[10-Q] DIRTT ENVIRONMENTAL SOLUTIONS LTD Quarterly Earnings Report
DIRTT Environmental Solutions Ltd. reported a softer quarter. For Q3 2025, total revenue was $37.7 million versus $43.4 million a year ago, and the company posted a net loss of $3.5 million compared to net income of $7.1 million. Gross profit was $11.5 million, and operating loss was $3.7 million as reorganization costs of $2.6 million weighed on results.
Cash from operations was positive at $4.4 million in the quarter. Cash and cash equivalents were $26.1 million, total assets $109.2 million, and shareholders’ equity $31.5 million as of September 30, 2025. The balance sheet shows current portion of long‑term debt and accrued interest of $12.2 million and long‑term debt of $10.8 million.
The company continues to manage its capital structure: it repurchased common shares under its NCIB and bought 3,920,844 shares from a holder at $0.80 per share in February 2025. Convertible debentures outstanding were C$16.6 million (January Debentures) and C$14.9 million (December Debentures) at quarter‑end. The revolving credit facility was extended on November 4, 2025 to mature on November 30, 2026, with a default if the January Debentures are not paid or refinanced by January 31, 2026.
- None.
- None.
Insights
Revenue declined and losses returned, but liquidity and facilities are in place with a key debenture date ahead.
DIRTT delivered Q3 2025 revenue of
Liquidity appears stable with cash of
A key dependency is the January Debentures; the facility cites default if they are not paid or refinanced by
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number
(Exact name of registrant as specified in its charter)
Alberta, (State or other jurisdiction of incorporation or organization) |
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Securities registered pursuant to Section 12(b) of the Exchange Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes
The registrant had
DIRTT ENVIRONMENTAL SOLUTIONS LTD.
FORM 10-Q
FOR THE QUARTER ENDED September 30, 2025
TABLE OF CONTENTS
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Page |
Cautionary Statement Regarding Forward-Looking Statements |
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ii |
PART I – FINANCIAL INFORMATION |
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4 |
Item 1. Financial Statements (Unaudited) |
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4 |
Interim Condensed Consolidated Balance Sheet |
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4 |
Interim Condensed Consolidated Statement of Operations and Comprehensive (Loss) Income |
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5 |
Interim Condensed Consolidated Statement of Changes in Shareholders’ Equity |
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7 |
Interim Condensed Consolidated Statement of Cash Flows |
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8 |
Notes to the Unaudited Interim Condensed Consolidated Financial Statements |
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9 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk |
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Item 4. Controls and Procedures |
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46 |
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PART II – OTHER INFORMATION |
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Item 1. Legal Proceedings |
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Item 1A. Risk Factors |
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47 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
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47 |
Item 3. Defaults Upon Senior Securities |
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47 |
Item 4. Mine Safety Disclosures |
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47 |
Item 5. Other Information |
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48 |
Item 6. Exhibits |
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49 |
i
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2025 (this “Quarterly Report”) are “forward-looking statements” within the meaning of “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and “forward-looking information” within the meaning of applicable Canadian securities laws. All statements, other than statements of historical fact included in this Quarterly Report, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report, the words “anticipate,” “believe,” “expect,” “estimate,” “intend,” “plan,” “project,” “outlook,” “may,” “will,” “should,” “would,” “could,” “can,” “continue,” the negatives thereof, variations thereon and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Forward-looking statements are based on certain estimates, beliefs, expectations and assumptions made in light of management’s experience and perception of historical trends, current conditions and expected future developments, as well as other factors that may be appropriate.
Forward-looking statements necessarily involve unknown risks and uncertainties, which could cause actual results or outcomes to differ materially from those contained in, or expressed or implied by such statements. Due to the risks, uncertainties and assumptions inherent in forward-looking information, you should not place undue reliance on forward-looking statements. Factors that could have a material adverse effect on our business, financial condition, results of operations and growth prospects can be found in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the U.S. Securities and Exchange Commission (the “SEC”) and applicable securities commissions or similar regulatory authorities in Canada on February 26, 2025 (the “Annual Report on Form 10-K”), and in this Quarterly Report under “Part II, Item 1A. Risk Factors.” These factors include, but are not limited to, the following:
ii
These risks are not exhaustive. Because of these risks and other uncertainties, our actual results, performance or achievement, or industry results, may be materially different from the anticipated or estimated results discussed in the forward-looking statements in this Quarterly Report. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the effects of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or expressed or implied by, any forward-looking statements. Our past results of operations are not necessarily indicative of our future results. You should not place undue reliance on any forward-looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. We undertake no obligation to update these forward-looking statements, even though circumstances may change in the future, except as required under applicable securities laws. We qualify all of our forward-looking statements by these cautionary statements.
iii
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
DIRTT Environmental Solutions Ltd.
Interim Condensed Consolidated Balance Sheet
(Unaudited – Stated in thousands of U.S. dollars)
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As at September 30, |
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As at December 31, |
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2025 |
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2024 |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
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Restricted cash |
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Trade and accrued receivables, net of expected credit losses of |
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Other receivables |
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Inventory |
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Prepaids and other current assets |
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Total Current Assets |
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Property, plant and equipment, net |
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Capitalized software, net |
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Operating lease right-of-use assets, net |
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Other assets |
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Total Assets |
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LIABILITIES |
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Current Liabilities |
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Accounts payable and accrued liabilities |
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Other liabilities |
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Customer deposits and deferred revenue |
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Current portion of long-term debt and accrued interest |
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Current portion of lease liabilities |
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Total Current Liabilities |
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Long-term debt |
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Long-term lease liabilities |
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Total Liabilities |
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SHAREHOLDERS’ EQUITY |
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Common shares, unlimited authorized without par value, |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Accumulated deficit |
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Total Shareholders’ Equity |
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Total Liabilities and Shareholders’ Equity |
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The accompanying notes are an integral part of these interim condensed consolidated financial statements.
4
DIRTT Environmental Solutions Ltd.
Interim Condensed Consolidated Statement of Operations
(Unaudited - Stated in thousands of U.S. dollars)
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For the Three Months Ended September 30, |
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For the Nine Months Ended September 30, |
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2025 |
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2024 |
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2025 |
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2024 |
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Product revenue |
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Service revenue |
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Total revenue |
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Product cost of sales |
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Service cost of sales |
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Total cost of sales |
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Gross profit |
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Expenses |
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Sales and marketing |
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General and administrative |
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Operations support |
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Technology and development |
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Stock-based compensation |
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Reorganization |
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Impairment charge on Rock Hill Facility (as defined in Note 4) |
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Total operating expenses |
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Operating (loss) income |
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( |
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( |
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Gain on extinguishment of convertible debentures |
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Foreign exchange gain (loss) |
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( |
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( |
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Interest income |
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Interest expense |
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( |
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( |
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Net (loss) income before tax |
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( |
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( |
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Income taxes |
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Current and deferred income tax expense |
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Net (loss) income after tax |
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( |
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Net (loss) income per share |
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Net (loss) income per share − basic |
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( |
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( |
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Net (loss) income per share − diluted |
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( |
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( |
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Weighted average number of shares outstanding (in thousands) |
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Basic |
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Diluted |
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5
Interim Condensed Consolidated Statement of Comprehensive (Loss) Income
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For the Three Months Ended September 30, |
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For the Nine Months Ended September 30, |
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2025 |
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2024 |
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2025 |
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2024 |
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Net (loss) income after tax for the period |
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( |
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( |
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Exchange differences on translation of foreign operations |
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( |
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( |
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Comprehensive (loss) income for the period |
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( |
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( |
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Interest expense for the three and nine months ended September 30, 2025 includes $
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
6
DIRTT Environmental Solutions Ltd.
Interim Condensed Consolidated Statement of Changes in Shareholders’ Equity
(Unaudited – Stated in thousands of U.S. dollars, except for share data)
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Accumulated |
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Number of |
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Additional |
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other |
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Total |
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Common |
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Common |
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paid-in |
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comprehensive |
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Accumulated |
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shareholders’ |
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shares |
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shares |
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capital |
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loss |
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deficit |
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equity |
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As at December 31, 2023 |
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( |
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( |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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Issued on vesting of RSUs (as defined in Note 9) |
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( |
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- |
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- |
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- |
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Issued on Rights Offering (as defined in Note 15) |
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- |
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- |
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- |
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Issued for employee share purchase plan |
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- |
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- |
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- |
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RSUs withheld to settle employee tax obligations |
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- |
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- |
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( |
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- |
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- |
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( |
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Foreign currency translation adjustment |
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- |
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- |
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- |
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( |
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- |
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( |
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Net income for the period |
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- |
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- |
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- |
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- |
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As at March 31, 2024 |
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( |
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( |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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Issued on vesting of RSUs |
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( |
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- |
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- |
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- |
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Issued for employee share purchase plan |
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- |
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- |
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- |
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RSUs and Share Awards withheld to settle employee tax obligations |
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- |
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- |
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( |
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- |
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- |
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( |
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Foreign currency translation adjustment |
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- |
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- |
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- |
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( |
) |
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- |
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( |
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Net income for the period |
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- |
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- |
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- |
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- |
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As at June 30, 2024 |
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( |
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( |
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Stock-based compensation |
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- |
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- |
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- |
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- |
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Issued on vesting of RSUs |
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( |
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- |
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- |
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Issued for employee share purchase plan |
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- |
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- |
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- |
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RSUs and Share Awards withheld to settle employee tax obligations |
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- |
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- |
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( |
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- |
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( |
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( |
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Foreign currency translation adjustment |
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- |
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- |
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- |
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- |
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Net income for the period |
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- |
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- |
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- |
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- |
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As at September 30, 2024 |
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( |
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As at December 31, 2024 |
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Stock-based compensation |
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Issued on vesting of RSUs |
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- |
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RSUs withheld to settle employee tax obligations |
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( |
) |
Issued for employee share purchase plan |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Cancelled from Shares NCIB and Share Repurchase (each as defined in Note 10) |
|
( |
) |
|
|
( |
) |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
Foreign currency translation adjustment |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
Net loss for the period |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
As at March 31, 2025 |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||
Stock-based compensation |
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Issued on vesting of RSUs |
|
|
|
|
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
||
RSUs withheld to settle employee tax obligations |
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Issued for employee share purchase plan |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Cancelled from Shares NCIB |
|
( |
) |
|
|
( |
) |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
Foreign currency translation adjustment |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||
Net loss for the period |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
As at June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||
Stock-based compensation |
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Issued on vesting of RSUs |
|
|
|
|
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
||
Settlement of DSU liability (as defined in Note 9) |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
RSUs withheld to settle employee tax obligations |
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Issued for employee share purchase plan |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Cancelled from Shares NCIB |
|
( |
) |
|
|
( |
) |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
Foreign currency translation adjustment |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Net loss for the period |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
As at September 30, 2025 |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
7
DIRTT Environmental Solutions Ltd.
Interim Condensed Consolidated Statement of Cash Flows
(Unaudited – Stated in thousands of U.S. dollars)
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income for the period |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Impairment charge on Rock Hill Facility |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign exchange loss (gain) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Gain on extinguishment of convertible debt |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Accretion of convertible debentures |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on disposal |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Trade and accrued receivables |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Other receivables |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Inventory |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Prepaid and other assets, current and long term |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Accounts payable and accrued liabilities |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Other liabilities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Customer deposits and deferred revenue |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Current portion of long-term debt and accrued interest |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Lease liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net cash flows provided by operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Purchase of property, plant and equipment, net of accounts |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Capitalized software development expenditures |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other asset expenditures |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Recovery of software development expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Proceeds on sale of property, plant, and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Proceeds on sale of assets held for sale |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net cash flows (used in) investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common share repurchases |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Repayment of long-term debt |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net proceeds received from Rights Offering |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Employee tax payments on vesting of RSUs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net cash flows (used in) financing activities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Effect of foreign exchange on cash, cash equivalents and |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net increase (decrease) in cash, cash equivalents and |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Cash, cash equivalents and restricted cash, beginning of period |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash, cash equivalents and restricted cash, end of period |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest paid |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Income taxes paid |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within |
|
|||||||||||||||
the consolidated balance sheet. |
|
|
|
|
|
|
|
As at September 30, |
|
|||||||
|
|
|
|
|
|
|
|
2025 |
|
|
2024 |
|
||||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted cash |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total cash, cash equivalents and restricted cash |
|
|
|
|
|
|
|
|
|
|
|
|
||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
8
DIRTT Environmental Solutions Ltd.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
(Amounts in thousands of U.S. dollars unless otherwise stated)
1. GENERAL INFORMATION
DIRTT Environmental Solutions Ltd. and its subsidiary (“DIRTT”, the “Company”, “we” or “our”) is a leader in industrialized construction. DIRTT’s system of physical products and digital tools empowers organizations, together with construction and design leaders, to build high-performing, adaptable, interior environments. Operating in the workplace, healthcare, education, and public sector markets, DIRTT’s system provides total design freedom, and greater certainty in cost, schedule, and outcomes.
DIRTT’s proprietary design integration software, ICE® (“ICE” or “ICE software”), translates the vision of architects and designers into a 3D model that also acts as manufacturing information. ICE is also licensed to unrelated companies and construction partners of the Company (“Construction Partners”), including Armstrong World Industries, Inc. (“AWI”), which owns a
DIRTT is incorporated under the laws of the province of Alberta, Canada. Its headquarters is located at 7303 – 30th Street S.E., Calgary, AB, Canada T2C 1N6 and its registered office is located at 4500, 855 – 2nd Street S.W., Calgary, AB, Canada T2P 4K7. DIRTT’s common shares trade on the Toronto Stock Exchange under the symbol “DRT”. On June 12, 2025, the Company began trading on the OTCQX® Best Market (“OTCQX”) under the symbol “DRTTF.” The Company previously traded on, and upgraded to OTCQX from, the OTC Pink® Market.
2. BASIS OF PRESENTATION
The accompanying unaudited interim condensed consolidated financial statements (the “Financial Statements”) have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X and, accordingly, the Financial Statements do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of the Company, the Financial Statements contain all adjustments necessary, consisting of only normal recurring adjustments, for a fair statement of its financial position as of September 30, 2025, and its results of operations and cash flows for the three and nine months ended September 30, 2025 and 2024. The condensed balance sheet at December 31, 2024, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. These Financial Statements should be read in conjunction with the audited consolidated financial statements as of December 31, 2024 and 2023 and for each of the three years in the period ended December 31, 2024 included in the Annual Report on Form 10-K of the Company as filed with the SEC and applicable securities commission or similar regulatory authorities in Canada.
In these Financial Statements, unless otherwise indicated, all dollar amounts are expressed in United States (“U.S.”) dollars. DIRTT’s financial results are consolidated in Canadian dollars, the Company’s functional currency, and the Company has adopted the U.S. dollar as its reporting currency. All references to US$ or $ are to U.S. dollars and references to C$ are to Canadian dollars.
Principles of consolidation
The Financial Statements include the accounts of DIRTT Environmental Solutions Ltd. and its subsidiary. All intercompany balances, income and expenses, unrealized gains and losses and dividends resulting from intercompany transactions have been eliminated on consolidation.
9
Basis of measurement
Seasonality
Sales of the Company’s products are driven by consumer and industrial demand for interior construction solutions. The timing of customers’ construction projects can be influenced by a number of factors including the prevailing economic climate and weather.
3. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS
On December 14, 2023, the FASB issued Accounting Standards Update No. 2023-09, “Improvements to Income Tax Disclosures” (“ASU-2023-09”) further disaggregated information on an entity’s tax rate reconciliation and income taxes paid. The amendments in ASU-2023-09 are effective for fiscal years beginning after December 15, 2024, on a prospective basis with an option of retrospective application. The Company is evaluating the impact of the adoption of this standard and expects the impact to be limited to disclosures.
On November 5, 2024, the FASB issued Accounting Standards Update No. 2024-03, “Disaggregation of Income Statement Expenses” (“ASU-2024-03”) which requires further disaggregated information on an entity’s types of expenses presented to better understand the components of an entity’s expense captions. The amendments within ASU-2024-03 are effective for annual reporting periods starting December 15, 2026, and interim periods beginning after December 15, 2027, on a prospective basis with an option of retrospective application. The Company is evaluating the impact of the adoption of this standard and expects the impact to be limited to disclosures.
On November 27, 2024, the FASB issued Accounting Standards Update No. 2024-04, “Induced Conversions of Convertible Debt Instruments” (“ASU-2024-04”) which requires discussing an entity’s assessment of induced conversion and debt extinguishment of convertible debt instruments. The amendments in ASU-2024-04 are effective for fiscal years beginning after December 15, 2025, on a prospective basis with an option of retrospective application. The Company is evaluating the impact of the adoption of this standard.
On September 18, 2025, the FASB issued Accounting Standards Update No. 2025-06, “Intangibles - Goodwill and Other - Internal-Use Software” (“ASU-2025-06”) which targets improvements to the accounting for internal-use software. The amendments in ASU-2025-06 are effective for fiscal years beginning after December 15, 2027, on a prospective basis with an option of retrospective application. The Company is evaluating the impact of the adoption of this standard.
4. REORGANIZATION
Temporary Suspension of Operations and Subsequent Closure at Rock Hill, South Carolina Facility (the “Rock Hill Facility”)
On September 27, 2023, the Company decided to permanently close the Rock Hill Facility. Certain assets, including manufacturing equipment, which met held for sale criteria at that time were reclassified from property, plant and equipment. During the three months ended March 31, 2024, $
10
|
|
As at September 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Assets held for sale, opening |
|
|
|
|
|
|
||
Proceeds from sale of assets held for sale |
|
|
|
|
|
( |
) |
|
Impairment charge on reassessment |
|
|
|
|
|
( |
) |
|
Assets held for sale, ending |
|
|
|
|
|
|
||
Transformation Office
In 2024, DIRTT’s leadership team set up a new team, the Construction Services team (previously referred to as Integrated Solutions), to support our Construction Partner network in increasing market share and accessing markets to which we previously did not have access. In early 2025, a transformation office was set up, 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 incurring one-time consultant costs to assist in, advise, and implement our transformation actions, as well as one-time termination benefits as a result of elimination of positions. The program is planned to be completed in 2026. At present, the Transformation Office is led by a special committee of the Board of Directors and has one dedicated staff member.
For the three months and nine months ended September 30, 2025 and 2024, the following
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Termination benefits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Transformation Office costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Rock Hill Facility temporary suspension and closure of operations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total reorganization costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reorganization costs in accounts payable and accrued liabilities at January 1, 2025 |
|
|
|
|
Reorganization expense |
|
|
|
|
Reorganization costs paid |
|
|
( |
) |
Reorganization costs in accounts payable and accrued liabilities at September 30, 2025 |
|
|
|
Of the $
5
On February 15, 2024, the Company commenced a substantial issuer bid and tender offer (the “Issuer Bid”) pursuant to which the Company offered to repurchase for cancellation: (i) up to C$
C$
11
On August 2, 2024, the Company entered into a Convertible Debenture Repurchase Agreement (the “Repurchase Agreement”) with 22NW Fund, LP (“22NW”), pursuant to which the Company purchased for cancellation an aggregate of C$
On August 28, 2024, the Company commenced a normal course issuer bid (the “Debentures NCIB”) for the Debentures which expired on
For the three months and nine months ended September 30, 2025 and 2024, the gain on extinguishment of convertible debentures relate to the above mentioned initiatives:
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
|
|
($ in thousands) |
|
|
($ in thousands) |
|
||||||||||
Extinguishment of convertible debentures |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Principal repayment through the Debentures NCIB and Renewed Debentures NCIB |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Principal repayment through the Repurchase Agreement |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Principal repayment through the Issuer Bid |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Gain on extinguishment of convertible debentures |
|
|
|
|
|
|
|
|
|
|
|
|
||||
In accordance with GAAP, it was determined that the C$
12
In accordance with GAAP, it was determined that the C$
6
Accounts receivable are recorded at the invoiced amount, do not require collateral and typically do not bear interest. The Company estimates an allowance for credit losses using the lifetime expected credit loss at each measurement date, taking into account historical credit loss experience as well as forward-looking information, in order to establish rates for each class of financial receivable with similar risk characteristics. Adjustments to this estimate are recognized in the consolidated statement of operations.
In order to manage and assess our risk, management maintains credit policies that include regular review of credit limits of individual receivables and systematic monitoring of aging of trade receivables and the financial well-being of our customers. At September 30, 2025, approximately
Our trade balances are spread over a broad Construction Partner base, which is geographically dispersed. For the three and nine months ended September 30, 2025, no single Construction Partner accounted for greater than
The Company’s aged receivables were as follows:
|
|
As at |
|
|||||
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
Current |
|
|
|
|
|
|
||
Overdue |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less: expected credit losses |
|
|
( |
) |
|
|
( |
) |
Trade and accrued receivables, net of expected credit losses |
|
|
|
|
|
|
||
No adjustment to our expected credit losses of $
7. OTHER LIABILITIES
|
|
As at |
|
|||||
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
Warranty provisions (1) |
|
|
|
|
|
|
||
DSU liability |
|
|
|
|
|
|
||
Income taxes payable |
|
|
|
|
|
|
||
Sublease deposits |
|
|
|
|
|
|
||
Other provisions and other liabilities |
|
|
|
|
|
|
||
Other liabilities |
|
|
|
|
|
|
||
13
|
|
As at |
|
|||||
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
||
As at January 1, |
|
|
|
|
|
|
||
Additions to warranty provision |
|
|
|
|
|
|
||
Payments related to warranties |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
8. LONG-TERM DEBT
|
|
Leasing |
|
|
Convertible |
|
|
Total Debt |
|
|||
Balance at January 1, 2024 |
|
|
|
|
|
|
|
|
|
|||
Accretion of issue costs |
|
|
|
|
|
|
|
|
|
|||
Accrued interest |
|
|
|
|
|
|
|
|
|
|||
Interest payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Principal repayments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Gain on extinguishment |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Exchange differences |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance at December 31, 2024 |
|
|
|
|
|
|
|
|
|
|||
Current portion of long-term debt and accrued interest |
|
|
|
|
|
|
|
|
|
|||
Long-term debt |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Balance at January 1, 2025 |
|
|
|
|
|
|
|
|
|
|||
Accretion of issue costs |
|
|
|
|
|
|
|
|
|
|||
Accrued interest |
|
|
|
|
|
|
|
|
|
|||
Interest payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Principal repayments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Gain on extinguishment |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Exchange differences |
|
|
|
|
|
|
|
|
|
|||
Balance at September 30, 2025 |
|
|
|
|
|
|
|
|
|
|||
Current portion of long-term debt and accrued interest |
|
|
|
|
|
|
|
|
|
|||
Long-term debt |
|
|
|
|
|
|
|
|
|
|||
Revolving Credit Facility
On February 12, 2021, the Company entered into a loan agreement governing a C$
On February 9, 2023, the Company extended the RBC Facility (the “Extended RBC Facility”). The Extended RBC Facility had a borrowing base of C$
14
or U.S. prime rate plus 75 basis points or the Canadian Dollar Offered Rate or Term Secured Overnight Financing Rate (“Term SOFR”) plus 200 basis points plus the Term SOFR Adjustment (as defined in the amended loan agreement governing the Extended RBC Facility). Under the Extended RBC Facility, if the trailing twelve-month FCCR was not above 1.25 for
On February 9, 2024, the Company extended the Extended RBC Facility (the “Second Extended RBC Facility”). The Second Extended RBC Facility is subject to the borrowing base calculation to a maximum of C$
On February 20, 2025, the Company extended the Third Extended RBC Facility (the “Fourth Extended RBC Facility”). The Fourth Extended RBC Facility is subject to the borrowing base calculation based on accounts receivable balances to a maximum of C$
On November 4, 2025, the Company extended the Fourth Extended RBC Facility (the “Fifth Extended RBC Facility”). The Fifth Extended RBC Facility matures on November 30, 2026 and is subject to the same borrowing base terms as the previous facility; with the borrowing base calculation based on accounts receivable balances to a maximum of C$
Leasing Facilities
The Company has a C$
The Company did not make any draws on the Canada Leasing Facility during the three and nine months ended September 30, 2025 (2024 – $nil). The associated financial liabilities are shown on the consolidated balance sheet in the current portion of long-term debt and accrued interest and long-term debt.
Convertible Debentures
On January 25, 2021, the Company completed a C$
15
January 29, 2021, the Company issued a further C$
On December 1, 2021, the Company completed a C$
16
9
In May 2020, shareholders approved the DIRTT Environmental Solutions Ltd. Long Term Incentive Plan, which was subsequently amended and restated in each of 2023, 2024 and 2025 and is currently called the DIRTT Environmental Solutions Ltd. Third Amended and Restated Long-Term Incentive Plan (as amended and restated, the “LTIP”). Each amendment and restatement was approved by our shareholders. The LTIP replaced the predecessor incentive plans, being the Performance Share Unit Plan (“PSU Plan”) and the Amended and Restated Stock Option Plan (“Stock Option Plan”). No further awards have been or will be granted under either the Stock Option Plan or the PSU Plan following initial approval of the LTIP in May of 2020, but both plans remain in place to govern the terms of any awards that were granted pursuant to such plans.
The LTIP gives the Company the ability to award options, share appreciation rights, restricted share units, deferred share units, restricted shares, dividend equivalent rights, and other share-based awards and cash awards to eligible employees, officers, consultants and directors of the Company and its affiliates. In accordance with the LTIP, the sum of (i)
Prior to May of 2023, deferred share units (“DSUs”) were granted to non-employee directors under the Deferred Share Unit Plan for Non-Employee Directors (as amended and restated, the “DSU Plan”) and settleable only in cash. As of May 30, 2023, the LTIP provides the Company the ability to settle DSUs in either cash or common shares, while consolidating future share-based awards under a single plan. The terms of the DSU Plan are otherwise materially unchanged as incorporated into the LTIP. Effective May 30, 2023, no new awards have been or will be made under the DSU Plan, but awards previously granted under the DSU Plan will continue to be governed by the DSU Plan. DSUs are settled following cessation of services with the Company.
Stock-based compensation expense
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
|
||||
Equity-settled awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash-settled awards |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
The following summarizes RSUs, PRSUs, PSUs (each as defined herein) and DSUs activity during the periods:
|
|
RSU Time- |
|
|
RSU Performance- |
|
|
|
|
|
|
|
||||
|
|
Based |
|
|
Based |
|
|
PSU |
|
|
DSU |
|
||||
|
|
Number of |
|
|
Number of |
|
|
Number of |
|
|
Number of |
|
||||
|
|
units |
|
|
units |
|
|
units |
|
|
units |
|
||||
Outstanding at December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Vested or settled |
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Withheld to settle employee tax obligations |
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Forfeited or expired |
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
- |
|
Outstanding at September 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Outstanding at December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|||
Vested or settled |
|
|
( |
) |
|
- |
|
|
|
- |
|
|
|
( |
) |
|
Withheld to settle employee tax obligations |
|
|
( |
) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
Forfeited or expired |
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Outstanding at September 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
17
Restricted share units (time-based vesting)
Except as noted below, outstanding restricted share units (“RSUs”) that vest based on time have an aggregate time-based vesting period of
Restricted share units (performance-based vesting)
During 2022 and 2021, RSUs were granted to executives with service and performance-based conditions for vesting based on the Company’s share price performance (the “PRSUs”). Based on share price performance since the date of grant,
Performance share units
During the second quarter of 2023, certain executives were issued a strategic equity grant through performance share units (“PSUs”). The performance period of the PSUs is from
Deferred share units
Granted under the DSU Plan
The fair value of the DSU liability and the corresponding expense is charged to profit or loss at the grant date. Subsequently, at each reporting date between the grant date and settlement date, the fair value of the liability is remeasured with any changes in fair value recognized in profit or loss for the period. In the three months ended September 30, 2025, the Company settled
Granted under the LTIP
DSUs granted after May 30, 2023 (the “New DSUs”) will be settled by way of the provision of cash or shares (or a combination thereof) to the directors, at the discretion of the Company. The Company intends to settle these DSUs through issuances of common shares. The weighted average fair value of the DSUs granted in the first nine months of 2025 and 2024 was C$
18
Dilutive Instruments
For the three and nine months ended September 30, 2025,
For the three and nine months ended September 30, 2024,
10
On December 18, 2024, the Company announced a normal course issuer bid for common shares (the “Shares NCIB”), which commenced on
On February 13, 2025, the Company entered into a share repurchase agreement (the “NGEN Repurchase Agreement”) with NGEN III, LP (“NGEN”), pursuant to which the Company purchased for cancellation
In addition to the Share Repurchase, DIRTT acquired and cancelled
The following table summarizes the common shares repurchased and cancelled during the period:
19
Period |
|
Total number of shares purchased |
|
|
Average price paid per share |
|
|
Total number of shares purchased as part of publicly announced programs |
|
|
Maximum number of shares that may yet be purchased under the program |
|
||||
January 1, 2025 - January 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
February 1, 2025 - February 28, 2025(1) |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
March 1, 2025 - March 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
April 1, 2025 - April 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
May 1, 2025 - May 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
June 1, 2025 - June 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
July 1, 2025 - July 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
August 1, 2025 - August 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
September 1, 2025 - September 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
||||
(1)
11. EARNINGS (LOSS) PER SHARE
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Net (loss) income per share – basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income (thousands of U.S. dollars) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Weighted average number of shares outstanding (thousands of shares) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income per share (U.S. dollars) − basic |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income per share − diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income (thousands of U.S. dollars) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Interest on convertible debentures |
|
NA |
|
|
|
|
|
NA |
|
|
|
|
||||
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Weighted average number of shares outstanding (thousands of shares) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive debentures on convertible debt (thousands of shares) (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive RSUs and PRSUs (thousands of shares) (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive New DSUs (thousands of shares) (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average number of shares outstanding (thousands of shares) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income per share (U.S .dollars) − diluted |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
(1)
(2)
20
12. REVENUE
In the following table, revenue is disaggregated by performance obligation and timing of revenue recognition. All revenue comes from contracts with customers. See Note 13 for the disaggregation of revenue by geographic region.
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
|
||||
Product |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Transportation |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
License fees from Construction Partners |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total product revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Installation and other services |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
DIRTT sells its products and services pursuant to fixed-price contracts which generally have a term of one year or less. The transaction price used in determining the amount of revenue to recognize from fixed-price contracts is based upon agreed contractual terms with each customer and is not subject to variability.
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
|
||||
At a point in time |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Over time |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue recognized at a point in time represents the majority of the Company’s sales. Revenue is recognized when a customer obtains legal title to the product, which is when ownership of the product is transferred to, or services are delivered to, the customer. Revenue recognized over time includes pre-construction services, license fees, installation and ongoing maintenance contracts with customers and is recorded as performance obligations which are satisfied over the term of the contract.
Contract Liabilities
|
|
As at |
|
|||||||||
|
|
September 30, 2025 |
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
|||
Customer deposits |
|
|
|
|
|
|
|
|
|
|||
Deferred revenue |
|
|
|
|
|
|
|
|
|
|||
Contract liabilities |
|
|
|
|
|
|
|
|
|
|||
Contract liabilities primarily relate to deposits received from customers and maintenance revenue from license subscriptions. The balance of contract liabilities was higher as at September 30, 2025 compared to December 31, 2024 mainly due to the timing of orders and payments. Contract liabilities as at December 31, 2024 and 2023 totaling $
21
Sales by Industry
The Company periodically reviews the growth of product and transportation revenue by vertical market to evaluate the success of industry-specific sales initiatives. The nature of products sold to the various industries is consistent and therefore review is focused on sales performance.
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Healthcare |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Government |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Education |
|
|
|
|
|
|
|
|
|
|
|
|
||||
License fees from Construction Partners |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total product and transportation revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Installation and other services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
13. SEGMENT REPORTING
The Company has
Revenue from external customers
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Canada |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-current assets
|
|
|
|
|
|
As at September 30, |
|
|
As at December 31, |
|
||
|
|
|
|
|
|
2025 |
|
|
2024 |
|
||
Canada |
|
|
|
|
|
|
|
|
|
|
||
U.S. |
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
DIRTT has one reportable segment: solutions. The DIRTT solutions segment derives revenues from customers by providing physical products and digital tools through our ICE software to create interior spaces for our customers across the commercial, healthcare, education and government industries. The solutions segment provides digital tools (access to ICE software) and physical products to create modular interior construction spaces for our customers.
DIRTT’s chief operating decision maker is the executive leadership team that includes the president and chief operating officer, chief financial officer, and the chief executive officer. The chief operating decision maker assesses performance for the solutions segment and decides how to allocate resources based on gross profit and net income (loss) that also is reported on the Consolidated Statement of Operations and Comprehensive (Loss) Income as consolidated gross profit and net income (loss). The measure of segment assets is reported on the balance sheet as total consolidated assets. The chief operating decision maker uses net income to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits into the solutions segment or into other parts of the entity, such as to repay long-term debt.
22
Net income (loss) are used to monitor budget versus actual results. The chief operating decision maker also uses net income (loss) in competitive analysis by benchmarking to DIRTT’s competitors. The competitive analysis along with the monitoring of budgeted versus actual results are used in assessing performance of the segment and in establishing management’s compensation.
DIRTT derives revenue primarily in North America and manages the business activities on a consolidated basis. The technology used in the customer arrangements is based on a single software platform that is deployed to, and implemented by, customers in a similar manner.
Segment profit and loss reconciliation to Net (loss) income after tax
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
|
||||
|
|
($ in thousands) |
|
|
($ in thousands) |
||||||||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating expenses (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating (loss) income |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
||
Other (expenses)/income and (losses)/gains (2) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|||
Net (loss) income after tax |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reconciliation of profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjustments and reconciling items |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income after tax |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
||
(1)
(2)
14. INCOME TAXES
23
15. RIGHTS OFFERING
On November 21, 2023, the Company announced that the Board of Directors had approved a rights offering (the “Rights Offering”) to its common shareholders for aggregate gross proceeds of C$
In connection with the Rights Offering, the Company entered into a standby purchase agreement, dated November 20, 2023 (the “Standby Purchase Agreement”) with 22NW and 726 BC LLC and 726 BF LLC (together, “726”), or their permitted assigns (collectively and including WWT Opportunity #1 LLC, to which 726 transferred all of their common shares to on December 1, 2023, the “Standby Purchasers”). Subject to the terms and conditions of the Standby Purchase Agreement, each Standby Purchaser agreed to exercise its Basic Subscription Privilege (as defined below) in full and to collectively purchase from the Company, at the subscription price, all common shares not subscribed for by holders of Rights (as defined below) under the Basic Subscription Privilege or Additional Subscription Privilege (as defined below), up to a maximum of C$
On January 9, 2024, the Company announced the completion of the Rights Offering to its common shareholders and the issuance of
DIRTT issued an aggregate of
16. COMMITMENTS AND CONTINGENCIES
As at September 30, 2025, the Company had outstanding purchase obligations of approximately $
DIRTT Environmental Solutions Inc. received a subpoena for records in relation to an ongoing inquiry by the U.S. Department of Justice into certain projects and services provided by a third party and DIRTT. The Company is complying with the subpoena and cooperating with the Department of Justice. At this time, there are no asserted claims against the Company. Therefore the extent of any loss, if any, to the Company cannot be reasonably estimable.
17. RELATED PARTY TRANSACTIONS
As at September 30, 2025 and September 30, 2024 there were
24
18. SUBSEQUENT EVENTS
On October 28, 2025, we entered into a non-binding term sheet with the Business Development Bank of Canada (“BDC”) for proposed financing of up to C$
On November 4, 2025, the Company entered into the Fifth Extended RBC Facility. For more information, refer to Note 8.
25
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited interim condensed consolidated financial statements and related notes and other financial information appearing in this Quarterly Report. This discussion contains forward-looking statements reflecting our current expectations and estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those described under the headings “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in this Quarterly Report.
Summary of Financial Results
DIRTT Environmental Solutions Ltd. and its subsidiary (“DIRTT”, the “Company”, “we” or “our”) is a leader in industrialized construction for interior spaces. DIRTT’s system of physical products and digital tools empowers organizations, together with construction and design leaders, to build high-performing, adaptable, interior environments. Operating in the workplace, healthcare, education, and public sector markets, DIRTT’s system provides total design freedom, and greater certainty in cost, schedule, and outcomes.
DIRTT’s proprietary design integration software, ICE® (“ICE” or “ICE software”), translates the vision of architects and designers into a 3D model that also acts as manufacturing information. ICE is also licensed to our Construction Partners and certain third parties, including Armstrong World Industries, Inc. (“AWI”) which owns a 50% interest in the rights, title and interests in certain intellectual property rights in a portion of the ICE software that is used by AWI.
Key Third Quarter Highlights and Other Recent Developments
26
27
Pipeline
The table below presents our qualified leads and twelve-month forward pipeline as at October 1, 2025, January 1, 2025 and October 1, 2024. We define qualified leads as the quantity of projects being pursued as of the date presented, and define our pipeline as the estimated potential revenue from qualified leads where a client has engaged DIRTT and is assessing DIRTT as a potential provider of prefabricated interior solutions. We believe these metrics are helpful to estimate near-term performance, particularly given the macroeconomic factors that affect our operating environment, including labor availability, interest rate changes, delayed contracts and slowed construction schedules driven by changing tariff policies and potential recessionary impacts on construction projects.
As of October 1, 2025, our twelve-month forward pipeline increased by 31% year-over-year and by 20% from January 1, 2025, illustrated in the table below.
|
|
As at |
|
|||||||||||||||||
|
|
October 1, 2025 |
|
|
January 1, 2025 |
|
|
% Change |
|
|
October 1, 2024 |
|
|
% Change |
|
|||||
Twelve-Month Forward Pipeline ($ 000s) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Commercial |
|
|
183,011 |
|
|
|
147,609 |
|
|
|
24 |
|
|
|
145,827 |
|
|
|
25 |
|
Healthcare |
|
|
67,140 |
|
|
|
51,214 |
|
|
|
31 |
|
|
|
48,931 |
|
|
|
37 |
|
Government |
|
|
51,877 |
|
|
|
55,203 |
|
|
|
(6 |
) |
|
|
34,829 |
|
|
|
49 |
|
Education |
|
|
31,431 |
|
|
|
24,292 |
|
|
|
29 |
|
|
|
25,383 |
|
|
|
24 |
|
|
|
|
333,459 |
|
|
|
278,318 |
|
|
|
20 |
|
|
|
254,970 |
|
|
|
31 |
|
Leads (#) |
|
|
1,464 |
|
|
|
1,012 |
|
|
|
45 |
|
|
|
940 |
|
|
|
56 |
|
28
Price Increases and Impact of Tariffs
On February 11, 2025, we announced a price increase of 5% on all orders placed after March 18, 2025, and price adjustments on certain products in response to market feedback and to mitigate the impact of rising raw material costs.
Commencing in February 2025, the U.S. government proposed and enacted various tariffs. Refer to “Outlook” and “Risk Factors” for further discussion on these tariffs. As of the date of this report, the following tariffs are currently in effect that materially affect DIRTT:
If further tariff changes are announced, we will consider the impact of such changes to our business. The most significant tariff impacting DIRTT at present is the 50% aluminum and steel tariff. Going into the fourth quarter, we expect the impact of prevailing tariffs to be substantially mitigated through our price increases, surcharges and various other internal tariff mitigation strategies.
Outlook
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 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
29
alleging breaches of restrictive covenants, fiduciary duties, employment duties and confidentiality is due to start on February 2, 2026 (the “Falkbuilt Litigation”). 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 Shares NCIB activity. 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 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 BDC (see “– Liquidity and Capital Resources”).
30
Non-GAAP Financial Measures
Note Regarding Use of Non-GAAP Financial Measures
Our interim condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These GAAP financial statements include non-cash charges and other charges and benefits that we believe are unusual or infrequent in nature or that we believe may make comparisons to our prior or future performance difficult.
As a result, we also provide financial information in this Quarterly Report that is not prepared in accordance with GAAP and should not be considered as an alternative to the information prepared in accordance with GAAP. Management uses these non-GAAP financial measures in its review and evaluation of the financial performance of the Company. We believe that these non-GAAP financial measures also provide additional insight to investors and securities analysts as supplemental information to our GAAP results and as a basis to compare our financial performance period-over-period and to compare our financial performance with that of other companies. We believe that these non-GAAP financial measures facilitate comparisons of our core operating results from period to period and to other companies by removing the effects of our capital structure (net interest income on cash deposits, interest expense on outstanding debt and debt facilities, or foreign exchange movements), asset base (depreciation and amortization), tax consequences, reorganization expense, unusual or infrequent charges or gains (such as gain on extinguishment of debt, and impairment charges), stock-based compensation, and government subsidies. We remove the impact of foreign exchange gain (loss) from Adjusted EBITDA. Foreign exchange gains and losses can vary significantly period-to-period due to the impact of changes in the U.S. and Canadian dollar exchange rates on foreign currency denominated monetary items on the balance sheet and are not reflective of the underlying operations of the Company. In addition, management bases certain forward-looking estimates and budgets on non-GAAP financial measures, primarily Adjusted EBITDA. We have not reconciled forward-looking non-GAAP measures, including Adjusted EBITDA guidance, to its corresponding GAAP measures due to the high variability and difficulty in making accurate forecasts and projections, particularly with respect to non-operating income and expenditures, which are difficult to predict and subject to change.
Depreciation and amortization, stock-based compensation expense, reorganization expense, foreign exchange gains and losses, gain on extinguishment of debt, impairment charges, net interest income on cash deposits, interest expense on outstanding debt and debt facilities, and tax expense are excluded from our non-GAAP financial measures because management considers them to be outside of the Company’s core operating results, even though some of those receipts and expenses may recur, and because management believes that each of these items can distort the trends associated with the Company’s ongoing performance. We believe that excluding these receipts and expenses provides investors and management with greater visibility to the underlying performance of the business operations, enhances consistency and comparativeness with results in prior periods that do not, or future periods that may not, include such items, and facilitates comparison with the results of other companies in our industry.
The following non-GAAP financial measures are presented in this Quarterly Report, and a description of the calculation for each measure is included.
Adjusted Gross Profit |
Gross profit before deductions for depreciation and amortization |
|
|
Adjusted Gross Profit Margin |
Adjusted Gross Profit divided by revenue |
|
|
EBITDA |
Net income before interest, taxes, depreciation, and amortization |
|
|
Adjusted EBITDA |
EBITDA adjusted to remove foreign exchange gains or losses; impairment charges; reorganization expenses; stock-based compensation expense; unusual or infrequent charges (such as gain on extinguishment of debt); and any other non-core gains or losses |
|
|
Adjusted EBITDA Margin |
Adjusted EBITDA divided by revenue |
31
You should carefully evaluate these non-GAAP financial measures, the adjustments included in them, and the reasons we consider them appropriate for analysis supplemental to our GAAP information. Each of these non-GAAP financial measures has important limitations as an analytical tool due to exclusion of some but not all items that affect the most directly comparable GAAP financial measures. You should not consider any of these non-GAAP financial measures in isolation or as substitutes for an analysis of our results as reported under GAAP. You should also be aware that we may recognize income or incur expenses in the future that are the same as, or similar to, some of the adjustments in these non-GAAP financial measures. Because these non-GAAP financial measures may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
Results of Operations
Three and Nine Months Ended September 30, 2025, Compared to the Three and Nine Months Ended September 30, 2024
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
% Change |
|
|
2025 |
|
|
2024 |
|
|
% Change |
|
||||||
|
|
($ in thousands) |
|
|
($ in thousands) |
|
||||||||||||||||||
Revenue |
|
|
37,716 |
|
|
|
43,375 |
|
|
|
(13 |
) |
|
|
117,933 |
|
|
|
125,423 |
|
|
|
(6 |
) |
Gross Profit |
|
|
11,467 |
|
|
|
16,813 |
|
|
|
(32 |
) |
|
|
36,827 |
|
|
|
46,836 |
|
|
|
(21 |
) |
Gross Profit Margin |
|
|
30.4 |
% |
|
|
38.8 |
% |
|
|
|
|
|
31.2 |
% |
|
|
37.3 |
% |
|
|
|
||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Sales and marketing |
|
|
4,795 |
|
|
|
5,183 |
|
|
|
(7 |
) |
|
|
15,265 |
|
|
|
17,165 |
|
|
|
(11 |
) |
General and administrative |
|
|
4,429 |
|
|
|
5,834 |
|
|
|
(24 |
) |
|
|
15,652 |
|
|
|
14,791 |
|
|
|
6 |
|
Operations support |
|
|
1,801 |
|
|
|
1,915 |
|
|
|
(6 |
) |
|
|
5,703 |
|
|
|
5,531 |
|
|
|
3 |
|
Technology and development |
|
|
805 |
|
|
|
1,294 |
|
|
|
(38 |
) |
|
|
3,513 |
|
|
|
3,981 |
|
|
|
(12 |
) |
Stock-based compensation |
|
|
742 |
|
|
|
803 |
|
|
|
(8 |
) |
|
|
2,075 |
|
|
|
1,905 |
|
|
|
9 |
|
Reorganization |
|
|
2,593 |
|
|
|
604 |
|
|
|
329 |
|
|
|
2,977 |
|
|
|
944 |
|
|
|
215 |
|
Impairment charge on Rock Hill Facility |
|
|
- |
|
|
|
- |
|
|
NA |
|
|
|
- |
|
|
|
530 |
|
|
|
(100 |
) |
|
Total operating expenses |
|
|
15,165 |
|
|
|
15,633 |
|
|
|
(3 |
) |
|
|
45,185 |
|
|
|
44,847 |
|
|
|
1 |
|
Operating (loss) income |
|
|
(3,698 |
) |
|
|
1,180 |
|
|
|
(413 |
) |
|
|
(8,358 |
) |
|
|
1,989 |
|
|
|
520 |
|
Operating margin |
|
|
(9.8 |
)% |
|
|
2.7 |
% |
|
|
|
|
|
(7.1 |
)% |
|
|
1.6 |
% |
|
|
|
||
Gain on extinguishment of convertible debentures |
|
|
8 |
|
|
|
7,478 |
|
|
|
(100 |
) |
|
|
22 |
|
|
|
10,409 |
|
|
|
(100 |
) |
Foreign exchange (loss) gain |
|
|
602 |
|
|
|
(360 |
) |
|
|
267 |
|
|
|
(1,422 |
) |
|
|
917 |
|
|
|
(255 |
) |
Interest income |
|
|
226 |
|
|
|
341 |
|
|
|
(34 |
) |
|
|
720 |
|
|
|
1,312 |
|
|
|
(45 |
) |
Interest expense |
|
|
(465 |
) |
|
|
(1,525 |
) |
|
|
(70 |
) |
|
|
(1,401 |
) |
|
|
(3,524 |
) |
|
|
(60 |
) |
|
|
|
371 |
|
|
|
5,934 |
|
|
|
(94 |
) |
|
|
(2,081 |
) |
|
|
9,114 |
|
|
|
(123 |
) |
Net (loss) income before tax |
|
|
(3,327 |
) |
|
|
7,114 |
|
|
|
(147 |
) |
|
|
(10,439 |
) |
|
|
11,103 |
|
|
|
(194 |
) |
Current and deferred income tax expense |
|
|
157 |
|
|
|
23 |
|
|
|
583 |
|
|
|
308 |
|
|
|
371 |
|
|
|
(17 |
) |
Net (loss) income after tax |
|
|
(3,484 |
) |
|
|
7,091 |
|
|
|
(149 |
) |
|
|
(10,747 |
) |
|
|
10,732 |
|
|
|
(200 |
) |
Revenue
Revenue mainly reflects sales to our construction partners (“Construction Partners”) for resale to their clients and, in limited circumstances, our direct sales to clients. We are investing in our Construction Services team to grow revenue and increase direct sales to clients where such opportunities are not available to our Construction Partners. Our revenue is generally affected by the timing of when orders are executed, particularly large orders, which can add variability to our financial results and shift revenue between quarters.
32
The following table sets forth the contribution to revenue of our DIRTT product and service offerings:
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
% Change |
|
|
2025 |
|
|
2024 |
|
|
% Change |
|
||||||
|
|
($ in thousands) |
|
|
($ in thousands) |
|
||||||||||||||||||
Product |
|
|
32,431 |
|
|
|
38,510 |
|
|
|
(16 |
) |
|
|
102,130 |
|
|
|
109,527 |
|
|
|
(7 |
) |
Transportation |
|
|
4,066 |
|
|
|
3,788 |
|
|
|
7 |
|
|
|
12,095 |
|
|
|
11,602 |
|
|
|
4 |
|
License fees from Construction Partners |
|
|
180 |
|
|
|
177 |
|
|
|
2 |
|
|
|
539 |
|
|
|
561 |
|
|
|
(4 |
) |
Total product revenue |
|
|
36,677 |
|
|
|
42,475 |
|
|
|
(14 |
) |
|
|
114,764 |
|
|
|
121,690 |
|
|
|
(6 |
) |
Installation and other services |
|
|
1,039 |
|
|
|
900 |
|
|
|
15 |
|
|
|
3,169 |
|
|
|
3,733 |
|
|
|
(15 |
) |
|
|
|
37,716 |
|
|
|
43,375 |
|
|
|
(13 |
) |
|
|
117,933 |
|
|
|
125,423 |
|
|
|
(6 |
) |
Revenue for the three months ended September 30, 2025 was $37.7 million, a decrease of $5.7 million compared to $43.4 million in the comparative period of 2024. Similar to the second quarter of 2025, revenue was adversely impacted by delays in project start dates. In the previous quarters, we believe that the delays were largely related to broader market uncertainties whereas in the third quarter of 2025, they were specific to job site readiness. When project delays occur, is typically deferred 1-12 months from the original planned start date. Revenue for the nine months ended September 30, 2025 was $117.9 million, a decrease from $125.4 million in the comparative period of 2024 for the same reasons explained above. For the quarter ended September 30, 2025, we recorded $0.8 million in revenue related to the 3.5% surcharge on orders placed on or after June 20, 2025. The 5% price increase on orders placed on or after March 18, 2025, has begun to be reflected in revenue. See “Price Increases and Impact of Tariffs.”
Installation and other services revenue was $1.0 million for the quarter ended September 30, 2025 compared to $0.9 million in the quarter ended September 30, 2024, and $3.2 million for the nine months ended September 30, 2025 compared to $3.7 million in the same period of 2024. This revenue primarily reflects services performed by our ICE teams for third parties. Except in limited circumstances, historically our Construction Partners, rather than the Company, perform installation services. As our Construction Services team grows, we expect to see a modest increase in installation services.
Our success is partly dependent on our ability to profitably develop our Construction Partner network to expand our market penetration and ensure best practices are shared across local markets. At September 30, 2025, we had 69 Construction Partners (September 30, 2024: 74; December 31, 2024: 71) servicing multiple locations. We also continue to work on developing our Construction Services team and partnering with our Construction Partner network to drive revenue for DIRTT.
The following tables present our product and transportation revenue by vertical market:
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
% Change |
|
|
2025 |
|
|
2024 |
|
|
% Change |
|
||||||
|
|
($ in thousands) |
|
|
($ in thousands) |
|
||||||||||||||||||
Commercial |
|
|
21,675 |
|
|
|
27,815 |
|
|
|
(22 |
) |
|
|
70,581 |
|
|
|
86,012 |
|
|
|
(18 |
) |
Healthcare |
|
|
8,645 |
|
|
|
6,975 |
|
|
|
24 |
|
|
|
25,014 |
|
|
|
14,824 |
|
|
|
69 |
|
Government |
|
|
2,057 |
|
|
|
3,768 |
|
|
|
(45 |
) |
|
|
7,713 |
|
|
|
12,335 |
|
|
|
(37 |
) |
Education |
|
|
4,120 |
|
|
|
3,740 |
|
|
|
10 |
|
|
|
10,917 |
|
|
|
7,958 |
|
|
|
37 |
|
License fees from Construction Partners |
|
|
180 |
|
|
|
177 |
|
|
|
2 |
|
|
|
539 |
|
|
|
561 |
|
|
|
(4 |
) |
Total product revenue |
|
|
36,677 |
|
|
|
42,475 |
|
|
|
(14 |
) |
|
|
114,764 |
|
|
|
121,690 |
|
|
|
(6 |
) |
Service revenue |
|
|
1,039 |
|
|
|
900 |
|
|
|
15 |
|
|
|
3,169 |
|
|
|
3,733 |
|
|
|
(15 |
) |
|
|
|
37,716 |
|
|
|
43,375 |
|
|
|
(13 |
) |
|
|
117,933 |
|
|
|
125,423 |
|
|
|
(6 |
) |
33
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
|
|
(in %) |
|
|
(in %) |
|
||||||||||
Commercial |
|
|
60 |
|
|
|
66 |
|
|
|
63 |
|
|
|
71 |
|
Healthcare |
|
|
24 |
|
|
|
16 |
|
|
|
22 |
|
|
|
12 |
|
Government |
|
|
6 |
|
|
|
9 |
|
|
|
7 |
|
|
|
10 |
|
Education |
|
|
11 |
|
|
|
9 |
|
|
|
10 |
|
|
|
7 |
|
Total Product Revenue(1) |
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
|
|
100 |
|
(1) Excludes license fees from Construction Partners.
Commercial sales decreased by 22% for the third quarter of 2025 from the third quarter of 2024. The quarter ended September 30, 2025 had fewer large commercial projects compared to the quarter ended September 30, 2024. Healthcare revenues increased by 24% in the third quarter of 2025 from the same period of 2024, primarily due to the third quarter of 2025 having a larger volume of high value projects than those in the same period of 2024. Sales in the healthcare sector tend to be larger individual projects and are subject to timing due to a typically longer sales cycle, resulting in variability in sales levels. We have made several investments in new product solutions (such as COVE™ and Applied Headwalls) and additions to the business development team to increase product placement in future healthcare and life science construction projects. Government sales in the third quarter of 2025 decreased by 45% from the third quarter of 2024 primarily due to one key project shipping in the third quarter of 2024 and the projects in 2025 having smaller value than those in the same period of 2024. Education sales in the third quarter of 2025 increased by 10% from the same period of 2024 due to a larger volume of high value projects in 2025 compared to the same period of 2024.
Revenue continues to be derived almost exclusively from projects in North America and predominantly from the United States. The following table presents our revenue dispersion by geography:
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
% Change |
|
|
2025 |
|
|
2024 |
|
|
% Change |
|
||||||
|
|
($ in thousands) |
|
|
($ in thousands) |
|
||||||||||||||||||
Canada |
|
|
3,298 |
|
|
|
7,879 |
|
|
|
(58 |
) |
|
|
14,220 |
|
|
|
15,607 |
|
|
|
(9 |
) |
U.S. |
|
|
34,418 |
|
|
|
35,496 |
|
|
|
(3 |
) |
|
|
103,713 |
|
|
|
109,816 |
|
|
|
(6 |
) |
|
|
|
37,716 |
|
|
|
43,375 |
|
|
|
(13 |
) |
|
|
117,933 |
|
|
|
125,423 |
|
|
|
(6 |
) |
For the three months ended September 30, 2025, 9% of revenue was from Canada, as compared to 18% for the three months ended September 30, 2024. Historically, approximately 10-15% and 85-90% of revenues are derived from sales to Canada and the United States, respectively. We expect the historical split to continue.
Sales and marketing expenses
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.
Sales and marketing expenses decreased by $1.9 million to $15.3 million for the nine months ended September 30, 2025 from $17.2 million for the nine months ended September 30, 2024. The decrease was primarily driven by a $0.8 million decrease in termination benefits, a $0.6 million decrease in commissions as a result of lower revenues, a $0.2 million decrease in pass through charges, a $0.2 million decrease in professional services costs, a $0.2 million decrease in depreciation and amortization expenses, and a $0.1 million decrease in other costs. The decrease was partially offset by a $0.2 million increase in salaries and benefits costs.
34
General and administrative expenses
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 Debenture Repurchase and the support and standstill agreement with 22NW Fund, LP (“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.
General and administrative expenses increased by $0.9 million to $15.7 million for the nine months ended September 30, 2025, from $14.8 million for the nine months ended September 30, 2024. The increase was primarily related to a $0.7 million increase in salaries and benefits costs, a $0.5 million increase in professional services costs as a result of litigation costs related to the Falkbuilt Litigation, and a $0.4 million increase in board fees. The increase was partially offset by a $0.6 million decrease in building and infrastructure costs and a $0.1 million decrease in other costs.
Operations support expenses
Operations support is comprised primarily of project managers, order entry and other professionals that facilitate the integration of our Construction Partner 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.
Operations support expenses increased by $0.2 million for the nine months ended September 30, 2025 to $5.7 million, from $5.5 million for the comparative period of 2024. The increase was primarily related to a $0.2 million increase in research and development costs, a $0.1 million increase in marketing and tradeshow costs, and a $0.1 million increase in other costs. The increase was offset by a $0.1 million decrease in travel, meals and entertainment costs, and a $0.1 million loss on disposal in the third quarter of 2024 not repeated in 2025.
Technology and development expenses
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.
Technology and development expenses decreased by $0.5 million to $3.5 million for the three months ended September 30, 2025 from $4.0 million for the comparative period of 2024. The decrease was primarily related to a $0.5 million decrease in salaries and benefits costs, and a $0.3 million loss on disposal of a software development project in 2024 not repeated in 2025. The decrease was partially offset by a $0.4 million increase in professional services costs.
Stock-based compensation
Stock-based compensation expense is dependent on share price in a period for fair value adjustments made on cash-settled deferred share units (“DSUs”) awards and grants, exercises, expirations or forfeitures made on other awards.
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 DSU 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 (“RSUs”) 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.
35
Stock-based compensation expense for the nine months ended September 30, 2025 was $2.1 million, compared to $1.9 million in the same periods of 2024. The increase in expense was largely due to an increase in RSU expense as a result of a full quarter of expense on an August 31, 2024 grant in the third quarter of 2025 compared to one month of the expense on the same August 31, 2024 grant in the third quarter of 2024, offset by a decrease in DSU expense caused by a recovery on cash-settled DSU expense from a lower share price as at September 30, 2025 compared to December 31, 2024.
Reorganization
Reorganization expenses for the three and nine months ended September 30, 2025 were $2.6 million and $3.0 million, respectively, compared to $0.6 million and $0.9 million in the three and nine months ended September 30, 2024, respectively. Reorganization expenses for the three and nine months ended September 30, 2025, primarily relate to one-time termination and consultant costs associated with the establishment of the Transformation Office, as described in Note 4 of our interim condensed consolidated financial statements, while the reorganization costs for the three and nine months ended September 30, 2024 were largely made up of movement of inventory and equipment from the facility at Rock Hill, South Carolina (the “Rock Hill Facility”) for use at the Calgary facility.
Impairment charge on Rock Hill Facility
On September 27, 2023, the Company decided to permanently close the Rock Hill Facility. Certain assets, including manufacturing equipment, which met held-for-sale criteria at that time were reclassified from property, plant and equipment. At March 31, 2024, we determined that the assets held for sale balance of $0.5 million was to be reduced to $nil resulting in a $0.5 million impairment charge for such quarter.
The Company had $nil impairment charges in the three and nine months ended September 30, 2025.
Gain on extinguishment of convertible debentures
During the three and nine months ended September 30, 2025 C$0.1 million ($0.1 million) and C$0.4 million ($0.3 million), respectively, principal amount of Debentures was repurchased for cancellation through the Debentures NCIB and Renewed Debentures NCIB which triggered an extinguishment of debt. The gain on extinguishment of debentures of $0.01 million and $0.02 million for the three and nine months ended September 30, 2025, respectively, was calculated as the difference between the repayment and the net carrying value of the extinguished principal less unamortized issuance costs (refer to Note 5 of our interim condensed consolidated financial statements for additional information).
During the first nine months of 2024, C$43.1 million ($31.7 million) in principal amount of Debentures was repurchased for cancellation through the Issuer Bid, a private repurchase, and the Debentures NCIB, which triggered an extinguishment of debt. The gain on extinguishment of $7.5 million and $10.4 million for the three and nine months ended September 30, 2024, respectively, was calculated as the difference between the repayment and the net carrying value of the extinguished principal less unamortized issuance costs. (refer to Note 8 of our interim condensed consolidated financial statements for additional information).
Foreign exchange (loss) gain
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.
Foreign exchange loss or gain decreased from a gain of $0.9 million for the nine months ended September 30, 2024 to a loss of $1.4 million for the same period of 2025. The decrease is primarily related to the strengthening of the Canadian dollar relative to the U.S. dollar over the twelve 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 and nine months ended September 30, 2025, were denominated in Canadian dollars.
Interest income
Interest income for the three and nine months ended September 30, 2025 was $0.2 million and $0.7 million compared to $0.3 million and $1.3 million for the comparative periods of 2024. The decreased interest income is due
36
to declining prime rates that determine interest yields on the Company’s lower cash equivalents during the three and nine months ended September 30, 2025 compared to the same periods of 2024.
Interest expense
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, and by $2.1 million from $3.5 million for the nine months ended September 30, 2024, to $1.4 million for the nine 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.
Income tax
Income tax expense for the three months ended September 30, 2025 increased to $0.2 million from $0.02 million in the three months ended September 30, 2024. Income tax expense for the nine months ended September 30, 2025 decreased to $0.3 million from $0.4 million in the nine months ended September 30, 2024. The current tax expense represents the income tax provision after the utilization of non-capital loss carry forwards against current period taxable income. The provision for income taxes comprises U.S. and Canadian federal, state and provincial taxes based on pre-tax income. Despite positive indications of future profitability, including the strength of our pipeline, the Company has determined that it is unlikely that a deferred tax asset will be recognized. Given the history of losses, the Company plans to maintain a valuation allowance against the deferred tax asset. As at September 30, 2025, the Company had a valuation allowance of $29.8 million (December 31, 2024: $30.0 million) against deferred tax assets. The Company plans to continue to evaluate indicators on whether a valuation allowance continues to be needed. For the quarter ended September 30, 2025, the Company utilized a balance of its non-capital loss carry-forwards in Canada and the United States. As at September 30, 2025, we had C$108.7 million of non-capital loss carry-forwards in Canada and $46.2 million of non-capital loss carry-forwards in the United States. These loss carry-forwards will begin to expire in 2037.
Net (loss) income after tax
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.
Net loss after tax was $10.7 million or $0.06 net loss per share, basic and diluted, for the nine months ended September 30, 2025, a decrease of $21.5 million from net income after tax of $10.7 million or $0.06 and $0.05 net income per share, basic and diluted, respectively, for the nine months ended September 30, 2024. The decrease in net income is primarily the result of a $10.4 million gain on extinguishment of debt resulting from the Debenture Repurchase in the nine months ended September 30, 2024 not repeated in the same period of 2025, a $10.0 million decrease in gross profit, a $2.3 million decrease in foreign exchange gain, a $2.0 million increase in reorganization expenses, a $0.6 million decrease in interest income, and a $0.1 million increase in income taxes. The decrease was partially offset by a $2.1 million decrease in interest expense, a $1.7 million decrease in other operating expenses, and a $0.1 million decrease in income tax expense.
37
Adjusted Gross Profit and Adjusted Gross Profit Margin for the Three and Nine months ended September 30, 2025 and 2024
The following table presents a reconciliation for the three and nine months ended September 30, 2025 and 2024 of Adjusted Gross Profit to our gross profit and Adjusted Gross Profit Margin to gross profit margin, which are the most directly comparable GAAP measures for the periods presented:
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
|
|
($ in thousands) |
|
|
($ in thousands) |
|
||||||||||
Gross profit |
|
|
11,467 |
|
|
|
16,813 |
|
|
|
36,827 |
|
|
|
46,836 |
|
Gross profit margin |
|
|
30.4 |
% |
|
|
38.8 |
% |
|
|
31.2 |
% |
|
|
37.3 |
% |
Add: Depreciation and amortization expense |
|
|
1,013 |
|
|
|
823 |
|
|
|
2,977 |
|
|
|
2,512 |
|
Adjusted Gross Profit |
|
|
12,480 |
|
|
|
17,636 |
|
|
|
39,804 |
|
|
|
49,348 |
|
Adjusted Gross Profit Margin |
|
|
33.1 |
% |
|
|
40.7 |
% |
|
|
33.8 |
% |
|
|
39.3 |
% |
For the quarter ended September 30, 2025, gross profit margin decreased to 30.4% compared to 38.8% for the same period of 2024. Adjusted Gross Profit Margin was 33.1% for the third quarter of 2025, down from 40.7% in the comparative period of 2024. The decrease in Adjusted Gross Profit Margin was primarily attributable to the $5.7 million reduction in revenue. Tariff-related costs for the third quarter of 2025 were $1.9 million and were substantially mitigated through price and other actions taken earlier in the year.
For the nine months ended September 30, 2025, gross profit margin decreased to 31.2%, compared to 37.3% in the prior year period. Adjusted Gross Profit Margin was 33.8%, compared to 39.3% in the same period of 2024. The year-to-date margin decline reflects the same underlying factors observed in the third quarter, including a $7.5 million reduction in revenue. Tariff-related costs for the nine months ended September 30, 2025 were $4.5 million. We began to realize the benefits of our tariff mitigation efforts in the third quarter of 2025, as explained above.
38
EBITDA and Adjusted EBITDA for the Three and Nine months ended September 30, 2025 and 2024
The following table presents a reconciliation for the results for the three and nine months ended September 30, 2025 and 2024 of EBITDA and Adjusted EBITDA to our net (loss) income after tax, and of Adjusted EBITDA Margin to net (loss) income margin, which are the most directly comparable GAAP measures for the periods presented:
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
|
|
($ in thousands) |
|
|
($ in thousands) |
|
||||||||||
Net (loss) income after tax for the period |
|
|
(3,484 |
) |
|
|
7,091 |
|
|
|
(10,747 |
) |
|
|
10,732 |
|
Add back (deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
465 |
|
|
|
1,525 |
|
|
|
1,401 |
|
|
|
3,524 |
|
Interest income |
|
|
(226 |
) |
|
|
(341 |
) |
|
|
(720 |
) |
|
|
(1,312 |
) |
Income tax expense |
|
|
157 |
|
|
|
23 |
|
|
|
308 |
|
|
|
371 |
|
Depreciation and amortization |
|
|
1,534 |
|
|
|
1,487 |
|
|
|
4,561 |
|
|
|
4,542 |
|
EBITDA |
|
|
(1,554 |
) |
|
|
9,785 |
|
|
|
(5,197 |
) |
|
|
17,857 |
|
Foreign exchange (gain) loss |
|
|
(602 |
) |
|
|
360 |
|
|
|
1,422 |
|
|
|
(917 |
) |
Stock-based compensation |
|
|
742 |
|
|
|
803 |
|
|
|
2,075 |
|
|
|
1,905 |
|
Reorganization expense(2) |
|
|
2,593 |
|
|
|
604 |
|
|
|
2,977 |
|
|
|
944 |
|
Gain on extinguishment of convertible debentures(2) |
|
|
(8 |
) |
|
|
(7,478 |
) |
|
|
(22 |
) |
|
|
(10,409 |
) |
Impairment charge on Rock Hill Facility (2) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
530 |
|
Adjusted EBITDA |
|
|
1,171 |
|
|
|
4,074 |
|
|
|
1,255 |
|
|
|
9,910 |
|
Net (Loss) Income Margin(1) |
|
|
(9.2 |
)% |
|
|
16.3 |
% |
|
|
(9.1 |
)% |
|
|
8.6 |
% |
Adjusted EBITDA Margin |
|
|
3.1 |
% |
|
|
9.4 |
% |
|
|
1.1 |
% |
|
|
7.9 |
% |
(1) Net (loss) income after tax divided by revenue.
(2) Reorganization expenses, the gain on extinguishment of convertible debentures and the impairment charge on the Rock Hill Facility (refer to Note 4 and Note 5 of the interim condensed consolidated financial statements) are not core to our business and are therefore excluded from the Adjusted EBITDA calculation.
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 is attributed to the $5.2 million decrease in Adjusted Gross Profit (explained above) offset by a decrease in operating expenses (excluding reorganization expense and stock-based compensation) of $2.4 million.
For the nine months ended September 30, 2025, Adjusted EBITDA decreased by $8.7 million to $1.3 million from $9.9 million and Adjusted EBITDA Margin decreased to 1.1% from 7.9%, for the same period of 2024. This reflects a $9.5 million decrease in Adjusted Gross Profit, a $0.7 million increase in professional services costs largely associated with higher litigation costs related to the Falkbuilt Litigation, a $0.5 million increase in public company costs and board fees, and a $0.2 million increase in marketing and tradeshow expenses, partially offset by a $0.6 million decrease in commissions from lower revenue, a $0.6 million decrease in building and infrastructure costs, a decrease of $0.4 million in salaries and benefits costs, a decrease of $0.2 million in travel, meals, and entertainment costs, and a $0.4 million decrease in other costs.
39
Liquidity and Capital Resources
As at September 30, 2025, the Company had $26.1 million of cash on hand and C$8.7 million ($6.2 million) of available borrowings, compared to $29.3 million of cash on hand and C$14.4 million ($10.0 million) of available borrowings as at December 31, 2024. Through the first nine months of 2025, the Company used $3.2 million of cash primarily due to the payment of $4.2 million to repurchase common shares under the Shares NCIB and Share Repurchase and $2.7 million for capital expenditures, offset by $4.1 million of net cash flows provided by operating activities.
We have assessed the Company’s liquidity as at September 30, 2025, taking into account our sales outlook for the next twelve months, our budget, forecast and expected cash outflows and our existing cash balances and available credit facilities. Based upon this analysis, we believe the Company has sufficient liquidity to remain a going concern for at least the next twelve months. We note that the January Debentures amounting to C$16.6 million ($11.9 million) as of September 30, 2025 are due on January 31, 2026 and have therefore been classified as current on our balance sheet. Another C$14.9 million ($10.7 million) of principal is due under the December Debentures (as defined herein), which mature on December 31, 2026 (and therefore not yet classified as current). We are evaluating whether we will settle or refinance this debt.
On October 28, 2025, we entered into a non-binding term sheet with the BDC for proposed financing of up to C$15.0 million, the net proceeds of which are expected to be used to further strengthen our balance sheet and partially repay the January Debentures. The remaining January Debentures (C$1.6 million) are expected to be repaid using cash on hand. DIRTT continues to consider, evaluate, and negotiate a definitive agreement with respect to the proposed financing with BDC. Any 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.
On November 4, 2025, the Company entered into the Fifth Extended RBC Facility (as defined herein), which matures on November 30, 2026. The Fifth Extended RBC Facility is subject to the same borrowing base terms as the previous facility; with the borrowing base calculation based on accounts receivable balances to a maximum of C$25.0 million. Interest is calculated as the Canadian or U.S. prime rate plus 50 basis points or at the Term CORRA Rate as adjusted by the Term CORRA Adjustment or Term SOFR plus the Term SOFR Adjustment, in each case plus 175 basis points. The Company will be in default under the Fifth Extended RBC Facility if the January Debentures are not paid in full or refinanced on terms and conditions satisfactory to RBC by January 31, 2026.
To the extent that existing cash and cash equivalents and available facilities are not sufficient to fund future activities, we may seek to raise additional funds through equity or debt financings. If additional funds are raised through the incurrence of indebtedness, such indebtedness may have rights that are senior to holders of our Debentures and our equity securities or contain instruments that may be dilutive to our existing shareholders. Any additional equity or debt financing may be dilutive to our existing shareholders. While we believe we can access capital markets when needed or under acceptable terms, there can be no assurance that we will be able to do so, particularly in light of recent market conditions.
40
We note that as of the date of this report, the imposition of trade barriers, including tariffs, quotas, embargoes, safeguards, and customs restrictions between Canada and the U.S., may increase the cost or reduce the supply of materials and products available to us, increase shipping times, affect our customers’ construction needs or budgets, affect the demand for our products or our product mix or require us to modify our supply chain organization, manufacturing facilities, or other current business practices, any of which could harm our business, financial condition, and results of operations.
Equity and Debt Issuances and Buyback Programs
During the past two years, we have executed various debt and share buyback programs. The Issuer Bid, Debenture Repurchase, Debentures NCIB, Renewed Debentures NCIB, Shares NCIB and the Share Repurchase (each as defined herein) were initiated after careful consideration of cash flow, and the Company continues to evaluate uses of cash on hand. As discussed in the “Part II, Item 1A. Risk Factors” section and elsewhere of this Quarterly Report, proposed and implemented tariffs on Canadian exports into the United States, and vice versa, may have a material impact on future cash flows and liquidity, which the Company will continue to monitor.
In January 2021, we issued C$40.3 million of convertible unsecured subordinated debentures (the “January Debentures”) for net proceeds after costs of C$37.6 million ($29.5 million). The January Debentures accrue interest at a rate of 6.00% per annum and are convertible into common shares of DIRTT at an exercise price of C$4.65 per common share, or if not converted will mature and be repayable on January 31, 2026. Interest and principal are payable in cash or shares at the option of the Company.
On December 1, 2021, we issued C$35.0 million of convertible unsecured subordinated debentures (the “December Debentures”, and collectively with the January Debentures, the “Debentures”) for net proceeds after costs of C$32.7 million ($25.6 million). The December Debentures accrue interest at a rate of 6.25% per annum and are convertible into common shares of DIRTT at an exercise price of C$4.20 per common share, or if not converted, will mature and be repayable on December 31, 2026. Interest and principal are payable in cash or shares at the option of the Company.
On November 21, 2023, the Company announced a rights offering, which closed on January 9, 2024, for aggregate gross proceeds of C$30.0 million (net proceeds of $21.3 million) (the “Rights Offering”). As a result of the Rights Offering, the conversion price was adjusted to C$4.03 per common share for the January Debentures, and C$3.64 per common share for the December Debentures.
On February 15, 2024, the Company announced a substantial issuer bid and tender offer (the “Issuer Bid”), under which the Company offered to repurchase for cancellation: (i) up to C$6,000,000 principal amount of the January Debentures at a purchase price of C$720 per C$1,000 principal amount of January Debentures; and (ii) up to C$9,000,000 principal amount of the December Debentures at a purchase price of C$600 per C$1,000 principal amount of December Debentures. Holders of Debentures who validly tendered and did not withdraw their Debentures received the applicable purchase price, plus a cash payment for all accrued and unpaid interest up to, but excluding, the date on which such Debentures were taken up by the Company. The applicable purchase price was denominated in Canadian dollars and payments of amounts owed to holders of deposited Debentures, including for interest, were made in Canadian dollars. The Issuer Bid expired on March 22, 2024 and DIRTT purchased C$4.7 million ($3.5 million) aggregate principal amount of the January Debentures and C$5.8 million ($4.3 million) aggregate principal amount of the December Debentures, representing approximately 11.66% of the January Debentures and 16.50% of the December Debentures issued and outstanding at that time. The Company took up all the Debentures tendered pursuant to the Issuer Bid for aggregate consideration of C$7.0 million ($5.2 million) (comprised of C$6.9 million ($5.1 million) repayment on principal and interest of C$0.1 million ($0.1 million)).
41
On August 2, 2024, the Company entered into an agreement with 22NW Fund LP (“22NW”), to purchase for cancellation an aggregate of C$18,915,000 principal amount of the January Debentures at a purchase price of C$684.58 per C$1,000 principal amount of January Debentures and C$13,638,000 principal amount of the December Debentures at a purchase price of C$665.64 per C$1,000 principal amount of December Debentures, for an aggregate purchase price of C$22,104,591.45, inclusive of a cash payment for all accrued and unpaid interest up to, but excluding, the date on which such Debentures were purchased by the Company (the “Debenture Repurchase”). The purchase price of each series of Debentures (excluding the cash payment for accrued and unpaid interest) represented a discount of approximately 4% to the average trading price of the applicable series of Debentures on the TSX for the 20 trading days preceding August 2, 2024. As a result of the Debenture Repurchase, 22NW no longer holds any Debentures.
On August 28, 2024, the Company commenced the Debentures normal course issuer bid (the “Debentures NCIB”) which expired on August 27, 2025. Under the Debentures NCIB, DIRTT was permitted to acquire up to C$1,664,200 principal amount of the January Debentures and C$1,558,700 principal amount of the December Debentures. For the three and nine months ended September 30, 2025, C$0.1 million ($0.1 million) and C$0.3 million ($0.2 million) principal amounts of the December Debentures (respectively) and C$0.01 million ($0.01 million) and C$0.06 million (C$0.04 million) principal amounts of the January Debentures (respectively) had been acquired through the Debentures NCIB. On August 26, 2025, the Company announced the Renewed Debentures NCIB which commenced August 28, 2025 and is expected to terminate on August 27, 2026 for the December Debentures and on January 31, 2026 for the January Debentures, concurrent with the maturity date of the January Debentures. Under the Renewed Debentures NCIB, DIRTT is permitted to acquire up to C$1,656,900 principal amount of the January Debentures and C$1,493,500 principal amount of the December Debentures. For the three months ended September 30, 2025, C$0.01 million ($0.01 million) principal amounts of the December Debentures and $nil principal amounts of the January Debentures had been acquired through the Renewed Debentures NCIB. As at September 30, 2025, C$16.6 million ($11.9 million) principal amount of the January Debentures and C$14.9 million ($10.7 million) principal amount of the December Debentures were outstanding.
On December 20, 2024, the Company commenced a normal course issuer bid for common shares (the “Shares NCIB”) which will terminate no later than December 19, 2025. Under the Shares NCIB, DIRTT is permitted to acquire up to 7,515,233 common shares. All purchases will be made on the open market at the market price of common shares at the time of acquisition. Any common shares acquired through the Shares NCIB will be immediately cancelled.
On February 13, 2025, the Company entered a share repurchase agreement with NGEN III, LP (“NGEN”) to purchase for cancellation 3,920,844 common shares held by NGEN (the “NGEN Shares”) at a purchase price of $0.80 per NGEN Share (the “Share Repurchase”). Following the Share Repurchase, there were 189,643,903 common shares outstanding. The NGEN Shares repurchased under the Share Repurchase were counted against the maximum number of shares that may be repurchased pursuant to the Shares NCIB being 7,515,233 shares. As at September 30, 2025, 5,510,884 common shares had been repurchased and cancelled for proceeds of C$6.0 million ($4.2 million) through the Shares NCIB and the Share Repurchase.
As explained above, initiating the debt and share buybacks was done after careful consideration of cash flow and with consideration to the risk of proposed and implemented tariffs.
42
Facilities
On February 12, 2021, the Company entered into a loan agreement governing a C$25.0 million senior secured revolving credit facility with the Royal Bank of Canada (“RBC”), as lender (the “RBC Facility”). Under the RBC Facility, the Borrowing Base is up to a maximum of 90% of investment grade or insured accounts receivable plus 85% of eligible accounts receivable plus the lesser of 75% of the book value of eligible inventory and 85% of the net orderly liquidation value of eligible inventory less any reserves for potential prior ranking claims. Interest is calculated at the Canadian or U.S. prime rate plus 30 basis points or at the Canadian Dollar Offered Rate or LIBOR plus 155 basis points. Under the RBC Facility, if the “Aggregate Excess Availability”, defined as the Borrowing Base less any loan advances or letters of credit or guarantee and if undrawn including unrestricted cash is less than C$5.0 million, the Company is subject to a fixed charge coverage ratio (“FCCR”) covenant of 1.10:1 on a trailing twelve-month basis. Additionally, if the FCCR has been below 1.10:1 for the three immediately preceding months, the Company is required to maintain a reserve account equal to the aggregate of one year of payments on outstanding loans on the Canada Leasing Facility and a leasing facility in the United States that is no longer available (together, the “Leasing Facilities”). Should an event of default occur or the Aggregate Excess Availability be less than C$6.25 million for five consecutive business days, the Company would enter a cash dominion period whereby the Company’s bank accounts would be blocked by RBC and daily balances will set-off any borrowings and any remaining amounts made available to the Company.
On February 9, 2023, the Company extended the RBC Facility (the “Extended RBC Facility”). The Extended RBC Facility has a maximum borrowing base of C$15.0 million and a one-year term. Interest is calculated as at the Canadian or U.S. prime rate plus 75 basis points or at the Canadian Dollar Offered Rate or LIBOR plus 200 basis points. Under the Extended RBC Facility, until such time that the trailing twelve-month FCCR is above 1.25 for three consecutive months, a cash balance equivalent to one-year’s worth of Leasing Facilities payments must be maintained.
On February 9, 2024, the Company extended the Extended RBC Facility (the “Second Extended RBC Facility”). The maximum availability under the Second Extended RBC Facility is subject to the borrowing base calculation to a maximum of C$15.0 million and a one-year term. Interest is calculated as at the Canadian or U.S. prime rate plus 75 basis points or at the Canadian Dollar Offered Rate or Adjusted Term CORRA or Term SOFR plus the Term SOFR Adjustment, in each case, plus 200 basis points. The Second Extended RBC Facility removed the three-month FCCR covenant, which resulted in the release of $0.1 million of restricted cash during the first quarter of 2024 (the Company had $0.4 million restricted cash as at December 31, 2023). On February 11, 2025, the Company extended the Second Extended RBC Facility (the “Third Extended RBC Facility”) for a period of two weeks up to February 25, 2025 whilst the Company and RBC completed negotiations.
On February 20, 2025, the Company extended the Third Extended RBC Facility (the “Fourth Extended RBC Facility”). The Fourth Extended RBC Facility is subject to the borrowing base calculation based on accounts receivable balances to a maximum of C$25.0 million and matures on November 30, 2025. Interest is calculated as the Canadian or U.S. prime rate plus 50 basis points or at the Term CORRA Rate as adjusted by the Term CORRA Adjustment or Term SOFR plus the Term SOFR Adjustment, in each case plus 175 basis points. At September 30, 2025, available borrowings were C$8.7 million ($6.2 million) (December 31, 2024 – C$14.4 million ($10.0 million) of available borrowings), calculated in the same manner as the RBC Facility described above, of which no amounts have been drawn. The Fourth Extended RBC Facility also includes a new letter of credit facility guaranteed by the Export Development of Canada of C$5 million. The Company has also entered into a bonding facility with Great Midwest Insurance Company, and any other company that is part of or added to Skyward Specialty Insurance Group, Inc. (“Skyward”), which allows access to a $15.0 million bonding facility subject to an individual maximum of $5 million. Under the terms of the facility with Skyward, any bonds issued will be secured through letters of credit issued pursuant to the Fourth Extended RBC Facility.
On November 4, 2025, the Company entered into the Fifth Extended RBC Facility (the “Fifth Extended RBC Facility”). The Fifth Extended RBC Facility expires November 30, 2026 and is subject to the same borrowing base terms as the previous facility; with the borrowing base calculation based on accounts receivable balances to a maximum of C$25.0 million. Interest is calculated as the Canadian or U.S. prime rate plus 50 basis points or at the Term CORRA Rate as adjusted by the Term CORRA Adjustment or Term SOFR plus the Term SOFR Adjustment, in each case plus 175 basis points. The Company will be in default under the Fifth Extended RBC Facility if the January Debentures are not paid in full or refinanced on terms and conditions satisfactory to RBC by January 31, 2026.
43
The Company has a C$5.0 million equipment leasing facility in Canada (the “Canada Leasing Facility”) of which, as of September 30, 2025, C$4.4 million ($3.2 million) has been drawn and C$4.0 million ($2.9 million) has been repaid. The Canada Leasing Facility has a seven-year term and bears interest at 4.25%. The Company did not make any draws on the Canada Leasing Facility during the years ended September 30, 2025 and 2024.
We are restricted from paying dividends unless Payment Conditions (as defined in the Fourth Extended RBC Facility) are met, including having a net borrowing availability of at least C$5.0 million over the proceeding 30-day period, and having a trailing twelve-month fixed charge coverage ratio above 1.10:1 and certain other conditions. The Fourth Extended RBC Facility is currently secured by substantially all of our real and personal property located in Canada and the United States.
44
Analysis of Cash Flow Changes During the Three and Nine Months Ended September 30, 2025 and 2024
The following table summarizes our consolidated cash flows for the periods indicated:
|
|
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
|
||||||||||
|
|
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
|
||||
|
|
|
|
($ in thousands) |
|
|
($ in thousands) |
|
|
||||||||||
Net cash flows provided by operating activities |
|
|
|
|
4,390 |
|
|
|
1,522 |
|
|
|
4,152 |
|
|
|
1,122 |
|
|
Net cash flows (used in) investing activities |
|
|
|
|
(780 |
) |
|
|
(596 |
) |
|
|
(2,488 |
) |
|
|
(1,159 |
) |
|
Net cash flows (used in) financing activities |
|
|
|
|
(422 |
) |
|
|
(16,262 |
) |
|
|
(4,665 |
) |
|
|
(289 |
) |
|
Effect of foreign exchange on cash, cash equivalents and restricted cash |
|
|
|
|
(156 |
) |
|
|
(567 |
) |
|
|
(155 |
) |
|
|
(906 |
) |
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
|
|
3,032 |
|
|
|
(15,903 |
) |
|
|
(3,156 |
) |
|
|
(1,232 |
) |
|
Cash, cash equivalents and restricted cash, beginning of period |
|
|
|
|
23,343 |
|
|
|
39,770 |
|
|
|
29,531 |
|
|
|
25,099 |
|
|
Cash, cash equivalents and restricted cash, end of period |
|
|
|
|
26,375 |
|
|
|
23,867 |
|
|
|
26,375 |
|
|
|
23,867 |
|
|
Operating Activities
For the three months ended September 30, 2025, net cash flows provided by operating activities were $4.4 million compared to $1.5 million in the same period of 2024. The increase in cash flows provided by operations in the third quarter of 2025 is largely due to a $5.9 million increase in working capital compared to a $2.6 million decrease in working capital in the third quarter of 2024, and partially offset by a $2.9 million decrease in Adjusted EBITDA.
For the nine months ended September 30, 2025, net cash flows provided by operating activities were $4.2 million compared to $1.1 million in the same period of 2024. The increase in cash flows provided by operations was largely driven by a $6.2 million increase in working capital in the nine months ended September 30, 2025 compared to a $7.6 million decrease in working capital in the nine months ended September 30, 2024, partially offset by an $8.7 million decrease in Adjusted EBITDA.
Investing Activities
We invested $0.8 million and $2.7 million in capital expenditures for the three and nine months ended September 30, 2025, compared to $0.7 million and $2.4 million for the three and nine months ended September 30, 2024, respectively. The capital expenditures in the three and nine months ended September 30, 2025 primarily consisted of $0.5 million and $1.4 million on capitalized software, $0.1 million and $0.4 million on manufacturing upgrades, $0.1 million and $0.3 million on marketing, $0.03 million and $0.2 million on leasehold improvements, and $0.3 million and $0.5 million on other asset spend.
Financing Activities
We used $0.4 million of cash in financing activities for the three months ended September 30, 2025 and $4.7 million in the nine months ended September 30, 2025, compared to $16.3 million used in the three months ended September 30, 2024 and $0.3 million used in the nine months ended September 30, 2024. The decrease in net cash flows used in financing activities from the third quarter of 2024 compared to the third quarter of 2025 is driven by a $0.2 million increase in common share repurchases under the Shares NCIB that was not available for the three months ended September 30, 2024, and a $0.1 million increase in employee tax payments on vesting RSUs and a $0.1 million increase in repayment of convertible debt under the Debentures NCIB. These increases were offset by a one time transaction in the three months ended September 30, 2024, where the Company used $16.1 million to settle debentures under the Debentures Repurchase.
Cash used in the nine months ended September 30, 2025 was mainly driven by the $4.2 million spent in repurchases of common shares through the Shares NCIB and the Share Repurchase, and $0.3 million repayment on convertible debt through the Debentures NCIB. The cash provided by financing activities in the nine months ended September 30, 2024 was driven by $21.3 million of net proceeds received from the Rights Offering, partially offset
45
by $21.3 million used for the repurchase for cancellation of C$10.5 million principal amount of Debentures as a result of the Issuer Bid.
Contractual Obligations
There have been no material changes in our contractual obligations during the nine months ended September 30, 2025, as compared to those disclosed in the “Management’s Discussion and Analysis of Financial Condition and results of Operations - Contractual Obligations” in our Annual Report on Form 10-K, as updated in our Form 10-Q for the quarter ended June 30, 2025.
Significant Accounting Policies and Estimates
There have been no material changes in our significant accounting policies during the nine months ended September 30, 2025, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Significant Accounting Policies and Estimates” in our Annual Report on Form 10-K. For information regarding significant accounting policies and estimates, please refer to Item 7 and Item 8 in our Annual Report on Form 10-K. As disclosed in Note 3, “Adoption of New and Revised Accounting Standards” to our interim condensed consolidated financial statements appearing in this Quarterly Report, we are evaluating the impact of Accounting Standards Update No. 2023-09, “Improvements to Income Tax Disclosures” (“ASU-2023-09”) which further disaggregated information on an entity’s tax rate reconciliation and income taxes paid. The amendments in ASU-2023-09 are effective for fiscal years beginning after December 15, 2024, on a prospective basis with an option of retrospective application. The Company expects the impact to be limited to disclosures.
Recent Accounting Pronouncements
For information regarding recent accounting pronouncements, please refer to Note 3, “Adoption of New and Revised Accounting Standards,” to our condensed consolidated interim financial statements and “–Significant Accounting Policies and Estimates” appearing in this Quarterly Report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to our market risk exposures since our disclosures in our Annual Report on Form 10-K. For information regarding our exposure to certain market risks, please refer to Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K. The Company’s cash and cash equivalents are predominantly all with one AA rated financial institution.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive officers and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
As required by Rule 13a-15 under the Exchange Act, our principal executive officers and principal financial officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2025. Based upon their evaluation, our principal executive officers and principal financial officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended September 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
46
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material developments in the legal proceedings previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”), as updated in our Form 10-Q for the quarters ended March 31, 2025 and June 30, 2025.
Item 1A. Risk Factors
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors and other cautionary statements described under the heading “Risk Factors” included in our 2024 Form 10-K, as updated in our Form 10-Q for the quarter ended March 31, 2025, which could materially affect our businesses, financial condition, or results of operations. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table summarizes the common shares repurchased and cancelled during the period:
Period |
|
Total number of shares purchased |
|
|
Average price paid per share |
|
|
Total number of shares purchased as part of publicly announced programs(1)(2)(3) |
|
|
Maximum number of shares that may yet be purchased under the program(1)(2)(3) |
|
||||
January 1, 2025 - January 31, 2025 |
|
|
109,556 |
|
|
$ |
0.77 |
|
|
|
109,556 |
|
|
|
7,347,199 |
|
February 1, 2025 - February 28, 2025(4) |
|
|
4,074,200 |
|
|
$ |
0.80 |
|
|
|
153,356 |
|
|
|
3,272,999 |
|
March 1, 2025 - March 31, 2025 |
|
|
255,351 |
|
|
$ |
0.69 |
|
|
|
255,351 |
|
|
|
3,017,648 |
|
April 1, 2025 - April 30, 2025 |
|
|
266,546 |
|
|
$ |
0.73 |
|
|
|
266,546 |
|
|
|
2,751,102 |
|
May 1, 2025 - May 31, 2025 |
|
|
197,129 |
|
|
$ |
0.66 |
|
|
|
197,129 |
|
|
|
2,553,973 |
|
June 1, 2025 - June 30, 2025 |
|
|
266,473 |
|
|
$ |
0.61 |
|
|
|
266,473 |
|
|
|
2,287,500 |
|
July 1, 2025 - July 31, 2025 |
|
|
255,173 |
|
|
$ |
0.65 |
|
|
|
255,173 |
|
|
|
2,032,327 |
|
August 1, 2025 - August 31, 2025 |
|
|
1,500 |
|
|
$ |
0.59 |
|
|
|
1,500 |
|
|
|
2,030,827 |
|
September 1, 2025 - September 30, 2025 |
|
|
84,956 |
|
|
$ |
0.52 |
|
|
|
84,956 |
|
|
|
1,945,871 |
|
Total |
|
|
5,510,884 |
|
|
|
|
|
|
1,590,040 |
|
|
|
1,945,871 |
|
|
(1) The normal course issuer bid for common shares was announced on December 18, 2024 and commenced on December 20, 2024;
(2) The maximum number of common shares approved to be purchased under the Shares NCIB is 7,515,233 common shares;
(3) The expiration date of the Shares NCIB is December 19, 2025. As of October 1, 2025, the number of shares available to be purchased under the Shares NCIB is 1,945,871; and
(4) Includes 3,920,844 common shares that were repurchased from NGEN under the Share Repurchase at a purchase price of $0.80 per share. The Share Repurchase was completed on February 14, 2025. The Share Repurchase was a privately negotiated transaction and was not made pursuant to the Shares NCIB or any other publicly announced share repurchase programs, although it was counted against the Shares NCIB limit.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
47
Item 5. Other Information
Insider Trading Arrangements
48
Item 6. Exhibits
EXHIBIT INDEX
Exhibit No. |
|
Description |
|
|
|
3.1 |
|
Restated Articles of Amalgamation of DIRTT Environmental Solutions Ltd. (incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form 10, File No. 001-39061, filed on September 20, 2019). |
3.2 |
|
Amended and Restated Bylaw No. 1 of DIRTT Environmental Solutions Ltd. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, File No. 001-39061, filed on May 22, 2020). |
4.1 |
|
Base Indenture, dated January 25, 2021, by and among DIRTT Environmental Solutions Ltd., Computershare Trust Company of Canada and Computershare Trust Company, National Association as Trustees (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, File No. 001-39061, filed on January 29, 2021). |
4.2 |
|
Supplemental Indenture, dated January 25, 2021, by and among the Company, Computershare Trust Company of Canada and Computershare Trust Company, National Association as Trustees (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K, File No. 001-39061, filed on January 29, 2021). |
4.3 |
|
Second Supplemental Indenture, dated December 1, 2021, by and among the Company, Computershare Trust Company of Canada and Computershare Trust Company, National Association as Trustees (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, File No. 001-39061, filed on December 1, 2021). |
10.1* |
|
Indemnity Agreement, dated July 30, 2025, between DIRTT Environmental Solutions Ltd and Adrian Zarate. |
10.2* |
|
Sixth Amendment to Loan Agreement, dated November 4, 2025, by and among DIRTT Environmental Solutions Ltd., DIRTT Environmental Solutions, Inc. and Royal Bank of Canada. |
31.1* |
|
Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2* |
|
Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1** |
|
Certification of the Principal Executive Officer required by 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2** |
|
Certification of the Principal Financial Officer required by 18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101.INS* |
|
Inline XBRL Instance Document |
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document |
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* |
|
Filed herewith |
** |
|
Furnished herewith |
+ |
|
Compensatory plan or agreement |
49
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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DIRTT ENVIRONMENTAL SOLUTIONS LTD. |
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By: |
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/s/ Fareeha Khan |
|
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Fareeha Khan |
|
|
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Chief Financial Officer (Duly Authorized Officer, Principal Financial Officer and Principal Accounting Officer) |
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Date: November 5, 2025 |
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50
