DIRTT Environmental Solutions (TSE:DRT) used its fourth-quarter 2025 earnings call to highlight what management described as a “return to normalcy” in sales and earnings power, alongside progress on transformation initiatives intended to improve the company’s long-term revenue and profitability profile.
Chief Transformation Officer Adrian Zarate opened the call with customary reminders about forward-looking statements and non-GAAP measures. CEO Benjamin Urban said the company believes its transformation initiatives are gaining traction and are expected to drive “a structural improvement” in DIRTT’s long-term revenue and earnings capacity.
Fourth-quarter results: revenue up, margins improved, but net loss reported
DIRTT’s gross profit margin increased to 36.6% of revenue, compared with 35.9% in the fourth quarter of 2024. Khan also noted a significant sequential improvement versus the third quarter of 2025, when gross margin was 30.4%, attributing the quarter-over-quarter increase to the “realization of tariff mitigation synergies.”
Operating expenses for the quarter, excluding several items management characterized as special or non-recurring (including reorganization costs, stock-based compensation, impairment charges, a legal provision, and other non-recurring operating expenses), were $14.1 million, which Khan said was consistent with the year-ago quarter. She added that higher professional fees and operating support expenses were offset by lower general and administrative expenses as well as lower technology and development expenses.
On the bottom line, DIRTT posted a net loss after tax of $3.7 million, compared with net income after tax of $4 million in the fourth quarter of 2024. Khan said the net loss was primarily impacted by $7.6 million of increased general and administrative reorganization expenses and impairment charges, partially offset by a $0.9 million non-cash gain related to disposal of the Rock Hill facility lease. She also cited a $0.3 million foreign exchange loss tied to a stronger Canadian dollar versus the U.S. dollar.
Adjusted EBITDA for the quarter was $6.2 million, up from $5.5 million in the same quarter last year.
Cash, liquidity, and working capital updates
DIRTT ended the quarter with $20.3 million in unrestricted cash, down $5.8 million from Sept. 30, 2025. Khan said cash used in operations was $4.3 million, cash used in investing activities was $1.2 million, and cash used in financing activities was $0.3 million. She said financing outflows primarily reflected long-term debt repayments, employee tax payments related to vested RSUs, and common share repurchases under the company’s normal course issuer bid.
Khan also pointed to improvements in working capital performance. Days inventory outstanding (DIO) declined to 53.7 days from 61.4 days, and the trailing three-month average cash conversion cycle improved to 47.2 days from 49 days at the end of September 2025.
Total liquidity was $32.1 million as of Dec. 31, 2025, including $11.8 million of availability under the company’s asset-based lending (ABL) credit facility. Khan said DIRTT has not drawn on the ABL facility to date.
On capital structure activity, Khan said DIRTT had minimal activity in its debentures NCIB and shares NCIB programs during the quarter, but repaid its January debentures using balance sheet cash in January 2026. She also said the company executed a letter of offer with BDC for up to CAD 15 million of total funds, and that the first tranche of CAD 5.5 million was received earlier in February.
Fiscal 2026 guidance and tariff considerations
Looking ahead, management issued fiscal 2026 guidance of $194 million to $209 million in revenue and $26 million to $31 million in Adjusted EBITDA. Khan said the guidance range reflects DIRTT’s current assessment of tariff impacts, but does not include potential effects from “unforeseen tariffs or trade policy changes.” She added the company would update guidance if and when the impact becomes quantifiable.
Urban said the company’s fourth-quarter results came in within its previously issued outlook, noting revenue and Adjusted EBITDA of $50.9 million and $6.2 million, respectively, versus guidance of $48 million to $52 million in revenue and $5 million to $7 million in Adjusted EBITDA. He also said the company was coming off its “highest revenue grossing month in two years.”
Commercial wins, distribution strategy, and operating model changes
Urban attributed recent performance and momentum to commercial wins, changes to distribution strategy, and a new operating model. He said DIRTT recently announced another project with “a 10-year plus legacy client,” Google, for the company’s Toronto office, and also cited a “major new contract” with U-Haul. Urban said the deals reflect DIRTT’s focus on expanding repeat and new enterprise relationships.
On distribution, Urban described an evolution in how DIRTT pursues and delivers projects. He said the company formed an Integrated Solutions team in the prior year to explore expanded revenue opportunities, and in the third quarter formalized the group as DIRTT Construction Services to reflect its full scope. Urban said the group provides services including:
- Pre-construction support
- Design-build assistance
- Targeted estimating
- Self-perform installation
He added that the intent is to elevate DIRTT “from manufacturing to a multi-trade, prefabricated interior construction company.” Urban said DIRTT Construction Services is designed to complement the existing partner distribution channel by helping select partners bid and win larger projects, filling capability gaps on partner teams, and pursuing projects in markets without partner coverage, in sectors requiring specific expertise, or in support of the company’s national account strategy.
Urban also said DIRTT has optimized its partner network through “greater stratification and targeted resource allocation,” and identified its highest potential partners while increasing investment in those relationships to expand the pipeline and improve conversion to revenue.
Separately, he said DIRTT introduced a new operating model focused on process standardization and operational discipline, intended to reduce complexity and unlock capacity across the business. Urban said these actions are designed to expand DIRTT’s addressable market, augment operating leverage, and support structurally higher earnings power.
Litigation update and Q&A
Urban provided a brief update on the Falkbuilt litigation, stating that an eight-week trial covering multiple allegations began on Feb. 2, 2026, and remained underway at the time of the call. He said DIRTT is pursuing damages it suffered in Canada, the United States, and abroad.
No analysts or investors entered the queue during the question-and-answer portion of the call. Urban closed by thanking participants and said he had no further remarks.
About DIRTT Environmental Solutions (TSE:DRT)
Dirtt Environmental Solutions Ltd is a manufacturer of customized interiors. The company combines its (3D) design, configuration, and manufacturing software (ICE or ICE Software) with in-house manufacturing of its prefabricated interior construction solutions and a distribution partner (DP) network. It offers services to various sectors which include healthcare, education, commercial and other sectors. DIRTT operates its activity through the U.S and Canada of which, the United States generates a majority of revenue.
