Purple Innovation, Inc. · NASDAQ:PRPL
Purple Innovation — Global Partner Acquisition — SPAC Merger (May 2017)
40 slides from Purple Innovation's SPAC merger presentation, May 22, 2017
Slide 1: Investor Presentation | May 2017
Investor Presentation | May 2017
Slide 2: Disclaimer: Confidentiality and Use of Projections
2 Disclaimer Confidentiality The information in this presentation is highly confidential . The distribution of this presentation by an authorized recipient to any other person is unauthorized . Any photocopying, disclosure, reproduction or alteration of the contents of this presentation and any forw
Slide 3: Disclaimer: Use of non-GAAP Financial Measures
3 Disclaimer Use of non - GAAP Financial Measures This presentation includes non - GAAP financial measures of Sequel, including program revenue, EBITDA, adjusted EBITDA, adjusted EBITDA margin, free cash flows and free cash flow conversion . In this presentation, “program revenue” means total progra
Slide 4: Presenters and senior leadership
4 Presenters and senior leadership Co - Founder and Chairman of Sequel Former Co - Founder, President & COO, and CFO of Youth Services International (YSI) 18 years of experience with Sequel and 23 years of experience in the behavioral health industry Seasoned entrepreneurial executive involv
Slide 5: GPAC is a supportive, value-added partner to Sequel
5 GPAC is a supportive, value - added partner to Sequel Team members with a compelling track record of growing companies organically, through corporate development and mergers and acquisitions History of creating significant value for investors Expertise in taking companies public and navigating the
Slide 6: Agenda
6 Agenda 1 2 3 Business Overview Financial Overview Transaction Summary
Slide 7: Business Overview
Section 1 Business Overview eae LS ino.
Slide 8: Investment highlights
8 Investment highlights 1 Best - in - class behavioral healthcare provider with national scale Comprehensive service offering; superior quality and clinical capabilities L arge, growing market with significant barriers to entry Diversified revenue, geography, referral and payor mix Attractive financ
Slide 9: Scarcity value
9 Scarcity value Sequel has a growth and profitability profile unique within the behavioral health market Behavioral market focus Exclusive behavioral focus Revenue growth >10% 90%+ FCF and low capex
Slide 10: A mission-driven company
10 A mission - driven company Mission : … to prepare our clients to lead responsible and fulfilling lives by providing mentoring, education, and living support within a safe, structured, dynamic environment — whether on one of our campuses, in the community, or in their own homes . 1 Core Values H u
Slide 11: Best-in-class behavioral healthcare provider
11 8 12 15 18 28 34 39 47 58 65 76 118 156 161 172 193 208 253 224 269 1 1 2 2 2 5 5 6 7 8 10 16 21 22 23 27 31 39 33 43 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017E CY 2016 CY 2017E $0 $50 $100 $150
Slide 12: National platform of scale
12 States referring to Sequel National platform of scale 1 Residential Treatment Centers Community Based Services Intensive Treatment Centers 30 of 41 states have customer relationships longer than 10 years
Slide 13: Large addressable market opportunity with high barriers to entry
13 Large addressable market opportunity with high barriers to entry US behavioral healthcare industry encompasses services for individuals at risk of, or suffering from, mental, behavioral / developmental or addictive disorders – O ver 17,000 facilities and a combined annual industry spend of over
Slide 14: Mental health initiatives and funding have bipartisan support
14 ~ 200 150 145 122 98 0 50 100 150 200 250 Mental disorders total Heart conditions Trauma Cancer Pulmonary conditions ($ bn ) Mental health initiatives and funding have bipartisan support Bipartisan support to increase mental health coverage through the 21 st Century Cures Act, which became law
Slide 15: AHCA provisions would have positive impact on Sequel
15 AHCA provisions would have positive impact on Sequel given the payor mix and client demographics 2 Provision Description Potential impact on Sequel State role Establish new Patient and State Stability Fund Funding available includes: – $100 billion over 9 years for grants to states or for def
Slide 16: Comprehensive program and service offering
16 Comprehensive program and service offering 3 Conduct disorder Substance use Sexual abuse Trauma resolution Delinquency ASD / SED Other conditions Our comprehensive set of services address the following behavioral health issues: Community - Based Services (“CBS”) Residential Treatment Centers (“RT
Slide 17: Superior quality of service
17 8% 4% 88% Satisfaction with provider performance 7% 3% Q uality and outcomes driven by focus on customized programs and treatment plans and impact of the n ormative culture approach C onducts a Youth Services Survey (YSS) with every discharged client – YSS is a standardized, nationally recogn
Slide 18: Compliance, performance and regulatory excellence
18 Compliance, performance and regulatory excellence to achieve better client outcomes Diverse and experienced team oversees compliance and ethics Propagate a culture of keeping client welfare first – Conduct staff conferences, webinars, training calls, email blasts, visual aids, and site visits
Slide 19: Diversified revenue, geography, referral and payor mix
19 Program A 8% Program B 8% Program C 6% Program D 6% Program E 5% We serve approximately 9,000 clients in three distinct program types, with facilities and programs in 19 US states Diversified by program and payor Focus on adolescent services, allows for education funding in addition to othe
Slide 20: Financial Overview
Section 2 Financial Overview 21 $16 $21 $22 $23 $27 $31 $39 $33 $43 $37 $0 $10 $20 $30 $40 $50 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017E CY 2016 CY 2017E TTM 3/31/2017 Adjusted EBITDA $118 $156 $161 $172 $193 $208 $253 $224 $269 $238 $0 $50 $100 $150 $200 $250 $300 FY 2011 FY 2012 FY
Slide 21: Attractive financial profile
2,614 2,614 0 400 800 1,200 1,600 2,000 2,400 2,800 3,200 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017E TTM 3/31/17 Bed capacity Attractive financial profile... 5 Number of residential beds Program revenue Adjusted EBITDA Free cash flow conversion 4 High free cash flow generation supports
Slide 22: Equal contribution from organic and acquisition growth in CY 2017E adjusted EBITDA
22 ... with equal contribution from organic and acquisition growth in CY 2017E adjusted EBITDA $32.8 $5.7 $7.9 ($3.4) $43.0 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 CY 16 adjusted EBITDA CY 17E Organic EBITDA CY 17E Acquisition EBITDA CY 17E Increase in corporate overhead + public company costs CY
Slide 23: Well positioned to serve as industry consolidator
23 W ell positioned to serve as industry consolidator 6 Positioned for success as a public company with better access to capital required for future acquisitions and organic growth Organic growth strategy D evelop de novo programs to meet market demand where ROI target can be met Work proactivel
Slide 24: Successful track record of organic and inorganic growth
24 Successful track record of organic and inorganic growth 6 Over our 18 year history , we have consistently grown organically and diversified our programs through strategic acquisitions FY 2004 Mingus Mountain Academy added FY 2001 Woodward Academy added Sequel is formed and Clarinda Academy added
Slide 25: Proven organic growth strategy supported by business development
25 Proven organic growth strategy supported by business development Formalized business development process by establishing a business development team in 2014 to oversee organic growth projects at the program, division and corporate level, and by adding a proposal coordinator in 2016 to respond t
Slide 26: Proven track record of identifying and integrating acquisitions
26 3.9x Proven track record of identifying and integrating acquisitions Management has significant experience executing both tactical and strategic acquisitions; ten acquisitions completed since 2007 ranging in size from $3mm to $ 50mm in revenue – More than tripled the number of programs – Expand
Slide 27: Robust pipeline of accretive acquisition opportunities
27 Robust pipeline of accretive acquisition opportunities We seek acquisitions that provide additional diversification from a payor perspective, service type, client type or geographic location and a good management / cultural fit Our best - in - class clinical outcomes and highest - quality of
Slide 28: Deep bench of executives with proven track record
28 Deep bench of executives with proven track record 7 Talented and experienced management team, to scale by acquisitions and organic growth Jay Ripley Co - founder and Chairman 18 years with Sequel and 23 years of experience in the behavioral health industry Previously served as President, COO,
Slide 29: Transaction Summary
Section 3 Transaction Summary
Slide 30: Transaction overview
30 Transaction overview – assuming $145 million of total PIPE investment (1) Pro - forma enterprise value of $ 421.2 million $75 million (already committed) from a lead PIPE investor, significantly increasing deal certainty and bringing meaningful institutional presence to the transaction – As i
Slide 31: Transaction overview (continued)
31 Transaction overview (continued) Rollover $ 62.2 million 1 of $ 92.2 million 2 of preferred equity of Alaris Royalty Corp., an investor in Sequel since July 2013 – Retire approximately $ 30.0 million of preferred equity, significantly reducing Sequel’s overall cost of funding Rollover $ 132.1
Slide 32: Illustrative transaction terms
32 Illustrative transaction terms Pro - forma enterprise value Sources & uses Pro - forma for transaction close GPAC illustrative share price $10.00 Pro - forma shares outstanding ( millions) 1 22.00 Total equity value $220.0 (+) Pro - forma net debt 2 $139.0 (+) Roll - over preferred equity $62.2 3
Slide 33: Well-positioned with regard to industry valuation drivers
33 We are well - positioned with regard to industry valuation drivers Favorable growth profile, 22.5% program revenue CAGR from FY 2000 to FY 2017 High free cash flow conversion of greater than 90% over the past five fiscal years No material regulatory or litigation issues Diversified payor mix with
Slide 34: Capital efficient business model makes us unique
34 Our capital efficient business model makes us unique within the behavioral health and broader healthcare services universe… Stable o rganic g rowth x x x x x x x x Acquisition pipeline x x x x x x x x x Low operating expenditures x x x x x Low capital expenditures x x x x x Favo
Slide 35: Differentiates us from other public behavioral assets
35 State 39% MCOs 16% County / Local 14% Medicaid 13% School Districts 6% Other 4% Education 3% Commercial Insurance 3% Private Pay 2% …and differentiates us from other public behavioral assets Services Residential Treatment, Intensive Treatment, and Community Based Diversified Behavioral Toxicology
Slide 36: Overview of Sequel's comparables
36 10.6x 22.6x 19.0x 17.9x 17.0x 16.4x 12.7x 12.2x 10.9x 0.0x 6.0x 12.0x 18.0x 24.0x 30.0x Median: 16.8x Overview of Sequel’s comparables Enterprise value / 2017E EBITDA Enterprise value / 2017E EBITDA – Capex 1 Note: Market data as of 5/5/17 1 Includes maintenance and growth Capex 2 Represents a dj
Slide 37: Sequel compares favorably on key operating metrics
37 93.0% 98% 89% 86% 72% 71% 60% 51% 42% 40% 60% 80% 100% Median: 71.4% 19.9% 9% 8% 7% 7% 6% 6% 6% 2% 0% 5% 10% 15% 20% 25% 30% Median: 6.4% Sequel compares favorably on key operating metrics 2017E Revenue Growth 1 2017E EBITDA Margin 2017E Cash Flow Conversion 4 Note: Market data as of 5/5/17 1 Gro
Slide 38: Conclusion
38 Growing market $220+ billion; approximately 5% forward growth Significant upside opportunity in $23 billion ASD market Financial success Five year program revenue and adjusted EBITDA CAGRs 1 of 12.1% and 13.8%, respectively 90%+ free cash flow conversion Low capex <2.0% of revenue Attra
Slide 39: Appendix
Appendix (Fal seh Lg Enos Dn
Slide 40: Non-GAAP EBITDA reconciliation
40 Non - GAAP EBITDA reconciliation For fiscal year ended June 30, For calendar year ended December 31, ($mm) 2014 % of program revenue 2015 % of program revenue 2016 % of program revenue 2016 1 % of program revenue Net income $10.8 6.3% $14.0 7.2% $18.6 8.9% $17.5 7.8% Interest expense, net 6.8 4.0