BuildDirect Reports Fourth Quarter and Year End 2022 Financial Results
- Delivered Adjusted EBITDA of $1.3 million, an increase of $5.3 million year-over-year
- Pro customer revenue increases to 88.2% of fourth quarter revenues, maintained consistency quarter-over-quarter and up 19.4% year-over-year
- Company to host Q4 and Year-End 2022 earnings conference call on April 12th at 7:00 AM (PST) / 10:00 AM (EST)
BuildDirect reports in US dollars and in accordance with IFRS
VANCOUVER, BC, April 12, 2023 /PRNewswire/ - BuildDirect.com Technologies Inc. (TSXV: BILD) ("BuildDirect" or the "Company") a leading omnichannel building material retailer, today announced its financial results for the Q4 2022 ("Q4 2022") and full-year audited financial results for the year ended December 31, 2022 ("Full Year 2022").
"We are pleased to announce Q4 2022 results, which further strengthens the progress the collective team has made to achieve profitability and structured, strategic growth which started in Q2 of 2022," said Shawn Wilson, CEO of BuildDirect. "Overall, BuildDirect demonstrated a strong financial performance as highlighted by its adjusted EBITDA of $1.3 million for the full year of 2022, up $5.3 million as compared to the previous fiscal year."
Fourth Quarter and Full Year 2022 Financial Results Conference Call
BuildDirect will host a conference call to discuss the Company's financial results at 7:00 AM (PST) / 10:00 AM (EST) on Wednesday, April 12, 2023. To access the conference call, participants need to register at https://us02web.zoom.us/webinar/register/WN_tYdmwMolR16aDCdMKKmskw.
The replay will be available approximately 24 hours after the completion of the conference call. In addition, an archived replay will be available on the Investor Relations section of the Company's website at https://ir.builddirect.com/events-and-presentation.
Among other things, BuildDirect will discuss long-term financial outlook on the conference call and related materials will be available on the Company's website at https://ir.builddirect.com/events-and-presentation. Investors should carefully review the factors, assumptions, risks and uncertainties included in such related materials concerning such long-term financial outlook.
Q4 and Full Year 2022 Highlights
USD$ (unless otherwise noted) |
Q4 2022 |
Q3 2022 |
% Change |
Full Year 2022 |
Revenue |
$21.7 million |
$22.0 million |
(1.4) % |
$92.2 million |
Gross Profit |
$7.9 million |
$6.9 million |
14.1 % |
$32.0 million |
Gross Margin |
36.4 % |
31.4 % |
5.0 % |
34.7 % |
Adjusted EBITDA1 |
$0.4 million |
$0.3 million |
39.8 % |
$1.3 million |
1Adjusted EBITDA is a non-IFRS measure. See "Non-IFRS Measures" in the MD&A and the reconciliation to the most directly comparable IFRS measure below. |
- Total revenue of $92.2 million for the Full Year 2022, an increase of 1.6% year-over-year, largely driven by immediate revenue contribution from the acquisition of Superb
- Independent Retailers segment contributed 67% of total revenue and increased by $19.9 million (48%) year-over-year, largely driven by the immediate revenue contribution from the acquisition of Superb
- Full Year 2022 Pro revenue reached $77 million, representing 84% of total revenue at the 2022 year end and year-over-year growth of 35%, driven by overall shift in strategy to focus on the more profitable Pro Customer base.
- Gross profit of $7.9 million in Q4 2022, an increase of 14.1% quarter-over-quarter while gross margin percentage in Q4 2022 increased 500bps quarter-over-quarter, driven by the increasing focus on the more profitable Pro customer and improvements to the BuildDirect's e-commerce product margin.
- Adjusted EBITDA of $0.4 million in Q4 2022, an increase of 39.8% quarter-over-quarter while Adjusted EBITDA for the Full Year 2022 reached $1.3 million, an increase of $5.3 million year-over-year, largely attributed to the change in strategy to increased focus on the more profitable Pro Customer base.
- On December 28, 2022, the Company announced the amendment of secured notes issued by BuildDirect Operations Limited, a wholly owned subsidiary of the Company ("BuildDirect Operations") to: (a) Deans Knight Capital Management Ltd. in its capacity as portfolio manager on behalf and for the benefit of two fully managed accounts in March 2018 (the "2018 Notes"); and (b) Pelecanus Investments Ltd., Lyra Growth Partners Inc. and Beedie Investments Ltd. in June 2022 (the "2022 Notes").
- The 2018 Notes were amended such that (a) the maturity date was extended to December 31, 2023 (b) the interest rate applicable to the 2018 Notes was adjusted to the greater of 15% and CDOR plus 10% effective January 1, 2023; (c) BuildDirect Operations agreed to make certain quarterly payments towards the aggregate outstanding principal amount of the 2018 Notes commencing January 1, 2023 (the "Quarterly Principal Payments") (d) BuildDirect Operations agreed to pay fees in the amount of (i) between 3% - 9% of the Quarterly Principal Payments which fees are payable by the Company on a quarterly basis commencing January 1, 2023 and (ii) between 3%- 9% of the then current outstanding principal of the 2018 Notes subject to timing for payment in full of the 2018 Notes and (e) BuildDirect Operations agreed to comply with certain operational covenants in relation to itself and its related entities.
- The 2022 Notes were amended such that (a) the maturity date of the 2022 Notes was extended to April 1, 2024 and (b) the interest rate applicable to the 2022 Notes was increased to 15% per annum effective January 1, 2023;
- On December 30, 2022, the Company closed the first tranche of a non-brokered private placement (the "Private Placement") pursuant to which the Company issued 4,283,785 common shares at a price of CDN$0.37 for total gross proceeds of CDN$1,585,000
Subsequent Events to Fiscal Year 2022
- On January 3, 2023, the Company announced the close of the second and final tranche of the Private Placement pursuant to which it issued 1,121,622 common shares at a price of CDN$0.37 for total gross proceeds of CDN$415,000
- On January 9, 2023, the Company announced the change of its auditor from KPMG LLP to Grant Thornton LLP
- On January 24, 2023, the Company announced that its wholly-owned U.S. subsidiary, Superb Flooring Covering, LLC integrated the Enterprise Resource Planning system of RFMS Inc., a leading business management software provider in the flooring industry, to leverage its robust features in managing key business processes
- On January 26, 2023, the Company announced a partnership with Maverick Design, the award-winning interior design studio at Wedgewood Homes, a division of Wedgewood LLC to launch a white-label marketing program for a collection of quality Maverick-branded engineered wood floors - The Maverick Design Wood Flooring Collection
- On February 6, 2023, the Company announced the appointment of Eyal Ofir, Director of BuildDirect, to its Audit Committee together with the resignations of Natalie Ku as Chief Operations Officer and Julie Todaro as Director of the Company
- On April 3, 2023, the Company announced the appointment of Jay Allen as the General Manager. Jay has deep experience in the apparel, home goods and flooring sectors. His experience includes direct-to-consumer home goods sales as well as direct to the trade digital solutions. He also brings experience in growing early-stage companies to maturity and has established a proven track record of scaling multiple e-commerce businesses to reach profitability.
2023 Outlook
The Company aims to advance its current strategy of growing the more profitable 'Pro' customer base, which includes a focus on brick-and-mortar operations and providing additional value-added services that are designed specifically for Pros. Furthermore, the Company intends to assess opportunities for accretive acquisitions of Pro-focused independent retailers across North America that have extensive client networks, in addition to reviewing incremental strategies to extend the BuildDirect brand and generate operating leverage.
Pro customers provide higher long-term values as compared to other consumer segments due to their recurring large purchase orders.1 They consist of home builders, realtors, multi-family and commercial real estate development companies, flooring contractors and other types of home improvement professionals.
In addition, the Company also intends to streamline its operations by unlocking operational synergies across all business units to improve its profitability.
Actual results may differ materially from BuildDirect's financial outlook as a result of, among other things, the factors described under "Forward-Looking Statements" below. BuildDirect's audited consolidated financial statements for the years ended December 31, 2021 and December 31, 2022 and Management's Discussion and Analysis for the three and twelve months ended December 31, 2021 and 2022 are available on the Company's website at www.BuildDirect.com. and on the Company's SEDAR profile available at www.sedar.com.
BuildDirect (TSXV: BILD) is a growing omnichannel building material retailer. BuildDirect connects North American home improvement B2B and B2C organizations, and homeowners with quality building materials and services through its robust global supply chain network. BuildDirect's growth trajectory, strong product offering, and proprietary heavyweight delivery network are delivering value today, solidifying its position as an innovative player in the home improvement industry. For more information, visit www.BuildDirect.com.
This press release contains statements which constitute "forward-looking statements" and "forward-looking information" within the meaning of applicable securities laws (collectively, "forward-looking statements"), including statements regarding the plans, intentions, beliefs and current expectations of the Company with respect to future business activities and operating performance. Forward-looking statements are often identified by the words "may", "would", "could", "should", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" or similar expressions. These statements reflect management's current beliefs and expectations and are based on information currently available to management as at the date hereof.
Forward-looking statements in this press release may include, without limitation, statements relating to pro customers as a profitable customer base and providing higher long-term values as compared to other consumer segments, the Company's profitability and structured, strategic growth, the Company's 2023 outlook and ability to achieve the items detailed in the "2023 Outlook" section, the Company's ability to grow the more profitable 'Pro' customer base (including a focus on brick-and-mortar operations and additional value-added services), the Company's intention to assess opportunities for accretive acquisitions of Pro-focused independent retailers across North America, its review of incremental strategies to extend the BuildDirect brand and generate operating leverage, and its intention to streamline its operations by unlocking operational synergies across all business units to improve its profitability.
Forward-looking statements involve significant risk, uncertainties and assumptions. Many factors could cause actual results, performance or achievements to differ materially from the results discussed or implied in the forward-looking statements. Among those factors are changes in consumer spending, inflation, availability of mortgage financing and consumer credit, changes in the housing market, changes in trade policies, tariffs or other applicable laws and regulations both locally and in foreign jurisdictions, availability and cost of goods from suppliers, fuel prices and other energy costs, interest rate and currency fluctuations, retention of key personnel and changes in general economic, business and political conditions and other factors referenced under the "Risks and Uncertainties" section of our MD&A. These forward-looking statements may be affected by risks and uncertainties in the business of the Company and general market conditions, including COVID-19.
These factors should be considered carefully, and readers should not place undue reliance on the forward-looking statements. Although the forward-looking statements contained in this press release reflect the Company's expectations, estimates or projections concerning future results or events based on the opinions, assumptions and estimates of management considered reasonable at the date the statements are made, the Company cannot assure readers that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this press release, and BuildDirect assumes no obligation to update or revise them to reflect new events or circumstances, except as required by law.
Reference is made in this press release to the following non-GAAP measures: Adjusted EBITDA. These non-GAAP measures are commonly used by investors and other interested parties to evaluate the Company's financial performance and are employed by the Company to measure its operating and economic performance and to assist in business decision-making. These non-GAAP measures do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers. These measures are provided as additional information to complement those IFRS measures by providing further understanding of the results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of the financial information reported under IFRS. Refer also to appendix tables, "Q4 and Full Year 2022 Highlights" of this press release as well as our Management's Discussion and Analysis for definitions and reconciliations of non-IFRS measures to the nearest IFRS measures.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
1. Internal company estimates
NON-IFRS MEASURES
We define EBITDA as net income or loss before interest, income taxes and amortization. Adjusted EBITDA removes fair value adjustment of convertible debt and warrants, fair value adjustment of inventory, restructuring expenses, non-recurring bad debt expense, foreign exchange gains and losses, and share-based compensation items from EBITDA. We are presenting these measures because we believe that our current and potential investors, and many analysts, use them to assess our current and future operating results and to make investment decisions. Management uses these measures in managing the business and making decisions. EBITDA and adjusted EBITDA are not intended as substitutes for IFRS measures.
For the three months ended |
For the year ended December 31 |
||||
Adjusted EBITDA |
2022 |
2021 |
2022 |
2021 |
|
Income (Loss for the period) |
(4,658,265) |
2,599,558 |
(7,870,427) |
(10,327,659) |
|
Income tax expense |
(485,258) |
(912,446) |
(383,703) |
371,091 |
|
Depreciation and amortization |
1,016,120 |
220,875 |
4,069,070 |
2,967,113 |
|
Interest |
580,450 |
530,556 |
2,034,933 |
2,295,715 |
|
EBITDA |
(3,968,016) |
2,438,543 |
(2,150,127) |
(4,693,740) |
|
EBITDA adjustments |
|||||
Stock-based compensation |
71,547 |
(967,833) |
266,817 |
282,281 |
|
Foreign exchange (gain)/loss |
783,099 |
197,301 |
104,596 |
187,402 |
|
Foreign currency translation |
- |
(34,123) |
- |
(34,123) |
|
Restructuring costs |
70,277 |
- |
218,374 |
- |
|
Fair value adjustment of convertible |
(38,153) |
(4,872,282) |
(794,708) |
(3,417,192) |
|
Impact of fair value adjustment of |
- |
- |
137,400 |
528,552 |
|
Significant bad debt expense2 |
- |
- |
- |
257,891 |
|
Finance costs3 |
- |
- |
- |
1,475,886 |
|
Listing expenses4 |
- |
- |
- |
1,017,659 |
|
Other expenses related to TSXV |
- |
- |
- |
409,211 |
|
Loss on extinguishment of debt6 |
107,524 |
- |
107,524 |
- |
|
Impairment loss on intangible assets |
3,385,374 |
- |
3,385,374 |
- |
|
Adjusted EBITDA |
411,651 |
(3,238,394) |
1,275,249 |
(3,986,173) |
|
Adjusted EBITDA %8 |
2 % |
-13 % |
1 % |
-4 % |
|
1 The adjustment for the impact of the fair value of FloorSource inventory relates to the impact on normal selling profit from the fact that IFRS requires that the inventory be recorded at fair value on acquisition and not at FloorSource's historical cost. Earnings are impacted as this inventory was sold in the period. |
2 The adjustment is a non-recurring activity, relating to a provision for an advance made to a former employee, which was deemed uncollectible in 2021. |
3 The adjustment relates to agents' commission and certain expenses of the private placement offering totalling CDN $1,796,748. |
4 The adjustment relates to the consideration transferred in excess of the net assets acquired and certain expenses related to the reverse acquisition. |
5 The adjustment relates to non-recurring legal and accounting expenses required to meet public company standards for TSXV listing. |
6 The adjustment relates to the requirement under IFRS 9 to recognize a gain or loss on extinguishment of a loan due to a significant modification to the 2018 Notes' terms. |
7 The impairment loss relates to impairment of goodwill and a portion of intangible assets related to the Superb CGU |
8 Adjusted EBITDA % is a ratio of Adjusted EBITDA divided by Total Revenue |
Consolidated Statements of Financial Position
(Expressed in United States dollars)
As at December 31, 2022 |
As at December 31, 2021 |
|
Assets |
||
Current assets: |
||
Cash and cash equivalents |
$ 4,107,754 |
$ 1,716,986 |
Short-term investments |
318,000 |
118,000 |
Trade and other receivables (note 5) |
4,000,121 |
4,420,994 |
Income taxes receivable |
171,502 |
- |
Inventories (note 6) |
6,657,450 |
7,452,570 |
Prepaid materials, expenses and deposits |
1,696,828 |
2,371,114 |
Total current assets |
16,951,655 |
16,079,664 |
|
||
Property and equipment (note 7) |
591,880 |
599,232 |
Intangible assets (note 8) |
8,155,769 |
12,650,528 |
Right-of-use assets (note 9) |
3,566,442 |
4,305,647 |
Non-current deposits |
987,216 |
1,173,889 |
Goodwill (note 8) |
2,530,622 |
4,280,165 |
Deferred tax asset (note 20) |
1,207,110 |
364,329 |
Total non-current assets |
17,039,039 |
23,373,790 |
Total Assets |
$ 33,990,694 |
$ 39,453,454 |
Liabilities and Shareholders' Equity |
||
Current liabilities: |
||
Accounts payable and accrued liabilities (note 10) |
$ 5,475,426 |
$ 6,205,690 |
Income taxes payable |
- |
735,420 |
Current portion of lease liabilities (note 11) |
1,441,420 |
1,286,775 |
Deferred revenue (note 12) |
1,767,136 |
3,874,745 |
Loan payable (note 13) |
3,691,672 |
3,828,971 |
Current portion of promissory note (note 15) |
1,065,131 |
1,021,161 |
Current portion of deferred consideration payable (note 4) |
1,903,731 |
2,484,571 |
Total current liabilities |
15,344,516 |
19,437,333 |
|
||
Deferred consideration payable (note 4) |
701,611 |
553,732 |
Lease liabilities (note 11) |
2,859,607 |
3,929,806 |
Loan payable (note 13) |
4,974,463 |
- |
Warrants (note 14) |
28,382 |
823,090 |
Promissory note (note 15) |
2,634,573 |
3,386,300 |
Total non-current liabilities |
11,198,636 |
8,692,928 |
Shareholders' equity: |
||
Share capital (note 17) |
122,803,204 |
119,075,245 |
Share based payment reserve |
11,121,785 |
10,854,968 |
Deficit |
(126,477,447) |
(118,607,020) |
Total Shareholders' equity |
7,447,542 |
11,323,193 |
Total Liabilities and Equity |
$ 33,990,694 |
$ 39,453,454 |
Consolidated Statements of Operations and Comprehensive Loss
(Expressed in United States dollars)
Years ended December 31, 2022 and 2021
2022 |
2021 |
|
Revenue (note 18) |
$ 92,150,276 |
$ 90,667,936 |
Cost of goods sold (note 6) |
60,181,861 |
58,833,238 |
Gross Profit |
31,968,415 |
31,834,698 |
Operating expenses: |
||
Fulfillment costs |
7,384,139 |
8,975,684 |
Selling and marketing |
6,832,947 |
11,700,348 |
Administration |
15,764,515 |
15,299,126 |
Research and development |
1,341,668 |
1,629,447 |
Depreciation and amortization |
4,069,070 |
2,967,113 |
Total operating expenses |
35,392,338 |
40,571,718 |
Loss from operations |
(3,423,923) |
(8,737,020) |
Other income (expense): |
||
Interest income |
62,472 |
96,166 |
Interest expense |
(2,097,405) |
(2,391,881) |
Finance costs (note 3) |
- |
(1,475,886) |
Rental income |
225,887 |
222,416 |
Fair value adjustment of convertible debt |
- |
(3,333,311) |
Fair value adjustment of warrants (note 14) |
794,708 |
6,750,503 |
Foreign exchange loss |
(104,596) |
(187,402) |
Restructuring costs |
(218,374) |
- |
Listing expenses (note 3) |
- |
(900,153) |
Impairment loss on intangible assets and goodwill (note 8) |
(3,385,373) |
- |
Loss on extinguishment of debt (note 13) |
(107,524) |
- |
Total Other income (expense) |
(4,830,207) |
(1,219,548) |
Loss before income taxes |
(8,254,130) |
(9,956,568) |
Income tax expense (note 20) |
383,703 |
(371,091) |
Total loss and comprehensive loss for the year |
$ (7,870,427) |
$ (10,327,659) |
Loss per share |
||
Basic and diluted loss per share (note 24) |
$ (0.25) |
$ (0.41) |
Consolidated Statement of Cash Flows
(Expressed in United States dollars)
Years ended December 31, 2022 and 2021
2022 |
2021 |
|
Cash provided by (used in): |
||
Operating activities: |
||
Loss for the year |
$ (7,870,427) |
$ (10,327,659) |
Add (deduct) items not affecting cash: |
||
Depreciation and amortization |
4,069,070 |
2,967,113 |
Income tax expense |
(383,703) |
371,091 |
Stock-based compensation expense |
266,817 |
459,231 |
Loss on disposal of property and equipment |
7,000 |
- |
Interest paid on leases |
284,868 |
317,282 |
Other interest and finance cost |
1,812,537 |
2,074,598 |
Interest earned on lease receivables |
(62,472) |
(96,166) |
Loss on extinguishment of debt |
107,524 |
- |
Impairment loss on intangible assets and goodwill |
3,385,374 |
- |
Fair value adjustment on convertible debt and warrants |
(794,708) |
(3,417,192) |
Finance costs |
86,447 |
1,475,886 |
Listing expenses |
- |
900,153 |
Unrealized foreign exchange |
44,991 |
16,238 |
Income taxes paid |
(1,366,000) |
- |
Changes in non-cash operating working capital: |
||
Short term investments |
(200,000) |
- |
Trade and other receivables |
176,855 |
(402,880) |
Inventories |
795,120 |
(1,453,263) |
Prepaid materials, expenses and deposits |
860,959 |
(1,591,481) |
Accounts payable and accrued liabilities |
(973,665) |
1,302,915 |
Deferred revenue |
(2,107,609) |
613,006 |
Total operating activities |
(1,861,022) |
(6,791,128) |
Investing activities: |
||
Purchase of property and equipment |
(47,256) |
(109,998) |
Principal received on lease receivables |
244,019 |
223,090 |
Acquisition of business, net of cash acquired and |
- |
(9,429,166) |
Total investing activities |
196,763 |
(9,316,074) |
Financing activities: |
||
Subscription receipts proceeds |
3,712,715 |
16,592,133 |
Subscription receipts issuance costs |
(14,143) |
(1,475,886) |
Financing and listing transaction costs |
- |
(34,040) |
Debt financing transaction costs |
(50,174) |
- |
Interest paid |
(1,092,438) |
(225,745) |
Principal lease payments |
(1,338,882) |
(1,110,304) |
Proceeds from exercise of stock options |
15,244 |
20,901 |
Promissory note repayment |
(933,750) |
(1,245,000) |
Loan repayment |
- |
(114,382) |
Deferred consideration repayment |
(675,000) |
- |
Loan proceeds |
4,500,000 |
- |
Total financing activities |
4,123,572 |
12,407,677 |
Effects of currency translation on cash and cash equivalents |
(68,545) |
- |
Increase (decrease) in cash and cash equivalents |
2,390,768 |
(3,699,525) |
Cash and cash equivalents, beginning of year |
1,716,986 |
5,416,511 |
Cash and cash equivalents, end of year |
$ 4,107,754 |
$ 1,716,986 |
SOURCE BuildDirect.com Technologies Inc.
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