Slide 1: Fiscal 2018 Year-End Investor Update
Fiscal 2018 Year-End Investor Update March 14, 2019
Slide 2: Fiscal 2018 Revenue Overview
Fiscal 2018 Revenue Overview Fiscal 2018 revenue increased by $15.1M, or 2.3% YOY, driven by revenue growth in our Distribution segment of $34.4M, or 5.8%. The primary drivers of revenue growth were as follows, ▪ Furniture revenue increased by $22.0M or 11.5% to $212.7M, showing strong, consistent g
Slide 3: Fiscal 2018 EBITDA Bridge
Fiscal 2018 EBITDA Bridge Fiscal 2018 Adjusted EBITDA was $35.1M, a decline of $18.1M as compared to the previous year. ▪ Adjusted EBITDA excludes a $22.3M non-cash goodwill impairment charge. The main drivers of the Adjusted EBITDA performance are as follows: ▪ $10.8M Adjusted EBITDA improvement YO
Slide 4: Fiscal 2018 EBITDA Bridge (continued)
Fiscal 2018 EBITDA Bridge ▪ $11.4M of the Adjusted EBITDA decline YOY was driven by a 410 bps decrease in our Supplies gross margin (“GM”). The GM decline was driven by price, cost and mix in relatively equal parts. This was partially off-set by a volume increase as 2018 Supplies revenue grew by 1.1
Slide 5: Fiscal 2018 SG&A Overview
Fiscal 2018 SG&A Overview Fiscal 2018 SG&A was $222.2M, an increase of $4.2M YOY. This includes $3.4M of incremental SG&A associated with the full-year impact of the Triumph Learning acquisition. ▪ Full year transportation costs (reported in SG&A) increased $5.0M, or 15.8%, in 2018. This was driven
Slide 6: Fiscal 2018 Performance Summary
Fiscal 2018 Performance Summary Fiscal 2018 operating loss of $18.4M vs. operating income of $24.9M in fiscal 2017. Fiscal 2018 net loss of $38.7M vs. net income of $6.8M in fiscal 2017. ▪ Fiscal 2018 operating and net loss includes a non-cash impairment charge of $22.3 million in Q4. ▪ Interest exp
Slide 7: Fiscal 2018 Summary Financial Results
Fiscal 2018 Summary Financial Results Q4 Full Year Actual PY Var to PY Actual PY Var to PY Revenue $ 114.6 $ 112.5 $ 2.1 $ 673.5 $ 658.4 $ 15.1 Gross profit 36.1 41.1 (4.9) 228.5 243.2 (14.7) Gross margin 31.5% 36.5% -500 bps 33.9% 36.9% -300 bps Variable SG&A 12.4 10.3 2.1 57.7 51.7 6.0 All other S
Slide 8: Q4 Performance vs. PY
Fiscal 2018 Q4 Performance vs. PY Q4 revenue of $114.6M, represented YOY growth of 1.9%. The main drivers of Q4 revenue performance are as follows: ▪ Supplies revenue was up 21.7% YOY in Q4, driven by a high open order position entering the quarter. The early part of Q4 experienced declines YOY due
Slide 9: Q4 Performance vs. PY (cont'd)
Fiscal 2018 Q4 Performance vs. PY (cont’d) ▪ Instruction & Intervention showed modest YOY growth in Q4 of +1.3%. We expect demand for core elements of our I&I offering to increase as states enact their recently adopted Every Student Succeeds Act (or “ESSA”) plans and seek to assess student progress.
Slide 10: Q4 Performance vs. PY (cont'd) - Gross Margin
Fiscal 2018 Q4 Performance vs. PY (cont’d) Gross Margin in Q4 of 31.5% was 500 bps below PY Q4. The main drivers of Q4 GM performance are as follows: ▪ GM in the Distribution Segment of 30.6% was down 270 bps YOY driven primarily by lower margins in the Supplies and Furniture product categories (whi
Slide 11: Q4 Performance vs. PY (cont'd) - SG&A
Fiscal 2018 Q4 Performance vs. PY (cont’d) Q4 SG&A declined YOY by $2.5M, or 4.6%. The main drivers of Q4 SG&A performance are as follows: ▪ Triumph Learning related SG&A decreased $3.5 million YOY in Q4 as the Company achieved operating synergies associated with the successful integration of that a
Slide 12: Update on Financing Agreements
Update on Financing Agreements ▪ Our 2018 financial performance required us to address certain provisions within our loan agreements. ▪ The required changes to our loan agreements have been successfully addressed with our financial partners who continue to demonstrate strong support for our business
Slide 13: Fulfillment Center Challenges Addressed
Fulfillment Center Challenges Addressed In Q3 of 2018, the Company experienced shipping delays during our peak volume season in our largest Distribution segment fulfillment center, resulting from an exceptionally tight labor market, which made seasonal staffing more challenging. ▪ Staffing challenge
Slide 14: 2019 Guidance
Fiscal 2019 Guidance Revenue: $705M to $720M, an increase of 5% to 7% YOY ▪ Modest growth in Supplies ▪ Improving trends in Instruction & Intervention ▪ Strong recovery in Science ▪ Modest declines in the Agenda and AV Tech ▪ Continued steady growth in Furniture Gross Margin: An increase of approxim
Slide 15: Financial Update
Financial Update
Slide 16: Q4 Financial Performance Summary
Fiscal 2018 Q4 Financial Performance Summary 2018 YTD Income Statement Summary 2018 YTD Revenue Summary (#039;s in millions) FY 18 Actual FY 17 Actual Variance (#039;s in millions) FY 18 Actual FY 17 Actual Variance Revenue $673.5 $658.4 $15.1 Supplies $308.9 $305.6 $3.3 Gross Profit $228.5 $243.2 ($14.7)
Slide 17: Year 2018 SG&A Review
Fiscal Year 2018 SG&A Review (amounts in thousands) Q4 YTD SG&A Comments 2018 2017 2018 2017 Total SG&A costs $ 51,615 $ 54,078 $ 222,168 $ 217,960 ❑ FY18 SG&A up $4.2M or 1.9%, driven by increases in D&A, increased transportation rates, and the Less: impact of the Triumph Learning acquisition. D&A
Slide 18: Working Capital Analytics / Other Cash Flow Drivers
Working Capital Analytics / Other Cash Flow Drivers ($’s in millions) Q4 2018 Q4 2017 Q4 2016 Q4 2015 ($’s in millions) Actual Actual Actual Actual Accounts Receivable $77.9 $69.3 $61.7 $58.4 Inventories $90.1 $77.2 $73.6 $76.2 Deferred Catalog Costs $0.0 $3.5 $5.2 $6.5 Prepaid Expense and Other Cur
Slide 19: Capitalization Summary
Capitalization Summary Q4 2018 Q4 2017 Q4 2016 Q4 2015 Total Net Debt Increase Driven by: ($’s in millions) Actual Actual Actual Actual a) $19.4M of negative FCF in 2018. Q3 ($’s in millions) Cash and Cash Equivalents $1.03 $31.86 $35.10 $12.87 2018 shipping delays have shifted ($’s in millions) the
Slide 20: Direct Cash Flow Calculations
Direct Cash Flow Calculations Fiscal Year Ended (amounts in thousands) Dec 29, 2018 Dec 30, 2017 Adjusted EBITDA $ 35,076 $ 53,130 Capex (12,464) (14,744) Prod Dev (4,486) (3,999) Proceeds from sales 100 - Unrealized FX (gain) loss 31 6 Other (5,835) (6,419) Change in WC, excl tax (17,976) 3,334 Unl
Slide 21: Appendix
Appendix
Slide 22: Consolidated Statement of Operations
Consolidated Statement of Operations For the Three Months Ended For the Twelve Months Ended December 29, 2018 December 30, 2017 December 29, 2018 December 30, 2017 Revenues………………………………………………………………………………………. $ 114,613 $ 112,455 $ 673,452 $ 658,383 Cost of revenues…………………………………………………………………………….. 78,46
Slide 23: Condensed Consolidated Balance Sheet
Condensed Consolidated Balance Sheet December 29, 2018 December 30 ,2017 December 29, 2018 December 30 ,2017 ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY Current assets: Current liabilities: Cash and cash equivalents……………………………………………………………………………….. $ 1,030 $ 31,861 Current maturities - long-term debt
Slide 24: Condensed Consolidated Statement of Cash Flows
Condensed Consolidated Statement of Cash Flows December 29, 2018 December 30, 2017 Cash flows from operating activities: Net income (loss)……………………………………………………………………………………….. $ (38,741) $ 6,779 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and intan
Slide 25: 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: Low End of High End of Adjusted
Slide 26: 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 Guidance” and the information regarding our Fiscal 2019 financ
Slide 27: 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