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Good morning, ladies and gentlemen, and thank you for standing by. I am the operator on today's call. Welcome to the DIRTT Environmental Solutions 2018 Second Quarter Results Announcement Conference Call. [Operator Instructions]I will now turn the call over to Ms. Kim MacEachern, Director, Investor Relations for DIRTT. Ms. Kim MacEachern, please go ahead.
Thank you, operator. Good morning, everyone, and welcome to the call. This morning, we are joined by Mr. Michael Goldstein, DIRTT's interim CEO. I'm also pleased to introduce Mr. Geoff Krause, who is appointed as DIRTT's Chief Financial Officer in June of this year. I will turn the call over to Michael and Geoff shortly to discuss DIRTT's second quarter results. Ms. Ha Tran, DIRTT's VP, Finance, is also on the call today to assist in the question-and-answer portion.Before we begin, I remind you that certain information on today's call, including responses to questions posed, could constitute forward-looking statements that are subject to risks and uncertainties relating to DIRTT's future financial or business performance. Actual results could differ materially from those anticipated in these forward-looking statements. Risk factors that may affect results are detailed in DIRTT's filings with the Canadian Securities Commission, which can be accessed at www.sedar.com.Please note that DIRTT is under no obligation to update any forward-looking statements discussed today, except as required by applicable law, and investors are cautioned not to place undue reliance on these statements.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.Management's prepared remarks today are accompanied by presentation slides. To access the slides, if you've not already done so, please 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.With that, I will now turn the call over to Michael.
Thank you, Kim, and good morning, everyone. If you'll turn to Slide 4. I'm very pleased to report that DIRTT followed up a very strong first quarter with another solid second quarter. Second quarter revenues increased by more than 15% over the same period last year and are up 19% on a year-to-date basis. Equally important, the company's focus on sound fiscal discipline drove significant improvements in profitability, with adjusted EBITDA increasing 240% on a year-to-date basis to $20.9 million. Further, we are on track to meet the targets that we set for ourselves in accordance with our planning, and Geoff will discuss this in more detail shortly.As interim CEO, my mandate from the board consisted of the following broad themes: setting and achieving near-term business performance objectives; ensuring an ongoing operation of the business; completing our strategic study for consideration by the permanent management team as they form their own plans; implementing structures, planning and control measures to improve the overall profitability on a sustainable basis; and finally, working with the board and senior management to fulfill and fill the permanent CEO and CFO positions of the company.I am pleased to report that we've been able to meet all of these objectives. During my tenure, this business demonstrated solid growth overall, including increases in key verticals such as health care. Our focus on planning and cost control introduced in the first half of this year has had significant improvement on profitability and sets the company up well from a free cash flow perspective in the coming years.The company's strategic study was also completed as planned and provided greater clarity on the opportunities that lie ahead. And I'm delighted that Geoff Krause joined the company as CFO in June of this year.With a strong culture at the core of DIRTT's values, finding the right CEO with a mix of experience, track record and vision to lead this company is paramount. And after a broad search, we're down to a very short list of strong candidates that exhibit all of these qualities. Senior management and founders recently met with each of the candidates and have provided their feedback to the selection committee for their consideration. So with the CEO search process nearly complete, my focus is now shifting to ensure a smooth transition of responsibilities to the permanent management team, and this is well underway with Geoff, our CFO. Geoff is fully operational, and he's picking up more and more of the day-to-day operational responsibilities as time goes on.The final step in this process will be as we bring in a new CEO and to effect a smooth onboarding and transition, which will then satisfy and complete my mandate here at DIRTT.When I look back, it's hard to imagine that we've moved as far as we have in just 2 quarters. This process is a testament to all of those DIRTT team members that have demonstrated the integrity and the commitment to growth and change, and I'm proud of this team and excited about the future prospects of this tremendous company.So listen, with that said, I'll turn this over to Geoff, who will tell you about our solid Q2 performance. Geoff?
Thanks, Michael. The board would also like to thank Michael for his leadership during this interim period and for his support as we get our permanent CEO on board.I'll start off with a bit of background on myself, reflected on Slide 5, and then move on to a more detailed discussion of the second quarter results.As many of you know, I joined DIRTT this past June as CFO taking over from Mr. Peter Henry, who held the position in an interim capacity. It's been a busy 2 months getting to know the business, the employees and meeting many of our partners. In joining DIRTT, I bring over 25 years of financial management experience at both private and public companies. Most recently, I was CFO of Pure Technologies, an international technology and services company based here in Calgary. Like DIRTT, Pure used innovative solutions to create innovative technologies to create solutions for long-standing infrastructure problems. Also, like DIRTT, a key growth driver was educating potential clients on the substantial benefits of a new approach. In their case, managing long-life assets through the use of condition assessment instead of replacements.Over a 4-year period at Pure, our team implemented a significant financial process transformation across the company. These changes led to substantial increase in revenue and profitability, the facilitation of multiple acquisitions and culminated in a successful sale to Xylem Inc. in January of this year. Over the years, I've been successful in establishing business partnerships within companies, ensuring that finance works in an integrated and collaborative way with operational functions. This allows the development and implementation of financial performance management processes and related accountabilities with the end goal of driving increased shareholder value. I'm excited to learn from my DIRTT colleagues and to apply my experience to contribute to DIRTT's future successes.During the past couple of months, I've been familiarizing myself with the leadership team and the business. I've also been delving into the data that's being collected to determine how we can best use it to drive the business forward. I've spent a significant time assessing the current state of DIRTT's financial processes, systems and reporting and developing related action plans. From my observations, DIRTT's financial books, systems and records are in good shape with the appropriate controls of our financial reporting in place and functioning well. An extensive amount of operational and financial data is available within the organization. We are working to streamline and mine that information. Our goal is to develop specific indicators regarding the most important areas of financial leverage and areas of improvement. This will position us to enhance DIRTT's operational, financial and strategic decision-making, which we expect will lead to continued growth and increase profitability.The company has already benefited from the foundational work that Peter and the rest of the senior management team started during the first half of 2018. The fiscal management control systems we've put into place are starting to show benefits, and we continue to seek additional near-term opportunities for improvement.Now taking a look at our second quarter and Slide 6. Our Q2 highlight is always DIRTT Connext, our annual sales, marketing and industry event in Chicago. This year was no exception. Our restructured trade show was held on June 11 to the 13, and attendance was by invitation only. The result was a shorter event that was deliberately more focused on forging stronger relationships with our partners and their key customers. Over the 3-day period, DIRTT welcomed more than 1,000 guests to our Chicago Green Learning Center, or GLC. Many of our DIRTT partners were also in attendance. Our head clients joining us for the show. Feedback on the new format was universally positive.Experiencing it for the first time this year, I found the energy was palpable. While our guests took in the latest interior construction advancements, technology really stole the show. A section of the physical GLC was cleared out for a virtual GLC. Guests explored an interior space and made changes to its design in real time, alongside others who were physically located in Calgary and Salt Lake City. We created this experience exclusively for Connext 2018, and it is a testament to DIRTT's ongoing commitment to innovation.Turning to the numbers in Slide 7. Revenue in the second quarter of 2018 grew by 15% to $80.7 million compared to $70 million in Q2 of 2017. Second quarter revenue included $2.1 million in installations. Looking at geographical mix, U.S. revenue grew by 23% in Canadian dollars or 29% excluding the impact of foreign exchange. While our revenue will vary geographically, we are encouraged by the increased penetration into the U.S. market.Revenue strength in the quarter benefited from some large orders. This includes the commencement of a 7-story medical office building interior in San Francisco as well as a project for an end user in the energy space. We continue to see health care as a key growth vertical for the company. For the period, health care as a percentage of revenue was 20% versus 18% in the last year second quarter.While we do not discuss the particulars of specific contracts, it is important to note that none of these orders are material on a stand-alone basis. As such, we encourage investors not to rely on any single order for modeling revenue growth, but collectively, they provide us with a solid, well-diversified base to continue into the second half of 2018.Turning to Slide 8. Adjusted gross profit of $34.7 million was higher by $4 million in Q2 of 2017. Adjusted gross profit margin of 43% for the quarter was modestly lower than Q2 2017, primarily reflecting increased direct materials costs. Higher direct labor costs were substantiality offset by leverage impacts of fixed production overhead. Comparing Q2 to Q1 of 2018, adjusted gross profit margin dropped 3.1% on similar revenue. This fluctuation also was a result of increased direct material costs in Q2 due to product mix.As we previously discussed, because DIRTT manufactures custom solutions, the product mix and timing of orders can impact gross profit margins. To provide a little more color, our cost of goods sold is comprised of direct materials, transportation, installation, direct and indirect labor and overhead. Direct material costs are variable and based on recent historical cost of goods sold, represent approximately 50% of those overall costs. The variability in direct material costs results in fluctuations to adjusted gross profit margin, which has ranged between 42.4% and 46.1% over the last 8 quarters. Including direct and indirect labor, our daily labor costs were effectively the same for both Q1 and Q2 of 2018. Given that we believe we have sufficient physical and labor capacity in place to meet expected demand for 2018, there's leverage opportunity off this fixed cost structure on higher expected revenue for the remainder of the year.SG&A has been a focus for the company and is a focus for the company in 2018, with new spending controls introduced on travel and entertainment and an increased attention to cost control. These initiatives are beginning to pay dividends, and we believe there are still additional benefits to be realized later in the year.Turning to Slide 9. Adjusted SG&A for the quarter was $26.6 million compared to $28.3 million in Q2 of 2017. As previously discussed, the restructured format of our Connext event was primarily responsible for the decrease in adjusted SG&A. Connext came in below budget at a total cost of $800,000. This show was a great success, and we expect to continue this new format moving forward.The $2.7 million in expense savings related to Connext were partially offset by $1.2 million in activist defense costs as well as $600,000 in costs related to the inbound nonbinding offer that we disclosed on August 1. As noted in that press release, the board's special committee was disbanded and the company is not currently in discussions with respect to any strategic transaction.Adjusted SG&A as a percentage of revenue for the quarter was 33% compared to 40.4% for the same quarter last year. Compared to the first quarter of this year, adjusted SG&A was 200 basis points higher, reflecting the planned expenditures on Connext, activist defense costs and costs related to the aforementioned inbound offer.Reorganization costs in Q2, not included in adjusted SG&A or adjusted EBITDA numbers, were approximately $1 million. We anticipate that there will be approximately $1.5 million in reorganization costs recognized in the second half of 2018 with an additional $500,000 in '19.As illustrated on Slide 10, the combination of top line growth and our increased focus on cost control results in a substantial increase in profitability. Adjusted EBITDA of $8.2 million in the quarter was up 283% from $2.1 million in Q2 of 2017. Net income also increased to $800,000 in the second quarter of 2018 from a net loss of $2.9 million in the second quarter of last year. Net income per share was $0.01 compared to a net loss of $0.03 per share.On a year-to-date basis, we continue to build off a very strong first quarter. Revenue in the first half of 2018 was $161.4 million, up 19.5% from the first half of 2017. U.S. revenues were 25% in Canadian dollars or 31% excluding the impact of foreign exchange. These were offset by lower Canadian sales.Adjusted SG&A of $51.6 million in the first 6 months was effectively flat when compared to $51.9 million incurred in the same period of last year. Included in SG&A in the year were $900,000 of costs related to the aforementioned inbound offer and $1.8 million in activist defense costs.Our adjusted SG&A margin in the first 6 months of 2018 was 32%, a notable improvement from the 2017 period when it stood at 38.4%.Like the second quarter, this growth in revenue, without any corresponding increase in adjusted SG&A, has had a very positive impact on profitability. Adjusted SG&A increased by 240% to $20.9 million so far this year from $6.1 million in the first half of 2017. Net income also improved to $4.3 million or $0.05 per share from a net loss of $4.3 million or a net loss of $0.05 per share.Looking forward to the rest of the year, we expect continued sales momentum, which will drive year-over-year growth. With the busier second half, we are on track to achieve our adjusted EBITDA margin target of between 13% and 15%. We have the capacity in place to manage higher production volumes without significant incremental investment and have an ongoing focus on cost control and maintaining our annual adjusted SG&A at absolute levels, consistent with last fiscal year.We're satisfied with Q2 performance. These results were achieved despite a weakening of the U.S. dollar in the first half of 2018 compared to the first half of 2017. As a reminder, approximately 80% to 85% of our revenue and approximately 50% to 60% of our costs are in U.S. dollars. This results in a partial natural hedge and reduces exposure to U.S.-Canadian foreign exchange swings.Turning to our balance sheet and cash flow highlights, as referenced on Slide 11. DIRTT remains financially strong with $59.9 million on the balance sheet and an unused credit line of USD 18 million. During the first half of the year, we've seen a build-up in our accounts receivable and an increase in days sales outstanding. This is driven by both the timing of orders in the quarter and payment terms provided to partners and to end customers.June 2018 was our busiest month on record. This drove increased accounts receivable at June 30 relative to year-end. In addition, we have negotiated payment terms that exceed our usual 30 days with respect to certain larger orders. As a result, higher profitability on sales growth and cost control was more than offset by this working capital build-up.Cash used in operations was $700,000 in the quarter and $9 million on a year-to-date basis. In 2017, cash used in operations was $600,000 in the second quarter, while $4 million was generated from operations in the first half of 2017. We continue to evaluate the underlying drivers to ensure that our working capital management is balanced between maintaining optimal levels and providing our partners with payment terms to support their sales efforts.We continued to invest in the business in the second quarter of 2018, spending about $4.4 million on property, plant and equipment and $2.2 million on internally generated assets. On a year-to-date basis, we invested approximately $6.8 million on PP&E and $4.5 million on internally generated assets. Investments in PP&E reflect investments in manufacturing equipment to remove bottlenecks and increase efficiency as well as leasehold improvements to showcase our products and support our sales efforts. Internally generated assets included enhancements to our ICE software, combined with new product development. As we refine our strategy upon the onboarding of our new CEO, we will certainly be evaluating our investment targets.In summary, our business is demonstrating the potential profitability leverage derived from previous investments and higher revenues. Connext was very successful. We're making good progress on our SG&A expense control. We have a strong outlook for the remainder of the year, and we're expecting to have a permanent CEO in place soon. Our focus will continue to be on innovation and on the success of our partners, balanced with an emphasis on fiscal discipline. DIRTT is well positioned for profitable growth moving forward.We look forward to giving you additional updates in the coming week. That concludes our prepared remarks for today. Operator, we are now ready for questions.
[Operator Instructions] Your first question comes from David Quezada from Raymond James.
My first question here is just on -- gross margin related. Just the volatility that you saw in monthly volume, I know that, that impacts gross margin. I'm wondering if you see any potential to smooth that in the future and if -- do larger projects help or exacerbate that phenomenon?
Thanks, David. The movement of gross margins is really driven by a couple of things. It's driven by, as we talked in the prepared remarks, the variability of our direct materials costs as well as impacted by the leverage off the fixed cost structure. The bespoke nature of our product does result in variability in that direct materials costs, which can move as a percentage of revenue by plus or minus 2%. I don't see that changing in the near term. I also don't think the larger projects impact it that much because we still manufacture a diverse solution suite. Where I do see upside is as our -- we move into the busier second half of the year, we should see some leverage off of our fixed costs, which will mute some of the direct material impacts. But in the near term, I don't see a lot of ability to change that.
Okay. Fair enough. My next question here just -- it seems as though the energy sector was a little bit better this quarter. I'm wondering if that was -- if you can comment at all, is that an isolated project? Or does it just seem that activity in that sector is picking up in a more broad-based way?
We did have a large project in the Houston area, which contributed to those results. But we are seeing it pick up a little bit more. I think it's important to note, though, that our solution is really industry agnostic. So diversification across a number of industries is very important to us.
Okay. Great. And then my last question here is just, you guys have made some really good progress on the G&A line. I'm wondering if you can share any color on what your target is maybe as a proportion of sales. Or is that -- kind of that low 30% range a good assumption going forward?
I think that's a good assumption going forward. Really, what we're focused on is keeping our revenue on a cost and absolute dollar basis with last year and not adding to it. And then, of course, it depends what happens on the top line. But we see a busier second half.
Your next question comes from Neil Linsdell from Industrial Alliance.
Just on the permanent CEO. I know, obviously, you're in the short list stage. From the candidates that you have, from the criteria, Michael, from the kind of business continuity plan that you're trying to present, can you give us any guidance on what we could expect as far as mandates for the permanent CEO?
The question on mandates -- look, the mandate for the permanent CEO is to map out a strategy for growth, map out a set of business plans and financial structures that's going to deliver the kind of ROIC that we think a company like this should be able to produce. In my tenure here, I can say that there's just tremendous opportunity here. And I think one of the next big levers in our growth is bringing in leadership and having this sort of long-term continuity around long-term growth. So I don't think the mandate will shift dramatically. I think the mandate is growth and value creation with a focus on things like ROIC and cash flow. So pretty much what you'd expect from a growth company like ours.
Okay. Fair enough. On the pipeline, can we talk about -- obviously, historically, we've talked about you can't really have any kind of backlog because it's all very short-term deliveries and contracts. As you're looking now with the contract we talked about in Houston or other stuff in the retail space you've got working on, do you have more visibility on what's going on in, say, the second half of the year? And how far out can you really start to get comfort on your growth or your revenue or your costs?
So we don't -- as you know, we don't disclose our pipeline numbers nor our backlog numbers. With that said, we do have reasonable visibility on about 120 days, which is normal for this type of a business. We are seeing from that look out a number that is larger than numbers that we have seen in prior years. And certainly, it's much higher than -- or it is higher than the comparative period last year. When we compound that with a very strong June and with us moving into a very busy second half, we feel pretty good about the last half of the year.
Okay. Yes, that's great. And I'm also thinking about the health care sector where you may have some contracts where you're working for several years on the bids or on the proposals and you're talking about -- you do a first contract and then you get shortlisted, basically, for a second contract. So you continually work there. Is that giving you even more confidence out beyond the 120 days on certain segments?
Certainly, that's the strategy moving forward is to build off of the initial successes that we have on the contract and then grow off of that. That does give us comfort. But of course, we have to continue delivering and providing the quality product and service that we do.
Okay. And then maybe -- so Geoff, if you could kind of expand -- I know a lot of the cost cutting that we saw, the benefits that we saw in this quarter with Connext being restructured and the trade shows, all that was apparently planned even late last year. Is there anything that you can tell us now from the time that you spent within the organization as far as things that you continue to see you're going to have to make adjustments for? And is there anything specifically good about the systems that they have in place now that you can highlight?
Sure. I'll actually take the second part of that first, and then I'll hit the first part of it second. So from a systems perspective, the systems that we have in place are fit for purpose. We have enough granularity in the systems. And in fact, we've got -- as I mentioned in the prepared remarks, we've got a lot of financial and nonfinancial information that is out there and being collected. So probably more than I actually expected when I joined the company. So they're in really good shape. We do have a little bit of process work to do on that to pull that together and bring it in a manner that is meaningful. So -- but I don't see the need for a new ERP or anything like that of a major basis in the near term. So that's -- that was very encouraging to me when I started. As we look forward, we're still in the evaluation stage. I've only been here for a couple of months. A really key part of looking at the SG&A side is understanding the levers and the drivers of it so that we make knowledgeable decisions and we make decisions that enhance the business and don't inadvertently cripple it. So right now, it's early days. Of course, I have ideas of what -- things that we should go after, but I'm not in a position to talk about that yet.
And you don't have any other targets other than the 13% to 15% EBITDA margin?
That's all we're willing to disclose right now.
Our next question comes from the line of Adnan Waheed with National Bank Financial.
I'll be filling in for Rupert. To begin with, could you let us know how you're progressing with the wood frame product?
I think what I'd say on timber is it brings an interesting design element into our suite of products. Apart from that, I think we're still evaluating it and getting an understanding of how it fits into the solutions as a whole. And we will be looking at that as part of our overall strategy when the new CEO comes on board.
Okay. Understood. Any potential growth in international market, maybe something in London or Singapore?
Our international markets right now comprise a small portion of our revenue side. Once our CEO onboards, we will certainly be looking at what our key target markets are and making sure that we're getting an appropriate return on investment. And so for me, it's too soon to tell until we actually go through that exercise.
And taking a longer-term view, would you be looking to move into the hospitality sector?
Actually, we completed our first major hospitality project in the first half of this year. And we do have a video of it on our website, which you can take a look at. We do see opportunities there. But like I said, we are industry agnostic, and it -- this is one more industry that we can move ourselves into. But I'd tell you, it was a very successful project here in Calgary. So...
[Operator Instructions] Our next question comes from the line of Elizabeth Johnston from Laurentian Bank.
Turning over and talk a bit about CapEx that you highlighted on in your prepared remarks. How should we think about the spending for the second half of the year, either compared to the first half or the second half last year? And what -- at what point do you see the need for more meaningful CapEx as you start to creep towards your reaching capacity in your existing manufacturing facilities?
Right now, when we look at the capacity, we've been running around 60% to 65%. So I think we've got -- certainly, we have enough room in the near term. We are looking at our CapEx spending both in terms of safety, of course, looking in terms of where we have potential bottlenecks that could impact that capacity and where we can increase our overall efficiency. I think we want to keep tight control of our CapEx numbers, particularly relative to what we did in the first half of this year. We do have to do some work in terms of evaluating the returns on our investments and where do we get the biggest bang for our buck. So I think we would like to keep that number lower than where we were last year, but we've got some work to do on that.
Okay, great. And is there any way that you can describe -- in the past, we've been given numbers on approximate revenue level for the full year that would be equated to a full capacity. Do you have a number like that, that you can share with us?
No, not right now. I'm sorry.
Okay. No problem. And turning over to Canada again and in the context of discussing the sales from the energy vertical, which, as you highlighted, did increase year-to-date. My understanding was in the past, in Canada, specifically, a meaningful amount of those sales came from the energy vertical. And so since Canada is down sequentially year-over-year, but energy is up. Just wondering if you can comment any further on the verticals associated with revenue in Canada, specifically.
I think what I would say is Canada is a small part of the overall mix from a geographic perspective. We have a number of verticals that roll through. The energy sector in Canada still is slow, I can tell you that from personal experience sitting here in Calgary, with the increase in that energy sector coming from Houston. We continue to work in -- across a number of industries in Canada, but I would not put a lot of weight on that. Our major penetration and our largest market continues to be in the U.S., and that's where we expect to see the majority of our growth coming from.
And is there anything -- maybe, Michael, you can share on this, why the growth has been so much stronger in the U.S. Is it just a result of the market being larger in general? Or is there something else that's taking place there with either quicker adoption or something else?
Look, we're -- the North American market for our product, we think, is in the range of $50 billion. And so just to -- I think it's useful for us to just check ourselves and how we think about this. For a company our size, I mean, we're still rounding error in the size of this market. So any small -- on a relative basis to the $50 billion, any small growth looks big on a relative basis to our numbers. So the market really is predominantly, if you look at the distribution in the U.S. -- so I would expect going forward as we keep ramping growth, it would not be -- it wouldn't be reasonable to assume that there's a disproportionate amount of growth where the disproportionately large market is, which is the U.S. It's not a statement on Canada or even the opportunity here, it's really just going where the action is.
I agree on that.
Okay, great. That's helpful. And maybe finally for me, just a clarification in part on an earlier comment when it comes to gross margin. You mentioned the potential variation being anywhere in the 1% to 2% range. Just to clarify if that's on an unadjusted gross margin basis and that is -- if that's really in terms of coming from mix, as in mix from changing the materials and labor costs.
Yes, that's correct. It's on adjusted gross margin on the material costs. But it is offset by impacts of leverage.
Okay. And just in this quarter, specifically, I know you broke out some of the variations on the gross margin year-over-year. Is there any specific color you could add with respect to the impact that FX had? Or that's just sort of embedded in the other items that were called out?
It's embedded in the other items. It's -- FX on our cost of sales is a little tricky because we do move our product around to various plants where it makes the most sense from an efficiency standpoint.
Okay. And just maybe one more on aluminum cost, which is one of the more meaningful ones. Any notable inflation on that item, specifically?
No. No. In fact, based on the last look, aluminum spot prices are actually starting to settle. And from a tariff perspective -- because I know that will be asked, from a tariff perspective, based on our analysis, the impact of that would be de minimis.
[Operator Instructions] We do have another question from Gabriel Leung with Beacon Securities.
Just got a couple of follow-up items. First, I didn't see in the MD&A, but historically, you sort of talked about largest order in the quarter. Do you have that figure, Geoff, by any chance?
I do, but it's not a very meaningful number. And the reason I say that is that's -- our orders can come from a number of projects. Or we can have a number of orders from the same project. So you might have a very large order that comes from this quarter relative to other quarters, but it's not reflective of what the overall projects are. If I look at -- on a project basis, our -- if you're looking on a project basis -- just one second. We'll come back in just one second.
Yes, no problem. Maybe for my second question then in terms of operating expenses for the second half. Can you just remind us, again, in terms of the DIRTT fall training camp, the timing of that and the expected costs associated with that event? That's it for me.
Sure. We'll get back to you on the project size that we've seen from our evaluations. But we don't really want to talk as much on the single orders because I think it's a bit misleading. Coming back to the fall training camp, the fall training camp right now is currently being planned for November. We're in our planning stages. Our overall budget for both Connext and the training camp is $2.5 million. We expect to stay within that number, but we are still in that planning stage. So that's where we're at. But certainly, we will be having a very large emphasis on cost control.
I guess the implication will be the fall camp would get at, let's call it, $1.5 million, $1.7 million in terms of expenses?
Yes, I think the number will be between $1.1 million to $1.6 million, but we've got -- like I said, we're in planning on that right now.
There are no further questions at this time. I'll turn it back over to Geoff.
Thank you, operator. We look forward to giving you additional updates in the coming weeks. And that concludes today's call.
This concludes today's conference call. You may now disconnect.