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DIRTT Environmental Solutions Ltd. — Interim / Quarterly Report 2025
Nov 6, 2025
47167_rns_2025-11-05_777532b7-da43-4d2f-9cf3-01198fc83b95.pdf
Interim / Quarterly Report
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These financial statements for DIRTT Environmental Solutions Ltd. are also included in the Form 10-Q for the quarterly period ended September 30, 2025 filed on SEDAR+ on November 5, 2025 in its entirety.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
DIRTT Environmental Solutions Ltd.
Interim Condensed Consolidated Balance Sheet
(Unaudited – Stated in thousands of U.S. dollars)
| As at September 30, 2025 | As at December 31, 2024 | |
|---|---|---|
| ASSETS | ||
| Current Assets | ||
| Cash and cash equivalents | 26,132 | 29,288 |
| Restricted cash | 243 | 243 |
| Trade and accrued receivables, net of expected credit losses of $0.1 million at September 30, 2025 and December 31, 2024 | 14,994 | 19,494 |
| Other receivables | 838 | 416 |
| Inventory | 15,974 | 15,109 |
| Prepaids and other current assets | 3,249 | 2,609 |
| Total Current Assets | 61,430 | 67,159 |
| Property, plant and equipment, net | 17,977 | 20,199 |
| Capitalized software, net | 3,145 | 2,548 |
| Operating lease right-of-use assets, net | 23,898 | 25,369 |
| Other assets | 2,760 | 2,945 |
| Total Assets | 109,210 | 118,220 |
| LIABILITIES | ||
| Current Liabilities | ||
| Accounts payable and accrued liabilities | 17,447 | 16,352 |
| Other liabilities | 3,126 | 3,217 |
| Customer deposits and deferred revenue | 5,771 | 4,028 |
| Current portion of long-term debt and accrued interest | 12,206 | 359 |
| Current portion of lease liabilities | 5,503 | 5,619 |
| Total Current Liabilities | 44,053 | 29,575 |
| Long-term debt | 10,805 | 21,993 |
| Long-term lease liabilities | 22,865 | 24,062 |
| Total Liabilities | 77,723 | 75,630 |
| SHAREHOLDERS’ EQUITY | ||
| Common shares, unlimited authorized without par value, 191,840,863 issued and outstanding at September 30, 2025 and 193,605,237 issued and outstanding at December 31, 2024 | 215,052 | 219,023 |
| Additional paid-in capital | 10,571 | 8,206 |
| Accumulated other comprehensive loss | (17,275) | (18,541) |
| Accumulated deficit | (176,861) | (166,098) |
| Total Shareholders’ Equity | 31,487 | 42,590 |
| Total Liabilities and Shareholders’ Equity | 109,210 | 118,220 |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
DIRTT Environmental Solutions Ltd.
Interim Condensed Consolidated Statement of Operations
(Unaudited - Stated in thousands of U.S. dollars)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Product revenue | 36,677 | 42,475 | 114,764 | 121,690 |
| Service revenue | 1,039 | 900 | 3,169 | 3,733 |
| Total revenue | 37,716 | 43,375 | 117,933 | 125,423 |
| Product cost of sales | 25,794 | 26,208 | 79,512 | 76,589 |
| Service cost of sales | 455 | 354 | 1,594 | 1,998 |
| Total cost of sales | 26,249 | 26,562 | 81,106 | 78,587 |
| Gross profit | 11,467 | 16,813 | 36,827 | 46,836 |
| Expenses | ||||
| Sales and marketing | 4,795 | 5,183 | 15,265 | 17,165 |
| General and administrative | 4,429 | 5,834 | 15,652 | 14,791 |
| Operations support | 1,801 | 1,915 | 5,703 | 5,531 |
| Technology and development | 805 | 1,294 | 3,513 | 3,981 |
| Stock-based compensation | 742 | 803 | 2,075 | 1,905 |
| Reorganization | 2,593 | 604 | 2,977 | 944 |
| Impairment charge on Rock Hill Facility (as defined in Note 4) | - | - | - | 530 |
| Total operating expenses | 15,165 | 15,633 | 45,185 | 44,847 |
| Operating (loss) income | (3,698) | 1,180 | (8,358) | 1,989 |
| Gain on extinguishment of convertible debentures | 8 | 7,478 | 22 | 10,409 |
| Foreign exchange gain (loss) | 602 | (360) | (1,422) | 917 |
| Interest income | 226 | 341 | 720 | 1,312 |
| Interest expense | (465) | (1,525) | (1,401) | (3,524) |
| 371 | 5,934 | (2,081) | 9,114 | |
| Net (loss) income before tax | (3,327) | 7,114 | (10,439) | 11,103 |
| Income taxes | ||||
| Current and deferred income tax expense | 157 | 23 | 308 | 371 |
| Net (loss) income after tax | (3,484) | 7,091 | (10,747) | 10,732 |
| Net (loss) income per share | ||||
| Net (loss) income per share – basic | (0.02) | 0.04 | (0.06) | 0.06 |
| Net (loss) income per share – diluted | (0.02) | 0.03 | (0.06) | 0.05 |
| Weighted average number of shares outstanding (in thousands) | ||||
| Basic | 190,981 | 193,020 | 190,693 | 189,585 |
| Diluted | 190,981 | 241,272 | 190,693 | 239,301 |
Interim Condensed Consolidated Statement of Comprehensive (Loss) Income
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Net (loss) income after tax for the period | (3,484) | 7,091 | (10,747) | 10,732 |
| Exchange differences on translation of foreign operations | (540) | 386 | 1,266 | (221) |
| Comprehensive (loss) income for the period | (4,024) | 7,477 | (9,481) | 10,511 |
Interest expense for the three and nine months ended September 30, 2025 includes $nil earned by a related party ($0.3 million and $1.0 million for the three and nine months ended September 30, 2024). Refer to Note 17.
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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DIRTT Environmental Solutions Ltd.
Interim Condensed Consolidated Statement of Changes in Shareholders' Equity
(Unaudited – Stated in thousands of U.S. dollars, except for share data)
| Number of Common shares | Common shares | Additional paid-in capital | Accumulated other comprehensive loss | Accumulated deficit | Total shareholders’ equity | |
|---|---|---|---|---|---|---|
| As at December 31, 2023 | 105,377,667 | 196,128 | 7,954 | (16,125) | (180,856) | 7,101 |
| Stock-based compensation | - | - | 248 | - | - | 248 |
| Issued on vesting of RSUs (as defined in Note 9) | 521,253 | 771 | (771) | - | - | - |
| Issued on Rights Offering (as defined in Note 15) | 85,714,285 | 21,273 | - | - | - | 21,273 |
| Issued for employee share purchase plan | 267,021 | 122 | - | - | - | 122 |
| RSUs withheld to settle employee tax obligations | - | - | (76) | - | - | (76) |
| Foreign currency translation adjustment | - | - | - | (297) | - | (297) |
| Net income for the period | - | - | - | - | 3,045 | 3,045 |
| As at March 31, 2024 | 191,880,226 | 218,294 | 7,355 | (16,422) | (177,811) | 31,416 |
| Stock-based compensation | - | - | 194 | - | - | 194 |
| Issued on vesting of RSUs | 702,918 | 300 | (300) | - | - | - |
| Issued for employee share purchase plan | 384,499 | 135 | - | - | - | 135 |
| RSUs and Share Awards withheld to settle employee tax obligations | - | - | (131) | - | - | (131) |
| Foreign currency translation adjustment | - | - | - | (310) | - | (310) |
| Net income for the period | - | - | - | - | 596 | 596 |
| As at June 30, 2024 | 192,967,643 | 218,729 | 7,118 | (16,732) | (177,215) | 31,900 |
| Stock-based compensation | - | - | 542 | - | - | 542 |
| Issued on vesting of RSUs | 125,205 | 49 | (49) | - | - | - |
| Issued for employee share purchase plan | 300,036 | 137 | - | - | - | 137 |
| RSUs and Share Awards withheld to settle employee tax obligations | - | - | (46) | - | (5) | (51) |
| Foreign currency translation adjustment | - | - | - | 386 | - | 386 |
| Net income for the period | - | - | - | - | 7,091 | 7,091 |
| As at September 30, 2024 | 193,392,884 | 218,915 | 7,565 | (16,346) | (170,129) | 40,005 |
| As at December 31, 2024 | 193,605,237 | 219,023 | 8,206 | (18,541) | (166,098) | 42,590 |
| Stock-based compensation | - | - | 566 | - | - | 566 |
| Issued on vesting of RSUs | 343,455 | 366 | (366) | - | - | - |
| RSUs withheld to settle employee tax obligations | - | - | (1) | - | - | (1) |
| Issued for employee share purchase plan | 236,834 | 152 | - | - | - | 152 |
| Cancelled from Shares NCIB and Share Repurchase (each as defined in Note 10) | (4,439,107) | (4,880) | 1,368 | - | - | (3,512) |
| Foreign currency translation adjustment | - | - | - | 67 | - | 67 |
| Net loss for the period | - | - | - | - | (661) | (661) |
| As at March 31, 2025 | 189,746,419 | 214,661 | 9,773 | (18,474) | (166,759) | 39,201 |
| Stock-based compensation | - | - | 561 | - | - | 561 |
| Issued on vesting of RSUs | 1,130,876 | 524 | (524) | - | - | - |
| RSUs withheld to settle employee tax obligations | - | - | (60) | - | (16) | (76) |
| Issued for employee share purchase plan | 298,039 | 152 | - | - | - | 152 |
| Cancelled from Shares NCIB | (730,148) | (852) | 365 | - | - | (487) |
| Foreign currency translation adjustment | - | - | - | 1,739 | - | 1,739 |
| Net loss for the period | - | - | - | - | (6,602) | (6,602) |
| As at June 30, 2025 | 190,445,186 | 214,485 | 10,115 | (16,735) | (173,377) | 34,488 |
| Stock-based compensation | - | - | 604 | - | - | 604 |
| Issued on vesting of RSUs | 235,807 | 231 | (231) | - | - | - |
| Settlement of DSU liability (as defined in Note 9) | 1,234,487 | 592 | - | - | - | 592 |
| RSUs withheld to settle employee tax obligations | - | - | (92) | - | - | (92) |
| Issued for employee share purchase plan | 267,012 | 130 | - | - | - | 130 |
| Cancelled from Shares NCIB | (341,629) | (386) | 175 | - | - | (211) |
| Foreign currency translation adjustment | - | - | - | (540) | - | (540) |
| Net loss for the period | - | - | - | - | (3,484) | (3,484) |
| As at September 30, 2025 | 191,840,863 | 215,052 | 10,571 | (17,275) | (176,861) | 31,487 |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
DIRTT Environmental Solutions Ltd.
Interim Condensed Consolidated Statement of Cash Flows
(Unaudited – Stated in thousands of U.S. dollars)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Cash flows from operating activities: | ||||
| Net (loss) income for the period | (3,484) | 7,091 | (10,747) | 10,732 |
| Adjustments: | ||||
| Depreciation and amortization | 1,534 | 1,487 | 4,561 | 4,542 |
| Impairment charge on Rock Hill Facility | - | - | - | 530 |
| Stock-based compensation | 742 | 803 | 2,075 | 1,905 |
| Foreign exchange loss (gain) | (492) | 1,051 | 1,573 | (420) |
| Gain on extinguishment of convertible debt | (8) | (7,478) | (22) | (10,409) |
| Accretion of convertible debentures | 80 | 1,013 | 255 | 1,398 |
| Loss on disposal | - | 132 | 115 | 422 |
| Changes in operating assets and liabilities: | ||||
| Trade and accrued receivables | 1,977 | (2,609) | 4,638 | (4,598) |
| Other receivables | 242 | 106 | (425) | (43) |
| Inventory | (422) | 327 | (498) | 1,558 |
| Prepaid and other assets, current and long term | 118 | 9 | (447) | 335 |
| Accounts payable and accrued liabilities | 1,773 | (781) | 1,342 | (3,366) |
| Other liabilities | (110) | (34) | (110) | (34) |
| Customer deposits and deferred revenue | 2,387 | 609 | 1,730 | (1,761) |
| Current portion of long-term debt and accrued interest | (11) | (352) | (14) | (445) |
| Lease liabilities | 64 | 148 | 126 | 776 |
| Net cash flows provided by operating activities | 4,390 | 1,522 | 4,152 | 1,122 |
| Cash flows from investing activities: | ||||
| --- | --- | --- | --- | --- |
| Purchase of property, plant and equipment, net of accounts payable changes | (283) | (310) | (1,084) | (973) |
| Capitalized software development expenditures | (490) | (409) | (1,420) | (1,333) |
| Other asset expenditures | (58) | 29 | (149) | (103) |
| Recovery of software development expenditures | 51 | 94 | 165 | 215 |
| Proceeds on sale of property, plant, and equipment | - | - | - | 10 |
| Proceeds on sale of assets held for sale | - | - | - | 1,025 |
| Net cash flows (used in) investing activities | (780) | (596) | (2,488) | (1,159) |
| Cash flows from financing activities: | ||||
| --- | --- | --- | --- | --- |
| Common share repurchases | (211) | - | (4,204) | - |
| Repayment of long-term debt | (122) | (16,230) | (312) | (21,323) |
| Net proceeds received from Rights Offering | - | - | - | 21,273 |
| Employee tax payments on vesting of RSUs | (89) | (32) | (149) | (239) |
| Net cash flows (used in) financing activities | (422) | (16,262) | (4,665) | (289) |
| Effect of foreign exchange on cash, cash equivalents and restricted cash | (156) | (567) | (155) | (906) |
| Net increase (decrease) in cash, cash equivalents and restricted cash | 3,032 | (15,903) | (3,156) | (1,232) |
| Cash, cash equivalents and restricted cash, beginning of period | 23,343 | 39,770 | 29,531 | 25,099 |
| Cash, cash equivalents and restricted cash, end of period | 26,375 | 23,867 | 26,375 | 23,867 |
| Supplemental disclosure of cash flow information: | ||||
| Interest paid | (367) | (853) | (1,076) | (2,531) |
| Income taxes paid | (1) | (133) | (5) | (544) |
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheet.
| As at September 30, | ||
|---|---|---|
| 2025 | 2024 | |
| Cash and cash equivalents | 26,132 | 23,626 |
| Restricted cash | 243 | 241 |
| Total cash, cash equivalents and restricted cash | 26,375 | 23,867 |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
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DIRTT Environmental Solutions Ltd.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements (Amounts in thousands of U.S. dollars unless otherwise stated)
1. GENERAL INFORMATION
DIRTT Environmental Solutions Ltd. and its subsidiary (“DIRTT”, the “Company”, “we” or “our”) is a leader in industrialized construction. DIRTT’s system of physical products and digital tools empowers organizations, together with construction and design leaders, to build high-performing, adaptable, interior environments. Operating in the workplace, healthcare, education, and public sector markets, DIRTT’s system provides total design freedom, and greater certainty in cost, schedule, and outcomes.
DIRTT’s proprietary design integration software, ICE® (“ICE” or “ICE software”), translates the vision of architects and designers into a 3D model that also acts as manufacturing information. ICE is also licensed to unrelated companies and construction partners of the Company (“Construction Partners”), including Armstrong World Industries, Inc. (“AWI”), which owns a 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.
DIRTT is incorporated under the laws of the province of Alberta, Canada. Its headquarters is located at 7303 – 30th Street S.E., Calgary, AB, Canada T2C 1N6 and its registered office is located at 4500, 855 – 2nd Street S.W., Calgary, AB, Canada T2P 4K7. DIRTT’s common shares trade on the Toronto Stock Exchange under the symbol “DRT”. On June 12, 2025, the Company began trading on the OTCQX® Best Market (“OTCQX”) under the symbol “DRTTF.” The Company previously traded on, and upgraded to OTCQX from, the OTC Pink® Market.
2. BASIS OF PRESENTATION
The accompanying unaudited interim condensed consolidated financial statements (the “Financial Statements”) have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X and, accordingly, the Financial Statements do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of the Company, the Financial Statements contain all adjustments necessary, consisting of only normal recurring adjustments, for a fair statement of its financial position as of September 30, 2025, and its results of operations and cash flows for the three and nine months ended September 30, 2025 and 2024. The condensed balance sheet at December 31, 2024, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. These Financial Statements should be read in conjunction with the audited consolidated financial statements as of December 31, 2024 and 2023 and for each of the three years in the period ended December 31, 2024 included in the Annual Report on Form 10-K of the Company as filed with the SEC and applicable securities commission or similar regulatory authorities in Canada.
In these Financial Statements, unless otherwise indicated, all dollar amounts are expressed in United States (“U.S.”) dollars. DIRTT’s financial results are consolidated in Canadian dollars, the Company’s functional currency, and the Company has adopted the U.S. dollar as its reporting currency. All references to US$ or $ are to U.S. dollars and references to C$ are to Canadian dollars.
Principles of consolidation
The Financial Statements include the accounts of DIRTT Environmental Solutions Ltd. and its subsidiary. All intercompany balances, income and expenses, unrealized gains and losses and dividends resulting from intercompany transactions have been eliminated on consolidation.
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Basis of measurement
These Financial Statements have been prepared on the historical cost convention except for certain financial instruments, assets held for sale and certain components of stock-based compensation that are measured at fair value. Historical cost is generally based on the fair value of the consideration given in exchange for assets. The Company's quarterly tax provision is based upon an estimated annual effective tax rate.
Seasonality
Sales of the Company's products are driven by consumer and industrial demand for interior construction solutions. The timing of customers' construction projects can be influenced by a number of factors including the prevailing economic climate and weather.
3. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS
On December 14, 2023, the FASB issued Accounting Standards Update No. 2023-09, "Improvements to Income Tax Disclosures" ("ASU-2023-09") further disaggregated information on an entity's tax rate reconciliation and income taxes paid. The amendments in ASU-2023-09 are effective for fiscal years beginning after December 15, 2024, on a prospective basis with an option of retrospective application. The Company is evaluating the impact of the adoption of this standard and expects the impact to be limited to disclosures.
On November 5, 2024, the FASB issued Accounting Standards Update No. 2024-03, "Disaggregation of Income Statement Expenses" ("ASU-2024-03") which requires further disaggregated information on an entity's types of expenses presented to better understand the components of an entity's expense captions. The amendments within ASU-2024-03 are effective for annual reporting periods starting December 15, 2026, and interim periods beginning after December 15, 2027, on a prospective basis with an option of retrospective application. The Company is evaluating the impact of the adoption of this standard and expects the impact to be limited to disclosures.
On November 27, 2024, the FASB issued Accounting Standards Update No. 2024-04, "Induced Conversions of Convertible Debt Instruments" ("ASU-2024-04") which requires discussing an entity's assessment of induced conversion and debt extinguishment of convertible debt instruments. The amendments in ASU-2024-04 are effective for fiscal years beginning after December 15, 2025, on a prospective basis with an option of retrospective application. The Company is evaluating the impact of the adoption of this standard.
On September 18, 2025, the FASB issued Accounting Standards Update No. 2025-06, "Intangibles - Goodwill and Other - Internal-Use Software" ("ASU-2025-06") which targets improvements to the accounting for internal-use software. The amendments in ASU-2025-06 are effective for fiscal years beginning after December 15, 2027, on a prospective basis with an option of retrospective application. The Company is evaluating the impact of the adoption of this standard.
Although there are several other new accounting standards issued or proposed by the FASB, which the Company has adopted or will adopt, as applicable, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its Financial Statements.
4. REORGANIZATION
Temporary Suspension of Operations and Subsequent Closure at Rock Hill, South Carolina Facility (the "Rock Hill Facility")
On September 27, 2023, the Company decided to permanently close the Rock Hill Facility. Certain assets, including manufacturing equipment, which met held for sale criteria at that time were reclassified from property, plant and equipment. During the three months ended March 31, 2024, $1.0 million of the assets held for sale were sold. At March 31, 2024, the assets held for sale balance was reduced from $0.5 million to $nil, resulting in a $0.5 million impairment charge for the first quarter as we were not able to determine the likelihood of a sale based on the market interest at that time.
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| As at September 30, | ||
|---|---|---|
| 2025 | 2024 | |
| Assets held for sale, opening | - | 1,555 |
| Proceeds from sale of assets held for sale | - | (1,025) |
| Impairment charge on reassessment | - | (530) |
| Assets held for sale, ending | - | - |
Transformation Office
In 2024, DIRTT’s leadership team set up a new team, the Construction Services team (previously referred to as Integrated Solutions), to support our Construction Partner network in increasing market share and accessing markets to which we previously did not have access. In early 2025, a transformation office was set up, to accelerate the strategic transformation of our business by streamlining the Company’s processes and procedures, supporting the Construction Services team and improving productivity across the Company (the “Transformation Office”). We are incurring one-time consultant costs to assist in, advise, and implement our transformation actions, as well as one-time termination benefits as a result of elimination of positions. The program is planned to be completed in 2026. At present, the Transformation Office is led by a special committee of the Board of Directors and has one dedicated staff member.
For the three months and nine months ended September 30, 2025 and 2024, the following reorganization costs incurred relate to the above mentioned initiatives:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Termination benefits | 1,879 | - | 1,879 | - |
| Transformation Office costs | 689 | - | 689 | - |
| Rock Hill Facility temporary suspension and closure of operations | - | 604 | - | 932 |
| Other costs | 25 | - | 409 | 12 |
| Total reorganization costs | 2,593 | 604 | 2,977 | 944 |
| Reorganization costs in accounts payable and accrued liabilities at January 1, 2025 | 117 | |||
| Reorganization expense | 2,977 | |||
| Reorganization costs paid | (1,794) | |||
| Reorganization costs in accounts payable and accrued liabilities at September 30, 2025 | 1,300 |
Of the $1.3 million of reorganization costs in accounts payable and accrued liabilities as at September 30, 2025 (December 31, 2024 – $0.1 million), $1.1 million relates to termination benefits (December 31, 2024 – $0.07 million) and $0.2 million relates to other reorganization costs (December 31, 2024 – $0.03 million).
5. GAIN ON EXTINGUISHMENT OF CONVERTIBLE DEBENTURES
On February 15, 2024, the Company commenced a substantial issuer bid and tender offer (the “Issuer Bid”) pursuant to which the Company offered to repurchase for cancellation: (i) up to C$6.0 million principal amount of its issued and outstanding January Debentures (as defined in Note 8) at a purchase price of C$720 per C$1,000 principal amount of January Debentures, and (ii) up to C$9.0 million principal amount of its issued and outstanding December Debentures (as defined in Note 8 and together with the January Debentures, the “Debentures”), at a purchase price of C$600 per C$1,000 principal amount of December Debentures.
C$4.7 million ($3.5 million) aggregate principal amount of the January Debentures and C$5.8 million ($4.3 million) aggregate principal amount of December Debentures were validly deposited and not withdrawn at the expiration of the Issuer Bid on March 22, 2024, representing approximately 11.66% of the January Debentures and 16.50% of the December Debentures issued and outstanding at that time. The Company took up all the Debentures tendered pursuant to the Issuer Bid for aggregate consideration of C$7.0 million ($5.2 million) (comprised of C$6.9 million ($5.1 million) repayment on principal and interest of C$0.1 million ($0.1 million)).
On August 2, 2024, the Company entered into a Convertible Debenture Repurchase Agreement (the "Repurchase Agreement") with 22NW Fund, LP ("22NW"), pursuant to which the Company purchased for cancellation an aggregate of C$18,915,000 principal amount of the January Debentures at a purchase price of C$684.58 per C$1,000 principal amount of January Debentures and C$13,638,000 principal amount of the December Debentures at a purchase price of C$665.64 per C$1,000 principal amount of December Debentures, for an aggregate purchase price of C$22,104,591.45, inclusive of a cash payment for all accrued and unpaid interest up to, but excluding, the date on which such Debentures were purchased by the Company (the "Debenture Repurchase"). The Debenture Repurchase closed on August 2, 2024. The purchase price of each series of Debentures (excluding the cash payment for accrued and unpaid interest) represented a discount of approximately 4% to the average trading price of the applicable series of Debentures on the Toronto Stock Exchange (the "TSX") for the 20 trading days preceding August 2, 2024. Following the Debenture Repurchase, C$16,642,000 principal amount of the January Debentures and C$15,587,000 principal amount of the December Debentures remained outstanding and 22NW no longer held any Debentures.
On August 28, 2024, the Company commenced a normal course issuer bid (the "Debentures NCIB") for the Debentures which expired on August 27, 2025. On August 26, 2025, the Company announced the renewal of the Debentures NCIB which commenced on August 28, 2025 upon expiry of the Debentures NCIB (the "Renewed Debentures NCIB"). The Renewed Debentures NCIB is expected to terminate on August 27, 2026 with respect to the December Debentures and is expected to terminate on January 31, 2026 with respect to the January Debentures, concurrent with the maturity date of the January Debentures. Under the Debentures NCIB, DIRTT was permitted to acquire up to C$1,664,200 principal amount of the January Debentures and C$1,558,700 principal amount of the December Debentures. For the three and nine months ended September 30, 2025, C$0.1 million ($0.1 million) and C$0.3 million ($0.2 million) principal amounts of the December Debentures (respectively) and C$0.01 million ($0.01 million) and C$0.06 million (C$0.04 million) principal amounts of the January Debentures (respectively) had been acquired in aggregate through the Debentures NCIB. Under the Renewed Debentures NCIB, DIRTT is permitted to acquire up to C$1,656,900 principal amount of the January Debentures and C$1,493,500 principal amount of the December Debentures. For the three months ended September 30, 2025, C$0.01 million ($0.01 million) principal amounts of the December Debentures and $nil principal amounts of the January Debentures had been acquired through the Renewed Debentures NCIB.
For the three months and nine months ended September 30, 2025 and 2024, the gain on extinguishment of convertible debentures relate to the above mentioned initiatives:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| ($ in thousands) | ($ in thousands) | |||
| Extinguishment of convertible debentures | 109 | 23,685 | 274 | 31,671 |
| Less: | ||||
| Principal repayment through the Debentures NCIB and Renewed Debentures NCIB | (101) | (73) | (252) | (73) |
| Principal repayment through the Repurchase Agreement | - | (16,134) | - | (16,134) |
| Principal repayment through the Issuer Bid | - | - | - | (5,055) |
| Gain on extinguishment of convertible debentures | 8 | 7,478 | 22 | 10,409 |
In accordance with GAAP, it was determined that the C$0.1 million ($0.1 million) repayment on convertible debt through the Debentures NCIB and the Renewed Debentures NCIB, in aggregate, in the three months ended September 30, 2025 (C$22.2 million ($16.2 million) repayment of convertible debt through the Repurchase Agreement and the Debentures NCIB for the three months ended September 30, 2024), triggered an extinguishment of C$0.1 million ($0.1 million) (C$32.6 million and $23.9 million for the three months ended September 30, 2024) of principal amount of debt. The gain on extinguishment of C$0.01 million ($0.01 million) for the three months ended September 30, 2025 (C$10.2 million and $7.5 million for the three months ended September 30, 2024), was calculated as the difference between the repayment and the net carrying value of the extinguished principal less unamortized issuance costs.
In accordance with GAAP, it was determined that the C$0.4 million ($0.3 million) repayment on convertible debt through the Debentures NCIB and the Renewed Debentures NCIB, in aggregate, in the nine months ended September 30, 2025 (C$29.0 million ($21.3 million) repayment of convertible debt through the Issuer Bid, the Debenture Repurchase, and the Debentures NCIB in the nine months ended September 30, 2024), triggered an extinguishment of C$0.4 million ($0.3 million) (C$43.1 million ($31.7 million) for the nine months ended September 30, 2024) of principal amount of debt. The gain on extinguishment of C$0.03 million ($0.02 million) for the nine months ended September 30, 2025 (C$14.2 million ($10.4 million) for the nine months ended September 30, 2024), was calculated as the difference between the repayment and the net carrying value of the extinguished principal less unamortized issuance costs.
6. TRADE AND ACCRUED RECEIVABLES
Accounts receivable are recorded at the invoiced amount, do not require collateral and typically do not bear interest. The Company estimates an allowance for credit losses using the lifetime expected credit loss at each measurement date, taking into account historical credit loss experience as well as forward-looking information, in order to establish rates for each class of financial receivable with similar risk characteristics. Adjustments to this estimate are recognized in the consolidated statement of operations.
In order to manage and assess our risk, management maintains credit policies that include regular review of credit limits of individual receivables and systematic monitoring of aging of trade receivables and the financial wellbeing of our customers. At September 30, 2025, approximately 67% of our trade accounts receivable are trade credit insured, relating to accounts receivable from counterparties deemed creditworthy by the insurer and excluding accounts receivable from government entities.
Our trade balances are spread over a broad Construction Partner base, which is geographically dispersed. For the three and nine months ended September 30, 2025, no single Construction Partner accounted for greater than 10% of revenue (no single Construction Partner for the three and nine months ended September 30, 2024). In addition, and where possible, we collect a 50% deposit on sales, excluding the government and certain other clients.
The Company’s aged receivables were as follows:
| As at | ||
|---|---|---|
| September 30, 2025 | December 31, 2024 | |
| Current | 11,596 | 16,677 |
| Overdue | 3,474 | 2,916 |
| 15,070 | 19,593 | |
| Less: expected credit losses | (76) | (99) |
| Trade and accrued receivables, net of expected credit losses | 14,994 | 19,494 |
No adjustment to our expected credit losses of $0.1 million was required for the three and nine months ended September 30, 2025. Receivables are generally considered to be past due when over 60 days old, unless there is a separate payment arrangement in place for the collection of the receivable.
7. OTHER LIABILITIES
| As at | ||
|---|---|---|
| September 30, 2025 | December 31, 2024 | |
| Warranty provisions (1) | 858 | 849 |
| DSU liability | 1,652 | 2,028 |
| Income taxes payable | 283 | - |
| Sublease deposits | 206 | 206 |
| Other provisions and other liabilities | 127 | 134 |
| Other liabilities | 3,126 | 3,217 |
(1) The following table presents a reconciliation of the warranty provision balance:
| As at | ||
|---|---|---|
| September 30, 2025 | December 31, 2024 | |
| As at January 1, | 849 | 873 |
| Additions to warranty provision | 486 | 640 |
| Payments related to warranties | (477) | (664) |
| 858 | 849 |
8. LONG-TERM DEBT
| Leasing Facilities | Convertible Debentures | Total Debt | |
|---|---|---|---|
| Balance at January 1, 2024 | 484 | 55,624 | 56,108 |
| Accretion of issue costs | - | 1,491 | 1,491 |
| Accrued interest | 35 | 2,402 | 2,437 |
| Interest payments | (35) | (2,839) | (2,874) |
| Principal repayments | (78) | (21,408) | (21,486) |
| Gain on extinguishment | - | (10,426) | (10,426) |
| Exchange differences | (33) | (2,865) | (2,898) |
| Balance at December 31, 2024 | 373 | 21,979 | 22,352 |
| Current portion of long-term debt and accrued interest | 78 | 281 | 359 |
| Long-term debt | 295 | 21,698 | 21,993 |
| Balance at January 1, 2025 | 373 | 21,979 | 22,352 |
| Accretion of issue costs | - | 255 | 255 |
| Accrued interest | 22 | 1,040 | 1,062 |
| Interest payments | (22) | (1,054) | (1,076) |
| Principal repayments | (60) | (252) | (312) |
| Gain on extinguishment | - | (22) | (22) |
| Exchange differences | 12 | 740 | 752 |
| Balance at September 30, 2025 | 325 | 22,686 | 23,011 |
| Current portion of long-term debt and accrued interest | 86 | 12,120 | 12,206 |
| Long-term debt | 239 | 10,566 | 10,805 |
Revolving Credit Facility
On February 12, 2021, the Company entered into a loan agreement governing a C$25.0 million senior secured revolving credit facility with the Royal Bank of Canada ("RBC"), as lender (the "RBC Facility"). Under the RBC Facility, the Company was able to borrow up to a maximum of 90% of investment grade or insured accounts receivable plus 85% of eligible accounts receivable plus the lesser of (i) 75% of the book value of eligible inventory and (ii) 85% of the net orderly liquidation value of eligible inventory less any reserves for potential prior ranking claims (the "Borrowing Base"). Interest was calculated at the Canadian or U.S. prime rate plus 30 basis points or at the Canadian Dollar Offered Rate or LIBOR plus 155 basis points. Under the RBC Facility, if the "Aggregate Excess Availability" (defined as the Borrowing Base less any loan advances or letters of credit or guarantee and if undrawn including unrestricted cash), was less than C$5.0 million, the Company is subject to a fixed charge coverage ratio ("FCCR") covenant of 1.10:1 on a trailing twelve-month basis. Additionally, if the FCCR had been below 1.10:1 for the three immediately preceding months, the Company was required to maintain a reserve account equal to the aggregate of one year of payments on outstanding loans on the Canada Leasing Facility (as defined below) and a leasing facility in the United States that is no longer available (together, the "Leasing Facilities"). Should an event of default have occurred or the Aggregate Excess Availability been less than C$6.25 million for five consecutive business days, the Company would have entered a cash dominion period whereby the Company's bank accounts would have been blocked by RBC and daily balances would have offset any borrowings and any remaining amounts made available to the Company.
On February 9, 2023, the Company extended the RBC Facility (the "Extended RBC Facility"). The Extended RBC Facility had a borrowing base of C$15.0 million and a one-year term. Interest was calculated as at the Canadian
or U.S. prime rate plus 75 basis points or the Canadian Dollar Offered Rate or Term Secured Overnight Financing Rate (“Term SOFR”) plus 200 basis points plus the Term SOFR Adjustment (as defined in the amended loan agreement governing the Extended RBC Facility). Under the Extended RBC Facility, if the trailing twelve-month FCCR was not above 1.25 for three consecutive months, a cash balance equivalent to one-year’s worth of Leasing Facilities payments was required to be maintained. Effective October 2023, inventory was scoped out of the Borrowing Base.
On February 9, 2024, the Company extended the Extended RBC Facility (the “Second Extended RBC Facility”). The Second Extended RBC Facility is subject to the borrowing base calculation to a maximum of C$15.0 million and a one-year term. Interest is calculated at the Canadian or U.S. prime rate plus 75 basis points or at the Canadian Dollar Offered Rate or Adjusted Term CORRA or Term SOFR plus the Term SOFR Adjustment, in each case plus 200 basis points. The Second Extended RBC Facility removed the three-month FCCR covenant, which resulted in the release of $0.1 million of restricted cash during the first quarter of 2024. On February 11, 2025, the Company extended the Second Extended RBC Facility (the “Third Extended RBC Facility”) for a period of two weeks up to February 25, 2025 whilst the Company and RBC completed negotiations.
On February 20, 2025, the Company extended the Third Extended RBC Facility (the “Fourth Extended RBC Facility”). The Fourth Extended RBC Facility is subject to the borrowing base calculation based on accounts receivable balances to a maximum of C$25.0 million and matures on November 30, 2025. Interest is calculated as the Canadian or U.S. prime rate plus 50 basis points or at the Term CORRA Rate as adjusted by the Term CORRA Adjustment or Term SOFR plus the Term SOFR Adjustment, in each case plus 175 basis points. At September 30, 2025, available borrowings are C$8.7 million ($6.2 million) (December 31, 2024 – C$14.4 million ($10.0 million) of available borrowings), calculated in the same manner as the RBC Facility described above, of which no amounts have been drawn. Under the RBC Facility, if the “Aggregate Excess Availability” (defined as the Borrowing Base less any loan advances or letters of credit or guarantee and if undrawn including unrestricted cash), was less than C$3.0 million for at least thirty consecutive calendar days, the Company is subject to a FCCR covenant of 1.10:1 on a trailing twelve-month basis. As at September 30, 2025, the Company is in compliance with its financial covenants. The Fourth Extended RBC Facility also includes a new letter of credit facility guaranteed by the Export Development of Canada of C$5.0 million. The Company has also entered into a bonding facility with Great Midwest Insurance Company, and any other company that is part of or added to Skyward Specialty Insurance Group, Inc. (“Skyward”), which allows access to a $15.0 million bonding facility subject to an individual maximum of $5.0 million. Under the terms of the facility with Skyward, any bonds issued will be secured through letters of credit issued pursuant to the Fourth Extended RBC Facility. At September 30, 2025, no bonds have been issued through such bonding facility.
On November 4, 2025, the Company extended the Fourth Extended RBC Facility (the “Fifth Extended RBC Facility”). The Fifth Extended RBC Facility matures on November 30, 2026 and is subject to the same borrowing base terms as the previous facility; with the borrowing base calculation based on accounts receivable balances to a maximum of C$25.0 million. Interest is calculated as the Canadian or U.S. prime rate plus 50 basis points or at the Term CORRA Rate as adjusted by the Term CORRA Adjustment or Term SOFR plus the Term SOFR Adjustment, in each case plus 175 basis points. The Company will be in default under the Fifth Extended RBC Facility if the January Debentures are not paid in full or refinanced on terms and conditions satisfactory to RBC by January 31, 2026.
Leasing Facilities
The Company has a C$5.0 million equipment leasing facility in Canada (the “Canada Leasing Facility”) of which C$4.4 million ($3.2 million) has been drawn and C$4.0 million ($2.9 million) has been repaid. The Canada Leasing Facility has a seven-year term and bears interest at 4.25%.
The Company did not make any draws on the Canada Leasing Facility during the three and nine months ended September 30, 2025 (2024 – $nil). The associated financial liabilities are shown on the consolidated balance sheet in the current portion of long-term debt and accrued interest and long-term debt.
Convertible Debentures
On January 25, 2021, the Company completed a C$35.0 million ($27.5 million) bought-deal financing of convertible unsecured subordinated debentures (the “January Debentures”) with a syndicate of underwriters. On
January 29, 2021, the Company issued a further C$5.25 million ($4.1 million) of the January Debentures under the terms of an overallotment option granted to the underwriters. The January Debentures will mature and be repayable on January 31, 2026 (the "January Debentures Maturity Date") and accrue interest at the rate of 6.00% per annum payable semi-annually in arrears on the last day of January and July of each year commencing on July 31, 2021 until the January Debentures Maturity Date. Interest and principal are payable in cash or shares at the option of the Company. The January Debentures will be convertible into common shares of DIRTT, at the option of the holder, at any time prior to the close of business on the business day prior to the earlier of the January Debentures Maturity Date and the date specified by the Company for redemption of the January Debentures. Costs of the transaction were approximately C$2.7 million, including the underwriters' commission. As a result of the Rights Offering (refer to Note 15), the conversion price of the January Debentures was adjusted to C$4.03 per common share representing a conversion rate of 248.1390 common shares per C$1,000 principal amount. On March 22, 2024, the Company completed the Issuer Bid in which the Company repurchased for cancellation C$4.7 million ($3.5 million) of the principal balance of the January Debentures, and paid C$0.04 million ($0.03 million) of the interest payable on such January Debentures (refer to Note 5). On August 2, 2024, the Company completed the Debenture Repurchase. On August 28, 2024, the Company commenced the Debentures NCIB which expired on August 27, 2025. On August 26, 2025, the Company announced the Renewed Debentures NCIB which commenced on August 28, 2025 upon expiry of the Debentures NCIB. The Renewed Debentures NCIB is expected to terminate on January 31, 2026, with respect to the January Debentures, concurrent with the maturity date of the January Debentures. During the three and nine months ended September 30, 2025, the Company repurchased for cancellation C$0.01 million ($0.01 million) and C$0.06 million ($0.04 million) principal amount of January Debentures, in aggregate, as part of the Debentures NCIB and Renewed Debenture NCIB (C$0.01 million ($0.01 million) for the three and nine months ended September 30, 2024). As at September 30, 2025, C$16.6 million ($11.9 million) principal amount of the January Debentures was outstanding.
On December 1, 2021, the Company completed a C$35.0 million ($27.4 million) bought-deal financing of convertible unsecured subordinated debentures (the "December Debentures") with a syndicate of underwriters. The December Debentures will mature and be repayable on December 31, 2026 (the "December Debentures Maturity Date") and accrue interest at the rate of 6.25% per annum payable semi-annually in arrears on the last day of June and December of each year commencing on June 30, 2022 until the December Debentures Maturity Date. Interest and principal are payable in cash or shares at the option of the Company. The December Debentures will be convertible into common shares of DIRTT, at the option of the holder, at any time prior to the close of business on the business day prior to the earlier of the December Debentures Maturity Date and the date specified by the Company for redemption of the December Debentures. Costs of the transaction were approximately C$2.3 million, including the underwriters' commission. As a result of the Rights Offering (refer to Note 15), the conversion price of the December Debentures was adjusted to C$3.64 per common share representing a conversion rate of 274.7253 common shares per C$1,000 principal amount. On March 22, 2024, the Company completed the Issuer Bid in which the Company repurchased for cancellation C$5.8 million ($4.3 million) of the principal balance of the December Debentures and paid C$0.08 million ($0.06 million) of the interest payable on such December Debentures (refer to Note 5). On August 2, 2024, the Company repurchased for cancellation C$13.6 million ($10.1 million) principal amount of December Debentures held by 22NW. On August 28, 2024, the Company commenced the Debentures NCIB which expired on August 27, 2025. On August 26, 2025, the Company announced the Renewed Debentures NCIB which commenced on August 28, 2025 upon expiry of the Debentures NCIB. The Debentures NCIB is expected to terminate on August 27, 2026 with respect to the December Debentures. During the three and nine months ended September 30, 2025, the Company repurchased for cancellation C$0.1 million ($0.1 million) and C$0.3 million ($0.2 million) principal amount of the December Debentures, in aggregate, as part of the Debentures NCIB and Renewed Debentures NCIB (C$0.1 million ($0.1 million) for the three and nine months ended September 30, 2024). As at September 30, 2025, C$14.9 million ($10.7 million) principal amount of the December Debentures was outstanding.
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9. STOCK-BASED COMPENSATION
In May 2020, shareholders approved the DIRTT Environmental Solutions Ltd. Long Term Incentive Plan, which was subsequently amended and restated in each of 2023, 2024 and 2025 and is currently called the DIRTT Environmental Solutions Ltd. Third Amended and Restated Long-Term Incentive Plan (as amended and restated, the "LTIP"). Each amendment and restatement was approved by our shareholders. The LTIP replaced the predecessor incentive plans, being the Performance Share Unit Plan ("PSU Plan") and the Amended and Restated Stock Option Plan ("Stock Option Plan"). No further awards have been or will be granted under either the Stock Option Plan or the PSU Plan following initial approval of the LTIP in May of 2020, but both plans remain in place to govern the terms of any awards that were granted pursuant to such plans.
The LTIP gives the Company the ability to award options, share appreciation rights, restricted share units, deferred share units, restricted shares, dividend equivalent rights, and other share-based awards and cash awards to eligible employees, officers, consultants and directors of the Company and its affiliates. In accordance with the LTIP, the sum of (i) 30,350,000 common shares plus (ii) the number of common shares subject to stock options previously granted under the Stock Option Plan that, following May 22, 2020, expire or are cancelled or terminated without having been exercised in full, have been reserved for issuance under the LTIP. Upon vesting of certain LTIP awards, the Company may withhold shares as a means of meeting DIRTT's tax withholding requirements in respect of the withholding tax remittances required in respect of award holders. To the extent the fair value of the withheld shares upon vesting exceeds the grant date fair value of the instrument, the excess amount is credited to retained earnings or deficit.
Prior to May of 2023, deferred share units ("DSUs") were granted to non-employee directors under the Deferred Share Unit Plan for Non-Employee Directors (as amended and restated, the "DSU Plan") and settleable only in cash. As of May 30, 2023, the LTIP provides the Company the ability to settle DSUs in either cash or common shares, while consolidating future share-based awards under a single plan. The terms of the DSU Plan are otherwise materially unchanged as incorporated into the LTIP. Effective May 30, 2023, no new awards have been or will be made under the DSU Plan, but awards previously granted under the DSU Plan will continue to be governed by the DSU Plan. DSUs are settled following cessation of services with the Company.
Stock-based compensation expense
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Equity-settled awards | 741 | 627 | 2,219 | 1,641 |
| Cash-settled awards | 1 | 176 | (144) | 264 |
| 742 | 803 | 2,075 | 1,905 |
The following summarizes RSUs, PRSUs, PSUs (each as defined herein) and DSUs activity during the periods:
| RSU Time-Based | RSU Performance-Based | PSU | DSU | |
|---|---|---|---|---|
| Number of units | Number of units | Number of units | Number of units | |
| Outstanding at December 31, 2023 | 3,530,564 | 64,029 | 1,845,608 | 3,086,172 |
| Granted | 8,456,663 | - | - | 1,409,962 |
| Vested or settled | (1,336,802) | (12,574) | - | (741,306) |
| Withheld to settle employee tax obligations | (351,672) | - | - | - |
| Forfeited or expired | (159,663) | (6,278) | - | - |
| Outstanding at September 30, 2024 | 10,139,090 | 45,177 | 1,845,608 | 3,754,828 |
| Outstanding at December 31, 2024 | 10,260,791 | 45,177 | 1,845,608 | 4,033,894 |
| Granted | 25,000 | - | - | 780,025 |
| Vested or settled | (1,710,138) | - | - | (1,234,487) |
| Withheld to settle employee tax obligations | (335,975) | - | - | - |
| Forfeited or expired | (439,119) | (45,177) | - | (347,628) |
| Outstanding at September 30, 2025 | 7,800,559 | - | 1,845,608 | 3,231,804 |
Restricted share units (time-based vesting)
Except as noted below, outstanding restricted share units (“RSUs”) that vest based on time have an aggregate time-based vesting period of three years and generally one-third of the RSUs vest every year over a three-year period from the date of grant. The RSUs will be settled following vesting by way of the provision of cash or shares to employees (or a combination thereof), at the discretion of the Company. The weighted average fair value of the RSUs granted in the nine months ended September 30, 2025 and September 30, 2024 was C$0.82 and C$0.63, respectively, which was determined using the closing price of the Company’s common shares on their respective grant dates. During the third quarter of 2024, certain of the Company’s executives were granted (i) 5 million RSUs which will cliff vest on August 14, 2026 and (ii) 975,000 RSUs, one-third of which will vest every year over a three-year period from the date of grant, at a weighted average fair value of C$0.75 which was determined using the closing price of the Company’s common shares on their respective grant dates.
Restricted share units (performance-based vesting)
During 2022 and 2021, RSUs were granted to executives with service and performance-based conditions for vesting based on the Company’s share price performance (the “PRSUs”). Based on share price performance since the date of grant, 66.7% of the 2021 PRSUs vested on March 1, 2024, but none of the 2022 PRSUs vested upon completion of the three-year service period. As at September 30, 2024, the Company had 45,177 PRSUs outstanding. All PRSUs were expired as of September 30, 2025.
Performance share units
During the second quarter of 2023, certain executives were issued a strategic equity grant through performance share units (“PSUs”). The performance period of the PSUs is from January 1, 2023 to December 31, 2026 with a cliff vesting term for December 31, 2026. 2,584,161 PSUs were granted and depending on the level of performance, the PSUs will vest 100%, 160% or 190% up to a maximum of 4,909,907 PSUs. Settlement will be made in the form of shares issued from treasury. The performance measures are a combination of Revenue and Earnings Before Interest, Taxes, Depreciation and Amortization and both targets have to be achieved. As of September 30, 2025, the fair value of these PSUs have been deemed to be $nil based on the likelihood of achieving the targets compared to current results. During the third quarter of 2023, 738,553 PSUs with a $nil value were forfeited as a result of an executive departure and 1,845,608 PSUs with a $nil value are outstanding at September 30, 2025.
Deferred share units
Granted under the DSU Plan
The fair value of the DSU liability and the corresponding expense is charged to profit or loss at the grant date. Subsequently, at each reporting date between the grant date and settlement date, the fair value of the liability is remeasured with any changes in fair value recognized in profit or loss for the period. In the three months ended September 30, 2025, the Company settled 0.3 million DSUs (nil in the three months ended September 30, 2024) to departed directors with a fair value of $0.2 million ($nil in the three months ended September 30, 2024). DSUs outstanding at September 30, 2025 had a fair value of $0.4 million which is included in other liabilities on the balance sheet (December 31, 2024 – $0.7 million).
Granted under the LTIP
DSUs granted after May 30, 2023 (the “New DSUs”) will be settled by way of the provision of cash or shares (or a combination thereof) to the directors, at the discretion of the Company. The Company intends to settle these DSUs through issuances of common shares. The weighted average fair value of the DSUs granted in the first nine months of 2025 and 2024 was C$0.89 ($0.63) and C$0.64 ($0.47), respectively, which was determined using the closing price of the Company’s common shares on the grant date. In the three months ended September 30, 2025, the Company settled 1.2 million New DSUs (nil in the three months ended September 30, 2024) to departed directors with a fair value of $0.6 million ($nil in the three months ended September 30, 2024). New DSUs outstanding at September 30, 2025 had a fair value of $1.3 million which is included in other liabilities on the balance sheet (December 31, 2024 – $1.3 million).
15
16
Dilutive Instruments
For the three and nine months ended September 30, 2025, 0.3 million and 5.3 million RSUs, respectively, 2.5 million and 2.3 million New DSUs, 1.8 million PSUs, and 39.9 million common shares which would have been issued if the principal amount of the Debentures was settled in common shares at the quarter-end price were excluded from the diluted weighted average number of common shares, as their effect would have been anti-dilutive to the net loss per share.
For the three and nine months ended September 30, 2024, 0.1 million and 2.0 million RSUs, respectively, 2.3 million and 1.8 million New DSUs, respectively, and 45.9 million shares which would have been issued if the principal amount of the Debentures was settled in common shares at the quarter-end price were included in the diluted net income per share calculation. 0.04 million PRSUs, 1.8 million PSUs and 6.1 million and 8.1 million RSUs in the three and nine months ended September 30, 2024, respectively, were excluded from the diluted weighted average number of common shares, as their effect would have been anti-dilutive to the net income per share. See Note 11 for the dilutive impact on net income per share.
10. SHARE REPURCHASES
On December 18, 2024, the Company announced a normal course issuer bid for common shares (the "Shares NCIB"), which commenced on December 20, 2024 and terminates on December 19, 2025, and which permits DIRTT to acquire up to 7,515,233 common shares. All repurchases under the Shares NCIB will be made on the open market through the facilities of the TSX at the market price of common shares at the time of acquisition. Any common shares acquired through the Shares NCIB will be immediately cancelled.
On February 13, 2025, the Company entered into a share repurchase agreement (the "NGEN Repurchase Agreement") with NGEN III, LP ("NGEN"), pursuant to which the Company purchased for cancellation 3,920,844 common shares held by NGEN at a purchase price of $0.80 per share (the "Share Repurchase"). Pursuant to the terms of the NGEN Repurchase Agreement, the purchase price of $0.80 per share was a 1% discount to the closing price of the common shares on the TSX on January 27, 2025 (converted into U.S. Dollars using the February 13, 2025 closing exchange rate published by the Bank of Canada). Upon completion of the Share Repurchase on February 14, 2025, there were 189,643,903 common shares outstanding. The common shares repurchased under the Share Repurchase count against the maximum number of shares that may be repurchased pursuant to the Shares NCIB, being 7,515,233 shares.
In addition to the Share Repurchase, DIRTT acquired and cancelled 341,629 and 1,590,040 common shares during the three and nine months ended September 30, 2025, respectively, under the Shares NCIB (58,478 common shares for the year ended December 31, 2024).
The following table summarizes the common shares repurchased and cancelled during the period:
| Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced programs | Maximum number of shares that may yet be purchased under the program |
|---|---|---|---|---|
| January 1, 2025 - January 31, 2025 | 109,556 | $ 0.77 | 109,556 | 7,347,199 |
| February 1, 2025 - February 28, 2025(1) | 4,074,200 | $ 0.80 | 153,356 | 3,272,999 |
| March 1, 2025 - March 31, 2025 | 255,351 | $ 0.69 | 255,351 | 3,017,648 |
| April 1, 2025 - April 30, 2025 | 266,546 | $ 0.73 | 266,546 | 2,751,102 |
| May 1, 2025 - May 31, 2025 | 197,129 | $ 0.66 | 197,129 | 2,553,973 |
| June 1, 2025 - June 30, 2025 | 266,473 | $ 0.61 | 266,473 | 2,287,500 |
| July 1, 2025 - July 31, 2025 | 255,173 | $ 0.65 | 255,173 | 2,032,327 |
| August 1, 2025 - August 31, 2025 | 1,500 | $ 0.59 | 1,500 | 2,030,827 |
| September 1, 2025 - September 30, 2025 | 84,956 | $ 0.52 | 84,956 | 1,945,871 |
| Total | 5,510,884 | 1,590,040 | 1,945,871 |
(1) Includes 3,920,844 common shares that were repurchased from NGEN under the Share Repurchase at a purchase price of $0.80 per share. The Share Repurchase was completed on February 14, 2025. The Share Repurchase was a privately negotiated transaction and was not made pursuant to the Shares NCIB or any other publicly announced share repurchase programs, although it was counted against the Shares NCIB limit.
11. EARNINGS (LOSS) PER SHARE
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Net (loss) income per share – basic | ||||
| Net (loss) income (thousands of U.S. dollars) | $ (3,484) | $ 7,091 | $ (10,747) | $ 10,732 |
| Weighted average number of shares outstanding (thousands of shares) | 190,981 | 193,020 | 190,693 | 189,585 |
| Net (loss) income per share (U.S. dollars) – basic | $ (0.02) | $ 0.04 | $ (0.06) | $ 0.06 |
| Net (loss) income per share – diluted | ||||
| Net (loss) income (thousands of U.S. dollars) | $ (3,484) | $ 7,091 | $ (10,747) | $ 10,732 |
| Interest on convertible debentures | NA | 486 | NA | 2,053 |
| $ (3,484) | $ 7,577 | $ (10,747) | $ 12,785 | |
| Weighted average number of shares outstanding (thousands of shares) | 190,981 | 193,020 | 190,693 | 189,585 |
| Dilutive debentures on convertible debt (thousands of shares) (1) | - | 45,861 | - | 45,861 |
| Dilutive RSUs and PRSUs (thousands of shares) (2) | - | 117 | - | 2,043 |
| Dilutive New DSUs (thousands of shares) (2) | - | 2,274 | - | 1,812 |
| Weighted average number of shares outstanding (thousands of shares) | 190,981 | 241,272 | 190,693 | 239,301 |
| Net (loss) income per share (U.S .dollars) – diluted | $ (0.02) | $ 0.03 | $ (0.06) | $ 0.05 |
(1) For the three and nine months ended September 30, 2024, the Net income per share - diluted includes the effect of 45.9 million shares that would be issued if the principal amount of the Debentures was settled in our common shares at the quarter end price as they would have the potential to dilute basic income per share. Refer to Note 9 for the anti-dilutive impact on the three and nine months ended September 30, 2025. (2) For the three and nine months ended September 30, 2024, the Net income per share - diluted includes the effect of 0.1 million and 2.0 million RSUs and PRSUs, and 2.3 million and 1.8 million New DSUs, as they would have the potential to dilute basic income per share. Refer to Note 9 for the anti-dilutive impact on the three and nine months ended September 30, 2025 and 2024.
12. REVENUE
In the following table, revenue is disaggregated by performance obligation and timing of revenue recognition. All revenue comes from contracts with customers. See Note 13 for the disaggregation of revenue by geographic region.
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Product | 32,431 | 38,510 | 102,130 | 109,527 |
| Transportation | 4,066 | 3,788 | 12,095 | 11,602 |
| License fees from Construction Partners | 180 | 177 | 539 | 561 |
| Total product revenue | 36,677 | 42,475 | 114,764 | 121,690 |
| Installation and other services | 1,039 | 900 | 3,169 | 3,733 |
| 37,716 | 43,375 | 117,933 | 125,423 |
DIRTT sells its products and services pursuant to fixed-price contracts which generally have a term of one year or less. The transaction price used in determining the amount of revenue to recognize from fixed-price contracts is based upon agreed contractual terms with each customer and is not subject to variability.
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| At a point in time | 36,497 | 42,298 | 114,225 | 121,129 |
| Over time | 1,219 | 1,077 | 3,708 | 4,294 |
| 37,716 | 43,375 | 117,933 | 125,423 |
Revenue recognized at a point in time represents the majority of the Company's sales. Revenue is recognized when a customer obtains legal title to the product, which is when ownership of the product is transferred to, or services are delivered to, the customer. Revenue recognized over time includes pre-construction services, license fees, installation and ongoing maintenance contracts with customers and is recorded as performance obligations which are satisfied over the term of the contract.
Contract Liabilities
| As at | |||
|---|---|---|---|
| September 30, 2025 | December 31, 2024 | December 31, 2023 | |
| Customer deposits | 5,591 | 4,028 | 5,290 |
| Deferred revenue | 180 | - | - |
| Contract liabilities | 5,771 | 4,028 | 5,290 |
Contract liabilities primarily relate to deposits received from customers and maintenance revenue from license subscriptions. The balance of contract liabilities was higher as at September 30, 2025 compared to December 31, 2024 mainly due to the timing of orders and payments. Contract liabilities as at December 31, 2024 and 2023 totaling $4.0 million and $5.3 million, respectively, were recognized as revenue in the nine months ended September 30, 2025 and 2024, respectively.
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Sales by Industry
The Company periodically reviews the growth of product and transportation revenue by vertical market to evaluate the success of industry-specific sales initiatives. The nature of products sold to the various industries is consistent and therefore review is focused on sales performance.
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Commercial | 21,675 | 27,815 | 70,581 | 86,012 |
| Healthcare | 8,645 | 6,975 | 25,014 | 14,824 |
| Government | 2,057 | 3,768 | 7,713 | 12,335 |
| Education | 4,120 | 3,740 | 10,917 | 7,958 |
| License fees from Construction Partners | 180 | 177 | 539 | 561 |
| Total product and transportation revenue | 36,677 | 42,475 | 114,764 | 121,690 |
| Installation and other services | 1,039 | 900 | 3,169 | 3,733 |
| 37,716 | 43,375 | 117,933 | 125,423 |
13. SEGMENT REPORTING
The Company has one reportable and operating segment and operates in two principal geographic locations – Canada and the United States. Revenue continues to be derived almost exclusively from projects in North America and predominantly from the United States. The Company's revenue from operations from external customers, based on location of operations, and information about its non-current assets, is detailed below.
Revenue from external customers
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Canada | 3,298 | 7,879 | 14,220 | 15,607 |
| U.S. | 34,418 | 35,496 | 103,713 | 109,816 |
| 37,716 | 43,375 | 117,933 | 125,423 |
Non-current assets
| As at September 30, 2025 | As at December 31, 2024 | |
|---|---|---|
| Canada | 24,286 | 25,924 |
| U.S. | 23,494 | 25,137 |
| 47,780 | 51,061 |
DIRTT has one reportable segment: solutions. The DIRTT solutions segment derives revenues from customers by providing physical products and digital tools through our ICE software to create interior spaces for our customers across the commercial, healthcare, education and government industries. The solutions segment provides digital tools (access to ICE software) and physical products to create modular interior construction spaces for our customers.
DIRTT's chief operating decision maker is the executive leadership team that includes the president and chief operating officer, chief financial officer, and the chief executive officer. The chief operating decision maker assesses performance for the solutions segment and decides how to allocate resources based on gross profit and net income (loss) that also is reported on the Consolidated Statement of Operations and Comprehensive (Loss) Income as consolidated gross profit and net income (loss). The measure of segment assets is reported on the balance sheet as total consolidated assets. The chief operating decision maker uses net income to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits into the solutions segment or into other parts of the entity, such as to repay long-term debt.
Net income (loss) are used to monitor budget versus actual results. The chief operating decision maker also uses net income (loss) in competitive analysis by benchmarking to DIRTT's competitors. The competitive analysis along with the monitoring of budgeted versus actual results are used in assessing performance of the segment and in establishing management's compensation.
DIRTT derives revenue primarily in North America and manages the business activities on a consolidated basis. The technology used in the customer arrangements is based on a single software platform that is deployed to, and implemented by, customers in a similar manner.
Segment profit and loss reconciliation to Net (loss) income after tax
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| ($ in thousands) | ($ in thousands) | |||
| Revenue | 37,716 | 43,375 | 117,933 | 125,423 |
| Cost of sales | 26,249 | 26,562 | 81,106 | 78,587 |
| Operating expenses(1) | 15,165 | 15,633 | 45,185 | 44,847 |
| Operating (loss) income | (3,698) | 1,180 | (8,358) | 1,989 |
| Other (expenses)/income and (losses)/gains(2) | 214 | 5,911 | (2,389) | 8,743 |
| Net (loss) income after tax | (3,484) | 7,091 | (10,747) | 10,732 |
| Reconciliation of profit or loss | ||||
| Adjustments and reconciling items | - | - | - | - |
| Net (loss) income after tax | (3,484) | 7,091 | (10,747) | 10,732 |
(1) Includes Sales and marketing, General and administrative, Operations support, Technology and development, Stock-based compensation, Reorganization costs and Impairment charges.
(2) Includes Tax expenses, non-recurring gains and losses, foreign exchange gains (losses), interest income and interest expenses.
14. INCOME TAXES
As at September 30, 2025, the Company had a valuation allowance of $29.8 million against deferred tax assets as the Company has experienced cumulative losses in recent years (December 31, 2024 – $30.0 million).
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15. RIGHTS OFFERING
On November 21, 2023, the Company announced that the Board of Directors had approved a rights offering (the "Rights Offering") to its common shareholders for aggregate gross proceeds of C$30.0 million ($22.4 million).
In connection with the Rights Offering, the Company entered into a standby purchase agreement, dated November 20, 2023 (the "Standby Purchase Agreement") with 22NW and 726 BC LLC and 726 BF LLC (together, "726"), or their permitted assigns (collectively and including WWT Opportunity #1 LLC, to which 726 transferred all of their common shares to on December 1, 2023, the "Standby Purchasers"). Subject to the terms and conditions of the Standby Purchase Agreement, each Standby Purchaser agreed to exercise its Basic Subscription Privilege (as defined below) in full and to collectively purchase from the Company, at the subscription price, all common shares not subscribed for by holders of Rights (as defined below) under the Basic Subscription Privilege or Additional Subscription Privilege (as defined below), up to a maximum of C$15.0 million each, so that the maximum number of common shares that could be issued in connection with the Rights Offering would be issued and the Company would receive aggregate gross proceeds of C$30.0 million ($22.4 million). As described below, no standby fee was paid to the Standby Purchasers in connection with the Rights Offering; however, DIRTT reimbursed the Standby Purchasers for their reasonable expenses in the amount of $0.03 million each.
On January 9, 2024, the Company announced the completion of the Rights Offering to its common shareholders and the issuance of 85,714,285 common shares at a price of C$0.35 ($0.26) per whole common share for aggregate gross proceeds of C$30.0 million ($22.4 million) and aggregate net proceeds of $21.3 million ($1.1 million of costs associated with the Rights Offering). Each right distributed under the Rights Offering (each, a "Right") entitled eligible holders to subscribe for 0.81790023 common shares, exercisable for whole common shares only, meaning 1.22264301 Rights were required to purchase one common share (the "Basic Subscription Privilege"). In accordance with applicable law, the Rights Offering included an additional subscription privilege (the "Additional Subscription Privilege") under which eligible holders of Rights who fully exercised the Rights issued to them under their Basic Subscription Privilege, were entitled to subscribe for additional common shares, on a pro rata basis, that were not otherwise subscribed for under the Basic Subscription Privilege.
DIRTT issued an aggregate of 67,379,471 common shares pursuant to the Basic Subscription Privilege and 18,334,814 common shares pursuant to the Additional Subscription Privilege. As a result of the common shares issued under the Basic Subscription Privilege and Additional Subscription Privilege, no common shares were available for issuance pursuant to the Standby Purchase Agreement.
16. COMMITMENTS AND CONTINGENCIES
As at September 30, 2025, the Company had outstanding purchase obligations of approximately $3.3 million related to service commitments, inventory, and property, plant and equipment purchases (December 31, 2024 – $4.2 million). As at September 30, 2025, the Company had undiscounted operating lease liabilities of $37.1 million (December 31, 2024 – $39.5 million), which includes undiscounted rent obligations of $1.4 million relating to a five-year lease agreement for a new DIRTT Experience Center ("DXC") in Houston, Texas that was signed by the Company in the second quarter of 2025.
DIRTT Environmental Solutions Inc. received a subpoena for records in relation to an ongoing inquiry by the U.S. Department of Justice into certain projects and services provided by a third party and DIRTT. The Company is complying with the subpoena and cooperating with the Department of Justice. At this time, there are no asserted claims against the Company. Therefore the extent of any loss, if any, to the Company cannot be reasonably estimable.
17. RELATED PARTY TRANSACTIONS
As at September 30, 2025 and September 30, 2024 there were no Debentures held by a related party. Interest earned on Debentures held by a related party is $nil for the three and nine months ended September 30, 2025 ($0.3 million and $1.0 million for three and nine months ended September 30, 2024). Interest was earned on terms applicable to all Debenture holders.
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18. SUBSEQUENT EVENTS
On October 28, 2025, we entered into a non-binding term sheet with the Business Development Bank of Canada (“BDC”) for proposed financing of up to C$15.0 million, the net proceeds of which are expected to be used to further strengthen our balance sheet and partially repay the January Debentures. The remaining January Debentures (C$1.6 million) are expected to be repaid using cash on hand. DIRTT continues to consider, evaluate, and negotiate a definitive agreement with respect to the proposed financing with BDC. Any advancement of funds is subject to, among other things, BDC’s due diligence and the negotiation and execution of binding definitive documentation. There can be no assurance that a definitive agreement will be reached or that the proposed financing will be completed on the terms in the non-binding term sheet or at all, and the Company may ultimately determine not to proceed with the financing or use any net proceeds of such financing for the repayment of the January Debentures.
On November 4, 2025, the Company entered into the Fifth Extended RBC Facility. For more information, refer to Note 8.