DIRTT ENVIRONMENTAL SOLUTIONS LTD

Previous wording

DIRTT’s proprietary design integration software, ICE® (“ICE” or “ICE software”), translates the vision of architects and designers into a 3D model that also acts as manufacturing information. ICE is also licensed to our Construction Partners and certain third parties, including Armstrong World Industries, Inc. (“AWI”) which owns a 50% interest in the rights, title and interests in certain intellectual property rights in a portion of the ICE software that is used by AWI.

Current wording

DIRTT’s proprietary design integration software, DIRTT Design Editor also known as the ICE® software and technology platform (“Design Editor”, “ICE” or “ICE software”), translates the vision of architects and designers into a 3D model that also acts as manufacturing information. ICE is also licensed to our Construction Partners and certain third parties, including Armstrong World Industries, Inc. (“AWI”) which owns a 50% interest in the rights, title and interests in certain intellectual property rights in a portion of the ICE software that is used by AWI.

Previous wording

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, 2026 were $13.0 million or 30.6% of revenue compared to $14.5 million or 35.2% of revenue for the quarter ended March 31, 2025. Adjusted Gross Profit (see “– Non-GAAP Financial Measures”) for the three months ended March 31, 2026 was $13.9 million, a decrease from $15.5 million Adjusted Gross Profit for the first quarter of 2025. Adjusted Gross Profit Margin (see “– Non-GAAP Financial Measures”) was 32.9% in the first quarter of 2026, a decrease from 37.5% in the comparative period of 2025. Gross profit and Adjusted Gross Profit for the quarter ended March 31, 2026 were negatively impacted by rising aluminum costs, lower margins on installation projects, and tariff costs. We incurred $2.0 million of tariff costs in the first quarter of 2026 compared to $0.6 million tariff mitigation costs in the first quarter of 2025.

Current wording

Gross profit and gross profit margin for the quarter ended June 30, 2026 were $14.0 million or 34.7% of revenue compared to $10.8 million or 27.8% of revenue for the quarter ended June 30, 2025. Adjusted Gross Profit (see “– Non-GAAP Financial Measures”) for the three months ended June 30, 2026 was $14.9 million, an increase from $11.8 million Adjusted Gross Profit for the second quarter of 2025. Adjusted Gross Profit Margin (see “– Non-GAAP Financial Measures”) was 37.0% in the second quarter of 2026, an increase from 30.4% in the comparative period of 2025. Gross profit and Adjusted Gross Profit for the quarter ended June 30, 2026 improved from prior periods primarily due to lower tariff and tariff mitigation costs, which was partially offset by lower margins on installation projects. A 1% aluminum price surcharge was put in place on orders placed after March 18, 2026 to help mitigate the impact of rising aluminum prices. We incurred $0.3 million of tariff and tariff mitigation costs in the second quarter of 2026 compared to $2.0 million tariff and tariff mitigation costs in the second quarter of 2025.

Previous wording

During the first three months of 2025, various tariffs were levied by the U.S. and Canadian governments. We incurred $2.0 million (4.7% of total revenue) in tariffs and costs related to tariff mitigation actions for the three months ended March 31, 2026 compared to $0.6 million tariff mitigation costs incurred in the three months ended March 31, 2025. DIRTT is most impacted by the 50% tariff levied on Canadian aluminum exports to the U.S. which increased from 25% in June 2025. DIRTT is evaluating the impact of tariff announcements issued by the U.S. Government on April 6, 2026.

Current wording

During the first six months of 2025, various tariffs were levied by the U.S. and Canadian governments. The Company was most significantly impacted by the 50% tariff levied on Canadian aluminum exports to the U.S. which increased from 25% in June 2025. Following tariff revisions announced by the U.S. Government on April 6, 2026 and June 8, 2026, the Company believes that the import of DIRTT product into the U.S. is no longer subject to certain tariffs under Section 232 of the Trade Expansion Act of 1962 (“Section 232 tariffs”) on steel and aluminum. We incurred $0.3 million (0.7% of total revenue) in tariffs and costs related to tariff mitigation actions for the three months ended June 30, 2026 compared to $2.0 million tariff and tariff mitigation costs incurred in the three months ended June 30, 2025.

Previous wording

During the three months ended March 31, 2026, the Company undertook activities associated with the deployment of its Transformation Office (as defined herein). An aggregate of $2.4 million of associated costs were recognized as reorganization expenses in the three months ended March 31, 2026 primarily related to termination benefits.

Current wording

Reorganization expenses related to the deployment of the Transformation Office (as defined herein) for the three months ended June 30, 2026 included $1.1 million primarily related to termination benefits.

Previous wording

Net loss after tax and net loss margin for the first quarter of 2026 was $3.3 million and 7.7% of revenue, respectively, compared to $0.7 million net loss after tax and net loss margin of 1.6% for the same period of 2025. The increase in net loss is primarily the result of a $1.5 million decrease in gross profit, a $2.2 million increase in reorganization expenses, offset by a $0.8 million decrease in other operating expenses, and a $0.5 million increase in foreign exchange gain.

Current wording

Net income after tax and net income margin for the second quarter of 2026 was $1.1 million and 2.6% of revenue, respectively, compared to $6.6 million net loss after tax and net loss margin of 17.0% for the same period of 2025. The increase in net income is primarily the result of a $3.2 million increase in gross profit, a $2.0 million increase in foreign exchange gain, a $1.2 million decrease in general and administrative expenses, $1.1 million decrease in sales and marketing expense, a $0.6 million decrease in operations support expenses, a $0.6 million decrease in technology and development expenses, offset by a $0.9 million increase in reorganization expenses.

Previous wording

Adjusted EBITDA (see “– Non-GAAP Financial Measures”) for the first quarter of 2026 was $1.4 million, or 3.3% of revenue, a decrease of $0.7 million from $2.1 million, or 5.1% of revenue, for the first quarter of 2025. Lower Adjusted EBITDA was mainly driven by a $1.6 million decrease in Adjusted Gross Profit, offset by the decrease in other operating expenses discussed above.

Current wording

Adjusted EBITDA (see “– Non-GAAP Financial Measures”) for the second quarter of 2026 was $4.7 million, or 11.8% of revenue, an increase of $6.8 million from $(2.0) million, or (5.2%) of revenue, for the second quarter of 2025. Higher Adjusted EBITDA was mainly driven by a $3.1 million increase in Adjusted Gross Profit, offset by the decrease in other operating expenses discussed above.

Previous wording

Cash on hand decreased by $5.3 million in the first quarter of 2026 to $15.0 million, compared to a $0.8 million decrease in cash in the first quarter of 2025. The decrease in cash in the first quarter of 2026 was driven by $12.1 million in repayment of the principal amount of the Company’s issued and outstanding 6.00% convertible unsecured subordinated debentures (the “January Debentures”) of C$16.6 million ($12.1 million) on January 31, 2026, $0.7 million in capital expenditures, $0.4 million in employee tax payments on vesting of RSUs, offset by $6.9 million net proceeds received on long-term debt through Business Development Bank of Canada (“BDC”), and $1.2 million of net cash flows provided by operating activities,

Current wording

Cash on hand decreased by $0.2 million in the second quarter of 2026 to $14.8 million, compared to a $5.3 million decrease in cash in the second quarter of 2025. The decrease in cash in the second quarter of 2026 was driven by $0.9 million of net cash flows provided by operating activities, offset by $0.5 million in investment activities, and $0.3 million in repayment of long term debt.

Previous wording

On February 2, 2026, the Company’s 10-week trial against Falkbuilt Ltd. (“Falkbuilt”), Messrs. Smed and Loberg and several other former DIRTT employees alleging breaches of restrictive covenants, fiduciary duties, employment duties and confidentiality (the “Falkbuilt Litigation”) commenced. DIRTT is pursuing damages and losses it suffered in Canada, the U.S., and abroad in the Court of King’s Bench of Alberta. The trial is in progress and additional dates have been reserved in July 2026,

Current wording

On February 2, 2026, the Company’s 10-week trial against Falkbuilt Ltd. (“Falkbuilt”), Messrs. Smed and Loberg and several other former DIRTT employees alleging breaches of restrictive covenants, fiduciary duties, employment duties and confidentiality (the “Falkbuilt Litigation”) commenced. DIRTT is pursuing damages and losses it suffered in Canada, the U.S., and abroad in the Court of King’s Bench of Alberta. An additional three weeks of trial began July 20, 2026.

Previous wording

As of April 1, 2026, our twelve-month forward pipeline increased by 16% year-over-year and by 1% from January 1, 2026, illustrated in the table below.

Current wording

As of July 1, 2026, our twelve-month forward pipeline remained consistent year-over-year and decreased by 7% from January 1, 2026, illustrated in the table below.

Previous wording

Throughout 2025 and into 2026, the U.S. Government proposed and enacted various tariffs, as disclosed in our Annual Report on Form 10-K. As of the date of this report, tariff revisions were announced effective April 6, 2026. We are reviewing the impact of these revisions on our business. Since we released our Annual Report on Form 10-K, conflict in the Middle East, including Iran, has resulted in rising oil and aluminum prices which are compressing our gross margin. In response, we have implemented an 8% freight and 1% aluminum price surcharge. We continue to monitor and mitigate the impact of tariffs and raw material costs through pricing actions, surcharges, and other operational strategies.

Current wording

Throughout 2025 and into 2026, the U.S. Government proposed and enacted various tariffs as disclosed in our Annual Report on Form 10-K.

Previous wording

On February 20, 2026, the U.S. Supreme Court issued a decision invalidating tariffs imposed under the International Emergency Economic Powers Act. As a result of this ruling, we may be eligible for a refund of certain tariffs previously paid on imported goods. The financial impact of these events is uncertain, as it is unclear to what extent tariff payments will be refunded, what processes will govern such refunds, or if we can fully collect amounts previously paid. We are evaluating the impact of these developments on our business and financial statements. No adjustments have been recorded in the accompanying interim condensed consolidated financial statements as the recoverability and timing of any such refund remains uncertain and we cannot reasonably predict or estimate the financial impact.

Current wording

On February 20, 2026, the U.S. Supreme Court issued a decision invalidating tariffs imposed under the International Emergency Economic Powers Act. As a result of this ruling, we may be eligible for a refund of certain tariffs previously paid on imported goods. As of June 30, 2026, the U.S. Customs and Borders Protection has confirmed that we are eligible to a refund of $0.3 million under Phase 1 of the program including $0.02 million of interest. These amounts have been recorded in our financial statements. We may be eligible for additional refunds in the future under Phase 2 and Phase 3. However, no adjustments have been recorded in the accompanying interim condensed consolidated financial statements for these two phases as the recoverability and timing of any such refund remains uncertain and we cannot reasonably predict or estimate the financial impact.

Previous wording

With ample liquidity, a growing pipeline, improving conversion trends, and a streamlined operating model, DIRTT remains focused on disciplined execution and long-term value creation for shareholders, partners, and employees.

Current wording

With a strong liquidity position, improving commercial discipline, and a streamlined operating model, DIRTT remains focused on disciplined execution and long-term value creation for shareholders, partners, and employees.

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), 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 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 stock-based compensation. 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 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

Depreciation and amortization, stock-based compensation expense, reorganization expense, foreign exchange gains and losses, gain on extinguishment of debt, 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.

Current wording

Depreciation and amortization, stock-based compensation expense, reorganization expense, foreign exchange gains and losses, gain on extinguishment of debt, legal provisions, 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, 2026, Compared to the Three Months Ended March 31, 2025

Current wording

Three and Six Months Ended June 30, 2026, Compared to the Three and Six Months Ended June 30, 2025

Previous wording

Revenue mainly reflects sales to our construction partners (“Construction Partners”) for resale to their clients and, in some circumstances, our direct sales to clients. We are investing in our Construction Services channel 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 some circumstances, our direct sales to clients. Our revenue is generally affected by the timing of order execution, particularly large orders, which can add variability to our financial results and shift revenue between quarters.

Previous wording

Installation and other services revenue was $1.6 million for the quarter ended March 31, 2026 compared to $0.9 million in the quarter ended March 31, 2025. Historically, 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. For the quarter ended March 31, 2026, our Construction Services channel was involved in a higher number of installation projects resulting in a 70% growth in that revenue stream.

Current wording

Installation and other services revenue was $1.4 million for the quarter ended June 30, 2026 compared to $1.2 million in the quarter ended June 30, 2025 and $3.0 million for the six months ended June 30, 2026 compared to $2.1 million for the same period of 2025. Historically, 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. For the three and six months ended June 30, 2026, our Construction Services channel was involved in a higher number of installation projects resulting in a 20% and a 42% growth in that revenue stream, respectively.

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, 2026, we had 60 Construction Partners (March 31, 2025: 69; December 31, 2025: 66) 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.

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, 2026, we had 59 Construction Partners (June 30, 2025: 70; December 31, 2025: 66) servicing multiple locations. We continue to both develop our Construction Services team and partner with our Construction Partner network to drive increased revenue for DIRTT.

Previous wording

For the three months ended March 31, 2026, 14% of revenue was from Canada, as compared to 17% for the three months ended March 31, 2025. 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 June 30, 2026, 13% of revenue was from Canada, as compared to 10% for the three months ended June 30, 2025. 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

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 operational processes team. Operations support expenses decreased by $0.4 million for the three months ended March 31, 2026 to $1.6 million from $2.0 million for the comparative period of 2025 primarily due to a $0.3 million decrease in salaries and benefits costs.

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 operational processes team. Operations support expenses decreased by $0.6 million for the three months ended June 30, 2026 to $1.2 million from $1.9 million for the comparative period of 2025 primarily due to a $0.7 million decrease in salaries and benefits 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. Technology and development expenses decreased $0.3 million to $0.9 million for the three months ended March 31, 2026 compared to $1.2 million for the three months ended March 31, 2025. The decrease is primarily related to a $0.2 million decrease in salaries and benefits costs.

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 $0.6 million to $0.9 million for the three months ended June 30, 2026 compared to $1.5 million for the three months ended June 30, 2025. The decrease is primarily related to a $0.3 million decrease in salaries and benefits costs.

Previous wording

Stock-based compensation expense for the three months ended March 31, 2026 was $0.9 million compared to $0.7 million in the same period of 2025. The increase in expense was largely due to an increase in performance share units (“PSUs”) expense, slightly offset by a decrease in DSU expense in the first quarter of 2026, compared to the first quarter of 2025.

Current wording

Stock-based compensation expense for the six months ended June 30, 2026 was $1.6 million compared to $1.3 million in the same period of 2025. The increase in expense was largely due to an increase in PSUs expense, slightly offset by a decrease in DSU expense and RSU expense in the second quarter of 2026, compared to the second quarter of 2025.

Previous wording

Reorganization expenses for the three months ended March 31, 2026 were $2.4 million, compared to $0.2 million in the three months ended March 31, 2025. Reorganization expenses for the three months ended March 31, 2026, primarily relate to termination benefit costs and consultant costs associated with our transformation plan, as described in Note 4 of our interim condensed consolidated financial statements, while the reorganization costs for the three months ended March 31, 2025 were largely made up of movement of inventory and equipment from the facility at Rock Hill, South Carolina (the “Rock Hill Facility”) for use at the Calgary facility.

Current wording

Reorganization expenses for the three and six months ended June 30, 2026 were $1.1 million and $3.4 million, respectively, compared to $0.2 million and $0.4 million, respectively, in the three and six months ended June 30, 2025. Reorganization expenses for the three and six months ended June 30, 2026, primarily relate to termination benefit costs and consultant costs associated with our Transformation Office, as described in Note 4 of our interim condensed consolidated financial statements, while the reorganization costs for the three and six months ended June 30, 2025 were largely made up of movement of inventory and equipment from the facility at Rock Hill, South Carolina (the “Rock Hill Facility”) for use at the Calgary facility.

Previous wording

Interest income for the three months ended March 31, 2026 was $0.1 million compared to $0.3 million for the comparative period of 2025. The decreased interest income is due to declining prime rates on the Company’s lower cash equivalents during the three months ended March 31, 2026 compared to the same period of 2025.

Current wording

Interest income for the three and six months ended June 30, 2026 was $0.1 million and $0.2 million, respectively, compared to $0.2 million and $0.5 million for the comparative periods of 2025. The decreased interest income is due to declining prime rates on the Company’s lower cash equivalents during the six months ended June 30, 2026 compared to the same period of 2025.

Previous wording

Foreign exchange loss or gain increased from a loss of $0.1 million for the three months ended March 31, 2025 to a gain of $0.3 million for the same period of 2026. The increase is primarily related to the weakening of the Canadian dollar over the three months ended March 31, 2026.

Current wording

Foreign exchange gain (loss) increased from losses of $1.9 million and $2.0 million for the three and six months ended June 30, 2025 to gains of $0.05 million and $0.4 million for the same periods of 2026. The increase is primarily related to the weakening of the Canadian dollar over the three and six months ended June 30, 2026.

Previous wording

Interest expense decreased by $0.1 million from $0.5 million in the quarter ended March 31, 2025 to $0.4 million for the three months ended March 31, 2026. This decrease is largely due to repayment of the 6% January Debentures on January 31, 2026. The BDC loan of C$10 million was advanced during February and March 2026 and bears an interest rate of 5.8% .

Current wording

Interest expense decreased by $0.1 million and $0.2 million from $0.5 million and $0.9 million in the three and six months ended June 30, 2025, respectively, to $0.4 million and $0.7 million for the three and six months ended June 30, 2026, respectively. This decrease is largely due to repayment of the 6.00% convertible unsecured subordinated debentures on January 31, 2026 (the “January Debentures”). The Business Development Bank of Canada (“BDC”) loan of C$10 million was advanced during February and March 2026 and bears an interest rate of 5.8% .

Previous wording

Income tax expense for the three months ended March 31, 2026 increased to $0.1 million from $0.04 million in the three months ended March 31, 2025. 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 March 31, 2026, the Company had a valuation allowance of $31.2 million (December 31, 2025: $30.9 million) against deferred tax assets. The Company plans to continue to evaluate indicators on whether a valuation allowance continues to be needed. As at March 31, 2026, we had C$115.9 million of non-capital loss carry-forwards in Canada and $41.8 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, 2026 decreased to $0.04 million and $0.1 million from $0.1 million and $0.2 million in the three and six months ended June 30, 2025. 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, 2026, the Company had a valuation allowance of $30.5 million (December 31, 2025: $30.9 million) against deferred tax assets. The Company plans to continue to evaluate indicators on whether a valuation allowance continues to be needed. As at June 30, 2026, we had C$112.4 million of non-capital loss carry-forwards in Canada and $41.2 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 $3.3 million or $0.02 net loss per common share, basic and diluted, in the three months ended March 31, 2026, a decrease of $2.6 million from net loss after tax of $0.7 million or $0.00 net loss per common share, basic and diluted, for the three months ended March 31, 2025. The increase in net loss is primarily the result of a $2.2 million increase in reorganization expenses, a $1.5 million decrease in gross profit, and a $0.2 million decrease in interest income. The decreases were offset by a $0.8 million decrease in other operating expenses, and a $0.5 million increase in foreign exchange gains.

Current wording

Net loss after tax was $2.2 million or $0.01 net loss per common share, basic and diluted, in the six months ended June 30, 2026, a decrease of $5.0 million from net loss after tax of $7.3 million or $0.04 net loss per common share, basic and diluted, for the six months ended June 30, 2025. The decrease in net loss is primarily the result of a $4.4 million decrease in operating expenses (excluding stock-based compensation and reorganization expenses), a $2.4 million increase in foreign exchange gain, and a $1.6 million increase in gross profit, offset by a $3.0 million increase in reorganization expenses.

Previous wording

The following table presents a reconciliation for the three months ended March 31, 2026 and 2025 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, 2026 and 2025 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, 2026, gross profit margin decreased to 30.6% compared to 35.2% for the same period of 2025. Adjusted Gross Profit Margin was 32.9% for the first quarter of 2026, down from 37.5% in the comparative period of 2025. The decrease in Adjusted Gross Profit Margin was primarily attributable to higher aluminum prices, lower margins on higher installation projects, and higher tariff costs. With respect to higher aluminum prices, we have put in place a 1% tariff surcharge on orders placed after March 18, 2026 to help mitigate the impact of rising aluminum prices.

Current wording

For the quarter ended June 30, 2026, gross profit margin increased to 34.7% compared to 27.8% for the same period of 2025. Adjusted Gross Profit Margin was 37.0% for the second quarter of 2026, an increase from 30.4% in the comparative period of 2025. The increase in Adjusted Gross Profit Margin was mainly attributable to lower tariff costs and partially offset by lower margins on installation projects. With respect to higher aluminum prices, we have put in place a 1% aluminum price surcharge on orders placed after March 18, 2026 to help mitigate the impact of rising aluminum prices.

Previous wording

EBITDA and Adjusted EBITDA for the Three months ended March 31, 2026 and 2025

Current wording

EBITDA and Adjusted EBITDA for the Three and Six months ended June 30, 2026 and 2025

Previous wording

The following table presents a reconciliation for the results for the three months ended March 31, 2026 and 2025 of EBITDA and Adjusted EBITDA to our net (loss) after tax, and of Adjusted EBITDA Margin to net (loss) margin, which are the most directly comparable GAAP measures for the periods presented:

Current wording

The following table presents a reconciliation for the results for the three and six months ended June 30, 2026 and 2025 of EBITDA and Adjusted EBITDA to our net income (loss) after tax, and of Adjusted EBITDA Margin to net income (loss) margin, which are the most directly comparable GAAP measures for the periods presented:

Previous wording

(1) Net (loss) after tax divided by revenue.

Current wording

(1) Net income (loss) after tax divided by revenue.

Previous wording

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

Current wording

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

Previous wording

For the three months ended March 31, 2026, Adjusted EBITDA decreased by $0.7 million to $1.4 million from $2.1 million and Adjusted EBITDA Margin decreased to 3.3% from 5.1% for the same period of 2025. This decrease is attributed to the $1.6 million decrease in Adjusted Gross Profit (explained above) offset by a decrease in operating expenses (excluding reorganization expense and stock-based compensation) of $0.9 million.

Current wording

For the three months ended June 30, 2026, Adjusted EBITDA increased by $6.8 million to $4.7 million from $(2.0) million and Adjusted EBITDA Margin increased to 11.8% from (5.2%) for the same period of 2025. This increase is attributed to the $3.1 million increase in Adjusted Gross Profit (explained above) and a decrease in operating expenses (excluding reorganization expense and stock-based compensation) of $3.5 million.

Previous wording

As at March 31, 2026, the Company had $15.0 million of cash on hand and C$14.0 million ($10.1 million) of available borrowings, compared to $20.3 million of cash on hand and C$16.3 million ($11.8 million) of available borrowings as at December 31, 2025. Through the first three months of 2026, the Company used $5.3 million of cash primarily for the repayment of $12.1 million outstanding January Debentures, $0.7 million for capital expenditures, $0.4 million for tax payments on vesting restricted share units (“RSUs”), $0.1 million to repurchase common shares and debentures under the Renewed Shares NCIB and Renewed Debentures NCIB (as defined herein), offset by $6.9 million net proceeds received from the BDC loan and $1.2 million of net cash flows provided by operating activities.

Current wording

As at June 30, 2026, the Company had $14.8 million of cash on hand and C$9.6 million ($6.7 million) of available borrowings, compared to $20.3 million of cash on hand and C$16.3 million ($11.8 million) of available borrowings as at December 31, 2025. Through the first six months of 2026, the Company used $5.5 million of cash primarily for $12.4 million repayment of long-term debt ($12.1 million relating to repayment of outstanding January Debentures), $1.3 million for capital expenditures, $0.4 million for tax payments on vesting RSUs, $0.1 million to repurchase common shares and debentures under the Renewed Shares NCIB and Renewed Debentures NCIB (as defined herein), offset by $6.9 million net proceeds received from the BDC loan and $2.1 million of net cash flows provided by operating activities.

Previous wording

We have assessed the Company’s liquidity as at March 31, 2026, taking into account our sales outlook for the next twelve months, our budget, forecast and expected cash outflows, 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 outstanding principal balance of the December Debentures (as defined herein) amounting to C$14.8 million ($10.6 million) as of March 31, 2026 are due on December 31, 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, 2026, taking into account our sales outlook for the next twelve months, our budget, forecast and expected cash outflows, 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 outstanding principal balance of the December Debentures (as defined herein) amounting to C$14.8 million ($10.4 million) as of June 30, 2026 are due on December 31, 2026 and have therefore been classified as current on our balance sheet. We are evaluating whether we will settle or refinance this debt.

Previous wording

On March 11, 2026, the Company entered into the Waiver and Eighth Amendment to Loan Agreement (the “Eighth Amended RBC Facility”), which matures on November 30, 2026. The Eighth Amended RBC Facility is subject to the same borrowing base terms stated in the Seventh Amended RBC Facility. The Eighth Amended RBC Facility includes a customary “Restricted Payments” covenant that prohibits us from, among other things, repurchasing our common shares and paying dividends, unless we have satisfied certain conditions (the “Payment Conditions”). The Payment Conditions include conditions that, after giving effect to the relevant Restricted Payment, the Company has a net borrowing availability of at least C$5.0 million over the preceding 30-day period, and our fixed charge coverage ratio (“FCCR”) be at least 1.10 to 1.00 on a trailing 12-month basis. In February 2026, we and RBC determined that our purchases of our common shares under our NCIB in December 2025 did not comply with the Restricted Payments covenant because our FCCR was below 1.10 to 1.00. The Eighth Amended RBC Facility provided a waiver in connection with the foregoing.

Current wording

On March 11, 2026, the Company entered into the Eighth Amended RBC Facility (as defined herein), which matures on November 30, 2026. The Eighth Amended RBC Facility is subject to the same borrowing base terms stated in the Seventh Amended RBC Facility. The Eighth Amended RBC Facility includes a customary “Restricted Payments” covenant that prohibits us from, among other things, repurchasing our common shares and paying dividends, unless we have satisfied certain conditions (the “Payment Conditions”). The Payment Conditions include conditions that, after giving effect to the relevant Restricted Payment, the Company has a net borrowing availability of at least C$5.0 million over the preceding 30-day period, and our fixed charge coverage ratio (“FCCR”) be at least 1.10 to 1.00 on a trailing 12-month basis. In February 2026, we and RBC determined that our purchases of our common shares under our NCIB in December 2025 did not comply with the Restricted Payments covenant because our FCCR was below 1.10 to 1.00. The Eighth Amended RBC Facility provided a waiver in connection with the foregoing.

Previous wording

On August 28, 2024, the Company commenced the Debentures normal course issuer bid (the “Debentures NCIB”) which expired on August 27, 2025. Under the Debentures NCIB, DIRTT was permitted to acquire up to C$1,664,200 principal amount of the January Debentures and C$1,558,700 principal amount of the December Debentures. For the three months ended March 31, 2025, C$0.03 million ($0.02 million) and C$0.1 million ($0.1 million) principal amounts of the December Debentures and January Debentures, respectively, had been acquired through the Debentures NCIB. On August 26, 2025, the Company announced the renewal of the Debentures NCIB which commenced August 28, 2025 and is expected to terminate on August 27, 2026 for the December Debentures and terminated on January 31, 2026 for the January Debentures, concurrent with the maturity date of the January Debentures (the “Renewed Debentures NCIB”). Under the Renewed Debentures NCIB, DIRTT was permitted to acquire up to C$1,656,900 principal amount of the January Debentures and is permitted to acquire C$1,493,500 principal amount of the December Debentures. For the three months ended March 31, 2026, C$0.03 million ($0.02 million) principal amounts of the December Debentures and $nil principal amounts of the January Debentures had been acquired through the Renewed Debentures NCIB. As at March 31, 2026, C$14.8 million ($10.6 million) principal amount of the December Debentures are outstanding.

Current wording

On August 28, 2024, the Company commenced the Debentures normal course issuer bid (the “Debentures NCIB”) which expired on August 27, 2025. Under the Debentures NCIB, DIRTT was permitted to acquire up to C$1,664,200 principal amount of the January Debentures and C$1,558,700 principal amount of the December Debentures. For the three months ended June 30, 2025, C$0.1 million ($0.1 million) and C$0.02 million ($0.01 million) principal amounts of the December Debentures and January Debentures, respectively, had been acquired through the Debentures NCIB. On August 26, 2025, the Company announced the renewal of the Debentures NCIB which commenced August 28, 2025 and is expected to terminate on August 27, 2026 for the December Debentures and terminated on January 31, 2026 for the January Debentures, concurrent with the maturity date of the January Debentures (the “Renewed Debentures NCIB”). Under the Renewed Debentures NCIB, DIRTT was permitted to acquire up to C$1,656,900 principal amount of the January Debentures and is permitted to acquire C$1,493,500 principal amount of the December Debentures. For the six months ended June 30, 2026, C$0.03 million ($0.02 million) principal amounts of the December Debentures had been acquired through the Renewed Debentures NCIB. As at June 30, 2026, C$14.8 million ($10.4 million) principal amount of the December Debentures are outstanding.