DIRTT Reports Third Quarter 2025 Financial Results

DIRTT Environmental Solutions Ltd. (“DIRTT”, the “Company”, “we”, “our”, “us” or “ours”) (TSX: DRT; OTCQX: DRTTF), a leader in industrialized construction, today announced its financial results for the three and nine months ended September 30, 2025. All financial information in this news release is presented in U.S. dollars, unless otherwise stated.

Third quarter 2025 revenue was $37.7 million, a decrease of $5.7 million or 13%, from $43.4 million for the same period of 2024. We entered the third quarter of 2025 with an 18% higher twelve-month forward pipeline as compared to July 1, 2024. We experienced higher than normal order delays due to job sites not being ready, which contributed to lower revenue this quarter.

Gross profit and gross profit margin for the quarter ended September 30, 2025 were $11.5 million or 30.4% of revenue compared to $16.8 million or 38.8% of revenue for the quarter ended September 30, 2024. Sequentially, gross profit margin increased from 27.8% in the second quarter of 2025 as tariff mitigation actions began to take effect. Adjusted Gross Profit (see “– Non-GAAP Financial Measures”) for the three months ended September 30, 2025 was $12.5 million, a decrease from $17.6 million Adjusted Gross Profit for the third quarter of 2024. Adjusted Gross Profit Margin (see “– Non-GAAP Financial Measures”) was 33.1% in the third quarter of 2025, a decrease from 40.7% in the comparative period of 2024. Gross profit and Adjusted Gross Profit for the quarter ended September 30, 2025 were negatively impacted due to the decline in revenues as well as tariff-related costs that commenced in March 2025.

Sales and marketing expenses decreased by $0.4 million to $4.8 million for the three months ended September 30, 2025 from $5.2 million for the three months ended September 30, 2024. The decrease was driven by a $0.3 million decrease in commissions as a result of lower revenues, a $0.1 million decrease in marketing and tradeshow costs, a $0.1 million decrease in depreciation and amortization expenses, and a $0.1 million decrease in travel, meals and entertainment costs. The decrease was partially offset by a $0.3 million increase in salaries and benefits costs.

General and administrative expenses decreased by $1.4 million to $4.4 million for the three months ended September 30, 2025, from $5.8 million for the three months ended September 30, 2024. The decrease was primarily related to a $1.2 million decrease in professional services costs largely due to insurance recoveries, lower litigation costs, and costs related to the repurchase of January Debentures and December Debentures from 22NW Fund, LP (“22NW”) and the support and standstill agreement with 22NW and WWT Opportunity #1 LLC that occurred in the third quarter of 2024 which were not repeated in 2025, a $0.2 million decrease in building and infrastructure costs, a $0.1 million decrease in public company costs, and a $0.1 million decrease in depreciation and amortization expenses. The decrease was offset by a $0.1 million increase in board fees, and a $0.1 million increase in communication costs.

Operations support is comprised primarily of project managers, order entry and other professionals that facilitate the integration of our Construction Partner (as defined herein) project execution, our manufacturing operations, and support staff for the Construction Services team. Operations support expenses decreased by $0.1 million for the three months ended September 30, 2025 to $1.8 million compared to $1.9 million for the comparative period of 2024. The decrease was related to a $0.2 million decrease in salaries and benefits costs, offset by a $0.1 million increase in research and development costs.

Technology and development expenses relate to non-capitalizable costs associated with our product and software development teams, and are primarily comprised of salaries and benefits of technical staff. Technology and development expenses decreased $0.5 million to $0.8 million for the three months ended September 30, 2025 compared to $1.3 million for the three months ended September 30, 2024. The decrease is primarily related to a $0.5 million decrease in salaries and benefits costs.

Stock-based compensation expense for the three months ended September 30, 2025 was $0.7 million compared to $0.8 million in the same period of 2024. The decrease in expense was largely due to a decrease in deferred share units (“DSUs”) expense as a result of a lower number of DSUs granted in the third quarter of 2025 compared to the third quarter of 2024, slightly offset by higher restricted share units expense due to a full quarter of expense on an August 31, 2024 grant in the third quarter of 2025 compared to one month of the expense in the third quarter of 2024.

Reorganization expenses for the three months ended September 30, 2025 were $2.6 million, from $0.6 million for the prior year quarter. Reorganization expenses for the three months ended September 30, 2025, primarily relate to one-time termination and consultant costs associated with the establishment of a Transformation Office, while the reorganization costs for the three months ended September 30, 2024 were largely made up of movement of inventory and equipment from our Rock Hill facility for use at the Calgary facility.

Foreign exchange loss or gain increased from a loss of $0.4 million for the three months ended September 30, 2024 to a gain of $0.6 million for the same period of 2025. The increase is primarily related to the weakening of the Canadian dollar over the three months ended September 30, 2025. The majority of our revenue is collected in U.S. dollars (approximately 90%), and approximately 70% of the costs incurred in the three months ended September 30, 2025, were denominated in Canadian dollars.

Interest income for three months ended September 30, 2025 was $0.2 million compared to $0.3 million for the comparative period of 2024. The decreased interest income is due to declining prime rates that determine interest yields on the Company’s lower cash equivalents during the three months ended September 30, 2025 compared to the same period of 2024.

Interest expense decreased by $1.1 million from $1.5 million in the quarter ended September 30, 2024, to $0.5 million for the three months ended September 30, 2025. This decrease is largely due to repayment of debt throughout the year ended December 31, 2024 and during the first nine months of 2025, reducing the interest payable on current and long-term debt.

Net loss after tax was $3.5 million or $0.02 net loss per share, basic and diluted, in the three months ended September 30, 2025, a decrease of $10.6 million from net income after tax of $7.1 million or $0.04 and $0.03 net income per share, basic and diluted, respectively, for the three months ended September 30, 2024. The decrease in net income is primarily the result of a $7.5 million gain on extinguishment of debt resulting from the Debenture Repurchase in the quarter ended September 30, 2024 not repeated in the same period of 2025, a $5.3 million decrease in gross profit, a $2.0 million increase in reorganization expenses, a $0.1 million increase in income taxes, and a $0.1 million decrease in interest income. The decrease was partially offset by a $2.5 million decrease in other operating expenses, a $1.1 million decrease in interest expense, and a $1.0 million increase in foreign exchange gain.

For the three months ended September 30, 2025, Adjusted EBITDA decreased by $2.9 million to $1.2 million from $4.1 million and Adjusted EBITDA Margin decreased to 3.1% from 9.4% for the same period of 2024. This decrease reflects a $5.2 million decrease in Adjusted Gross Profit, offset by a decrease in operating expenses (excluding reorganization expense and stock-based compensation) of $2.4 million.

Business is returning to normal and we returned to positive Adjusted EBITDA in the third quarter of 2025 as the effects of tariffs on gross profit have been substantially mitigated through price and other tariff mitigation actions taken by the Company earlier in the year. For the fourth quarter of 2025, we expect to report revenues between $48.0 to $52.0 million and Adjusted EBITDA of $5.0 to $7.0 million.

Our twelve-month forward pipeline has grown 7.2% to $333 million from July 1, 2025 to October 1, 2025. Our revenue growth is attributable to our construction partners of (“Construction Partners”) as well as our new Construction Services team (formerly known as Integrated Solutions). As our revenue outlook improves, we are looking to transform our business. In early 2025, DIRTT’s leadership team established a transformation office to accelerate the strategic transformation of our business by streamlining the Company’s processes and procedures, supporting the Construction Services team and improving productivity across the Company (the “Transformation Office”). We are restructuring certain aspects of the business as disclosed in Note 4 of our interim condensed consolidated financial statements and will continue to look for cost improvements to grow Adjusted EBITDA. The program is expected to be completed in 2026.

Construction Services opportunities are growing and we have almost doubled the number of persons on that team since the beginning of the year. Our manufacturing capacity is approximately $400 million and we will benefit from fixed cost leverage as our revenue grows.

Our 8-week trial against Falkbuilt Ltd., Messrs. Smed and Loberg and several other former DIRTT employees alleging breaches of restrictive covenants, fiduciary duties, employment duties and confidentiality is due to start on February 2, 2026. DIRTT is pursuing damages and losses it suffered in Canada, the United States, and abroad in the Court of King’s Bench of Alberta.

Our balance sheet is strong, including $32.3 million of liquidity (comprising of unrestricted cash and available borrowings). Despite lower revenue in the third quarter, cash flow increased by $3.0 million this quarter due to improved margins, cost containment and limited activity on the normal course issuer bid for our common shares that commenced on December 18, 2024. There is C$16.6 million ($11.9 million) principal due under the January Debentures (as defined herein), which mature on January 31, 2026. We are pleased to announce we recently entered a preliminary non-binding term sheet with Business Development Corporation of Canada (“BDC”) for financing of up to C$15.0 million. We expect to use the proceeds to partially settle the January Debentures. The remaining January Debentures (C$1.6 million) will be settled through our cash balances. Advancement of funds remains subject to, among other things, completion of due diligence by BDC¹.

¹Any advancement of funds is subject to, among other things, BDC’s due diligence and the negotiation and execution of binding definitive documentation. There can be no assurance that a definitive agreement will be reached or that the proposed financing will be completed on the terms in the non-binding term sheet or at all, and the Company may ultimately determine not to proceed with the financing or use any net proceeds of such financing for the repayment of the January Debentures.

A conference call and webcast for the investment community is scheduled for November 6, 2025 at 08:00 a.m. MDT (10:00 a.m. EDT). The call and webcast will be hosted by Benjamin Urban, chief executive officer, and Fareeha Khan, chief financial officer.

The call is being webcast live on the Company’s website at dirtt.com.

A webcast replay of the call will be available on DIRTT’s website. Click here to listen to the live webcast of the call. Following the presentation, DIRTT will take questions from covering analysts. To participate in the question-and-answer session, register here.