School Speciality Inc · OTC:SCOO
School Speciality — School Specialty — Q2 2019 Earnings Presentation
24 slides from School Speciality's earnings presentation, Aug 13, 2019
Slide 1: Fiscal Q2 2019 Investor Update
Fiscal Q2 2019 Investor Update August 12, 2019 Exhibit 99.2
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains statements about School Specialty’s future financial condition, results of operations, equity value, expectations, plans, or prospects, including information under the heading “Fiscal 2019 Full Year Guidance”, “Peak Season Update – H2 2019 Outlook”, a
Slide 3: Q2 2019 – Key Takeaways
Q2 2019 – Key Takeaways Core Business Stable; Move Away From Low-Margin Business and Isolated Headwinds Affect Top-Line Exceptionally Strong Operational Performance Road to Success in Second Half & Beyond Traction with large U.S. districts remains strong; Q2 2019 revenue top-line softness due to Sup
Slide 4: 2019 Key Priorities & Objectives
2019 Key Priorities & Objectives Drive Organic Revenue Growth Cost Efficiency & Process Excellence Build Long-Term Growth Momentum Boost Free Cash Flow Leverage team-sell model and customer segmentation strategy to drive growth. Strengthen relationships at the District Administration & School Board
Slide 5: Q2 2019 Revenue Overview
Q2 2019 Revenue Overview Q2 2019 revenue was $160.6M, a decline of 5.1% as compared to the previous year. The main drivers were as follows: Distribution segment revenue of $150.1M, a decline of 3.6% as compared to the previous year. Supplies revenue softness and continued headwinds in the Agendas ca
Slide 6: Q2 2019 Gross Profit Overview
Q2 2019 Gross Profit Overview Q2 2019 gross profit was $52.7M, down $6.1M or 10.3% as compared to the previous year, representing a gross margin of 32.8%, contracting 190 bps YoY. YoY spread in gross margin continues to narrow positively (from a 220 bps YoY decline in Q1 2019 to a 190 bps decline in
Slide 7: Structural Improvements Leading to Improved YoY Gross Margin Profile
Structural Improvements Leading to Improved YoY Gross Margin Profile Pricing actions and the re-pricing of material bids / contracts gradually materialized in the 1H of the year. The full impact of pricing changes becomes most evident in the peak-season. Lower gross margins are expected during the “
Slide 8: Q2 2019 SG&A Overview
Q2 2019 SG&A Overview Q2 2019 SG&A was $50.5M, down $3.3M or 6.1% as compared to the previous year. The main drivers of SG&A during Q2 2019 were as follows: Total compensation and benefit costs declined $1.4M or 5.5% YoY, reflecting our continued focus on cost management. Fixed labor and benefit exp
Slide 9: Q2 2019 Operating Income, Adj. EBITDA and Cash Flow Overview
Q2 2019 Operating Income, Adj. EBITDA and Cash Flow Overview Q2 2019 operating income of $1.8M vs. operating income of $4.8M in Q2 2018. Operating income reduced by $3.0M, or 62.5%, as SG&A reductions were not able to offset the full impact of lower Revenues and Gross Profit realized in Q2 2019. Q2
Slide 10: Financial Update
Financial Update
Slide 11: Q2 2019 and YTD Financial Performance Summary
Q2 2019 and YTD Financial Performance Summary ($’s in millions) (1) SG&A includes restructuring-related costs of $2.2M and $3.9M for the Q2 2019 and YTD 2019, respectively. SG&A includes restructuring-related costs of $0.4M and $1.7M for Q2 2018 and YTD 2018, respectively.
Slide 12: Working Capital Analytics / Other Cash Flow Drivers
Working Capital Analytics / Other Cash Flow Drivers Working capital balances have returned to historic levels. Accounts Receivable down by $3.2M due to volume. The impact of PY FC issues on A/R balances contributed approximately $10.0M of incremental collections in 2019. Inventory decrease of $9.5M
Slide 13: Capitalization Summary
Capitalization Summary Increase in Net Debt over the past 3 years due entirely to acquisition (+$20.2M) and PIK Note accretion (+$6.7M), partially offset by free cash flow. Anticipate deleveraging in FY19 based on free cash flow outlook. Total Net Debt Essentially Flat: $3.4M of positive TTM Q2 2019
Slide 14: Guidance Update
Guidance Update
Slide 15: Fiscal 2019 Full Year Guidance
Fiscal 2019 Full Year Guidance Metric Guidance Announced on Q1 2019 Earnings Call Updated Guidance Announced on Q2 2019 Earnings Call Revenue $695 – 705 million $640 – 650 million Gross Margin Increase of 50 bps No change Total SG&A Increase of 1-3%, resulting in improved SG&A margin Decrease of app
Slide 16: Peak Season Update – H2 2019 Outlook
Peak Season Update – H2 2019 Outlook Fulfillment centers are having their best peak-season operational performances in over 5 years. Key operational metrics are positive. Lead times are excellent as the fulfillment centers remain current in processing and shipping orders. On-time shipments are appro
Slide 17: Appendix
Appendix
Slide 18: Consolidated Statement of Operations
Consolidated Statement of Operations
Slide 19: Condensed Consolidated Balance Sheet
Condensed Consolidated Balance Sheet
Slide 20: Condensed Consolidated Statement of Cash Flows
Condensed Consolidated Statement of Cash Flows
Slide 21: Q2 2019 SG&A Review
Q2 2019 SG&A Review SG&A Comments Q2 2019 SG&A down $3.3M or 6.1%, driven by favorable transportation rates and aggressive management of both fixed and variable personnel costs. Continued focus on managing SG&A expenses in Q2 2019 contributed to a decline in SG&A as a percentage of revenue. As a per
Slide 22: Direct Cash Flow Calculations
Direct Cash Flow Calculations
Slide 23: Fiscal 2019 Outlook: Reconciliation to Non-GAAP
Fiscal 2019 Outlook: Reconciliation to Non-GAAP The Company’s Adjusted EBITDA and Leveraged Free Cash Flow outlook for FY19 are non-GAAP measures. Reconciliations of these non-GAAP measures to the nearest GAAP financial measures are presented in the following tables:
Slide 24: Non-GAAP Financial Information
Non-GAAP Financial Information Non-GAAP Financial Information This update includes references to Adjusted EBITDA, Leveraged/Unleveraged Free Cash Flow, and Total Debt, each of which is a non-GAAP financial measure. Adjusted EBITDA represents net income (loss) adjusted for: provision for (benefit fro