DIRTT ENVIRONMENTAL SOLUTIONS LTD

Previous wording

Key Second Quarter Highlights and Other Recent Developments

Current wording

Key Third Quarter Highlights and Other Recent Developments

Previous 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.

Current wording

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

Previous 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.

Current wording

During the first nine months of 2025, various tariffs were levied by the U.S. and Canadian governments. We incurred $1.9 million (5.1% of total revenue) and $4.5 million (3.8% of total revenue) in tariffs and costs related to tariff mitigation actions for the three and nine months ended September 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. We believe that going into the fourth quarter of 2025, costs relating to existing tariffs will be substantially mitigated through price and other actions taken earlier in the year.

Previous 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.

Current wording

Net loss after tax and net loss margin for the third quarter of 2025 was $3.5 million and 9.2% of revenue, respectively, compared to $7.1 million net income after tax and net income margin of 16.3% for the same period of 2024. The decrease in net income is primarily the result of a $5.3 million decrease in gross profit, a $2.0 million increase in reorganization expenses, a $7.5 million decrease in gain on extinguishment of convertible debentures, offset by a $2.5 million decrease in other operating expenses, a $1.1 million decrease in interest expense, and a $1.0 million increase in foreign exchange gain.

Previous 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.

Current wording

Adjusted EBITDA (see “– Non-GAAP Financial Measures”) for the third quarter of 2025 was $1.2 million, or 3.1% of revenue, a decrease of $2.9 million from $4.1 million, or 9.4% of revenue, for the third quarter of 2024. Lower Adjusted EBITDA was mainly driven by a $5.2 million decrease in Adjusted Gross Profit, offset by the decrease in operating expenses discussed above.

Previous 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.

Current wording

Cash on hand increased by $3.0 million in the third quarter of 2025 to $26.1 million, compared to a $15.9 million decrease in cash in the third quarter of 2024. The increase in cash in the third quarter of 2025 was driven by $4.4 million of net cash flows provided by operating activities, offset by $0.8 million in capital expenditures, an aggregate of $0.2 million in common share repurchases from the Shares NCIB (as defined herein) and repurchase of convertible debt through the Debentures NCIB (as defined herein) and the Renewed Debentures NCIB (as defined herein), $0.1 million in employee tax payments on vesting of RSUs, and $0.1 million in repayment of long-term debt. The decrease in cash for the third quarter of 2024 was mainly due to $16.2 million repayment of long-term debt.

Previous 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.

Current wording

As of October 1, 2025, our twelve-month forward pipeline increased by 31% year-over-year and by 20% from January 1, 2025, illustrated in the table below.

Previous 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.

Current wording

On March 12, 2025, a 25% tariff was levied on steel and aluminum imports from Canada into the U.S. 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 9% of our total product revenue. This tariff impacts aluminum exports from our Calgary plants to our U.S. customers.

Previous wording

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 wording

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, which was extended an additional two months on October 17, 2025. If these tariffs are maintained, we will look into seeking exemptions or alternative suppliers to mitigate this tariff impact.

Previous 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.

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 7% of total raw material spend, representing 2% of total product revenue). In response, we increased the price of certain hardware by 10%, effective June 5, 2025.

Previous wording

As tariff changes are announced, we will continue to consider the impact to our business. The most significant tariff impacting DIRTT is the 50% aluminum and steel tariff. Over time, we expect the impact of tariffs (if maintained at current levels) to be balanced through the price increases, surcharges and various internal tariff mitigation strategies. However, until the price increase and surcharges are fully passed onto customers, which we expect to occur later in 2025, we anticipate the tariffs will result in a compression on our margins.

Current wording

If further tariff changes are announced, we will consider the impact of such changes to our business. The most significant tariff impacting DIRTT at present is the 50% aluminum and steel tariff. Going into the fourth quarter, we expect the impact of prevailing tariffs to be substantially mitigated through our price increases, surcharges and various other internal tariff mitigation strategies.

Previous wording

Our balance sheet is strong, including $31.1 million of liquidity (comprising of unrestricted cash and available borrowings), although we experienced negative cash flows from operations in the three months ended June 30, 2025. There is C$16.6 million ($12.2 million) principal due under the January Debentures (as defined herein), which mature on January 31, 2026, and we are evaluating whether we will settle or refinance this debt.

Current wording

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

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, 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 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

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.

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 Construction Services team to grow revenue and increase direct sales to clients where such opportunities are not available to our Construction Partners. Our revenue is generally affected by the timing of when orders are executed, particularly large orders, which can add variability to our financial results and shift revenue between quarters.

Previous wording

Revenue for the three months ended June 30, 2025 was $38.9 million, a decrease of $2.3 million compared to $41.2 million in the comparative period of 2024. Due to market uncertainties and other macroeconomic factors, we are seeing a delay in the decision making of our customers resulting in delayed project starts, resulting in lower revenue this quarter. Given the growth in our twelve-month forward pipeline compared to prior year, we believe this is a timing matter and not indicative of a decline in DIRTT’s business. Revenue for the six months ended June 30, 2025 was $80.2 million, a decrease from $82.0 million in the comparative period of 2024 for the same reasons explained above. For the quarter ended June 30, 2025, we did not collect any of the 3.5% surcharge on orders placed on or after June 20, 2025 and did not collect a material amount of the 5% price increase on orders placed on or after March 18, 2025, due to negotiated price holds. Surcharge recovery and price increases are expected to be collected in the second half of the year. See “Price Increases and Impact of Tariffs.”

Current wording

Revenue for the three months ended September 30, 2025 was $37.7 million, a decrease of $5.7 million compared to $43.4 million in the comparative period of 2024. Similar to the second quarter of 2025, revenue was adversely impacted by delays in project start dates. In the previous quarters, we believe that the delays were largely related to broader market uncertainties whereas in the third quarter of 2025, they were specific to job site readiness. When project delays occur, is typically deferred 1-12 months from the original planned start date. Revenue for the nine months ended September 30, 2025 was $117.9 million, a decrease from $125.4 million in the comparative period of 2024 for the same reasons explained above. For the quarter ended September 30, 2025, we recorded $0.8 million in revenue related to the 3.5% surcharge on orders placed on or after June 20, 2025. The 5% price increase on orders placed on or after March 18, 2025, has begun to be reflected in revenue. See “Price Increases and Impact of Tariffs.”

Previous 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.

Current wording

Installation and other services revenue was $1.0 million for the quarter ended September 30, 2025 compared to $0.9 million in the quarter ended September 30, 2024, and $3.2 million for the nine months ended September 30, 2025 compared to $3.7 million in the same period of 2024. This revenue primarily reflects services performed by our ICE teams for third parties. Except in limited circumstances, historically our Construction Partners, rather than the Company, perform installation services. As our Construction Services team grows, we expect to see a modest increase in installation services.

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 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.

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 September 30, 2025, we had 69 Construction Partners (September 30, 2024: 74; December 31, 2024: 71) servicing multiple locations. We also continue to work on developing our Construction Services team and partnering with our Construction Partner network to drive revenue for DIRTT.

Previous 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.

Current wording

Commercial sales decreased by 22% for the third quarter of 2025 from the third quarter of 2024. The quarter ended September 30, 2025 had fewer large commercial projects compared to the quarter ended September 30, 2024. Healthcare revenues increased by 24% in the third quarter of 2025 from the same period of 2024, primarily due to the third quarter of 2025 having a larger volume of high value projects than those in the same period of 2024. Sales in the healthcare sector tend to be larger individual projects and are subject to timing due to a typically longer sales cycle, resulting in variability in sales levels. We have made several investments in new product solutions (such as COVE™ and Applied Headwalls) and additions to the business development team to increase product placement in future healthcare and life science construction projects. Government sales in the third quarter of 2025 decreased by 45% from the third quarter of 2024 primarily due to one key project shipping in the third quarter of 2024 and the projects in 2025 having smaller value than those in the same period of 2024. Education sales in the third quarter of 2025 increased by 10% from the same period of 2024 due to a larger volume of high value projects in 2025 compared to the same period of 2024.

Previous 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.

Current wording

For the three months ended September 30, 2025, 9% of revenue was from Canada, as compared to 18% for the three months ended September 30, 2024. Historically, approximately 10-15% and 85-90% of revenues are derived from sales to Canada and the United States, respectively. We expect the historical split to continue.

Previous wording

Sales and marketing expenses decreased by $0.8 million to $5.3 million for the three months ended June 30, 2025 from $6.1 million for the three months ended June 30, 2024. The decrease was driven by a $0.4 million decrease in salary and benefits costs, $0.2 million lower commission costs as a result of lower revenues, a $0.2 million decrease in travel, meals and entertainment costs, and a $0.1 million decrease in other costs, partially offset by a $0.1 million increase in marketing and tradeshow expenses.

Current wording

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

Previous 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.

Current wording

Sales and marketing expenses decreased by $1.9 million to $15.3 million for the nine months ended September 30, 2025 from $17.2 million for the nine months ended September 30, 2024. The decrease was primarily driven by a $0.8 million decrease in termination benefits, a $0.6 million decrease in commissions as a result of lower revenues, a $0.2 million decrease in pass through charges, a $0.2 million decrease in professional services costs, a $0.2 million decrease in depreciation and amortization expenses, and a $0.1 million decrease in other costs. The decrease was partially offset by a $0.2 million increase in salaries and benefits costs.

Previous wording

General and administrative expenses increased by $1.4 million to $5.7 million for the three months ended June 30, 2025, from $4.4 million for the three months ended June 30, 2024. The increase was primarily related to a $0.7 million increase in professional services costs as a result of litigation costs as we prepare for the Falkbuilt Litigation (as defined herein), a $0.5 million increase in salaries and benefits costs, a $0.2 million increase in board fees and expenses, and a $0.1 million increase in public company costs, partially offset by a $0.1 million decrease in building and infrastructure costs.

Current wording

General and administrative expenses increased by $0.9 million to $15.7 million for the nine months ended September 30, 2025, from $14.8 million for the nine months ended September 30, 2024. The increase was primarily related to a $0.7 million increase in salaries and benefits costs, a $0.5 million increase in professional services costs as a result of litigation costs related to the Falkbuilt Litigation, and a $0.4 million increase in board fees. The increase was partially offset by a $0.6 million decrease in building and infrastructure costs and a $0.1 million decrease in other costs.

Previous wording

Operations support is comprised primarily of project managers, order entry and other professionals that facilitate the integration of our Construction Partner project execution, our manufacturing operations, and support staff for the Integrated Solutions team. Operations support expenses slightly increased by $0.03 million for the three months ended June 30, 2025 to $1.9 million compared to $1.8 million for the comparative period of 2024.

Current wording

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

Previous 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.

Current wording

Operations support expenses increased by $0.2 million for the nine months ended September 30, 2025 to $5.7 million, from $5.5 million for the comparative period of 2024. The increase was primarily related to a $0.2 million increase in research and development costs, a $0.1 million increase in marketing and tradeshow costs, and a $0.1 million increase in other costs. The increase was offset by a $0.1 million decrease in travel, meals and entertainment costs, and a $0.1 million loss on disposal in the third quarter of 2024 not repeated in 2025.

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. 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.

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 decreased $0.5 million to $0.8 million for the three months ended September 30, 2025 compared to $1.3 million for the three months ended September 30, 2024. The decrease is primarily related to a $0.5 million decrease in salaries and benefits costs.

Previous 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.

Current wording

Stock-based compensation expense for the nine months ended September 30, 2025 was $2.1 million, compared to $1.9 million in the same periods of 2024. The increase in expense was largely due to an increase in RSU expense as a result of a full quarter of expense on an August 31, 2024 grant in the third quarter of 2025 compared to one month of the expense on the same August 31, 2024 grant in the third quarter of 2024, offset by a decrease in DSU expense caused by a recovery on cash-settled DSU expense from a lower share price as at September 30, 2025 compared to December 31, 2024.

Previous wording

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

Current wording

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

Previous 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).

Current wording

During the three and nine months ended September 30, 2025 C$0.1 million ($0.1 million) and C$0.4 million ($0.3 million), respectively, principal amount of Debentures was repurchased for cancellation through the Debentures NCIB and Renewed Debentures NCIB which triggered an extinguishment of debt. The gain on extinguishment of debentures of $0.01 million and $0.02 million for the three and nine months ended September 30, 2025, respectively, was calculated as the difference between the repayment and the net carrying value of the extinguished principal less unamortized issuance costs (refer to Note 5 of our interim condensed consolidated financial statements for additional information).

Previous 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.

Current wording

Foreign exchange loss or gain decreased from a gain of $0.9 million for the nine months ended September 30, 2024 to a loss of $1.4 million for the same period of 2025. The decrease is primarily related to the strengthening of the Canadian dollar relative to the U.S. dollar over the twelve months ended September 30, 2025. The majority of our revenue is collected in U.S. dollars (approximately 90%), and approximately 70% of the costs incurred in the three and nine months ended September 30, 2025, were denominated in Canadian dollars.

Previous 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.

Current wording

Interest income for the three and nine months ended September 30, 2025 was $0.2 million and $0.7 million compared to $0.3 million and $1.3 million for the comparative periods of 2024. The decreased interest income is due to declining prime rates that determine interest yields on the Company’s lower cash equivalents during the three and nine months ended September 30, 2025 compared to the same periods of 2024.

Previous 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.

Current wording

Interest expense decreased by $1.1 million from $1.5 million in the quarter ended September 30, 2024 to $0.5 million for the three months ended September 30, 2025, and by $2.1 million from $3.5 million for the nine months ended September 30, 2024, to $1.4 million for the nine months ended September 30, 2025. This decrease is largely due to repayment of debt throughout the year ended December 31, 2024 and during the first nine months of 2025, reducing the interest payable on current and long-term debt.

Previous 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.

Current wording

Income tax expense for the three months ended September 30, 2025 increased to $0.2 million from $0.02 million in the three months ended September 30, 2024. Income tax expense for the nine months ended September 30, 2025 decreased to $0.3 million from $0.4 million in the nine months ended September 30, 2024. The current tax expense represents the income tax provision after the utilization of non-capital loss carry forwards against current period taxable income. The provision for income taxes comprises U.S. and Canadian federal, state and provincial taxes based on pre-tax income. Despite positive indications of future profitability, including the strength of our pipeline, the Company has determined that it is unlikely that a deferred tax asset will be recognized. Given the history of losses, the Company plans to maintain a valuation allowance against the deferred tax asset. As at September 30, 2025, the Company had a valuation allowance of $29.8 million (December 31, 2024: $30.0 million) against deferred tax assets. The Company plans to continue to evaluate indicators on whether a valuation allowance continues to be needed. For the quarter ended September 30, 2025, the Company utilized a balance of its non-capital loss carry-forwards in Canada and the United States. As at September 30, 2025, we had C$108.7 million of non-capital loss carry-forwards in Canada and $46.2 million of non-capital loss carry-forwards in the United States. These loss carry-forwards will begin to expire in 2037.

Previous wording

Net loss after tax was $7.3 million or $0.04 net loss per share, basic and diluted, for the six months ended June 30, 2025, a decrease of $10.9 million from net income after tax of $3.6 million or $0.02 net income per share, basic and diluted, for the six months ended June 30, 2024. The decrease in net income from the six months ended June 30, 2024 is primarily the result of a $2.9 million gain on extinguishment of convertible debt as a result of the Issuer Bid, a $4.7 million decrease in gross profit, a $3.3 million decrease in foreign exchange gain, a $0.5 million decrease in interest income, a $0.8 million increase in operating expenses, partially offset by a $1.1 million decrease in interest expense and a $0.2 million decrease in income tax expense.

Current wording

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

Previous 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.

Current wording

Net loss after tax was $10.7 million or $0.06 net loss per share, basic and diluted, for the nine months ended September 30, 2025, a decrease of $21.5 million from net income after tax of $10.7 million or $0.06 and $0.05 net income per share, basic and diluted, respectively, for the nine months ended September 30, 2024. The decrease in net income is primarily the result of a $10.4 million gain on extinguishment of debt resulting from the Debenture Repurchase in the nine months ended September 30, 2024 not repeated in the same period of 2025, a $10.0 million decrease in gross profit, a $2.3 million decrease in foreign exchange gain, a $2.0 million increase in reorganization expenses, a $0.6 million decrease in interest income, and a $0.1 million increase in income taxes. The decrease was partially offset by a $2.1 million decrease in interest expense, a $1.7 million decrease in other operating expenses, and a $0.1 million decrease in income tax expense.

Previous 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:

Current wording

The following table presents a reconciliation for the three and nine months ended September 30, 2025 and 2024 of Adjusted Gross Profit to our gross profit and Adjusted Gross Profit Margin to gross profit margin, which are the most directly comparable GAAP measures for the periods presented:

Previous 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).

Current wording

For the quarter ended September 30, 2025, gross profit margin decreased to 30.4% compared to 38.8% for the same period of 2024. Adjusted Gross Profit Margin was 33.1% for the third quarter of 2025, down from 40.7% in the comparative period of 2024. The decrease in Adjusted Gross Profit Margin was primarily attributable to the $5.7 million reduction in revenue. Tariff-related costs for the third quarter of 2025 were $1.9 million and were substantially mitigated through price and other actions taken earlier in the year.

Previous wording

For the six months ended June 30, 2025, gross profit margin decreased to 31.6%, compared to 36.6% in the prior year period. Adjusted Gross Profit Margin was 34.1%, compared to 38.7% in the same period of 2024, a decrease of 460 basis points. The year-to-date margin decline reflects the same underlying factors observed in the second quarter, including a $1.8 million reduction in revenue and a $2.6 million increase in tariff related costs (327 basis points).

Current wording

For the nine months ended September 30, 2025, gross profit margin decreased to 31.2%, compared to 37.3% in the prior year period. Adjusted Gross Profit Margin was 33.8%, compared to 39.3% in the same period of 2024. The year-to-date margin decline reflects the same underlying factors observed in the third quarter, including a $7.5 million reduction in revenue. Tariff-related costs for the nine months ended September 30, 2025 were $4.5 million. We began to realize the benefits of our tariff mitigation efforts in the third quarter of 2025, as explained above.

Previous wording

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

Current wording

EBITDA and Adjusted EBITDA for the Three and Nine months ended September 30, 2025 and 2024

Previous 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:

Current wording

The following table presents a reconciliation for the results for the three and nine months ended September 30, 2025 and 2024 of EBITDA and Adjusted EBITDA to our net (loss) income after tax, and of Adjusted EBITDA Margin to net (loss) income margin, which are the most directly comparable GAAP measures for the periods presented:

Previous 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.

Current wording

(2) Reorganization expenses, the gain on extinguishment of convertible debentures and the impairment charge on the Rock Hill Facility (refer to Note 4 and Note 5 of the interim condensed consolidated financial statements) are not core to our business and are therefore excluded from the Adjusted EBITDA calculation.