November 5, 2020 Q3 2020 Earnings Call Supplemental Slides Kevin O’Meara, Chief Executive Officer Geoff Krause, Chief Financial Officer
Advisory CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Certain statements contained in this presentation for the quarter ended September 30, 2020 (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 Section 21E of the Exchange Act of 1934, as amended (the “Exchange Act”) and “forward-looking information” within the meaning of applicable Canadian securities laws. All statements, other than statements of historical fact included in this presentation, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this presentation, the words “anticipate,” “believe,” “expect,” “estimate,” “intend,” “plan,” “project,” “outlook,” “may,” “will,” “should,” “would,” “could,” “can,” the negatives thereof, variations thereon and other similar expressions are intended to identify forward- looking statements, although not all forward-looking statements contain such identifying words. Forward-looking statements are based on certain estimates, beliefs, expectations and assumptions made in light of management’s experience and perception of historical trends, current conditions and expected future developments, as well as other factors that may be appropriate. Forward-looking statements necessarily involve unknown risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed or implied in such statements. Due to the risks, uncertainties and assumptions inherent in forward-looking information, you should not place undue reliance on forward-looking statements. Factors that could have a material adverse effect on our business, financial condition, results of operations and growth prospects include, but are not limited to, the severity and duration of the coronavirus (“COVID-19”) pandemic and related economic repercussions and other risks described under the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the U.S. Securities and Exchange Commission (the “SEC”) and applicable securities commissions or similar regulatory authorities in Canada (the “Annual Report on Form 10-K”) and in our Quarterly Report on Form 10-Q for the period ended September 30, 2020 under “Part II, Item 1A. Risk Factors.”. Currency and Presentation of Financial Information Unless otherwise indicated, all financial information relating to the Company in this Presentation has been prepared in U.S. dollars using accounting principles generally accepted in the United States (“GAAP") and the rules and regulations of the SEC. 2
Non-GAAP Financial Measures Our consolidated financial statements are prepared in accordance with GAAP. These GAAP financial statements include non-cash charges and other charges and benefits that we believe are unusual or infrequent in nature or that we believe may make comparisons to our prior or future performance difficult. 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 financial performance of the Company. We believe that these non-GAAP financial measures also provide additional insight to investors and securities analysts as supplemental information to our GAAP results and as a basis to compare our financial performance from period to period and to compare our financial performance with that of other companies. We believe that these non-GAAP financial measures facilitate comparisons of our core operating results from period to period and to other companies by removing the effects of our capital structure (net interest income on cash deposits, interest expense on outstanding debt, or foreign exchange movements on debt revaluation), asset base (depreciation and amortization), tax consequences and stock-based compensation. In addition, management bases certain forward-looking estimates and budgets on non-GAAP financial measures, primarily Adjusted EBITDA. Reorganization expenses, government subsidies impairment expenses, depreciation and amortization, and stock-based compensation are excluded from our non-GAAP financial measures because management considers them to be outside of the Company’s core operating results, even though some of those expenses may recur, and because management believes that each of these items can distort the trends associated with the Company’s ongoing performance. We believe that excluding these expenses provides investors and management with greater visibility to the underlying performance of the business operations, enhances consistency and comparativeness with results in prior periods that do not, or future periods that may not, include such items, and facilitates comparison with the results of other companies in our industry. For the current year, we removed the impact of all foreign exchange from Adjusted EBITDA. Foreign exchange gains and losses can vary significantly period-on-period due to the impact of changes in the U.S. and Canadian dollar exchange rates on foreign currency denominated monetary items on the balance sheet and are not reflective of the underlying operations of the Company. We have presented a reconciliation to our prior calculation of Adjusted EBITDA for all years presented. Additionally, in the current year, we have excluded from Adjusted Gross Profit costs associated with under-utilized capacity. Fixed production overheads are allocated to inventory on the basis of normal capacity of the production facilities. In periods where production levels are abnormally low, unallocated overheads are recognized as an expense in the period in which they are incurred. The following non-GAAP financial measures may be presented herein. A description of the calculation for each measure is as follows: Adjusted Gross Profit is Gross profit before deductions for costs of under-utilized capacity, depreciation and amortization. Adjusted Gross Profit Margin is Adjusted Gross Profit divided by revenue. EBITDA is net income before interest, taxes, depreciation and amortization. Adjusted EBITDA is EBITDA adjusted for foreign exchange gains or losses; impairment expenses; stock-based compensation expense; government subsidies; reorganization expenses; and any other non-core gains or losses. Adjusted EBITDA Margin is Adjusted EBITDA divided by revenue. You should carefully evaluate these non-GAAP financial measures, the adjustments included in them, and the reasons we consider them appropriate for analysis supplemental to our GAAP information. Each of these non-GAAP financial measures has important limitations as an analytical tool due to exclusion of some but not all items that affect the most directly comparable GAAP financial measures. You should not consider any of these non-GAAP financial measures in isolation or as substitutes for an analysis of our results as reported under GAAP. You should also be aware that we may recognize income or incur expenses in the future that are the same as, or similar to, some of the adjustments in these non-GAAP financial measures. Because these non-GAAP financial measures may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measure is presented in the tables at the end of this presentation. A reconciliation of these non-GAAP measures is also contained in DIRTT’s Form 10-Q filed with the Securities and Exchange Commission (the “SEC”), complete copies of which are available on the Company’s website at www.dirtt.com and on EDGAR at www.sec.gov/edgar 3
Q3 Update • Q3 revenue slightly exceeded Q1 and Q2 2020 • Delivered modestly positive adjusted EBITDA • $50.7 million cash (as at September 30) • Healthcare 36% of Q3 revenue; including 3 large projects • Developed 4 Constructed Clinical Enclosures in response to COVID-19 • marketing to healthcare organizations, retailers, educational institutions and large employers 4
Strategic Plan – One-Year Progress COMMERCIAL EXECUTION COVID-19 36 new hires in sales and marketing Established sales and marketing organization structure Marketing • Named VP Strategic Marketing, added six team members • Make Space for Possibilities Campaign • Increase brand awareness; integrated lead generation and tracking • Increased engagement with general contractors, architects and designers Sales • Regional Sales Directors in place • Established Strategic Accounts function • Named Director of Strategic Accounts and Enterprise Sales • Identified target list of end users 5
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