DIRTT ENVIRONMENTAL SOLUTIONS LTD

Previous wording

Key First Quarter Highlights and Other Recent Developments

Current wording

Key Second Quarter Highlights and Other Recent Developments

Previous 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.

Current wording

Gross profit and gross profit margin for the quarter ended June 30, 2025 were $10.8 million or 27.8% of revenue compared to $15.4 million or 37.3% of revenue for the quarter ended June 30, 2024. Adjusted Gross Profit (see “– Non-GAAP Financial Measures”) for the three months ended June 30, 2025 was $11.8 million, a decrease from $16.2 million Adjusted Gross Profit for the second quarter of 2024. Adjusted Gross Profit Margin (see “– Non-GAAP Financial Measures”) was 30.4% in the second quarter of 2025, a decrease from 39.4% in the comparative period of 2024. Gross profit and Adjusted Gross Profit for the quarter ended June 30, 2025 were negatively impacted due to the decline in revenues as well as tariff costs that commenced in March 2025.

Previous wording

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 wording

During the first six months of 2025, various tariffs have been levied by the U.S. and Canadian governments. We incurred $2.0 million (5.1% of total revenue) and $2.6 million (3.3% of total revenue) in tariffs and costs related to tariff mitigation actions for the three and six months ended June 30, 2025, respectively. DIRTT is most impacted by the 25% tariff levied on Canadian aluminum exports to the United States which increased to 50% in June 2025.

Previous 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.

Current wording

Net loss after tax and net loss margin for the second quarter of 2025 was $6.6 million and 17.0%, respectively, compared to $0.6 million net income after tax and net income margin of 1.4% for the same period of 2024. The decrease in net income is primarily the result of a $4.6 million decrease in gross profit, a $0.8 million increase in operating expenses, a $2.3 million decrease in foreign exchange gain, and a $0.3 million decrease in interest income, partially offset by a decrease of $0.5 million in interest expense and $0.2 million in income tax expense.

Previous 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.

Current wording

Adjusted EBITDA (see “– Non-GAAP Financial Measures”) for the second quarter of 2025 was $(2.0) million, or (5.2%) of revenue, a decrease of $5.2 million from $3.2 million, or 7.7% of revenue, for the second quarter of 2024. Lower Adjusted EBITDA was mainly driven by a $4.4 million decrease in Adjusted Gross Profit and an increase in operating expenses.

Previous 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.

Current wording

Cash on hand decreased by $5.3 million in the second quarter of 2025 to $23.1 million, compared to a $0.5 million increase in cash in the second quarter of 2024. The decrease in cash in the second quarter of 2025 was driven by $3.9 million of net cash flows used in operating activities, $1.0 million in capital expenditures, and an aggregate of $0.6 million in common share repurchases from the Shares NCIB (as defined herein) and repurchase of convertible debt through the Debentures NCIB (as defined herein). The increase in cash for the second quarter of 2024 was mainly due to $1.6 million of cash flows provided by operating activities.

Previous wording

The table below presents our qualified leads and twelve-month forward pipeline as at April 1, 2025, January 1, 2025 and April 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, and potential recessionary impacts on construction projects.

Current wording

The table below presents our qualified leads and twelve-month forward pipeline as at July 1, 2025, January 1, 2025 and July 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.

Previous 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.

Current wording

As of July 1, 2025, our twelve-month forward pipeline increased by 18% year-over-year and by 12% from January 1, 2025, illustrated in the table below.

Previous wording

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 wording

On March 12, 2025, a 25% tariff was levied on steel and 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 costs represent approximately 10% of our total product revenue. This tariff impacts aluminum exports from our Calgary plants to our U.S. customers.

Previous wording

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 wording

On April 9, 2025, tariffs of 145% were levied on imports from China into the U.S., which were subsequently reduced on May 12, 2025 to 30% for 90 days. On June 11, 2025, China and the U.S. agreed to reduce overall tariffs by 115%. The Company imports certain raw materials from China (approximately 6% of total raw material spend, representing 3% of total product revenue). In response, we increased the price of certain hardware by 10%, effective June 5, 2025.

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 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.

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, 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, 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

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.

Previous wording

Three Months Ended March 31, 2025, Compared to the Three Months Ended March 31, 2024

Current wording

Three and Six Months Ended June 30, 2025, Compared to the Three and Six Months Ended June 30, 2024

Previous 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.

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. We are investing in our Integrated Solutions 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.

Previous 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.

Current wording

Installation and other services revenue was $1.2 million for the quarter ended June 30, 2025 compared to $1.0 million in the quarter ended June 30, 2024, and $2.1 million for the six months ended June 30, 2025 compared to $2.8 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 Integrated Solutions team grows, we expect to see a modest increase in 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 March 31, 2025, we had 69 Construction Partners (March 31, 2024: 74; December 31, 2024: 71) 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 June 30, 2025, we had 70 Construction Partners (June 30, 2024: 76; December 31, 2024: 71) servicing multiple locations. We also continue to work on developing our Integrated Solutions team and partnering with our Construction Partner network to drive revenue for DIRTT.

Previous 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.

Current wording

Commercial sales decreased by 26% for the second quarter of 2025 from the second quarter of 2024. The quarter ended June 30, 2025 had fewer large commercial projects compared to the quarter ended June 30, 2024. Healthcare revenues increased by 91% in the second quarter of 2025 from the same period of 2024, primarily due to four key projects shipping in the second quarter of 2025 and larger projects in 2025. 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 second quarter of 2025 decreased by 41% from the second quarter of 2024 primarily due to a customer order delay of a large project due to site readiness. We are monitoring our Government pipeline for any adverse impacts from actions being taken by the U.S. government. Education sales in the second quarter of 2025 increased by 119% from the same period of 2024 due to a higher volume of large projects.

Previous wording

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 wording

For the three months ended June 30, 2025, 10% of revenue was from Canada, as compared to 11% for the three months ended June 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.

Previous 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.

Current wording

Sales and marketing expenses decreased by $1.5 million to $10.5 million for the six months ended June 30, 2025 from $12.0 million for the six months ended June 30, 2024. The decrease was driven by a $0.8 million decrease in salaries and benefits costs, a $0.3 million decrease in commission costs as a result of lower revenues, a $0.1 million decrease in pass through charges, a $0.1 million decrease in travel, meals and entertainment costs, a $0.1 million decrease in building costs, a $0.1 million decrease in office and communications costs, a $0.1 million decrease in professional services costs, and a $0.1 million decrease in depreciation and amortization expenses. The decrease was partially offset by a $0.2 million increase in marketing and tradeshow expenses.

Previous wording

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 wording

General and administrative expenses increased by $2.3 million to $11.2 million for the six months ended June 30, 2025, from $9.0 million for the six months ended June 30, 2024. The increase was primarily related to a $1.6 million increase in professional services costs as a result of litigation costs as we prepare for the Falkbuilt Litigation, a $0.7 million increase in salaries and benefits costs, a $0.3 million increase in board fees and expenses, a $0.1 million increase in public company costs, a $0.1 million loss on disposal of manufacturing equipment, and a $0.1 million gain on auction of assets from our Rock Hill facility in South Carolina (the “Rock Hill Facility”) that occurred in 2024 and was not repeated in 2025. The increase was partially offset by a $0.4 million decrease in building and infrastructure costs and a $0.2 million decrease in depreciation and amortization expenses.

Previous wording

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 wording

Operations support expenses increased by $0.3 million for the six months ended June 30, 2025 to $3.9 million, from $3.6 million for the comparative period of 2024. The increase was primarily related to a $0.2 million increase in salaries and benefits costs, a $0.1 million increase in tradeshow expenses, a $0.1 million increase in product research and development costs, partially offset by a $0.1 million decrease in travel, meals and entertainment costs.

Previous wording

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.

Current wording

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 slightly increased $0.04 million to $1.5 million for the three months ended June 30, 2025 compared to $1.4 million for the three months ended June 30, 2024.

Previous wording

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 wording

Stock-based compensation expense for the three and six months ended June 30, 2025 was $0.6 million and $1.3 million respectively, compared to $0.4 million and $1.1 million in the same periods of 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. The increase in expense was largely due to an increase in RSU expense as a result of a higher number of RSUs granted and outstanding for the quarter ended June 30, 2025 compared to the same period of 2024, partially offset by a decrease in DSU expenses as a result of decreasing share prices during the second quarter of 2025.

Previous 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.

Current wording

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.

Previous wording

The Company had $nil impairment charges in the first quarter of 2025.

Current wording

The Company had $nil impairment charges in the three and six months ended June 30, 2025.

Previous 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).

Current wording

The gain on extinguishment of debentures of $0.01 million and $0.01 million for the three and six months ended June 30, 2025, respectively, 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) and C$0.2 million ($0.1 million) (refer to Note 4 of our Interim Condensed Consolidated Financial Statements for additional information). During the three and six months ended June 30, 2024, an aggregate of $nil and 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 $nil and C$3.9 million ($2.9 million).

Previous 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.

Current wording

Foreign exchange loss or gain decreased from a gain of $0.4 million and $1.3 million for the three and six months ended June 30, 2024 to a loss of $1.9 million and $2.0 million for the same periods in 2025. The decrease is primarily related to the strengthening of the Canadian dollar relative to the U.S. dollar over the three and six months ended June 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 six months ended June 30, 2025, were denominated in Canadian dollars.

Previous 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.

Current wording

Interest income for the three and six months ended June 30, 2025 was $0.2 million and $0.5 million compared to $0.5 million and $1.0 million for the comparative periods of 2024. The decreased interest income is due to declining prime rates that determine interest yields on the Company’s lower cash equivalents during the three and six months ended June 30, 2025 compared to the same periods of 2024.

Previous wording

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 wording

Interest expense decreased by $0.5 million from $0.9 million in the quarter ended June 30, 2024 to $0.5 million for the three months ended June 30, 2025, and by $1.1 million from $2.0 million for the six months ended June 30, 2024, to $0.9 million for the six months ended June 30, 2025. This decrease is largely due to repayment of debt throughout the year ended December 31, 2024 and during the first six months of 2025, reducing the interest payable on current and long-term debt.

Previous 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.

Current wording

Income tax expense for the three and six months ended June 30, 2025 decreased to $0.1 million and $0.2 million, respectively, from $0.3 million in each of the same periods 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 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 June 30, 2025, the Company had a valuation allowance of $30.0 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 June 30, 2025, the Company utilized a balance of its non-capital loss carry-forwards in Canada and the United States. As at June 30, 2025, we had C$104.5 million of non-capital loss carry-forwards in Canada and $47.1 million of non-capital loss carry-forwards in the United States. These loss carry-forwards will begin to expire in 2037.

Previous wording

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 wording

Net loss after tax was $6.6 million or $0.03 net loss per share, basic and diluted, in the three months ended June 30, 2025, a decrease of $7.2 million from net income after tax of $0.6 million or $0.00 net income per share, basic and diluted, for the three months ended June 30, 2024. The decrease in net income is primarily the result of a $4.6 million decrease in gross profit, a $0.8 million increase in operating expenses, a $2.3 million decrease in foreign exchange gain, and a $0.3 million decrease in interest income, partially offset by decreases of $0.5 million in interest expense and $0.2 million in income tax expense.

Previous 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:

Current wording

The following table presents a reconciliation for the three and six months ended June 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:

Previous wording

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 wording

For the quarter ended June 30, 2025, gross profit margin decreased to 27.8% compared to 37.3% for the same period of 2024. Adjusted Gross Profit Margin was 30.4% for the second quarter of 2025, down from 39.4% in the comparative period of 2024, a decline of 900 basis points. The decrease in Adjusted Gross Profit Margin was primarily attributable to the $2.3 million reduction in revenue and tariff related costs of $2.0 million (512 basis points).

Previous wording

EBITDA and Adjusted EBITDA for the three months ended March 31, 2025 and 2024

Current wording

EBITDA and Adjusted EBITDA for the Three and Six months ended June 30, 2025 and 2024

Previous 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:

Current wording

The following table presents a reconciliation for the results for the three and six months ended June 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:

Previous 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.

Current wording

(2) Reorganization expenses, the gain on extinguishment of convertible debentures (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

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 wording

For the six months ended June 30, 2025, Adjusted EBITDA decreased by $5.8 million to $0.1 million from $5.8 million and Adjusted EBITDA Margin decreased to 0.1% from 7.1%, for the same period of 2024. This reflects a $4.4 million decrease in Adjusted Gross Profit, a $1.8 million increase in professional services costs largely associated with higher litigation costs related to the Falkbuilt Litigation, a $0.4 million increase in public company costs and board fees, and a $0.3 million increase in marketing and tradeshow expenses, partially offset by a $0.3 million decrease in commissions from lower revenue, a $0.5 million decrease in building and infrastructure costs, a decrease of $0.2 million from loss on disposal, and a $0.1 million decrease in other costs.

Previous wording

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 wording

As at June 30, 2025, the Company had $23.1 million of cash on hand and C$10.9 million ($8.0 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 six months of 2025, the Company used $6.2 million of cash primarily due to the payment of $4.0 million to repurchase common shares under the Shares NCIB and Share Repurchase and $1.8 million for capital expenditures.

Previous 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.

Current wording

We have assessed the Company’s liquidity as at June 30, 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 ($12.2 million) as of June 30, 2025 are due on January 31, 2026 and have therefore been classified as current on our balance sheet. We are evaluating whether we will settle or refinance this debt. Another C$15.1 million ($11.0 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), and we are also evaluating our options for this debt.

Previous 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.

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. Interest and principal are payable in cash or shares at the option of the Company.