School Speciality Inc · OTC:SCOO
School Speciality — School Specialty — LD MicroCap Conference (June 2018)
32 slides from School Speciality's conference presentation, Jun 4, 2018
Slide 1: LD MicroCap Conference Investor Presentation
v . ; oe Sctiexal Specialty. 4 | Nb KiB) B 4 hae LD MicroCap Conference Investor Presentation — June 4, 2018
Slide 2: School Specialty At-a-Glance
Ni School School Specialty (“SSI”) At-a-Glance Specialty. Leading provider of products and services that meet the needs of the 21° Century Safe School, from educational supplies, furniture, equipment, and instructional materials to products that address the social, emotional, mental and physical wel
Slide 3: Investment Highlights
Slide 4: Investment Highlights
Ni School a Investment Highlights Specialty. Key factors that will enable School Specialty to continue to drive sustainable growth, bottom- line margin expansion and increased shareholder value. Large, Stable Addressable Market Strong, Improving Financial Metrics Compelling and Unique Customer and S
Slide 5: A Large Addressable Market
Ni School s A Large Addressable Market Specialty. + Based on its current portfolio of productsand market positioning, School Specialty estimates" its “base” addressable PreK-12 education market in the U.S. is as follows: + Consumable Facility and Classroom Supplies (~$2.3B) — + Furniture & Equipment
Slide 6: SSI Serves a Stable End Market
Ni School SSI Serves a Stable End Market Specialty. * Total revenue receipts for U.S. Public Schools have increased each year since 2007 ata CAGR of 1.5%, reaching an estimated $639Bin 2017", * Overall public schools receipts have been stable through recessions. * State funding for public education
Slide 7: Competitive Value Proposition
a a School 7 Competitive Value Proposition Of scroa\. SSI’s long-standing customer relationships and reach into 95% of school districts is the result of a unique, competitive market position. * Business model differentiated from both large office supply companies & niche market participants. * Schoo
Slide 8: Comprehensive Suite of Products and Solutions
Ni School Comprehensive Suite of Products and Solutions Specialty. Over 100,000 products across ~25 proprietary brands and many trusted third-party brands. ‘Art Supplies SpecialNeeds @yyyy@ | Physical Education Safety and Security _ see ream OMNIKIN" (SO @D SMR Qa Science (Curriculum & Supplies) fpr
Slide 9: Diverse and Growing Customer Base
School Specialty. » Diverse and Growing Customer Base Large, national customer base with limited customer concentration Attractive, Diversified Nationwide Customer Base + Long-standing relationships with a By Customer Typel’) U.S. District Sales by Tier“)? broad spectrum of preK-12 customers. (G6 of
Slide 10: Multiple Avenues to Drive Growth and Enhance Profitability
Multiple Avenues to Drive Growth and Enhance Profitability Ni School Specialty. Clear pathway to grow substantially all product categories organically, while pursuing accretive acquisitions to enhance our offerings and leverage our scalable operating platform. Sales Transformation Operations Pursue
Slide 11: Driving Growth — Combining Strategy with Opportunity
Ni School u Driving Growth — Combining Strategy with Opportunity Specialty. Go to market transformation, platform investments and other strategic initiatives all align to penetrate considerable “white space” within our current customer base. + Larger Districts (Tiers 1-4/ Largest 500/ ~40% of Studen
Slide 12: Financial Overview
Slide 13: Business Transformation: Meaningful & Positive Financial Trends
Ni School Business Transformation: Meaningful & Positive Financial Trends Specialty. Revenue Gross Profit % of Revenue $700 $688 $260 $257 $680 S60 $656 9658 $250 $638 an o cial LI OJ 620 5 $230 $600 $580 $220 2014 «201520162017 2018 2014 LJ 2016 20172018 376% 364% 366K 36.9% © 37.3% Total SG&A Adju
Slide 14: Historical & Projected Income Statement
(| School u Historical & Projected Income Statement Specialty. 2018 2017 2016 2015 (Geemmon) Estimate (1) Actual Actual Actual Revenue $688 $658 $656 $637 Gross Profit ($057 $243 $240 $232 % Gross Margin 37.3% 26.9% 36.6% 36.4% Reported SG&A $225 $218 $215 $225 Impairment Charges $0 $0 $0 $3 Facilit
Slide 15: Capitalization Summary as of 2017 FYE
1 Capitalization Summary as of 2017 FYE (S'sin mitons Cash and Cash Equivalents ABL Facility, maturing in 2022 (L+175 bps) Term Loan, maturing in 2022 (L+ 600 bps) Total 45 Lien Debt Deferred Payment Obligations (Dec 2019) (9.09%) Total Debt Net Debt (Total Debt— Cash and Cash Equiv.) Equity Market
Slide 16: Working Capital Analytics / Other Cash Flow Drivers
(| School as Working Capital Analytics / Other Cash Flow Drivers Specialty. (S'sin mitions) Accounts Receivable Inventories Prepaid Expense and Other Current Assets Accounts Payable Other Current Liabiities Net Working Capital | | NWC (% of Revenue) Days Sales Outstanding (DSO) 61.0 Days Days Invent
Slide 17: 2018 Public Guidance: Top- and Bottom-Line Improvements
Le School *” 2018 Public Guidance: Top-and Bottom-Line Improvements WE Specialty 2017 Actual vs. 2018 look) Revenue $658.4 $680 - $695 3.3% — 5.6% YOY growth Gross Profit $243.2 $252 - $261 ~$9M - $18M YOY improvement Gross Margin % 36.9% 37.0% — 37.6% Up to a 70 bps improvement Variable SG&A % ~1.1
Slide 18: 2018 Outlook: Significant Opportunity for Equity Value Creation
(| School Specialty. * 2018 Outlook: Significant Opportunity for Equity Value Creation Current Valuation: 2017 Actual vs. 2018 Outlook (8 in millions) FY1T Actual ee Comments Estimate ; 2017 Includes ~$14M Based on current debt amortization schedul Term Loan 1188 $109.1 anaes TTM Average ABL (Net) $
Slide 19: Comparable Company Performance / Valuation Data
NA School 1 Comparable Company Performance / Valuation Data Specialty. Comp Group SSI Seat Mean 2017 FYE Market Capitalization $902 $1,810 $136.5 Enterprise Value $871 $2,259 $302.3 LTM Sales $1,515 $2,718 $658 EBITDA Margin 5.9% 94% 8.1% EBIT Margin | 45% | 5.9% | 5.1% Operating Cash Flow (OCF) $34
Slide 20: Summary
20 4 School Summary Specialty. * SSI is a market leader serving the large and stable education market with a differentiated and defensible value proposition. + Since 2014, a new management team has embarked on a strategy to: a.) strengthen SSI’s competitive market position; b.) improve the operation
Slide 21: Appendix
Slide 22: Consolidated Statement of Operations
Ni School 2 Consolidated Statement of Operations Specialty. SCHOOL SPECIALTY, INC (CONSOLIDATED STATEMENTS OF OPERATIONS (da Thousands. Except PerShare Ameosts) For the Three Months Ended For the Twelve Months Ended December 30,2017 _ December 31,2016 _ December 30,2017 __Decenber 31,2016 Revenes, 1
Slide 23: Condensed Consolidated Balance Sheet
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Slide 24: Condensed Consolidated Statement of Cash Flows
(| School 2 Condensed Consolidated Statement of Cash Flows Specialty. SCHOOL SPECISLTY.INC (CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS (a Thossznds) Fiscal YearEnled Fiscal YearEnded Decenber 30,2017 __December 31,2016 (Cash flows Somoperating activites: Netincone. s 6m aye ‘Adjustments to sconc
Slide 25: Direct Cash Flow Calculations
i . School 2 Direct Cash Flow Calculations é Specialty. mths Ended Adjusted EBITDA $ 53,130 $ Capex (14,744) (11,816) Prod Dev (3,999) (2.545) Unrealized FX (gain) loss 6 (1,091) Proceeds from sale of unconsolidated affiliate a 9,893 Other (8.269) (5.362) Change in WC 3,457 4,601 Unleveraged free CF
Slide 26: Fiscal 2018 Outlook: Reconciliation to Non-GAAP
School Specialty. #6 Fiscal 2018 Outlook: Reconciliation to Non-GAAP The Company's Adjusted EBITDA and Leveraged Free Cash Flow outlook for FY18 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
Slide 27: Comparable Company Information
eo School wi 2 Comparable Company Information — Page 1 Specialty. Value Calculation (Sin ans) Interest Non-Cash and Shares Market Bearing Preferred Controling Cash Enterprise Company Ticker Stock Price __Outstanding_ _Capitalization, __Debt Stock _ _Interests_ _Equvalents __VaWe Barnes & Noble, Ine.
Slide 28: Comparable Company Information
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Slide 29: Comparable Company Information
eo School wi 2 Comparable Company Information — Page 3 Specialty. Guideline Public Enterprise Value to um > oom 7 Enterprise Fyet EBTDA EBT Company Ticker Value LEY Sales Sdes__LFYSales, LTM Sales FY:1Saes _Maran_ _Mamvin ‘ames & Noble, Ine Nyse: KS ag 33,598 $3731 02x 0.2 Om 38% ~ 12% Blue Bird Cor
Slide 30: Comparable Company Information
3 Comparable Company Information — Page 4 \ (| School Specialty. ever Byes Svar Enepse Awage 3 Your Amage | Aveage FY comess Toke Vabe OG Aerens OCF LEVOCE LIMOCE Fyst0ce Oo OCF LVOCE LTMOCF __OcF ‘Benes & Nebia Ine NWSE ERS 78 = 372 ca 2 2 wi 9m We ie ase Ble Bid Corperaton NasasgGht BLED ee 8 Se =
Slide 31: Safe Harbor Statement
Ni School Specialty. % Safe Harbor Statement This presentation contains statements about School Specialty’s future financial condition, results of operations, equity value, expectations, plans, or prospects, including the information regarding our Fiscal 2018 financial and performance and business o
Slide 32: Non-GAAP Financial Information
(| School Specialty. 2 Non-GAAP Financial Information Non-GAAP Financial Information This presentation includes references to Adjusted EBITDA, Leveraged/Unleveraged Free Cash Flow, and Total Debt, each of which isa non-GAAP financial measure. Adjusted EBITDA represents net incomeadjusted for: provis
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