28 slides from Dirtt Environmental Solutions's proxy contest presentation, Apr 5, 2022
Slide 1: DIRTT Investor Deck
DIRTT | investor Deck
Slide 2: Advisories: Cautionary Statement Regarding Forward-Looking Statements
Advisories CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Certain statements contained in this presentation (this “presentation”) are “forward-looking statements” within the meaning of “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995 and Secti
Slide 3: Advisories: Non-GAAP Financial Measures
Advisories As a result, we also provide financial information that is not prepared in accordance with GAAP and should not be considered as an alternative to the information prepared in accordance with GAAP. Management uses these non-GAAP financial measures in its review and evaluation of the financi
Slide 4: Background
Background Unlike typical proxy contests, this is one is unique: It is the Board that is seeking change and the activist 22NW, led by Mr. Aron English, that has stated an intent to “stay the course” and keep the status quo, which through our pandemic experience, we have learned needs adjustment. Ove
Slide 5: Executive Summary
Executive Summary • DIRTT’s Board is committed to executing its plan to create long-term value in the face of a costly and distracting proxy fight. • DIRTT is delivering critical changes to accelerate growth and profitability, driven by feedback from partners, management and shareholders. The feedba
Slide 6: Executive Summary
Executive Summary • As a whole, 22NW’s predominantly male slate is unqualified to lead DIRTT and would reverse the progress made. • DIRTT has consistently engaged with its shareholders, including 22NW. The Company had several meetings with Mr. English regarding his Board candidacy prior to his unfor
Slide 7: DIRTT Has Been Open and Willing to Work with 22NW
DIRTT Has Been Open and Willing to Work with 22NW • From March 2020 to November 2021, there were at least 20 meetings between 22NW and DIRTT’s management and/or Board. • On November 5 and 12, 2021, the Board informed 22NW’s founder, Mr. English, that his candidacy would be considered in February 202
Slide 8: The Pandemic's Unpredictable Negative Impact on DIRTT
The Pandemic’s Unpredictable Negative Impact on DIRTT • DIRTT’s business was particularly hard-hit by the COVID-19 pandemic, with the initial reaction in March 2020 and every new wave of infection causing uncertainty among clients and hindering the economic recovery. The status quo, supported by 22N
Slide 9: How the Board Championed Change and Moved Into Action
How the Board Championed Change and Moved Into Action Appointment of New Board Chair • July 9, 2021: Todd Lillibridge appointed as Chair of the Board. • Todd’s track record as an entrepreneur, pioneer and CEO in the healthcare market – one of DIRTT’s largest growth areas – made him the ideal leader
Slide 10: The Board's Bold Change Agenda
The Board’s Bold Change Agenda In a short amount of time, DIRTT has been By replacing the CEO with an Interim CEO (Todd Lillibridge), the able to pivot and strategically refocus thanks Board was able to restore management’s focus on DIRTT’s key to a winning combination of Todd’s strategic pillars of
Slide 11: Meaningful Change That is Working
Meaningful Change That is Working • Expanding aluminum manufacturing at the Calgary and Savannah facilities, while closing manufacturing at the Phoenix facility – a move that is expected to create annualized cost savings of approximately $2.4 million. Manufacturing This is part of DIRTT’s new Master
Slide 12: Positive Change Continues
Positive Change Continues And this is only the beginning. With our November financing – which provided balance sheet stability – we believe our cost reduction activities and focused commercial improvements provide us more than two years of runway and we expect to be Adjusted EBITDA positive in 2023
Slide 13: No Articulated Plan and an Underqualified, Nearly All-Male Team
No Articulated Plan and an Underqualified, Nearly All-Male Team Despite having no articulated plan, the Activist has assembled an underqualified slate of directors to replace the entire Board. -13-
Slide 14: Critique of the Activist's Transition Plan
Critique of the Activist’s “Transition Plan” A Plan to Create a Plan is NOT a Plan × 22NW has not presented DIRTT shareholders with a detailed business plan, including strategic initiatives. × 22NW has not articulated a transition plan. × 22NW has not identified a new management team. 22NW’s Words a
Slide 15: DIRTT is Already Pursuing Several of 22NW's Suggested Changes
DIRTT is Already Pursuing Several of 22NW’s Suggested Changes 22NW appears to be supportive of the change that is already well underway at DIRTT: 22NW says the healthcare vertical is important. DIRTT already has one of healthcare real estate’s most experienced and respected executives as its Board C
Slide 16: Correcting 22NW's Inaccurate Claims
Correcting 22NW’s Inaccurate Claims 22NW’s approach of misleading shareholders has unnecessarily prolonged our ability to reach a fair resolution for all DIRTT shareholders. 1 DIRTT sets the record straight on 22NW’s inaccurate and misleading statements. 22NW’s False Claim: “The Board chose to deny
Slide 17: Correcting 22NW's Inaccurate Claims
Correcting 22NW’s Inaccurate Claims 22NW’s False Claim: “The Board allegedly fired Kevin O’Meara for performance related reasons, despite paying him a bonus of about 3.0x his base salary in 2021 just weeks before.” Ø FACT: This is incorrect as Mr. O’Meara was not awarded a “bonus.” The 2021 equity-b
Slide 18: DIRTT is Committed to Board Refreshment
DIRTT is Committed to Board Refreshment What has been assembled in the last DIRTT recognizes the value of strategic and deliberate board refreshment 20 months cannot be easily replicated. balanced with historical continuity given the unique nature of DIRTT’s business. Most recently, this process has
Slide 19: 22NW has No Experience and No Plan
22NW has No Experience and No Plan. A Wholesale Board Change could Reverse Progress and Damage the Company Director Director Since Charlie Chiappone N/A Michael Ford 2020 Denise Karkkainen 2015 Shauna King 2020 Todd Lillibridge 2017 Jim Lynch 2021 Diana Rhoten 2021 Director Director Since Aron Engli
Slide 20: The Incumbent Board is the Best Team to Effect Change
The Incumbent Board is the Best Team to Effect Change DIRTT’s director nominees are industry leaders with complementary, multi-disciplinary expertise and unique industry-specific, world-class capabilities precisely selected to drive DIRTT forward and deliver shareholder value. -20-
Slide 21: The DIRTT Board is Best-Equipped to Lead the Company
The DIRTT Board is Best-Equipped to Lead the Company SHAUNA KING DIRTT’s Director Nominees: Corporate Director Highly Qualified Directors with Diverse and Director Since: 2020 Key Competencies: Finance, Strategy and Educational Real Relevant Skills to Drive DIRTT forward and Estate Deliver Sharehold
Slide 22: DIRTT's Director Slate is Superior to 22NW's Slate
DIRTT’s Director Slate is Superior to 22NW’s Slate DIRTT’s Board 22NW’s Slate DIRECTOR NOMINEES WITH: DIRECTOR NOMINEES WITH: ü Extensive direct industry experience × Inadequate direct industry experience ü Deep expertise in real estate and innovation × Inadequate relevant work experiences ü Specifi
Slide 23: DIRTT
DIRTT
Slide 24: Appendices
Appendices • Appendix A - 22NW Expects DIRTT Shareholders to Pay for the Proxy Fight They Started • Appendix B - 22NW Pushed for a ‘Stay the Course’ Agenda, Misaligned with Other Shareholders • Appendix C - Background and Need for ASC Application -24-
Slide 25: Appendix A - 22NW Expects DIRTT Shareholders to Pay for the Proxy Contest
Appendix A - 22NW Expects DIRTT Shareholders to PAY for the Proxy Contest THEY Started 22NW and Mr. English have already disclosed they will be claiming their costs associated with the proxy fight $ they started, a move that can hurt the Company’s finances and negatively impact your investment. -25-
Slide 26: Appendix B - 22NW Wanted to Maintain Status Quo and Stay the Course
Appendix B - 22NW Wanted to Maintain Status Quo and “Stay the Course” which was Misaligned with DIRTT’s Board and Many Other Major Shareholders 22NW’s commitment to a “stay the course” strategy illustrated by its communications with the Company, and a press release, including: June 17, Aug 12, Nov 5
Slide 27: Appendix C - Background, Evidence and Need for ASC Application
Appendix C - Background, Evidence and Need for ASC Application • Our due diligence with respect to Mr. English’s bid to join DIRTT’s Board uncovered what were thought to be multiple regulatory breaches and the Board believed it had an obligation to report them to the ASC to take action in exercising
Slide 28: Appendix C - Background, Evidence and Need for ASC Application
Appendix C - Background, Evidence and Need for ASC Application • We had a multitude of evidence in making this application: • 22NW and 726 had an extraordinary number of joint interactions with DIRTT’s management in 2020 and 2021. • August 12, 2021 - 22NW and 726 both purchased DIRTT common shares f