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DIRTT ENVIRONMENTAL SOLUTIONS LTD (DRTTF)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $37.7M, down 13% year over year, with gross margin improving sequentially to 30.4% as tariff mitigation actions took effect; net loss was $3.5M and Adjusted EBITDA returned positive at $1.2M .
  • Management guided Q4 2025 revenue to $48.0–$52.0M and Adjusted EBITDA to $5.0–$7.0M, citing substantially mitigated tariff impact and a stronger pipeline ($333.5M 12‑month forward) .
  • Versus S&P Global consensus, revenue missed ($37.7M vs $40.4M), while EPS beat (−$0.02 vs −$0.03) and EBITDA was above expectations; consensus coverage was limited (one estimate) *.
  • Liquidity stood at $32.3M; the company extended its RBC credit facility to Nov 30, 2026 and signed a non‑binding term sheet with BDC for up to C$15M to help settle January 2026 debentures .

What Went Well and What Went Wrong

What Went Well

  • Sequential margin recovery: gross margin rose from 27.8% in Q2 to 30.4% in Q3 as tariff mitigations took effect, with Adjusted EBITDA turning positive to $1.2M .
  • Strengthening pipeline and operational momentum: “Our 12‑month forward pipeline has increased to $333.5 million… We have the pipeline, the manufacturing excellence and the innovation and are excited for the future.” — CEO Benjamin Urban .
  • Balance sheet and financing progress: “This quarter we increased cashflows by $3.0 million and closed the quarter with $32.3 million of liquidity… we expect to use [BDC financing] to partially settle the January Debentures… [and] extended our RBC Facility for an additional year.” — CFO Fareeha Khan .

What Went Wrong

  • Revenue pressure and YoY margin compression: revenue −13% YoY to $37.7M; gross margin 30.4% vs 38.8% a year ago, reflecting tariffs and lower volumes .
  • Tariffs remained a headwind: $1.9M in tariff/mitigation costs (5.1% of revenue) in Q3, with a 50% tariff on Canadian aluminum exports to the U.S. most impactful .
  • Elevated reorganization costs: $2.6M recognized in Q3 for Transformation Office activities, contributing to a net loss of $3.5M vs net income of $7.1M in Q3 2024 (prior year included a $7.5M gain on extinguishment of debt) .

Financial Results

Consolidated Performance vs prior periods and YoY

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$43.4 $41.3 $38.9 $37.7
Gross Profit ($USD Millions)$16.8 $14.5 $10.8 $11.5
Gross Profit Margin %38.8% 35.2% 27.8% 30.4%
Adjusted Gross Profit ($USD Millions)$17.6 $15.5 $11.8 $12.5
Adjusted Gross Margin %40.7% 37.5% 30.4% 33.1%
Net (Loss) Income ($USD Millions)$7.1 $(0.7) $(6.6) $(3.5)
EPS (Basic) ($USD)$0.04 $(0.00) $(0.03) $(0.02)
EBITDA ($USD Millions)$9.8 $1.1 $(4.7) $(1.6)
Adjusted EBITDA ($USD Millions)$4.1 $2.1 $(2.0) $1.2
Adjusted EBITDA Margin %9.4% 5.1% (5.2%) 3.1%

Notes: EBITDA reflects GAAP definition; Adjusted EBITDA excludes FX, stock-based comp, reorganization, etc., per company reconciliation .

Revenue Mix

Revenue Type ($USD Millions)Q3 2024Q1 2025Q2 2025Q3 2025
Product Revenue$42.5 $40.35 $37.74 $36.68
Service Revenue$0.90 $0.95 $1.18 $1.04
Total Revenue$43.38 $41.30 $38.92 $37.72

KPIs and Operating Metrics

KPIQ3 2024Q1 2025Q2 2025Q3 2025
Tariff/mitigation costs (% of revenue)—1.4% 5.1% 5.1%
12‑month forward pipeline ($USD Millions)—$292 at Apr 1 >$300M (up 7% q/q) $333.5 (as of Sep 30)
Liquidity ($USD Millions)—$36.0 $31.1 $32.3
RBC Facility status—Extended to Nov 30, 2025 —Extended to Nov 30, 2026
BDC term sheet———Up to C$15.0M (non‑binding)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q4 2025None (annual FY25 guidance withdrawn in Q1 2025) $48.0–$52.0 Initiated quarterly guidance; effectively raised visibility
Adjusted EBITDA ($USD Millions)Q4 2025None (annual FY25 guidance withdrawn in Q1 2025) $5.0–$7.0 Initiated quarterly guidance; positive Adjusted EBITDA targeted

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
Tariffs/macroInitial 25% aluminum tariff; 145% China hardware tariff; withdrew annual guidance due to uncertainty Tariff increased to 50% on aluminum; margins pressured; mitigation strategies underway Tariff impacts “substantially mitigated”; sequential margin improvement Improving mitigation; normalization expected
Product innovationICE software investment; awards; new Spectra Door variants; Cove recognition One‑hour fire‑rated wall; expanding into healthcare, hospitality, multi‑family Continued innovation; industry recognition (COVE awards) Broadening scope and sector penetration
Integrated Solutions / Construction ServicesPipeline up 21%; large airport casework win ($5.2M) Integrated Solutions pipeline +20% YTD; key driver of pipeline Construction Services team highlighted; ~$50M in pipeline Growing contribution to revenue outlook
AI/automation/process transformationTransformation Office; deploying AI/automation to back‑office Ongoing transformation to scale and compete with conventional construction $2.6M reorg expense tied to Transformation Office; completion by 2026 Investment continues; cost to realize efficiencies
Financing/capital structureRBC facility extended; share repurchase from NGEN NCIB for debentures ongoing RBC extended to 2026; BDC term sheet up to C$15M; renewed debentures NCIB Proactive liability management ahead of Jan 2026 maturity
Legal/regulatoryFalkbuilt litigation trial set for Feb 2026 (Canada) Litigation costs increased 8‑week trial scheduled Feb 2, 2026; pursuing damages Case progressing; cost impact persists

Management Commentary

  • “The third quarter of 2025 marked a shift back to normal business with improving margins and a return to positive Adjusted EBITDA… Our 12‑month forward pipeline has increased to $333.5 million… We have the pipeline, the manufacturing excellence and the innovation and are excited for the future.” — Benjamin Urban, CEO .
  • “This quarter we increased cashflows by $3.0 million and closed the quarter with $32.3 million of liquidity… we expect to use [BDC financing] to partially settle the January Debentures… We have also extended our RBC Facility for an additional year… for the fourth quarter of 2025, we expect revenue between $48.0 and $52.0 million and Adjusted EBITDA between $5.0 and $7.0 million.” — Fareeha Khan, CFO .

Q&A Highlights

  • Q3 2025 earnings call was held Nov 6, 2025; a webcast replay was referenced, but no transcript is available in our document corpus. Q&A themes and clarifications are therefore unavailable at this time .

Estimates Context

Q3 2025 vs S&P Global Wall Street consensus:

MetricConsensusActualBeat/Miss
Revenue ($USD)$40.4M*$37.7M Miss
EPS (Primary, $USD)−$0.03*−$0.02 Beat
EBITDA ($USD)−$2.0M*$(1.6)M (EBITDA) / $1.2M (Adj. EBITDA) Above consensus on Adjusted EBITDA; GAAP EBITDA below

Values marked with an asterisk retrieved from S&P Global. Coverage was limited (one estimate for EPS and revenue). Note: Company reports both GAAP EBITDA and Adjusted EBITDA; consensus may not align with the company’s adjusted definition .

Key Takeaways for Investors

  • Sequential margin improvement and return to positive Adjusted EBITDA are constructive signals despite softer revenue; gross margin rose to 30.4% from 27.8% in Q2, and Adjusted EBITDA reached $1.2M .
  • Revenue missed consensus while EPS beat; limited analyst coverage increases the potential for estimate volatility and outsized stock reactions on guidance updates *.
  • Q4 guidance ($48–$52M revenue; $5–$7M Adjusted EBITDA) implies strong sequential growth and margin recovery; watch conversion of the $333.5M pipeline and the extent of tariff normalization .
  • Liquidity of $32.3M, RBC facility extended to Nov 30, 2026, and the C$15M BDC term sheet collectively de‑risk near‑term debenture maturities; monitor definitive documentation and execution .
  • Transformation Office investments ($2.6M reorg in Q3) target process efficiency and scalability; margin trajectory should benefit as initiatives standardize and scale through 2026 .
  • Integrated Solutions/Construction Services are expanding scope and driving pipeline diversification, with ~$50M of opportunities and new product introductions widening addressable markets .
  • Litigation (Falkbuilt) remains a 2026 event risk with ongoing cost impact; resolution could remove uncertainty but timing and outcome are inherently binary .

Bolded beats/misses and surprises:

  • Revenue: Miss vs consensus ($37.7M vs $40.4M)* .
  • EPS: Beat vs consensus (−$0.02 vs −$0.03)* .
  • Adjusted EBITDA: Positive surprise vs prior quarter (−$2.0M in Q2 to +$1.2M) .

Footnote: Values retrieved from S&P Global (consensus estimates).