Executive Summary

Q1 2025 revenue was $41.3M (+1% YoY) and gross margin was 35.2% (down 70 bps YoY) as newly enacted aluminum and China hardware tariffs (~$0.6M, 1.4% of revenue) weighed on profitability; Adjusted EBITDA was $2.1M (5.1% margin) and GAAP net loss was $0.7M .
Management withdrew full-year 2025 revenue and Adjusted EBITDA guidance given tariff uncertainty and cascading delays in customer decision-making; 12‑month pipeline remains resilient (+8% YoY; $36.0M liquidity) and they still expect positive Adjusted EBITDA in 2025 .
Against S&P Global consensus*, revenue missed ($41.3M vs $45.2M*), and EBITDA was below expectations ($1.37M* vs $3.45M*); EPS consensus was unavailable*, highlighting headwinds from tariffs and higher professional fees tied to litigation and a private share repurchase .
Strategic levers: 5% list price increase (effective for orders after Mar 18, 2025) with expected benefit in 2H25, mix shift toward education/healthcare projects, and operational flexibility by balancing loads between Calgary and Savannah to mitigate tariffs .
Potential stock reaction catalysts: guidance withdrawal and revenue/EBITDA miss vs. consensus*, tariff path/mitigation clarity, and updates on litigation timelines and partner/channel progress .

What Went Well and What Went Wrong

What Went Well
- Pipeline and demand signals: 12‑month forward pipeline up 8% YoY; leads +47% from 1/1/25 to 4/1/25; Integrated Solutions pipeline +21% QoQ with a $5.2M casework win; liquidity of $36.0M supports execution .
- Channel and market progress: HB Work Places became an exclusive DIRTT seller; new healthcare Experience Centre lease in Houston; expansion into airport and government projects; on-time/in-full delivery 98.8% and TRIF 0.5 in Q1 .
- Pricing and operations: 5% price increase announced (Feb 11) to offset rising inputs; benefits expected in 2H25; flexibility to rebalance aluminum production across Calgary and Savannah .
What Went Wrong
- Tariff shock and mix: 25% aluminum tariff (March 2025) and 145% tariff on China hardware increased costs ($0.6M or 1.4% of revenue), pressuring gross margin (35.2% vs 35.9% YoY) and delaying customer decisions .
- Operating expense pressure: Professional fees rose ~$0.9M tied to litigation and the NGEN share repurchase, contributing to lower Adjusted EBITDA ($2.1M vs $2.7M YoY) .
- Guidance withdrawal: Management pulled FY25 revenue and Adjusted EBITDA guidance due to uncertainty around tariffs and near‑term scheduling/signing delays, reducing visibility for investors .

Financial Results

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($USD Millions)	43.375	48.890	41.295
Gross Profit ($USD Millions)	16.813	17.539	14.542
Gross Margin %	38.8%	35.9%	35.2%
Adjusted Gross Profit ($USD Millions)	17.636	18.980	15.499
Adjusted Gross Margin %	40.7%	38.8%	37.5%
Adjusted EBITDA ($USD Millions)	4.074	5.499	2.107
Adjusted EBITDA Margin %	9.4%	11.2%	5.1%
Net Income (Loss) ($USD Millions)	7.091	4.038	(0.661)
EPS (Basic) ($)	0.04	0.02	(0.00)

Segment/Product Mix

Revenue Component	Q3 2024 ($M)	Q4 2024 ($M)	Q1 2025 ($M)
Product Revenue	42.475	47.970	40.346
Service Revenue	0.900	0.920	0.949

KPIs and Operating Metrics

KPI	Q3 2024	Q4 2024	Q1 2025
Liquidity ($M)	34.3	39.3	36.0
Unrestricted Cash ($M)	23.6	29.3	28.4
12‑mo Pipeline ($M)	—	278 at 1/1/25	292 at 4/1/25
Leads Growth	—	—	+47% vs 1/1/25
DSO / DPO (days)	—	31 / 34	26 / 27
Inventory ($M)	—	15.1	14.5
OTIF Delivery %	99.2% (Q3)	99.1% (FY24)	98.8% (Q1)
TRIF	0.63 (9M’24)	0.82 (FY24)	0.5 (Q1)

Q1 2025 Actuals vs S&P Global Consensus*

Metric (Q1 2025)	Consensus*	Actual	Surprise*
Revenue ($M)	45.150*	41.295	-8.5%*
EBITDA ($M)	3.450*	1.368*	-60.3%*
Primary EPS ($)	N/A*	(0.00)	N/A*

*Values retrieved from S&P Global.

Notes: Company-reported Adjusted EBITDA was $2.107M vs S&P Global EBITDA actual of $1.368M, reflecting differences in definition and non‑GAAP adjustments .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2025	$194–$209M (provided Feb 26, 2025)	Withdrawn (May 7, 2025)	Withdrawn
Adjusted EBITDA	FY 2025	$18–$25M (provided Feb 26, 2025)	Withdrawn (May 7, 2025)	Withdrawn
Qualitative Outlook	FY 2025	Maintain guidance (as of Feb)	Expect positive Adjusted EBITDA in 2025	Updated qualitative

Additional Pricing Action: 5% list price increase announced Feb 11, 2025 (effective for orders after Mar 18, 2025); benefits expected in 2H25 .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3’24 and Q4’24)	Current Period (Q1’25)	Trend
Tariffs / Macro	Anticipated tariff risk; maintaining FY25 guide while monitoring; flexibility via US/Canada footprint	25% aluminum tariff (Mar) and 145% China hardware tariff (Apr) impacted Q1 gross profit by $0.6M (1.4% of rev); guidance withdrawn	Deteriorated; elevated uncertainty
Pricing	No changes in Q3; planning for 2025; 5% price increase announced Feb 11	Price action in place; benefits expected in 2H25	Positive mitigation in 2H
Pipeline / Demand	12‑mo pipeline mechanics; year‑over‑year pipeline affected by phased mega‑project; liquidity strong	12‑mo pipeline +8% YoY; leads +47%; near‑term delays in awards/schedules	Mixed: long‑term healthy, near‑term delays
ICE / Technology	Expanded ICE features; exploring AI for efficiency; Siemens Xcelerator partnership	Continued ICE investment; AI/automation in back‑office; showcased at industry events	Continued execution
Operations KPIs	OTIF ~99%; TRIF well below industry; capacity headroom	OTIF 98.8%; TRIF 0.5; ongoing lean focus	Stable strong ops
Litigation	Canadian trial scheduled Feb 2, 2026; confidence in case	Utah case moved to Canada; trial set; building case	Proceeding toward trial
Capital Allocation	NCIB for shares and debentures; strengthening liquidity	Continued buybacks; private repurchase from NGEN; ABL extended/increased	Ongoing balance sheet actions

Management Commentary

CEO (Benjamin Urban): “The uncertainty of tariffs are causing a delay in decision making on projects…we have signed a lease with the Texas Medical Center Innovation Factory in Houston to build a DIRTT Experience Centre…we have increased our full pipeline by 21% from December 31, 2024 to March 31, 2025…secured a pipeline for casework of $5.2 million” .
CFO (Fareeha Khan): “Our first quarter revenue was in line with expectations and first quarter Adjusted EBITDA was better than expected…we are withdrawing our annual guidance…we expect to generate positive Adjusted EBITDA in 2025” .
CFO on tariffs: “$0.6 million or 1.4% of our revenue [in Q1] of costs related to enacted tariffs and tariff mitigation actions…25% aluminum tariff…145% tariff on Chinese imports…we benefit from geography…balanc[ing] loads between Calgary and Savannah” .
CEO on innovation and execution: “Innovation continues to fuel everything we do at DIRTT…DIRTT was named #1 in manufacturing on Fast Company's list of the world's most innovative companies of 2025…on time and in full delivery was 98.8%…TRIF was 0.5” .

Q&A Highlights

The published transcript consisted of prepared remarks and did not include a separate analyst Q&A section; emphasis was on tariff impacts, guidance withdrawal, pipeline/leads, pricing actions, and operational mitigations .
Management clarified that benefits from the February price increases are expected to materialize in 2H25 and that tariff mitigation includes shifting aluminum production and increasing US sourcing .
Liquidity and capital structure remain focal points: $36.0M liquidity; extended and upsized RBC ABL; ongoing share and debenture repurchases .

Estimates Context

Revenue missed S&P Global consensus by ~8.5% ($41.3M actual vs $45.2M consensus*) and EBITDA missed by ~~60% ($1.37M* actual vs $3.45M* consensus), driven by tariff costs (~~$0.6M), higher professional services (litigation and share repurchase), and a slightly lower gross margin .
EPS consensus was unavailable via S&P Global for Q1 2025*; company reported basic/diluted EPS of $(0.00) .
Given guidance withdrawal and tariff timing/extent uncertainty, we expect sell‑side models to reduce FY25 revenue and EBITDA, partially offset by 2H25 pricing tailwinds and pipeline resilience .
*Values retrieved from S&P Global.

Key Takeaways for Investors

Q1 prints a small adjusted EBITDA profit amid tariff headwinds; near‑term visibility reduced as management withdrew FY25 guidance, a likely overhang until tariff paths and demand timing clear .
Consensus miss on revenue and EBITDA* plus guidance withdrawal are immediate stock catalysts; watch for updates on tariff mitigation (production rebalancing, US sourcing) and 2H25 pricing realization .
Demand signals remain constructive (pipeline/leads up) even as awards and schedules are delayed; education and healthcare momentum and Integrated Solutions expansion provide diversification .
Balance sheet/liquidity remain solid with $36.0M of liquidity and extended/increased ABL; ongoing share/debenture buybacks underscore capital discipline .
Legal process advancing toward a Feb 2026 Canadian trial in the Falkbuilt matter; while non‑operational, legal costs pressured Q1 OpEx and bear monitoring .
Medium‑term: If tariffs stabilize and price increases flow through, margins should recover; ICE/AI and operational excellence continue to differentiate and support profitable growth .

Additional Detail and Cross‑Checks

Q1 YoY revenue +1% to $41.3M; QoQ -15.6% vs Q4’s $48.9M as volumes normalized from typical Q4 strength and early‑year tariff disruptions .
Gross margin 35.2% (vs 35.9% YoY; -70 bps); Adjusted gross margin 37.5% (vs 37.9% YoY; -40 bps), with ~$0.6M tariff cost headwind .
Net swing to $(0.7)M loss vs $3.0M profit YoY driven by non‑recurring debt extinguishment gain in Q1’24 and FX shift (gain to loss), partially offset by lower interest expense from deleveraging .

DIRTT ENVIRONMENTAL SOLUTIONS LTD (DRTTF)·Q1 2025 Earnings Summary