Mogens Smed didn't build two wildly successful demountable wall companies by being meek. Throughout his career, he fought and clawed for every sale, every success. So when word came down from the DIRTT Environmental Solutions board of directors Smed would be moved from his role as chief executive officer to “executive chair,” it sent shockwaves through the industry.
It is arguable no one individual is tied as closely to the company they founded than Smed is to DIRTT. While it is obvious his role is diminished, and the decision by the board to relieve him of the day-to-day operations of the company stung him personally, he is clear about one thing: He isn't going anywhere quietly.
“Let me give it to you straight,” says Smed, just after arriving in Chicago to meet with customers. “We built this business to $300 million (a year in sales), and quite frankly, it is still growing. The board said that right now, we are not the right guys (to lead the company). Obviously, I don't agree with them, but I am going to support it.”
The company has been quiet about the sudden change in leadership, which not only included moving Smed to the new executive chair position, but also included the ouster of Scott Jenkins, who served as president of DIRTT for six years.
The board moved Smed into a role that shifts his focus from the day-to-day operation of the company to work on DIRTT's sales partner network and key business development initiatives. He will report to Michael Goldstein, the interim president and CEO.
What caused the board to move Smed? The company has done little to explain why the changes were made. Calls and emails to DIRTT's public relations department were not returned. An analysis of recent calls with investors and analysts from August and November show a company excited about the future, but also dealing with a few internal issues, including the removal of a CFO and the search for a new one, though it is not clear if that had any impact on the change in leadership.
In the Aug. 3, 2017, call, Smed says he “would be remiss” if he didn't discuss the recent challenges with its CFO position.
“First, let me start by saying we are building the foundation of what we hope will grow into a billion-dollar company in the not-so-distant future. I am confident we have a talented team focused on getting us there. Earlier this year, we did hire someone for the CFO position and unfortunately we learned very quickly that this person did not meet the high standards of our culture or our expectations. After a series of unfortunate incidents at company events, DIRTT conducted a thorough and transparent investigation and parted ways with the short-tenured CFO along with three other people.
“I want to be very clear that DIRTT has a culture of respect, encouragement, teamwork, support, innovation and creativity, where all team members are free from harassment, coercion, inappropriate behavior and discrimination. I recognize that for our shareholders our quick and swift action may have caused some uncertainty, but there was never a doubt in my mind nor in Scott's or the rest of our team's minds about making the correct and immediate decisions that we did. This was best for our company. My final comment on this subject is that we are fortunate to have a strong finance team that has already stepped up, including Ha Tran, our vice president of finance, along with all the other leaders in that group. Along with our board of directors, Scott has already begun quarterbacking the search for our new CFO. In the meantime, he's more than capable of the role of CFO, having previously led our IPO and held that position as CFO for DIRTT.”
The subject was not mentioned in the Dec. 2, 2017, call with analysts and investors, but Smed was not part of the call. Jenkins, the former president and interim CFO and director handled the call with the investment community, along with Tran.
In a recent call with Business of Furniture, Smed would not discuss the CFO situation, other than saying “something egregious happened,” adding the company had gone through a “sequence of circumstances.” He did not elaborate.
Smed does not disagree that the company would eventually need new leadership to take it further, but felt that would be more appropriate in the next three or four years, not now. He said he knew nothing about the leadership changes until two days before the board meeting.
“I had no idea what was going on. If I knew I was getting fired or demoted or whatever you want to call it, I would have been fighting a lot sooner,” he says.
Though he says he was “totally fine” with the board's decision, he pointed to the company's stock price as proof the markets were not. The stock price was $5.90 on Dec. 26. It dipped to as low as $4.16 recently, near its 52-week low. Smed says the company lost $170 million in market capitalization since the executive changes. “When they see something like this, it unnerves them,” he says of the financial community.
Last week, DIRTT announced highlights of its go-forward plan for the quarter ending March 31, 2018, in addition to reaffirming the senior leadership team's commitment to DIRTT.
Smed confirmed his continued focus on the revenue generation aspects of the business, including sales and marketing activities, and partner engagement and success. "DIRTT is built on a culture of empowerment to drive change and make things happen, and that's not always comfortable, but it's worth it,” he says. "We're determined to push DIRTT forward, and I'm committed to helping this team succeed.”
Michael Goldstein, DIRTT's interim president and CEO, has laid out a 90-day plan to build momentum:
- Deliver on near-term growth: The company reaffirms its commitment to capitalize on significant investments made throughout 2017 to drive revenue growth and focus on improvement to Adjusted EBITDA.
- Integrate senior leadership initiatives: Changes to DIRTT's senior management team announced Jan. 2, 2018, “establish a leadership group that is driven to realize the company's growth and profit potential. Company founders and other members of the senior management team have confirmed their commitment and support. The team is actively engaged with integration work related to new executive team members and roles.” The company diligently continues its search for a permanent CFO, and management and the board are participating in the search process.
- Launch strategic growth analysis: The company believes its opportunity for growth and increased earnings generation is substantial. As such, it is undertaking a strategic assessment to sharpen its strategy for growth and to support a renewed resource focus on significant markets and opportunities to evolve.
- Implement shareholder engagement initiatives: The company will implement a program to increase its connection and communications with shareholders and to encourage open dialogue and the exchange of ideas with its shareholders.
- "We believe DIRTT has a compelling opportunity to dominate significant portions of this market," Goldstein says. "I have never experienced a more committed, engaged and motivated team than what DIRTT has. What the founders have created here is truly remarkable, and we are committed to reinforcing and building upon the capabilities of this team and the Company's technology to fully realize the potential of DIRTT."
- Smed says he remains as excited as ever about the prospect of the company that he founded. He is also pleased to be out in the marketplace explaining the vision of the company.
“You absolutely won't see any change in me,” he says. “If you think I am going to be mellow and docile now, it ain't going to happen. I've never been a spin doctor. I'm just a straight shooter. I have no malicious intention. I want to help DIRTT as it continues to change.”