DIRTT Environmental Solutions’ goal is to build and deliver complete, well-designed, high-quality interior spaces faster and more efficiently than traditional construction methods, which can entail cost overruns, inconsistent quality, delays and significant material waste.
“DIRTT’s business model is very different for the construction industry in that everything we do is predicated on technology,” said president Scott Jenkins, who joined the 10-year-old, Calgary-headquartered company in December 2006.
DIRTT (Doing It Right This Time) uses its proprietary 3D ICE software to design, manufacture and install fully customized prefabricated interiors for clients in the corporate, government, education and healthcare sectors, and will move into the multi-family residential business this summer.
The technology allows for precise design and costing, rapid lead times with high levels of customization and flexibility, and faster and cleaner construction.
Video game technology
The technology shares similarities with that used in cutting-edge video games and enables the configuration, engineering, architecture and design components of projects to be handled in real time.
That data is fed immediately to DIRTT’s manufacturing facilities in Phoenix, Savannah, Ga., Kelowna and Calgary, and then makes its way to project management teams and installation crews.
“It takes the whole delivery process and reduces errors and timelines,” said Jenkins. “We sell through local distribution partners.
“They are local companies that want to represent DIRTT and have to invest in a DIRTT team. They have local construction relationships, facility relationships and real estate relationships, and we work closely with them with our own direct sales team in each major North American city.”
Conventional construction costs usually have a split of around 70 per cent labour and 30 per cent materials, which can lead to cheaper materials being used to reduce costs. Many tradespeople are aging baby boomers and, for every four who retire, only one young person is entering the trades.
Jenkins said DIRTT is looking to take advantage of this potentially problematic situation.
“DIRTT costs are 70 per cent materials and 30 per cent labour because it’s all manufactured. And because we use technology, we’re that much more efficient to give you a custom solution. You get much higher-end materials.”
The company’s growth strategy is focused on:
* increasing penetration of existing markets by providing continued support and increased investment to existing distribution partners throughout North America;
* penetrating new industries such as the hospitality and residential sectors;
* continuing to invest in ICE and innovative interior construction solutions;;
* and partnering with industry leaders on their solutions, with a recent example being the Corning Willow Glass initiative signed in February.
While that all sounds impressive, Jenkins said DIRTT still has only “0.1 per cent of the total addressable market for North America right now” and has a long way to go.
“We have to evangelize and do a lot of education with potential clients before we even start the sales process because we are so different. That takes up a lot of resources and there are challenges. This is a new way for North Americans to think and we have to overcome that bias.
“I think we’re starting to hit a tipping point because now in Toronto I can point to projects at Air Miles, Google, Enbridge, Hydro One and Ontario Tourism. That helps and local architects, designers, facilities people and businesses are saying, ‘Oh yeah, I’ve heard of DIRTT. We should talk to you.’ ”
No comparable competitors
Microsoft, eBay and Devon Energy are other major companies that have been serviced by DIRTT’s 700 employees across North America. Jenkins is confident in the assertion it has no comparable competitors.
“There are companies out there that say they do everything DIRTT does, but with our intellectual property in ICE, nobody does what we do. We’re the only pre-manufactured solution that can build out a full hospital room or a neo-natal intensive care unit in Mecca, Saudi Arabia.
“It’s us versus conventional construction. There are other manufacturers who build some beautiful projects out there, but they don’t have parametric. They have to throw people at custom stuff. It’s just like comparing apples to oranges.”
Improving financial performance
DIRTT (DRT-T) went public on the Toronto Stock Exchange on Nov. 28, 2013 and several who invested in the initial public offering have remained and increased their stakes in the company, which had net income of $5.95 million on revenues of $187.33 million in 2014.
The company has a market cap of about $643 million and its stock is trading around $8.30 per share, three times its 52-week low and not too far off its 52-week high of $9.19.
DIRTT’s latest quarterly results released earlier this month showed 40 per cent revenue growth over the same quarter a year earlier after the company registered a 35 per cent year-over-year increase in 2014.
“We believe we have the chance to build a $1-billion business here,” said Jenkins. “And that’s $1 billion in annual sales, not market cap.”
DIRTT recently raised $37.6 million in new financing from a syndicate of underwriters led by Raymond James Ltd. that will be put towards a combination of growth initiatives.
“We don’t know what opportunities are going to come at us, so we want to be flexible and nimble,” said Jenkins. “This financing brought very little dilution to the company and we got some great new shareholders in the company who will be very supportive of us going forward.
“We want to change the world. That’s why we’re a long-term-focused company and we want to align with shareholders who also think that way. We want to reduce waste and be more efficient and support reusability of space, and not constant knocking down and rebuilding.”