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DIRTT Environmental Solutions Ltd. (DRTT)
Q1Â 2020 Earnings Call
May 8, 2020, 5:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Ladies and gentlemen, thank you for standing by, and welcome to DIRTT Environmental Solutions 2020 Q1 Financial Results Conference Call. [Operator Instructions]
I would now like to hand the conference over to your speaker today, Kim MacEachern. Thank you. Please go ahead, madam.
Kim MacEachern -- Investor Relations
Thank you, operator. Good morning, everyone, and welcome to today's call to discuss DIRTT's first quarter 2020 results. Joining me on the call are DIRTT's Chief Executive Officer, Kevin O'Meara; and Chief Financial Officer, Geoff Krause.
Management's prepared remarks today are accompanied by presentation slides. To access the slides, please use them from the web page of this webcast or go to the Investors section of DIRTT's website. The earnings press release that was issued yesterday afternoon can also be found 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 include references to non-GAAP results, excluding special items. Please reference our Form 10-Q as filed on May 6th, 2020, 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 1:00 p.m. Eastern Time.
I will now turn the call over to Kevin.
Kevin O'Meara -- Chief Executive Officer
Thank you, Kim, and thank you, everyone, joining us today. Before Geoff reviews our first quarter financial results, I'd like to discuss both the impact of the COVID-19 pandemic on our business and how we are proceeding with our strategic plan in this uncertain environment. These are summarized on Slide 4.
DIRTT's response to COVID began early and continues to emphasize the health and safety of our employees, customers and communities. Across most of North America, construction was deemed an essential service early in the pandemic's on site, and our manufacturing operations have continued uninterrupted. We have implemented work-from-home policies for our non-factory employees and have instituted strict access restrictions and social distancing measures within our factories, all consistent with health authority protocols. While most construction sites remain open across North America, and we continue to deliver projects, we've seen some project delays impacted by the implementation of social distancing and other safety-related measures on site. Within our immediate pipeline, we are seeing some delays. But so far, no cancellation of orders.
As a result of all of these factors, we are taking a more measured approach to executing our strategic plan, moving forward to make the most of opportunities before us without incurring excessive financial risk. We've curtailed discretionary non-essential spending, including our annual Connext trade show. However, we are continuing to selectively hire the sales and marketing positions that are critical to the success of our strategic plan.
Notably, we hired our Director of Partner Programs, our third Regional Sales Director and added one person to our Strategic Accounts team. With these additions, we have completed the hiring of all the people who will report directly to our Chief Commercial Officer. We will delay filling certain other roles until we have a better sense of business conditions. We continue to upgrade our sales management process and move forward with improving our commercial systems. We also added two new distribution partners, one in Texas and one in Wisconsin, and having ongoing conversations with several other prospective distribution partners in underpenetrated geographic areas.
Finally, we made the decision to move forward with the commissioning of our South Carolina plant in the first half of 2021, With state-of-the-art automation, we expect the new plant to provide significant improvement in cost efficiency and material yield, while at the same time reducing the risk inherent in operating a single tile plant. We consider this a very prudent business decision for the future and a clear mitigation of risk. We've been deploying our new marketing capability to respond to the pandemic.
In March, when all indications were that North America's healthcare systems would come under considerable strain and require additional infrastructure, we quickly mobilized to increase our visibility among targeted healthcare clients and other organizations, who influence healthcare facility decisions. Our teams collaborated to develop a pre-designed, scalable, stand-alone healthcare solution that could be ordered, delivered and installed quickly.
In the ensuing weeks, with lower-than-anticipated need for peak or overflow facilities, the large-scale emergency response demand has diminished. While we've had some small COVID-related projects, the relationships that have grown out of our COVID-related initiatives and that we will build upon post pandemic represent excellent opportunities for both our strategic accounts and large project teams.
From an operational perspective, the most critical short-term goal we had laid out in our strategic plan was focused on safety. Last quarter, we reported a 50% reduction in safety-related recordable incidents at the end of 2019 versus 2018. In the first quarter of this year, we achieved a 92% reduction from the same period last year. In real terms, this means that four of our five facilities had no reportable injuries during the first quarter, and the fifth facility had two. Don't get me wrong, even one injury is too many. However, these results are an indication of how far we've come in a short period of time and is a tremendous accomplishment for our entire organization.
We're moving forward with quality and delivery improvements as well as identifying opportunities to further implement lean manufacturing processes to ensure operational efficiency. In fact, last week was our first week when every facility met or exceeded our quality goal. We remain on track to achieve continuous improvement within our manufacturing operations by year-end.
Looking forward, we recognize this pandemic will disrupt long-held assumptions about how people and businesses interact and gather, and this will present both challenges and opportunities for us. Organizations may embrace the ability of their workforce to operate from home, thus reducing the need for commercial office space. We may also see an increased desire for less open workspaces and more focused on opportunities for social distancing for both physical and mental well-being. In addition, needs may evolve over time as companies experience new ways of working.
Regardless of the trends that emerge, the flexibility to create custom spaces to meet current needs and modify them as needs evolve is core to DIRTT's DNA. The ability to reduce the number of tradespeople working on a job site is also a long-standing part of our value proposition, which we believe will become even more relevant going forward. It is our intention to deploy our newly established commercial organizational capabilities to maximize sales opportunities and engagement with end clients, architects and designers and general contractors throughout targeted and thoughtful marketing campaigns. We are prepared and eager to drive market share growth for DIRTT in whatever market is available to us.
With that, I will turn the call over to Geoff for a financial review.
Geoffrey Krause -- Chief Financial Officer
Thank you, Kevin. I'd like to begin by reviewing some of the additional steps we took to address the COVID pandemic. In early 2020, we commenced a process of reviewing our credit facility. This process expanded to include other forms of equipment lease financing to ensure liquidity in the face of considerable uncertainty.
On May 4th, we entered into a seven-year revolving CAD5 million equipment capital lease facility at an implied lease rate of 4.25%. We also entered into a five-year $16 million equipment capital lease facility to fund equipment purchases for our New South Carolina plant at an implied lease rate of approximately 3.5%. The US facility is extendable for an additional year. We expect to draw on approximately $7.3 million of these facilities in May to fund purchases -- fund equipment purchased and deposits made in 2019.
With the establishment of the US equipment leasing facility and the increased liquidity it provides, we will provide -- proceed with commissioning activities of the South Carolina plant's chromacoat production line in the second half of 2020, with commercial operations expected to commence in the first half of 2021. The incremental cash cost of commissioning the plant is approximately $4 million, of which approximately $2 million is expected to be funded with our new capital lease facility and $2 million from cash on hand.
If you recall, in the second half of 2019, we made equipment deposits of $4.5 million. We expect our spending in 2020 related to the South Carolina plant to be $10.5 million, comprised of the remaining cost of the equipment as well as a portion of the commissioning cost. With the balance of commissioning completed in 2021, the -- with the balance complete in 2021, the timing of these expenditures depends on the receipt of the major pieces of equipment being manufactured in Italy that were originally scheduled to be delivered in September. We estimate COVID-19 will delay delivery by two to three months.
We are going to defer moving forward on the mill work component, which is expected to cost approximately $2 million of the total $18.5 million, while we are currently in compliance with all of our revolving credit facility covenants, we have taken steps to ensure the availability of the revolver during these challenging times. Accordingly, we have reached an agreement in principle with our lender, subject to definitive agreements, to provide near-term covenant relief on our existing credit facility, modifying the borrowing base to be based on working capital, subject to an aggregate cap of CAD50 million, including the aforementioned leasing facilities. The covenant relief extends until October 2020, at which point, we will seek further relief, if necessary. At the end of the quarter, we had CAD30 million or $21.4 million equivalent of unused credit capacity under our revolving credit facility and $43.5 million of cash.
With that background, let's now turn to the first quarter's results on Slide 5. Revenue for the first quarter was $41 million, a decline of 37% from the comparable period of 2019 and a sequential decline from last year's fourth quarter. As we've discussed, we've been experiencing a prolonged disruption to our sales pipeline, particularly with respect to larger-sized projects. As it relates to our partner network, in the quarter, we added the reporting of discrete partner relationships, which was 78, as well as opposed to -- or as opposed to partner locations, which was 93. That is the way we only reported previously. We believe this is a more appropriate presentation.
On Slide 6, adjusted gross profit margin was 38% in the quarter, a decline from 39.6% from the comparable 2019 period, but a sequential improvement despite lower revenue. As in Q4 2019, we separately classified $2 million of costs related to our underutilized capacity within cost of sales. This number is reflected in the adjusted gross profit margin calculation. The improvement compared to Q4 2019 was a result of the many steps we took to manage our operational costs.
In the quarter, we reduced our factory staffing by 14%. We also reduced the length of shifts in our factory from 12 hours to 10 hours per day and instituted planned factory curtailments. Subsequent to the end of the quarter, we further reduced our factory labor by an additional 12%, bringing the total production head count to 600, in response to current sales volumes.
On Slide 7, as a result of the shift in the cost structure of our plants and the recent changes in revenue levels, in the near-term, our monthly fixed plant overhead costs are approximately $1.9 million to $2 million. From a contribution margin perspective, every dollar of revenue contributes approximately $0.54 of gross margin after deducting direct materials as well as variable labor costs. These numbers are an update from what we shared with you at our Analyst Day last November. It is important to note that our plant labor is quasi-variable, being more variable as activity increases through the use of overtime and increased hours but sticky to the downside.
Slide 8 details the breakdown of operating expenses. As you can see, overall operating expenses have remained relatively consistent from the comparable period of last year.
Looking at Slide 9, adjusted EBITDA and adjusted EBITDA margin for the year -- for the quarter decreased to negative $5.4 million and negative 13.2%, respectively, compared to the first quarter of 2019. This decrease was driven by the $10.1 million decrease in adjusted gross profit, the $2 million of underutilized capacity and $800,000 of higher litigation costs incurred in 2020. Ensuring we maintain liquidity through this uncertain period is paramount, and we remain highly focused on the conversion of working capital to cash, including an increased focus on accounts receivable collection. Despite this, and during the quarter, we increased our allowance for doubtful accounts by $600,000 to reflect increased collection risk related to certain distribution partners.
We continue to monitor the financial health of our partners. As a backstop, we acquired a trade credit insurance effective April 1st, 2020. Like us, our partners are focused on the safety of their employees and liquidity. We are encouraged that construction in North America has not stopped and that we have only seen project deferrals as opposed to cancellations. That said, these are challenging times for everyone.
Net working capital as of March 31st, 2020, was $51 million, compared to $58.6 million at December 31st, 2019, and included $43.5 million of cash with no debt. Despite a slow quarter, our current ratio remains healthy at 2.4 times versus 2.7 times at December 31st, 2019.
Turning to Slide 10. Net loss for the quarter was $5.3 million or $0.06 per share, driven largely by the change in gross profit. The loss was consistent with the first quarter of 2019, which included $6.4 million of stock-based compensation expense and $2.6 million of reorganization expenses, compared to $500,000 and $0, respectively, in 2020. We also benefited from increased foreign exchange gains and income tax recoveries in the first quarter of 2020.
Excluding the cost of the equipment and commissioning of the South Carolina plant as described previously, which is largely funded by our new equipment leasing facility, we expect our ongoing capital expenditures for 2020 to be between $6 million and $8 million, directed mainly toward our DXC refresh in Chicago, our new DXC in Dallas, commercial systems implementations and software development activities.
Let's now touch on our revenue outlook. Given where DIRTT fits in the construction schedule, typically closer to completion, our current deliveries are for projects that are well under way as the COVID-19 pandemic hit North America. Our average daily order entry levels for April have been only slightly lower than the average daily order entry for the first quarter of this year.
However, since none of us know how long the crisis will last or, as Kevin discussed, what the overall impact on the commercial construction industry will be, we have taken decisive action to enhance DIRTT's financial flexibility during what may be a prolonged period of economic uncertainty. We have done an extensive analysis and developed multiple contingency plans depending on the timing and the magnitude of the effects of COVID-19 on our end markets and the related cash needs of the company. While in a worst-case scenario further actions to reduce costs would be required, we are confident that we will continue to have the balance sheet to support operations going forward.
I will now turn the call back to Kevin for closing remarks. Kevin?
Kevin O'Meara -- Chief Executive Officer
Thank you, Geoff. Turning to Slide 11. I want to conclude by talking about the strategic plan we laid out in November. Both the management team and the Board remain wholly committed to those priorities and strategies. The road map we laid out then remains as relevant, if not more, in the current environment. While we will encounter some delays in implementation of the overall strategic plan as a result, we continue to focus on the following measures of success.
Staffing our commercial organization, while we were targeting to complete the hiring in our commercial organization by year-end, we are now delaying noncritical hires to remain financially flexible in dealing with the current market uncertainty. However, we have made nearly all of the critical additions to our commercial team.
Implementing sales tools. We are focused on improving our CRM processes and related commercial systems. We're revising the partner portal we plan, rebuilding the user interface and building out resources for our partners on our existing platform rather than migrating to a new stand-alone site. The total cost of ownership tool remains a priority to be launched in the fourth quarter. This tool will assist our sales reps, partners and everyone involved in the construction process to accurately assess the value DIRTT delivers over conventional construction, including both day one costs and ongoing operating costs.
Tracking conversion rates at every stage of the sales funnel. We've begun tracking conversion rates in our current forecasting system and will continue on this path once our CRM system is in place. We anticipate full lead tracking to be in effect by mid-year. Securing at least two national account agreements. We continue to have active discussions with numerous clients and feel confident, we are moving forward in these conversations. Injury rates below BLS standards. We believe we are now operating at a sustained level far below BLS standards.
Improving quality and on-time delivery performance. Our success in dramatically improving safety is enabling us to devote additional time to improving our quality and on-time delivery, as well as drive efficiency throughout our operations. We will complete our step function improvements by the end of 2020 and then enter into continuous improvement phase of our lean journey.
Wrapping up now on Slide 12. While COVID-19 has presented considerable uncertainty to North American economic activity, we've responded with appropriate conservative financial and operational management decisions, and we remain fully committed to the objectives of our strategic plan while continually evaluating long-term financial targets associated with that plan. We are positioning DIRTT to take full advantage of the range of opportunities to develop in our market.
I would like to specifically thank our tremendous employees who have demonstrated resiliency and commitment to the face of extraordinary circumstances over the past several months. Your dedication to DIRTT and our collective mission is the foundation of our organization.
Operator, I would now like to open the call for any questions.
Questions and Answers:
Operator
Thank you. [Operator Instructions] Your first question comes from the line of Rupert Merer from National Bank. Your line is open.
Rupert Merer -- National Bank Financial -- Analyst
Hi, good morning, everyone.
Kevin O'Meara -- Chief Executive Officer
Good morning.
Geoffrey Krause -- Chief Financial Officer
Good morning. Rupert.
Rupert Merer -- National Bank Financial -- Analyst
Can you give us a sense of the percentage of the orders that you've seen being postponed with COVID-19?
Geoffrey Krause -- Chief Financial Officer
It's in the -- it's mainly been in the second quarter so far, somewhere in the range of $5 million to $10 million-ish, but we're also seeing some stuff come in. But that's kind of what we're seeing right now. It is fluid, I think it's more a function of people looking to see what's happening within their areas and then updating their construction schedules accordingly.
Rupert Merer -- National Bank Financial -- Analyst
And do you have any color on when those orders may be delivered? Is it indeterminate at this point? Or are you seeing some of the markets, which have shutdown starting to open up or some indication of when they could open up?
Kevin O'Meara -- Chief Executive Officer
Rupert, it's Kevin. The short answer is, nominally, they shift either into a later month or to a later quarter. It's driven less by jurisdictions being open or not open than it is individual job sites and be at a job site closed for 14 days, because somebody was diagnosed with COVID, and the general contractor decides to shut it, or where historically, you might have both the electricians and the plumbers working on the floor, and instead, they split it up to get more social distancing, and that slows the process down.
I think the reality is nobody knows. It's a job site by job site analysis and location by location. It's not as simple as saying 20% of the jurisdictions won't let us work, and now they will. And so that will come forward. It's very uncertain and on a job site basis.
Rupert Merer -- National Bank Financial -- Analyst
Okay, thanks. And you mentioned that the order entry in Q2 so far is only slightly lower than Q1. So is that an indication for where revenue is headed for Q2 at this point? Would Q1 be a good proxy for what we should expect in Q2?
Geoffrey Krause -- Chief Financial Officer
I'll answer that in a couple of ways. I think the first piece is, as you know, the shelter-in-place orders really started happening in the last half of March, and we were encouraged that the order entry continued into April at that same level. Those were jobs that were currently ongoing. The larger question for us is what happens in the next two months. And as Kevin said, it is pretty uncertain relative to what happens on each of the individual job sites and how that goes.
I think the other thing that I would say on that, Rupert is when you look at the split of what the projects were, they followed our normal distribution. We had 67% on the commercial side, 12% in the healthcare, 11% in government and 10% in education. We'll see how that moves forward. But it's very difficult at this point for us to tell what kind of the next two months will look like as areas open up and as job sites deal with distancing and things.
Rupert Merer -- National Bank Financial -- Analyst
Okay, thanks. And then just finally, I understand that sales and marketing efforts can be challenged today. But are you seeing any green shoots or any benefits of your efforts to start pulling in some larger jobs?
Kevin O'Meara -- Chief Executive Officer
Yes. I think we are starting to get some traction on some larger jobs. Consistent with what we've said, looking backwards, those have long sales cycles. And so I don't know that any of those are ones that you will see in 2020, but we are starting to see a pickup in the pipeline of the larger jobs that are over $2 million.
Rupert Merer -- National Bank Financial -- Analyst
Okay, thanks. I'll jump back in the queue.
Kevin O'Meara -- Chief Executive Officer
Thanks, Rupert.
Operator
Your next question comes from the line of Greg Palm from Craig-Hallum Capital. Your line is open.
Danny Eggerichs -- Craig-Hallum Capital -- Analyst
This is actually Danny Eggerichs on for Greg today.
Kevin O'Meara -- Chief Executive Officer
Hey, Danny.
Danny Eggerichs -- Craig-Hallum Capital -- Analyst
I guess just looking at the demand environment, possibly coming out of this current situation. Could you give some color on possible pent-up demand for renovations? Or what about new builds? And could you possibly remind us of the mix between those two?
Kevin O'Meara -- Chief Executive Officer
It's highly variable. I don't know that we've got great numbers as it relates to our mix, which is only part of the story, because where a lot of the activity happens, it's an important part of our value proposition, is our partners doing reconfigurations that are happening every day, every weekend of the year. So I'll have Geoff give you kind of his approximation when I finish, but that will just be a small piece of the reconfiguration, renovation number.
And the reason is that's because you can reuse -- and our solutions are modular, we don't necessarily sell a whole lot more when somebody does a reconfiguration, but setting that aside -- in terms of what people are looking at, it's very early days, and people are still trying to figure out what's the right approach for them to take and being very strategic about it and, kind of, dipping their toe back in, just wanting to make sure that their people remain safe.
And so that's where we're mobilizing our efforts, to make sure that our value proposition that has been the same for 15 years, and this resonates for what's going on now in terms of very quick lead times, the ability to do the reconfigurations. So if you want to have lots of discrete offices now, but think when -- down the road, for a variety of reasons, you might want to have a more open plan, we could certainly help you with that, all with very few people on the job site and a very clean construction job site. And so I think that is something that we will be playing to.
The other thing that we will put a strong sales push on is jobs that are currently in process where somebody elected to go with conventional construction, and they find out that the schedule really hasn't moved, even though you've lost one to three months of construction time. Now they may reconsider and decide that in order to hit their original construction schedule, they need to finish the interior with a prefabricated solution from us as opposed to staying conventionally.
So there are any number of avenues that we're going to pursue. It's just early days knowing exactly how much traction we're going to get and getting a sense as to what the coming quarters hold. And Geoff, do you want to go ahead and answer the split between renovation and new construction in our mix?
Geoffrey Krause -- Chief Financial Officer
Yes. And unfortunately, our data is not phenomenal on that historically, but it's tended to trend around 50-50, so...
Danny Eggerichs -- Craig-Hallum Capital -- Analyst
All right. Great. That's really helpful. And then I guess, moving to distribution partners and the financial shape. Are you guys worried at all about certain distribution partners and their ability to withstand this kind of near-term shock?
Geoffrey Krause -- Chief Financial Officer
Yes. We're -- I guess, like every company, we're looking at what our customers, which are our distribution partners, and what their financial health is. Our best measure of that is how payments are coming in and what our receivables and DSOs look like. Our DSOs is still really healthy. We haven't seen any significant impact on our collections. But I would be -- it would be imprudent for us not to be watching that. They're watching their cash just like we're watching our cash. I'd say, so far, so good. We'll see what happens as this continues. And if construction sites get back to work very quickly and commercial market opens up really quickly, probably don't need quite as much attention as we're putting in it, but we're watching it. We don't have concerns yet, but it is certainly very high on our radar.
Danny Eggerichs -- Craig-Hallum Capital -- Analyst
Great. And then just one last one for me. How do you see the, I guess, potential for the use of technology as we emerge from this crisis and possibly even like your VR solution?
Kevin O'Meara -- Chief Executive Officer
Increasing fairly significantly throughout everything that we do, starting with we're going to be rolling out a virtual client tool experience so that the experience that we give people when they come to Calgary and meet our people and tour the plants and get the full experience of our capabilities, we are going to be able to do that on a virtual basis, which I think will become critically important.
And then also one of the attributes of our solutions is the ability to embed technology throughout everything that we do. So be it touchless entry sensors or enhanced video conferencing capabilities, etc, we can put together the -- depending upon, which way you're going, we can either fully install it in one of our plants or put in place the wiring and infrastructure in order to do that. So we're very well positioned to respond to whatever the technological needs are that somebody will need in their space.
Danny Eggerichs -- Craig-Hallum Capital -- Analyst
Alright, great. That's all from me. Thanks, guys.
Operator
[Operator Instructions] Your next question comes from the line of Josh Wilson from Raymond James. Your line is open.
Josh Wilson -- Raymond James -- Analyst
Thanks. Good morning, Kevin and Geoff. Abd thanks for taking my questions.
Kevin O'Meara -- Chief Executive Officer
Good morning.
Josh Wilson -- Raymond James -- Analyst
Good morning. And I had trouble getting connected to the call, so I apologize if some of this has been covered. But you talked in the filing some about eliminating some underperforming distribution partners and also recruiting some new ones. Could you walk us through the decision process in the eliminations and what the pipeline might look like for adding others to the fold in the coming quarters?
Kevin O'Meara -- Chief Executive Officer
Sure. I'll take that one. The single probably biggest determinant of the likelihood of a distribution partner being successful is where are they in the individual market in terms of size of competitors. So for an office furniture dealer, we would like to have the number one or number two obviously, because we're relying on them for their customer relationships as well as their installation capability and their financial wherewithal. All of that comes together with size and with market presence and history of success.
And so what we have seen is that -- a couple of things. In a couple of core markets, either we didn't have enough partners. New York is an example of that. And the partner that was there was clearly not number one or number two. And then in the Texas market, the partner we had was like the sixth largest. And you also see it in terms of how they perform historically. Are they selling the full solution, etc? We have found a very strong reception when we have approached potential partners in terms of taking on DIRTT, and we're focusing on the number one or number two that we think will drive the most success.
And then after you have the initial conversation, what becomes very important is asking them for a business plan and kind of resources are they committed to in the marketplace investing, because what our history shows is that you need to have a stand-alone dedicated DIRTT team. A lot of times, it will be rebranded, and we can really help them through that. But there is a start-up amount of capital that's required to get going, and so we help them through that.
In terms of the pipeline, I think that you could see anywhere over the next six to 12 months, two to eight to give a wide band. This is also where we've had a variety of experiences with COVID. A couple just took a couple of week delay, and then we were able to sign them up pretty quickly. A few others, delay has been a little bit longer. So I think we will have a little bit of a delay going forward. And there's a little bit of a challenge getting them on-boarded. It is easier to get people on-boarded, to have them come to the factory and get hands-on experience, but we're also prepared to onboard partners with virtual tools and have a dedicated team for on-boarding them.
Josh Wilson -- Raymond James -- Analyst
Thanks. And just so we're clear on the gross margin outlook. That slide you provided, is that following all of the labor cuts? And how should we think about that $2 million of underutilization persisting in the next few quarters?
Geoffrey Krause -- Chief Financial Officer
Yes. So that is following the cuts that we did at the end of April. So you will see some underutilization within April, though I don't think it's sufficient for us to call out. But that's really the go-forward at the plant level.
Josh Wilson -- Raymond James -- Analyst
Got it. Thanks.
Geoffrey Krause -- Chief Financial Officer
Yes.
Operator
There are no further questions at this time. Kevin O'Meara, I turn the call back over to you.
Kevin O'Meara -- Chief Executive Officer
Thanks for joining us today. I hope we've given you a thorough picture of the steps we're taking to keep our employees safe, improve our operations and enhance our commercial organization, all while being very prudent with our finances. We're highly focused on execution, such that whatever the timing and pace of economic recovery and related demand, we're positioned to take full advantage of the market available to us. Thank you, and have a good rest of your day.
Operator
[Operator Closing Remarks]
Duration: 36 minutes
Call participants:
Kim MacEachern -- Investor Relations
Kevin O'Meara -- Chief Executive Officer
Geoffrey Krause -- Chief Financial Officer
Rupert Merer -- National Bank Financial -- Analyst
Danny Eggerichs -- Craig-Hallum Capital -- Analyst
Josh Wilson -- Raymond James -- Analyst
