DIRTT ENVIRONMENTAL SOLUTIONS LTD
For the period ended Mar 31, 2025. Filed May 7, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 7, 2025
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-06.
0000950170-24-122442
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-07.
0000950170-25-065863
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 155 previous paragraphs and 120 current paragraphs.
35 unchanged; 44 reworded; 40 added; 72 removed; 4 previous and 1 current paragraphs rearranged.
Tables are not compared: 10 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (40)
Current report
Key First Quarter Highlights and Other Recent Developments
Current report
Revenue for the quarter ended March 31, 2025 was $41.3 million, an increase of $0.4 million or 1%, from $40.8 million for the same period of 2024. The increase in revenue, as compared to the same period of 2024, was primarily the result of a higher volume of large education and healthcare projects, offset by smaller commercial and government projects in the first quarter of 2025.
Current report
During the first quarter of 2025, various tariffs have been levied by the U.S. and Canadian governments. We incurred $0.6 million (1.4% of revenue) in tariffs and costs related to tariff mitigation actions. DIRTT is most impacted by the 25% tariff levied on Canadian aluminum exports to the United States. Subsequent to quarter end, the U.S. also levied tariffs of 145% on imports from China which increases the cost of Chinese sourced hardware used in DIRTT’s products.
Current report
On February 5, 2025, the U.S. District Court for the Northern District of Utah dismissed and redirected DIRTT’s lawsuit against Falkbuilt Ltd. (“Falkbuilt”) in Utah on procedural grounds to Canada. In DIRTT’s similar lawsuit against Falkbuilt in Canada, the Court of King’s Bench of Alberta has scheduled an eight-week trial to commence February 2, 2026. With the Canadian trial commencing less than a year away, DIRTT is pursuing damages and losses it suffered in Canada, the United States, and abroad in the Court of King’s Bench of Alberta.
Current report
On February 13, 2025, the Company entered into a share repurchase agreement with NGEN III, LP (“NGEN”) pursuant to which the Company purchased for cancellation 3,920,844 common shares of DIRTT held by NGEN at a purchase price of $0.80 per common share (the “Share Repurchase”). The purchase price of $0.80 per share was a 1% discount to the closing price of the common shares on the TSX on January 27, 2025 (converted into U.S. Dollars using the February 13, 2025 closing exchange rate published by the Bank of Canada).
Current report
During the first quarter of 2025 we saw increasing levels of business uncertainty stemming from deteriorating macroeconomic conditions. The ongoing risk around the timing and size of tariffs in North America has forced many businesses, including DIRTT, to evaluate their capital planning, operating expenses and supply chains. In response, DIRTT has been preparing for tariffs and has started implementing mitigation strategies, such as leveraging our Savannah manufacturing facility and increasing our sourcing of materials within the U.S.
Current report
In the first quarter of 2025, we observed a softening in leading indicators relating to our revenue pipeline, specifically above-trend scheduling delays and below-trend signed awards driven by macroeconomic conditions that we believe are unrelated to DIRTT. The nature of the uncertainty is currently most pronounced in near-term decision making, and we have not yet seen a meaningful increase in project cancellations or losses. Due to the wide-ranging delays, we believe it is prudent to withdraw our full-year revenue and Adjusted EBITDA guidance. Despite this near-term softening, our twelve-month forward-looking pipeline is up 8% year-over-year. We remain confident in DIRTT’s strategic priorities, and expect to generate positive Adjusted EBITDA in 2025 due to DIRTT’s cost controls, business process improvements and manufacturing efficiencies.
Current report
We will continue to work to support our partners, grow our business, and transform how the world builds. DIRTT’s balance sheet is strong, including $36.0 million of liquidity (comprising of unrestricted cash and available borrowings). We will continue making key investments with DIRTT’s long-term growth in mind.
Current report
Revenue for the three months ended March 31, 2025 was $41.3 million, an increase of $0.4 million compared to $40.8 million in the comparative period of 2024, primarily due to a higher volume of large education and healthcare projects, offset by lower value commercial and government projects in the first quarter of 2025.
Current report
For the three months ended March 31, 2025, 17% of revenue was from Canada, as compared to 8% for the three months ended March 31, 2024. Historically, approximately 11-15% and 85-89% of revenues are derived from sales to Canada and the United States, respectively. The first quarter of 2025 had a large Canadian project which is expected to be ongoing throughout 2025; apart from that, we expect the historical split to continue.
Current report
General and administrative expenses increased by $0.9 million to $5.5 million for the three months ended March 31, 2025, from $4.6 million for the three months ended March 31, 2024. The increase was primarily related to a $0.9 million increase in professional services costs as a result of costs associated with the Share Repurchase from NGEN and an increase in litigation costs as we prepare for the Falkbuilt trial, a $0.2 million increase in salaries and benefits costs, a $0.1 million increase in termination benefits, a $0.1 million loss on disposal of equipment and a $0.1 million increase in board fees, offset by a $0.3 million decrease in building and infrastructure costs, a $0.1 million decrease in depreciation expense and a $0.1 million decrease in office and communication costs.
Current report
Operations support expenses increased by $0.3 million for the three months ended March 31, 2025 to $2.0 million, from $1.8 million for the comparative period of 2024. The increase was primarily related to a $0.1 million increase in termination benefits, a $0.1 million increase in tradeshow expenses, and a $0.1 million increase in other discretionary expenses.
Current report
Stock-based compensation expense for the three months ended March 31, 2025 was $0.7 million, consistent with $0.7 million for the three months ended March 31, 2024. Stock-based compensation expense is dependent on share price in a period for fair value adjustments made on cash-settled DSU awards and grants, exercises, expirations or forfeitures made on other awards.
Current report
The Company had $nil impairment charges in the first quarter of 2025.
Current report
Gain on extinguishment of debt
Current report
Foreign exchange gain (loss)
Current report
Interest expense decreased by $0.6 million from $1.1 million in the quarter ended March 31, 2024, to $0.5 million in the quarter ended March 31, 2025. This decrease is largely due to repayment of debt throughout the year ended December 31, 2024 and during the first quarter of 2025, reducing the interest payable on current and long-term debt.
Current report
Net (loss) income after tax
Current report
Net loss after tax was $0.7 million or $0.00 basic and diluted net loss per share in the three months ended March 31, 2025, a decrease of $3.7 million from net income after tax of $3.0 million or $0.02 and $0.01 net income per share, basic and diluted, respectively, for the three months ended March 31, 2024. The decrease in net income is primarily the result of a $2.9 million decrease in gain on extinguishment of debt (relating to the Issuer Bid that was completed in February 2024 and not repeated in 2025), a $1.0 million decrease in foreign exchange gain, a $0.2 million decrease in interest income and a $0.1 million decrease in gross profit, offset by a decrease of $0.6 million in interest expense.
Current report
For the quarter ended March 31, 2025, gross profit margin decreased to 35.2%, from 35.9% for the same period of 2024. Adjusted Gross Profit Margin was 37.5% for the first quarter of 2025, a decrease from 37.9% in the comparative period of 2024. Adjusted Gross Profit for the quarter ended March 31, 2025 was negatively impacted by the tariffs implemented in 2025.
Current report
Adjusted Gross Profit Margin in the first quarter of 2025 was consistent with the first quarter of 2024 as a result of an increase in revenue of $0.4 million and a decrease in indirect technical support costs resulting from operational efficiencies offset by $0.6 million of costs (1.4% of revenue) in tariffs and costs related to tariff mitigation actions.
Current report
For the three months ended March 31, 2025, Adjusted EBITDA and Adjusted EBITDA Margin decreased by $0.6 million to $2.1 million and 5.1%, respectively, from $2.7 million and 6.5% for the same period of 2024. This reflects a $0.9 million increase in professional services costs as a result of costs associated with higher litigation costs related to the Falkbuilt Litigation and the Share Repurchase from NGEN, a $0.2 million increase in marketing and tradeshow costs, a $0.2 million increase in costs for travel, meals and entertainment, offset by a $0.4 million decrease in salaries and benefits costs, a $0.2 million decrease in commissions and pass through charges and a $0.3 million decrease in building and infrastructure costs.
Current report
As at March 31, 2025, the Company had $28.4 million of cash on hand and C$10.9 million ($7.6 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 three months of 2025, the Company used $0.8 million of cash. The Company generated $3.7 million of cash flows from operations during the first three months of 2025. During the same period, the Company paid $3.5 million to repurchase common shares under the Shares NCIB and Share Repurchase and used $0.8 million for capital expenditures. The Company incurred $0.2 million in foreign exchange loss resulting in a net decrease of $0.8 million of cash for the quarter.
Current report
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.
Current report
Price Increases and Impact of Tariffs
Current report
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.
Current report
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:
Current report
On March 12, 2025, a 25% tariff was levied on aluminum imports from Canada into the United States. As disclosed in our Annual Report on Form 10-K, DIRTT manufactures aluminum components, which are machined and processed in Calgary, Alberta as well as Savannah, Georgia. Aluminum forms 10% of our product costs. This tariff impacts aluminum exports from our Calgary plants to our U.S. customers. To date, we have not passed the impact of this tariff on to our customers and are managing the costs through internal efficiencies.
Current report
On March 13, 2025, Canada responded to the U.S. tariffs by announcing reciprocal tariffs. As disclosed in our Annual Report on Form 10-K, approximately 92% of DIRTT’s raw materials are sourced in North America and certain products are imported from the U.S. to Canada. We incurred costs on these reciprocal tariffs but note that the Canadian government has put a six month pause on these tariffs, effective April 15, 2025. If these tariffs are maintained, we will look into seeking exemptions or alternative suppliers to mitigate this tariff impact.
Current report
On April 9, 2025, tariffs of 145% were levied on imports from China into the United States. The Company imports certain raw materials from China (6% of total raw material). In response, we will be increasing the price of certain hardware by 10%, effective June 5, 2025.
Current report
Equity and Debt Issuances and Buyback Programs
Current report
During the past two years, we have executed various debt and share buyback programs. The Issuer Bid, Debenture Repurchase, 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.
Current report
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.
Current report
On February 13, 2025, the Company entered into the Share Repurchase with 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. 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 March 31, 2025, 4,439,107 common shares had been repurchased and cancelled for proceeds of C$5.0 million ($3.5 million) through the Shares NCIB and the Share Repurchase.
Current report
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.
Current report
Facilities
Current report
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 March 31, 2025, available borrowings were C$10.9 million ($7.6 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.
Current report
Analysis of Cash Flow Changes Between the Three Months Ended March 31, 2025 and 2024
Current report
For the three months ended March 31, 2025, net cash flows provided by operating activities were $3.7 million compared to $2.0 million used in the same period of 2024. The increase in cash flows provided by operations in the first quarter of 2025 is due to better working capital management against the first quarter of 2024 (positive $1.7 million in working capital changes for the three months ended March 31, 2025 compared to negative $(4.1) million for the three months ended March 31, 2024).
Current report
We invested $0.8 million in capital expenditures during the three months ended March 31, 2025, compared to $0.9 million in the three months ended March 31, 2024. The capital expenditures in the first quarter of 2025 consisted of $0.5 million on software development, $0.1 million on manufacturing upgrades, $0.1 million on tradeshow booths and $0.1 million on other facility and leasehold improvements.
Removed paragraphs (72)
Previous report
Key Third Quarter Highlights
Previous report
Revenue for the quarter ended September 30, 2024 was $43.4 million, a decrease of $6.2 million, or 12.4%, from $49.5 million for the same period of 2023, and an increase of $2.2 million, or 5.3%, from the second quarter of 2024. Third quarter revenue was in line with the expected guidance range of $40 million to $44 million provided last quarter. The decrease in revenue, as compared to the same period of 2023, was primarily the result of three large commercial projects and one large healthcare project that were completed in the third quarter of 2023 and were not repeated in the same period in 2024, partially offset by higher volume in the education sector.
Previous report
On August 2, 2024, the Company and 22NW closed the Debenture Repurchase in which the Company purchased for cancellation an aggregate of C$18,915,000 principal amount of the January Debentures and C$13,638,000 principal amount of the December Debentures. As at September 30, 2024, C$16,642,000 principal amount of the January Debentures and C$15,587,000 principal amount of the December Debentures remain outstanding, and 22NW no longer holds any Debentures.
Previous report
On August 2, 2024, the Board of Directors adopted the Amended and Restated Shareholder Rights Plan (the “Amended and Restated SRP”) which superseded the plan adopted on March 22, 2024 and was approved by the Company’s shareholders at a special meeting held on September 20, 2024 (the “SRP Meeting”). The Company also entered a support and standstill agreement (the “Support Agreement”) with 22NW, DIRTT’s largest shareholder, and WWT Opportunity #1 LLC (“WWT”), DIRTT’s second largest shareholder. The Support Agreement replaces the previously announced support and standstill agreement entered into with 22NW on March 22, 2024.
Previous report
The October 1, 2023 pipeline included a large commercial project awarded to us in the first quarter of 2024, but the project was phased over a three-year period. As a result, the twelve-month pipeline decreased by $25 million while the project value remained in the full pipeline. After accounting for this phasing, the twelve-month pipeline decreased by $3 million.
Previous report
As shared in our outlook, the Company’s revenue guidance for the second half of 2024 was $83 million to $93 million, as compared to revenue for the second half of 2023 of $100 million. The October 1, 2024 pipeline reflects the lower revenue guidance for the fourth quarter of 2024. We believe our pipeline has higher integrity and has more projects further along the process and therefore we are maintaining our revenue guidance for 2025 at $194 million to $209 million.
Previous report
This quarter we continued on our Journey to Excellence, reporting net profit after tax of $7.1 million and 9.4% Adjusted EBITDA Margin. At September 30, 2024, we held $23.6 million in cash on hand with total liquidity (inclusive of borrowing availability) of $34.3 million. Improved operational results have also led to positive cash flow in the last six quarters. We have strengthened our balance sheet through the repurchase and cancellation of a significant portion of our debt. Our debt at September 30, 2024 is $23.9 million, down from $56.1 million at December 31, 2023. We expect to be in a position to pay off or refinance the remaining Debentures when they come due.
Previous report
Construction is a multi-billion-dollar industry and growing. Increasing challenges, such as rising costs, labor shortages and environmental impact are leaving end users in search of a better alternative, which increases the business case to build with DIRTT. We believe that we stand apart from competition with project certainty, our core focus on sustainability, adaptability, and our “custom is standard” offering.
Previous report
DIRTT’s executive and senior leadership team met this fall to plan for the future. We finalized our new mission, vision and values and determined four strategic priorities for the next three years: Revenue growth, continued expansion of DIRTT’s proprietary ICE software, accelerated innovation, and investment in talent. New leadership in our commercial organization is driving forward a commercial strategy focusing on our core principles as stated in our mission, vision and values. Our vision is to “Transform how the world builds,” which comes to life through what we view as our key differentiators:
Previous report
Product Design: DIRTT’s reconfigurable system offers a paradigm shift in how end users interact with their spaces. Our design offers a compelling alternative to conventional construction and our drywall alternative installs significantly faster and requires fewer trades
Previous report
Speed: Our industry-leading 10-business-day lead time is among the fastest in our peer group. We have delivered on that commitment more than 99% of the time year-to-date
Previous report
Quality: Our comprehensive 10-year warranty which typically exceeds conventional alternatives
Previous report
Innovation: Our 20-year ethos of “custom is standard” allows us to serve a diversity of clientele and respond to their needs
Previous report
Customer Service: Our sales representatives, project managers and internal teams are available to our customers to deliver on “custom is standard” as well as other organizational commitments
Previous report
Technology: Our ICE software (as defined below) provides an end-to-end system for customers to design and for DIRTT to manufacture a diverse mix of products at scale
Previous report
As we lean into these values, we continue to focus on removing bottlenecks for our commercial team and Construction Partners. We also continue to focus on accelerating pipeline growth from our new, diversified sales channels such as other prefabricators that are meaningfully contributing to our commercial strategy. We are reducing administrative tasks and offering our internal teams to support the sales cycle. We also enable our Construction Partners to pursue an increasing share of healthcare work through unique and differentiated products, such as our applied headwall offerings and the Clinical Observation Vertical Exam (the “COVE™”), a new innovative product designed to help improve patient care in emergency rooms. Just as we have implemented best practices for operational excellence in our plants, we are doing the same in our commercial organization.
Previous report
Officially launching in November, we’re already seeing positive demand for the COVE with interest from over 15 major health systems. The industry also recognized the COVE with two significant product awards for “Most Innovative” and “Architect’s Choice” at the 2024 Healthcare Facilities Symposium and Expo.
Previous report
A critical driver of our innovative process is our proprietary design integration software, ICE (“ICE” or “ICE Software”). We have committed to an ongoing process of enhancing this software to deliver more value and drive more efficiency. In Q3, in addition to launching ICE Manager and Design Editor, DIRTT’s team made updates to enable our partners to rely less on the DIRTT support team to specify their designs in ICE.
Previous report
Our operations team continues to excel in its goal of zero defects, missed deliveries, and workplace injuries. For the nine months ended September 30, 2024, our total recordable incident rate (TRIF) rate was 0.63, which is 85% below the industry average. Our on-time in full (OTIF) delivery performance was 99.2% for the quarter.
Previous report
We believe that DIRTT has significant untapped manufacturing capacity that can serve a multiple of our current revenue base. Improvements to our cost structure, including a materially reduced fixed cost base and incremental growth in revenue, will flow through to Adjusted EBITDA and free cash flow.
Previous report
Looking at macroeconomic conditions through the third quarter of 2024, the US economy remains uncertain, but we are increasingly optimistic. On the positive side, inflation has tempered considerably from a high in 2022. Unemployment has only risen modestly during that period of disinflation. It appears that the US economy is on the path to a soft-landing scenario. With commercial office as our largest segment, factors affecting workplace investment and occupancy are closely monitored. We continue to see a slow but steady increase in Kastle Systems occupancy data as well as large employers continuing their requirement for in-person attendance. Conversely, the AIA/Deltek Architectural Billings Index continues its twentieth month of declining billings for architecture firms. Additionally, the interest rate environment has begun to ease, but the tailwinds of that reduction have yet to reach the commercial real estate market. Overall, we remain confident in our continued ability to navigate diverse economic environments through our exceptional operational excellence and continued focus on scaling our organization for profitable growth.
Previous report
As we look forward, our year-over-year 12-month pipeline is 10% lower than 2023. However, this is almost exclusively driven by winning a bid for a three-year +$25 million opportunity which began production in Q2 and will continue shipping into 2026. Clients order large projects (>$1m USD) in phases due to install schedules. Our full pipeline continues to grow and reach post-COVID highs. As we analyze the integrity of our pipeline, we have more won work year-over-year which reinforces our view for revenue growth in 2025. We have maintained the 2024 and 2025 guidance numbers that were provided in our Q2 outlook:
Previous report
2024 Revenue: $165-175 million
Previous report
2024 Adjusted EBITDA: $12-15 million
Previous report
2025 Revenue: $194-209 million
Previous report
2025 Adjusted EBITDA: $18-25 million
Previous report
We have minimal capital expenditure needs in the short term and with the availability of tax losses, we expect most of our Adjusted EBITDA will flow through to free cash flow. Our expected 2025 Adjusted EBITDA takes into account planned investments to achieve our strategic breakthroughs. The level of investments made will be finalized as we go through our budget process in the next quarter. We expect the Company will have approximately one turn of debt to Adjusted EBITDA financial leverage by the end of 2025 and we expect to have improved access to traditional bank lines.
Previous report
DIRTT could not have achieved the past two years of organizational improvements without the support of our talented employee base. We are advancing our goal to make DIRTT an employer of choice and we will aspire to maintain this stance in our industry.
Previous report
Revenue for the three months ended September 30, 2024 was $43.4 million, a decrease of $6.2 million compared to $49.5 million in the comparative period of 2023, primarily due to three large commercial projects and one large healthcare project that were completed in the third quarter of 2023 and were not repeated in the same period in 2024, offset by higher volume in the education sector. Revenue for the nine months ended September 30, 2024 was $125.4 million, a decrease of $5.6 million from $131.0 million in the comparative period of 2023.
Previous report
We periodically analyze our revenue growth by vertical markets in the defined markets of commercial, healthcare, government and education. Due to the concentration of large projects in our commercial and healthcare sectors in 2023, we are not seeing growth in these segments this year. We completed a large hospital system in 2023, and do not foresee completion of another project of that size until 2025. We secured several large commercial contracts in Q3 and Q4 of 2023 that we will not repeat this year.
Previous report
The third quarter of 2024 included a lower proportion of sales to customers in the United States than to those in Canada, with 18% of sales for the period being in Canada and the rest occurring in the United States, compared to 11% of sales to Canada in the third quarter of 2023. The increase in Canadian revenue relative to total revenue is primarily the result of a large commercial project that will be active until 2026. Following completion of this project, we expect revenue to return to historic proportions of approximately 10-20% of revenue derived from Canada and 80-90% of revenue derived from the United States.
Previous report
Sales and marketing expenses decreased by $1.0 million to $5.2 million for the three months ended September 30, 2024 from $6.2 million for the three months ended September 30, 2023. The decrease was driven by a $0.4 million decrease in commissions, a $0.3 million decrease in salaries and benefits costs, a $0.3 million decrease in pass through charges, and a $0.2 million decrease in other individual costs, offset by a $0.2 million increase in marketing and tradeshow expenses related to the “Partner Camp” event hosted by the Company for our Construction Partners and held at the end of the third quarter of 2024.
Previous report
General and administrative expenses increased by $1.2 million to $5.8 million for the three months ended September 30, 2024, from $4.7 million for the three months ended September 30, 2023. The increase was primarily related to a $1.1 million increase in professional services costs, a $0.1 million increase in salaries and benefits costs, and a $0.1 million increase in building costs, offset by a $0.1 million decrease in office costs, and a $0.1 million decrease in communications costs. Professional services costs increased as a result of the SRP Meeting held in the third quarter, the Debenture Repurchase, the Support Agreement and the NCIB that we commenced during the third quarter.
Previous report
For the nine months ended September 30, 2024, general and administrative expenses decreased $1.2 million to $14.8 million from $16.0 million in the same period of 2023. The decrease was mainly driven by a $0.8 million decrease in salaries and benefits costs, a $0.5 million decrease in office costs, a $0.3 million decrease in communications costs, a $0.2 million decrease in public company costs, and a $0.4 million decrease in other individual costs, offset by a $0.7 million increase in professional services, and a $0.3 million increase in building and infrastructure costs.
Previous report
Operations support is comprised primarily of project managers, order entry and other professionals that facilitate the integration of our Construction Partner project execution and our manufacturing operations. Operations support expenses for the three months ended September 30, 2024 were $1.9 million, an increase of $0.1 million from $1.8 million for the comparative period of 2023.
Previous report
Operations support expenses decreased $0.1 million for the nine months ended September 30, 2024 to $5.5 million, from $5.6 million in the same period of 2023, driven by a $0.2 million decrease in salaries and benefits costs, a $0.1 million decrease in professional services costs, offset by a $0.1 million increase in travel meals and entertainment expenses, and a $0.1 million increase in research & development costs.
Previous report
For the nine months ended September 30, 2024, technology and development costs decreased by $0.1 million to $4.0 million, from $4.1 million in the same period of 2023. The decrease is primarily related to a $0.3 million decrease in salaries and benefits costs, and a $0.2 million decrease in building and infrastructure costs, offset by a $0.3 million write off of a previously capitalized software project, and a $0.1 million increase in professional services costs.
Previous report
Stock-based compensation expense for the three and nine months ended September 30, 2024 was $0.8 million and $1.9 million, respectively, compared to $1.1 million and $2.5 million in the same periods of 2023. The decrease in this expense was largely due to a higher number of RSUs outstanding in the prior year’s period compared to the first nine months of 2024. The decrease in RSU expense was offset by a higher DSU expense, as a result of a higher share price during the third quarter of 2024 compared to the third quarter of 2023.
Previous report
Reorganization
Previous report
Reorganization expenses for the three and nine months ended September 30, 2024 was $0.6 million and $0.9 million, respectively from $0.3 million and $2.9 million in the three and nine months ended September 30, 2023, respectively. Reorganization expenses for the three and nine months ended September 30, 2024, primarily relate to the movement of inventory and equipment from the Rock Hill Facility for use at the Calgary facility, while the reorganization costs in the third quarter of 2023 were largely made up of termination costs associated with actions taken to streamline our back office and operational support functions.
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Reworded paragraphs (44)
Previous wording
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.
Current wording
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.
Previous wording
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, including 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.
Current wording
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.
Previous wording
Gross profit and gross profit margin for the quarter ended September 30, 2024 were $16.8 million or 38.8% of revenue, a decrease of $0.3 million from $17.1 million or 34.4% of revenue for the quarter ended September 30, 2023. Adjusted Gross Profit (see “– Non-GAAP Financial Measures”) for the three months ended September 30, 2024 was $17.6 million, a decrease of $0.7 million from $18.3 million for the third quarter of 2023. Adjusted Gross Profit Margin (see “– Non-GAAP Financial Measures”) for the third quarter of 2024 was 40.7% as compared to 36.9% in the comparative period of 2023. These increases in Adjusted Gross Profit Margin are the result of improved material optimization to offset the inflationary impacts on material costs.
Current wording
Gross profit and gross profit margin for the quarter ended March 31, 2025 were $14.5 million or 35.2% of revenue compared to $14.6 million or 35.9% of revenue for the quarter ended March 31, 2024. Adjusted Gross Profit (see “– Non-GAAP Financial Measures”) for the three months ended March 31, 2025 was $15.5 million, consistent with the $15.5 million Adjusted Gross Profit for the first quarter of 2024. Adjusted Gross Profit Margin (see “– Non-GAAP Financial Measures”) was 37.5% for the first quarter of 2025, a decrease from 37.9% in the comparative period of 2024. Gross profit and Adjusted Gross Profit for the quarter ended March 31, 2025 were negatively impacted by the tariffs implemented in 2025.
Previous wording
Net income after tax for the third quarter of 2024 was $7.1 million compared to a $6.3 million net loss after tax for the same period of 2023. The increase in net income is primarily the result of a $7.5 million gain on extinguishment of debt relating to the Debenture Repurchase and the NCIB, a $7.5 million decrease in operating expenses (operating expenses in the third quarter of 2023 included an $8.0 million impairment charge on the Rock Hill Facility which was not repeated in the third quarter of 2024), and a $0.2 million increase in interest income, offset by a $0.3 million decrease in Gross Profit, a $1.2 million increase in foreign exchange loss, and a $0.3 million increase in interest expense.
Current wording
Net loss after tax and net loss margin for the first quarter of 2025 was $0.7 million and 1.6%, respectively, compared to $3.0 million net income after tax and net income margin of 7.5% for the same period of 2024. The decrease in net income is primarily the result of a $2.9 million decrease in gain on extinguishment of debt (relating to the Issuer Bid (as defined herein) that was completed in February 2024 and not repeated in 2025), a $1.0 million decrease in foreign exchange gain, a $0.2 million decrease in interest income and a $0.1 million decrease in gross profit, offset by a decrease of $0.6 million in interest expense.
Previous wording
Adjusted EBITDA (see “– Non-GAAP Financial Measures”) for the third quarter of 2024 was $4.1 million, or 9.4% of revenue, a decrease of $1.2 million from $5.3 million, or 10.6% of revenue, for the third quarter of 2023. Lower Adjusted EBITDA was mainly driven by the decrease in gross profit and an increase in operating expenses due to the above noted reasons.
Current wording
Adjusted EBITDA (see “– Non-GAAP Financial Measures”) for the first quarter of 2025 was $2.1 million, or 5.1% of revenue, a decrease of $0.6 million from $2.7 million, or 6.5% of revenue, for the first quarter of 2024. Lower Adjusted EBITDA was mainly driven by a $0.9 million increase in professional services costs as a result of higher litigation costs offset by incremental decreases in other operating expenses.
Previous wording
Cash on hand decreased by $15.9 million in the third quarter of 2024 to $23.9 million, compared to a $0.6 million increase in cash in the third quarter of 2023. The decrease in cash in the third quarter of 2024 was driven by a $16.2 million repayment of long-term debt, $0.6 million in capital expenditures, offset by $1.5 million cash flows from operations. Our cash on hand was negatively impacted by a $0.6 million foreign exchange loss.
Current wording
Cash on hand decreased by $0.8 million in the first quarter of 2025 to $28.4 million, compared to a $14.1 million increase in cash in the first quarter of 2024. The decrease in cash in the first quarter of 2025 was driven by $3.5 million of common share repurchases under the Shares NCIB and the Share Repurchase (each as defined herein), $0.8 million in capital expenditures and a $0.2 million foreign exchange loss offset by $3.7 million of cash flows from operations. The increase in cash for the first quarter of 2024 was mainly due to net proceeds of $21.3 million from the Rights Offering (as defined herein) offset by a $5.2 million debt repayment under the Issuer Bid.
Previous wording
As of October 1, 2024, our twelve-month forward pipeline decreased by 10% year-over-year and decreased by 6% from January 1, 2024, illustrated in the table below.
Current wording
As of April 1, 2025, our twelve-month forward pipeline increased by 8% year-over-year and by 5% from January 1, 2025, illustrated in the table below.
Previous wording
Our interim condensed consolidated financial statements are prepared in accordance with 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.
Current wording
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.
Previous wording
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 sale of software and patents, gain on extinguishment of debt, and impairment charges), stock-based compensation, related party expense, 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 periods where production levels are abnormally low, unallocated overheads are recognized as an expense in the period in which they are incurred. In addition, management bases certain forward-looking estimates and budgets on non-GAAP financial measures, primarily Adjusted EBITDA. We have not reconciled non-GAAP forward-looking 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.
Current wording
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, related party expense, 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 periods where production levels are abnormally low, unallocated overheads are recognized as an expense in the period in which they are incurred. 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.
Previous wording
Government subsidies, depreciation and amortization, stock-based compensation expense, reorganization expense, foreign exchange gains and losses, gain on extinguishment of debt, impairment charges, gain on sale of software and patents, net interest income on cash deposits, interest expense on outstanding debt and debt facilities, tax expense, and related party 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.
Current wording
Government subsidies, 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, tax expense, and related party 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.
Previous wording
Three and Nine Months Ended September 30, 2024, Compared to the Three and Nine Months Ended September 30, 2023
Current wording
Three Months Ended March 31, 2025, Compared to the Three Months Ended March 31, 2024
Previous wording
Revenue mainly reflects sales to our Construction Partners for resale to their clients and, in limited circumstances, our direct sales to clients. 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.
Current wording
Revenue mainly reflects sales to our construction partners (“Construction Partners”) for resale to their clients and, in limited circumstances, our direct sales to clients. 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.
Previous wording
Installation and other services revenue was $0.9 million for the quarter ended September 30, 2024 compared to $1.4 million in the quarter ended September 30, 2023, and $3.7 million in the nine months ended September 30, 2024 compared to $3.9 million in the same period of 2023. Installation and other services revenue primarily reflects services performed by our ICE and design teams for third parties. Except in limited circumstances where it is beneficial for DIRTT to hold the contract or a requirement of the end customer, the Construction Partner, rather than the Company, perform and are responsible for the installation services.
Current wording
Installation and other services revenue was $0.9 million for the quarter ended March 31, 2025 compared to $1.8 million in the quarter ended March 31, 2024. This revenue primarily reflects services performed by our ICE design teams for third parties. Except in limited circumstances, our Construction Partners, rather than the Company, perform installation services.
Previous wording
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, 2024, we had 74 Construction Partners (September 30, 2023: 71; December 31, 2023: 72) servicing multiple locations.
Current wording
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 March 31, 2025, we had 69 Construction Partners (March 31, 2024: 74; December 31, 2024: 71) servicing multiple locations.
Previous wording
(1) Excludes license fees from Construction Partners.
Current wording
(1)Excludes license fees from Construction Partners.
Previous wording
Commercial revenues decreased by 11% for the third quarter of 2024 from the prior year period. The quarter ended September 30, 2024 included fewer large commercial projects compared to the quarter ended September 30, 2023. Healthcare revenues decreased by 18% in the third quarter of 2024 from the same period of 2023, primarily due to one large healthcare project completed in the third quarter of 2023. Healthcare sales tend to be larger individual projects and are subject to timing due to a typically longer sales cycle, resulting in variability in sales levels. Government revenues in the third quarter of 2024 decreased by 18% from the prior year period. Similar to healthcare, government revenues tend to be larger individual projects. Education sales in the third quarter of 2024 increased by 6% from the same period of 2023.
Current wording
Commercial sales decreased by 7% for the first quarter of 2025 from the first quarter of 2024. The quarter ended March 31, 2025 included fewer large commercial projects compared to the quarter ended March 31, 2024. Healthcare revenues increased by 136% in the first quarter of 2025 from the same period of 2024, primarily due to four key projects shipping in the first quarter of 2025 and a higher volume of larger projects. 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 construction projects. This had led to multiple project commitments set to commence in 2025. Those investments continue in 2025 and are expected to expand into life sciences. Government sales in the first quarter of 2025 decreased by 24% from the first quarter of 2024 due to lower volume and lower value projects. Education sales in the first quarter of 2025 increased by 4% from the same period of 2024.
Previous wording
Sales and marketing expenses decreased $1.1 million to $17.2 million for the nine months ended September 30, 2024 from $18.3 million in the same period of 2023. The decrease was mainly driven by a $1.0 million decrease in pass through charges, a $0.6 million decrease in building and infrastructure costs, a $0.1 million decrease in salaries and benefits costs, a $0.2 million decrease in commissions, a $0.1 million decrease in travel, meals and entertainment costs, a $0.1 million decrease in communications costs, and a $0.2 million decrease in depreciation costs, offset by a $0.9 million increase in termination benefits and a $0.3 million increase in marketing and tradeshow expenses.
Current wording
Sales and marketing expenses decreased by $0.7 million to $5.2 million for the three months ended March 31, 2025 from $5.9 million for the three months ended March 31, 2024. The decrease was driven by a $0.3 million decrease in termination benefits, a $0.2 million decrease in salaries and benefits costs, a $0.2 million decrease in commissions and pass through charges, a $0.1 million decrease in professional services costs, a $0.1 million decrease in depreciation expense and a $0.1 million decrease in building and communications costs. The decrease was offset by a $0.1 million increase in travel, meals and entertainment costs, and a $0.1 million increase in marketing and tradeshow expenses.
Previous wording
Technology and development expenses increased by $0.1 million to $1.3 million for the three months ended September 30, 2024 from $1.2 million for the three months ended September 30, 2023. This increase was primarily related to a $0.1 million increase in professional services costs.
Current wording
Technology and development expenses decreased slightly to $1.2 million for the three months ended March 31, 2025 from $1.3 million for the three months ended March 31, 2024. This decrease was related to a $0.1 million decrease in salaries and benefits costs, offset by a $0.1 million increase in professional services costs.
Previous wording
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 the first quarter of 2024. We were not able to determine the likelihood of recoverability based on the current market interest in the equipment.
Current wording
On September 27, 2023, the Company decided to permanently close the Rock Hill Facility in South Carolina. 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.
Previous wording
During the first nine months of 2024, C$43.1 million ($31.7 million) in principal amount of Debentures was repurchased for cancellation through an Issuer Bid, a private repurchase, and a 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 of C$1.2 million ($0.9 million) (refer to Note 9 of our Interim Condensed Consolidated Financial Statements for additional information).
Current wording
The gain on extinguishment of debt of $0.01 million for the three months ended March 31, 2025, relates to the Debentures NCIB and was calculated as the difference between the repayment and the net carrying value of the extinguished principal less unamortized issuance costs of C$0.1 million ($0.1 million) (refer to Note 4 of our Interim Condensed Consolidated Financial Statements for additional information). During the first three months of 2024, an aggregate of C$10.5 million ($7.8 million) in principal amount of Debentures was repurchased for cancellation through the Issuer Bid, which triggered an extinguishment of debt of C$3.9 million ($2.9 million).
Previous wording
Foreign exchange gain or loss decreased from a gain of $0.8 million for the three months ended September 30, 2023 to a loss of $0.4 million for the same period in 2024. Foreign exchange gain or loss increased from a $0.1 million loss for the nine months ended September 30, 2023, to a $0.9 million gain for the same period in 2024. Approximately 60% of DIRTT’s costs are denominated in the Canadian dollar.
Current wording
Foreign exchange gain or loss decreased $1.0 million from a gain of $0.9 million for the three months ended March 31, 2024 to a loss of $0.1 million for the same period in 2025. The decrease is primarily related to the strengthening of the Canadian dollar relative to the U.S. dollar over the three months ended March 31, 2025.
Previous wording
Interest income for the three and nine months ended September 30, 2024 was $0.3 million and $1.3 million compared to $0.2 million and $0.3 million for the same periods of 2023. The higher income is due to the interest earned on the Company’s higher cash equivalents during the three and nine months ended September 30, 2024 compared to the same periods of 2023.
Current wording
Interest income for the three months ended March 31, 2025 was $0.3 million compared to $0.5 million for the comparative period of 2024. The decreased interest income is due to lower interest earned on the Company’s lower cash equivalents during the three months ended March 31, 2025 compared to the same period of 2024.
Previous wording
Income tax expense for the three and nine months ended September 30, 2024 increased to $0.02 million and $0.4 million, respectively, from $nil in the same periods of 2023. 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 current period profit and strength of our pipeline, the Company has determined that it is unlikely that a deferred tax asset will be recognized. Given the recent history of losses, the Company will maintain a valuation allowance against the deferred tax asset. As at September 30, 2024, the Company had a valuation allowance of $31.8 million (December 31, 2023: $34.5 million) against deferred tax assets. The Company will continue to evaluate indicators on whether a valuation allowance continues to be needed. For the quarter ended September 30, 2024, the Company utilized a balance of its non-capital loss carry-forwards in Canada and the United States. As at September 30, 2024, we had C$94.7 million of non-capital loss carry-forwards in Canada and $51.3 million in the United States. These loss carry-forwards will begin to expire in 2037.
Current wording
Income tax expense for the three months ended March 31, 2025 increased to $0.04 million, from $0.03 million in the same period of 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 current period profit and strength of our pipeline, the Company has determined that it is unlikely that a deferred tax asset will be recognized. Given the recent history of losses, the Company plans to maintain a valuation allowance against the deferred tax asset. As at March 31, 2025, the Company had a valuation allowance of $29.4 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 March 31, 2025, the Company utilized a balance of its non-capital loss carry-forwards in Canada and the United States. As at March 31, 2025, we had C$86.1 million of non-capital loss carry-forwards in Canada and $51.3 million of non-capital loss carry-forwards in the United States. These loss carry-forwards will begin to expire in 2037.
Previous wording
The following table presents a reconciliation for the three and nine months ended September 30, 2024 and 2023 of Adjusted Gross Profit to our gross profit and Adjusted Gross Profit Margin to gross profit margin, which are the most directly comparable GAAP measure for the periods presented:
Current wording
The following table presents a reconciliation for the three months ended March 31, 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:
Previous wording
EBITDA and Adjusted EBITDA for the Three and Nine Months Ended September 30, 2024 and 2023
Current wording
EBITDA and Adjusted EBITDA for the three months ended March 31, 2025 and 2024
Previous wording
The following table presents a reconciliation for the results of the three and nine months ended September 30, 2024 and 2023 of EBITDA and Adjusted EBITDA to our net income (loss) after tax, and of Adjusted EBITDA Margin to net income (loss) margin, which are the most directly comparable GAAP measures for the periods presented:
Current wording
The following table presents a reconciliation for the results of the three months ended March 31, 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:
Previous wording
(1) Net income (loss) after tax divided by revenue.
Current wording
(1) Net (loss) income after tax divided by revenue.
Previous wording
(3) Reorganization expenses, the gain on sale of software and patents, the gain on extinguishment of convertible debt and the impairment charge on the Rock Hill Facility are not core to our business and are therefore excluded from the Adjusted EBITDA calculation (refer to Note 4, Note 5 and Note 6 of the interim condensed consolidated financial statements).
Current wording
(2) Reorganization expenses, the gain on extinguishment of convertible debt (refer to Note 4 of the interim condensed consolidated financial statements) and the impairment charge on the Rock Hill Facility are not core to our business and are therefore excluded from the Adjusted EBITDA calculation.
Previous wording
We have assessed the Company’s liquidity as at September 30, 2024, taking into account our sales outlook for the next twelve months, 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.
Current wording
We have assessed the Company’s liquidity as at March 31, 2025, taking into account our sales outlook for the next twelve months, our budget 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 ($11.5 million) as of March 31, 2025 are due on January 25, 2026 and have therefore been classified as current on our balance sheet. We are evaluating whether we will settle or refinance this debt.
Previous wording
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 we will be able to do so.
Current wording
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.
Previous wording
On January 9, 2024, the Rights Offering closed for aggregate gross proceeds of C$30.0 million and net proceeds of $21.3 million.
Current wording
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”).
Previous wording
In January 2021, we issued C$40.3 million of 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. As a result of the Rights Offering, the conversion price of the January Debentures was adjusted to C$4.03 per common share, representing a conversion rate of 248.1390 common shares per C$1,000 principal amount. On March 22, 2024, the Company completed the Issuer Bid in which the Company repurchased for cancellation C$4.7 million ($3.5 million) of the principal balance of the January Debentures and paid C$0.04 million ($0.03 million) of the interest payable on such January Debentures.
Current wording
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. As a result of the Rights Offering, the conversion price was adjusted to C$4.03 per common share. Interest and principal are payable in cash or shares at the option of the Company.
Previous wording
On December 1, 2021, we issued C$35.0 million of the December 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. As a result of the Rights Offering, the conversion price of the December Debentures was adjusted to C$3.64 per common share, representing a conversion rate of 274.7253 common shares per C$1,000 principal amount. On March 22, 2024, the Company completed the Issuer Bid in which the Company repurchased for cancellation C$5.8 million ($4.3 million) of the principal balance of the December Debentures and paid C$0.08 million ($0.06 million) of the interest payable on such December Debentures.
Current wording
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. As a result of the Rights Offering, the conversion price was adjusted to C$3.64 per common share. Interest and principal are payable in cash or shares at the option of the Company.
Previous wording
On February 15, 2024, the Company announced 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)).
Current wording
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)).
Previous wording
On August 2, 2024, the Company entered into an agreement with 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 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. Following the Debenture Repurchase, which closed on August 2, 2024, C$16,642,000 principal amount of the January Debentures and C$15,587,000 principal amount of the December Debentures remain outstanding, and 22NW no longer held any Debentures.
Current wording
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. Following the Debenture Repurchase, 22NW no longer holds any Debentures.
Previous wording
On August 28, 2024, the NCIB for the Debentures commenced and is expected to terminate on August 27, 2025. Under the NCIB, DIRTT is 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. As at September 30, 2024, C$0.1 million and $nil principal amounts of the December Debentures and January Debentures were acquired through the NCIB, respectively.
Current wording
On August 28, 2024, the Company commenced the Debentures normal course issuer bid (the “Debentures NCIB”) which will terminate no later than August 27, 2025. Under the Debentures NCIB, DIRTT is 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. As at March 31, 2025, C$0.4 million ($0.3 million) and C$0.05 million ($0.03 million) principal amounts of the December Debentures and January Debentures had been acquired through the Debentures NCIB, respectively. As at March 31, 2025, C$16.6 million ($11.5 million) principal amount of the January Debentures and C$15.2 million ($10.5 million) principal amount of the December Debentures were outstanding.
Previous wording
On February 12, 2021, the Company entered into 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 was 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 was subject to a fixed charge coverage ratio (“FCCR”) covenant of 1.10:1 on a trailing twelve-month basis. Additionally, if the FCCR was below 1.10:1 for the three immediately preceding months, the Company was required to maintain a reserve account equal to the aggregate of one year of payments on outstanding loans on the Leasing Facilities. Had an event of default occurred or the Aggregate Excess Availability been less than C$6.25 million for five consecutive business days, the Company would have entered a cash dominion period whereby the Company’s bank accounts would be blocked by RBC and daily balances would set-off any borrowings and any remaining amounts made available to the Company.
Current wording
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.
Previous wording
On February 9, 2023, the Company entered into the Extended RBC Facility. The Extended RBC Facility had a maximum borrowing base of C$15 million and a one-year term. Interest was 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 was above 1.25 for three consecutive months, a cash balance equivalent to one-year’s worth of Leasing Facilities payments would be maintained. Effective October 2023, inventory was scoped out of the Borrowing Base.
Current wording
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.
Previous wording
On February 9, 2024, the Company entered into 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 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. At September 30, 2024, available borrowings are C$14.4 million ($10.7 million) (December 31, 2023 – C$13.6 million ($10.3 million) of available borrowings), calculated in the same manner as the RBC Facility described above, of which no amounts have been drawn. 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).
Current wording
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.
Previous wording
The Company has a C$5.0 million equipment leasing facility in Canada (the “Canada Leasing Facility”) of which C$4.4 million ($3.3 million) has been drawn and C$3.9 million ($2.9 million) has been repaid, and a $14.0 million equipment leasing facility in the United States of which $13.3 million has been drawn and repaid (the “U.S. Leasing Facility” and, together with the Canada Leasing Facility, the “Leasing Facilities”) with RBC. The Canada Leasing Facility has a seven-year term and bears interest at 4.25%.
Current wording
The Company has a C$5.0 million equipment leasing facility in Canada (the “Canada Leasing Facility”) of which, as of March 31, 2025, C$4.4 million ($3.1 million) has been drawn and C$3.9 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 March 31, 2025 and 2024.
Showing the first 40 of 44 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Adjusted Gross Profit and Adjusted Gross Profit Margin for the three months ended March 31, 2025 and 2024
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
On August 28, 2024, the Company commenced the NCIB for the Company’s Debentures, which permits DIRTT 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. As at September 30, 2024, C$0.1 million and C$nil principal amounts of the December Debentures and January Debentures were acquired through the NCIB, respectively.
Previous report — wording carried elsewhere
Gain on Extinguishment of Convertible Debt
Previous report — wording carried elsewhere
(2) The related party transaction is a non-recurring transaction that is not core to our business and is excluded from the Adjusted EBITDA calculation (refer to Note 17 of the interim condensed consolidated financial statements).
Previous report — wording carried elsewhere
The Company did not make any draws on the Canadian Leasing Facility during the nine months ended September 30, 2024 and the year ended December 31, 2023.