BuildDirect, a Vancouver e-commerce company, has been granted creditor protection in the wake of the sudden departure of former CEO Jeff Booth who alluded the company he founded in 1999 was struggling.
Booth announced his resignation last week in a LinkedIn post where he described how the company’s rapid growth and technological hurdles strained his relationship with debt holders who didn’t see eye-to-eye with the executive chief’s vision for the company.
PwC said it has been appointed BuildDirect’s monitor by the Supreme Court of B.C. as the online building materials seller tries to recapitalize or arrange a sale transaction.
In the meantime, PwC said BuildDirect has negotiated a $15 million USD loan. BuildDirect told the court it needed immediate access to this interim financing in order to continue operations. The court has approved an immediate advance of $4 million USD, providing the company a sudden injection of needed capital.
Court documents filed October 31 in B.C. Supreme Court state: “The immediate cause of BuildDirect’s financial difficulties is its failure to complete an anticipated significant equity financing in mid-October 2017.”
Along with the petition to the court, an affidavit submitted by John Sotham, BuildDirect’s VP of finance, outlined the company’s attempts to cut costs while managing breakneck growth.
Sotham said BuildDirect’s growth strategy in 2014 intended to allow the company to be more competitive in the U.S. building materials market.
“To facilitate this growth, the company rapidly expanded its internal operations and invested significant resources into developing a new online platform,” said Sotham.
BuildDirect grew its annual revenue to $120 million in 2014. But two years later, the company was in trouble.
Sotham explained how the launch of Marketplace Business in October 2016—a new online launch that positioned the company to compete with e-commerce giants at Amazon—surged the number of products BuildDirect was hosting from 6,500 to 100,000.
The company couldn’t keep up, and Sotham said they “struggled to meet obligations.”
In the first nine months of 2017, revenue plunged to $72 million with operating costs exceeding that revenue by $2.6 million a month. That loss comes even after Sotham said BuildDirect worked to reduced losses and improve operating efficiencies.
The company owes secured lenders approximately $75 million.
However, Sotham doesn’t spell the end of BuildDirect despite the financial troubles, stating the company’s “Core businesses and proprietary technology are of significant value” and have the “tremendous potential for growth.”
Now with creditor protection, Sotham said moving forward BuildDirect will continue to improve margins, reduce operating costs and lower its monthly burn rate.
Dan Park has been appointed CEO after Booth’s departure.