conventional construction i also believe that ice is still our most powerful sales and manufacturing tool and i'm also a strong proponent of evolving yet resolving some of the pain points and getting orders entry ready which uses up valuable time and resources the big picture is encouraging notably we are starting to see demand increase in the industry for more specifically for dirt's products as we emerge from the pandemic-induced market uncertainty of the past several years our 12-month forward pipeline including needs is and attendance at our Connects trade show, which we held in June 2022, was about 10% higher than it was in 2019. All of these indicators are pointing in the right direction. It's especially important to me, however, to ensure that while we consider what we could grow into in the future, we also recognize where we are now. What we are currently facing are escalating costs that are impacting our profitability and manufacturing constraints, which are impeding our ability to scale up with increased demand. We have and are taking will positively impact third quarter results and beyond. First, to combat inflationary efforts on our raw materials and labor, we recently implemented two price increases, a 5% increase effective June 1st, 2022, and a further 10% increase effective July 21st, 2022. We also terminated a pilot price reduction program for Reflect and Inspire. Furthermore, we have increased our governance around discounts provided. During the pandemic, we used discounts as a means to drive increased volume in a period of low demand, but with demand increasing and in a rising cost market, we recognized that we needed to curtail this activity. We expect the positive profitability impacts of both these items will begin to be realized mid-third quarter. Second, we are unlocking our physical manufacturing capacity through multiple actions. As Jeff will talk about in a bit, during the quarter we increased our manufacturing headcount by 9%, mainly in Calgary, and are continuing to work on hiring in Savannah, which has proved more challenging. It takes about 45 days for a new employee to become fully productive, so we will begin to see the effects of this in the third quarter. Given this lead time, we have moved to a proactive hiring stance and have begun to hire in advance of anticipated growth. Adding headcount, though, is only part of the solution. Increasing the pace of projects going through our order engineering process, improving our internal communication by breaking down silos, and optimizing our manufacturing processes for new products like Reflect and Inspire is also key. To that end, we have established a cross-functional working group to address these first two issues and are seeing immediate improvement. We are also implementing changes to manufacturing processes for Reflect and Inspire that will reduce manufacturing time and equipment bottlenecks, a portion of which is already in place. and the remainder of which will be complete by mid-Q3. Turning to slide five, we are also focused on improving overall productivity across the organization, not simply in our manufacturing facilities. This includes taking a good look at our approach to distribution partner requirements, onboarding, management, and accountability. It involves redefining our approach to strategic accounts and market segment management, evaluating how these two important components of our commercial function interact with our partners and drive results. It includes reigniting our culture by bringing our people back together. And above all, it means streamlining the overall organization, including our sales organization, such that we can be agile and responsive while we grow our market share and establish our market presence. In this latter component, that has enabled us to implement further fixed cost reductions, including 36 salary positions for a total annual savings of approximately $5 million. This also includes some leadership changes. We announced the departures of Charles Krause, Senior Vice President and General Counsel, and Colin Blen, Vice President, Product Development, as well as the promotion of Trevor Didlock to the Vice President, Product Development role. Nandini Samayi has been promoted to Senior Vice President, Talent and General Counsel, and Corporate Secretary and Company. Jeff Krause, DIRT's current Chief Financial Officer, has announced his intention to retire operation officer. I'd like to take this opportunity to thank Chuck, Colin, and Jeff for their dedication and service to the company. As we look forward and complete the aforementioned year-term realignment initiatives, I anticipate prosperity and opportunity ahead for this company. Today, we have a renewed, stronger, and altogether different DERD, and it is through the efforts of all the passionate individuals here at DERD, our distribution partners, and our board that have made it successful. We will continue to affect great and rapid change by rekindling that culture and dedication that is so uniquely DIRT. I firmly believe that there isn't another company that can affect change the way that we can with the people, technology, and solutions that we deliver. Our method of construction will continue to change the construction industry, and with it, not only the growth of DIRT, but also those partners that journey with us. I'll now turn it over to Jeff to provide some further financial color on the quarter and the items that I've discussed. Jeff.