DIRTT Environmental Solutions Reports Q4 2025 Results and Issues Strong 2026 Guidance

Key Financial Highlights

• Q4 2025 Revenue: \$50.9 million, up 4% year-over-year and at the high end of guidance (\$48M–\$52M).
• Q4 2025 Gross Profit: \$18.6 million (36.6% margin), up from \$17.5 million (35.9% margin) in Q4 2024.
• Q4 2025 Net Loss: \$3.7 million, compared to net income of \$4.0 million in Q4 2024, primarily due to one-time charges.
• Q4 2025 Adjusted EBITDA: \$6.2 million (12.1% margin), up from \$5.5 million (11.2% margin) in Q4 2024.
• Liquidity: \$32.1 million at year end, down from \$39.3 million YoY, including unrestricted cash and borrowing capacity.
• 2026 Guidance: Revenue between \$194–\$209 million, Adjusted EBITDA between \$26–\$31 million.

Major Corporate Developments and Shareholder-Relevant Events

• Transformation Office Established: Two strategic short-term executive appointments (Scott Robinson, Executive Chairman; Adrian Zarate, Chief Transformation Officer) to accelerate strategic changes and improve long-term earnings.
• BDC Financing: Agreement for up to C\$15.0 million in new debt funding from Business Development Bank of Canada, with C\$5.5 million already received to refinance outstanding convertible debentures. Remaining funds subject to conditions.
• Normal Course Issuer Bid (NCIB): Renewal of share buyback program, allowing the company to repurchase up to 9,593,000 shares through December 2026, with all purchases to be cancelled—potentially price supportive for shareholders.
• Lease Termination and Impairment: Early termination of Rock Hill, SC facility lease, resulting in a \$2.3 million one-time non-cash impairment charge and \$0.9 million gain on derecognition of lease liability/right-of-use asset.
• Leadership Changes: Departure of President & COO Richard Hunter and hiring of Aaron Merkin as Chief Technology Officer.
• Litigation: Commencement of an 8-week trial against Falkbuilt Ltd. and former employees, seeking damages for alleged breaches of restrictive covenants, fiduciary duties, and confidentiality. Outcome could materially affect future results and reputation.
• Support Agreement: Signed with largest shareholder (22NW Fund, L.P.) and 726 Entities, providing governance stability and board appointment (Jeremy Gold of Briger Family Office).
• Debt Repayment: Repaid C\$16 million (\$12.1 million) in outstanding convertible debentures, improving balance sheet flexibility.

Detailed Financial Analysis

Revenue & Gross Profit

DIRTT’s Q4 revenue of \$50.9 million reflects a 4% YoY increase, driven by improved pipeline conversion, a 5% price increase, and a 3.5% tariff surcharge introduced earlier in 2025. Gross profit margin improved to 36.6% as tariff mitigation efforts took effect. Adjusted Gross Profit Margin was 38.7%, steady with the prior year and up from Q3 2025 (30.4%).

Operating Expenses & One-Time Charges

• Sales & Marketing: Down \$0.4 million YoY to \$5.4 million due to lower commissions, travel, and marketing spend, partly offset by higher salaries/benefits.
• General & Administrative: Up \$2.8 million YoY to \$8.0 million, including a \$2.0 million legal provision, \$0.4 million bad debt write-off, and \$0.3 million in litigation costs.
• Reorganization Costs: \$2.0 million (vs \$0.2 million prior year), related to executive changes and transformation plan consultants.
• Impairment: \$2.3 million non-cash charge for Rock Hill facility leasehold improvements and \$0.7 million for Phoenix facility right-of-use assets.
• Stock-Based Compensation: \$1.0 million, slightly lower YoY due to lower share price.

Other Income/Expenses

• Foreign Exchange: \$0.3 million loss in Q4 2025 vs \$2.1 million gain in Q4 2024, reflecting CAD strength vs. USD.
• Interest Income: \$0.2 million (down YoY), Interest Expense: \$0.5 million (flat YoY).
• Net loss after tax: \$3.7 million, compared to net income of \$4.0 million in Q4 2024—driven by one-time impairments, higher reorg/legal costs, and FX losses.

Non-GAAP Measures

• Adjusted EBITDA: \$6.2 million (12.1% margin), up 0.9 percentage points YoY.
• Adjusted Gross Profit: \$19.7 million (38.7% margin), in line with last year.

2026 Outlook and Guidance

• Revenue: \$194–\$209 million expected for 2026.
• Adjusted EBITDA: \$26–\$31 million expected for 2026.
• Guidance does not reflect potential future tariffs or trade policy changes; will be updated as necessary.
• Transformation Office initiatives expected to further enhance revenue and earnings capacity beyond 2026.

Industry and Macroeconomic Context

• Dodge Momentum Index rose through year-end, indicating supportive demand for construction/interior solutions.
• DIRTT’s order pipeline started Q4 2025 20% higher YoY, with volumes normalizing and price/tariff actions supporting top line.
• Balance sheet remains robust with \$32.1 million liquidity and modest indebtedness (\$23.4 million).

Risks and Shareholder-Sensitive Events

• Falkbuilt Litigation: The outcome of the ongoing trial could materially impact DIRTT’s financial position and reputation.
• Legal Provisions: \$2.0 million provision in Q4 reflects litigation risk.
• Transformation Plan: Execution and cost savings from Transformation Office initiatives are key to future earnings power.
• Tariff/Trade Risks: Guidance excludes unforeseen tariff impacts, which could materially affect future results.
• NCIB: Active share repurchase program may support share price if executed.
• Leadership Changes: New executive appointments and board changes may influence strategic direction and market perception.
• Debt Refinancing: Successful refinancing and repayment of debentures improve financial flexibility and reduce risk.

Conference Call Information

Management will host a call on February 26, 2026 at 08:00 a.m. MDT (10:00 a.m. EDT), webcast live at dirtt.com. Replay and Q&A registration links are available on the company’s website.

About DIRTT Environmental Solutions

DIRTT Environmental Solutions (TSX: DRT; OTCQX: DRTTF) is a leader in industrialized construction, specializing in adaptable interior environments for workplace, healthcare, education, and public sector markets. The company offers both physical products and digital tools to empower flexible construction and design solutions.

Investor Contact

Email: [email protected]

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Forward-looking statements are subject to risks and uncertainties as disclosed in the company’s public filings. Investors should review all relevant disclosures and consult with a financial advisor before making investment decisions.

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