School Speciality Inc · OTC:SCOO
School Speciality — School Specialty — The MicroCap Conference (April 2018)
39 slides from School Speciality's conference presentation, Apr 9, 2018
Slide 1: The MicroCap Conference Investor Presentation
v . ; oe Sctiexal Specialty. 4 | Nb KiB) B 4 hae The MicroCap Conference Investor Presentation — April 9, 2018
Slide 2: School Specialty At-a-Glance
Ni School School Specialty 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 well-being
Slide 3: 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 4: Diverse and Growing Customer Base
School Specialty. Diverse and Growing Customer Base Large, national customer base with limited revenue concentration risk. Attractive, Diversified Nationwide Customer Base Long-standing relationships with a By Customer Type(”) U.S. District Sales by Tier”! broad spectrum of preK-12 customers. (G6 of
Slide 5: Investment Highlights
Slide 6: Investment Highlights
Ni School @ Investment Highlights Specialty. Key factors surrounding our business that collectively will enable School Specialty to continue to drive sustainable growth, bottom-line margin expansion and increased shareholder value. Large, Stable Addressable Market Improving Financial Metrics Compell
Slide 7: Competitive Market Position
7 Competitive Market Position OF scroo. 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, national / regional office supply companies & niche market participants.
Slide 8: SSI Serves a Large, Stable Market
School SSI Serves a Large, Stable Market OF scroo. While Education Budgets can vary in many respects (source of funds, allocation, state & local Priorities, etc.), overall they support a large, stable addressable market. * Accordingto a report published by the National Education Association, total r
Slide 9: A Large Addressable Market
Ni School 2 A Large Addressable Market Specialty. SSI's depth and breadth of offerings result in a large addressable market with PreK-12 education. + Based on its current portfolio of productsand market positioning, School Specialty estimates its “base” addressable PreK-12 education market in the U.
Slide 10: Multiple Avenues to Drive Growth and Enhance Profitability
Multiple Avenues to Drive Growth and Enhance Profitability (| 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: Transformation of the School Specialty Platform
(| School Specialty. Transformation of the School Specialty Platform SS] is at an inflection point; strong near-term opportunities to increase shareholder value. 2014-2015 2046 Operational and Foundation for Pre-2013 Performance Decline 2017-2021 Significant Upside Structural Change Profitable Growt
Slide 12: 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 13: Financial Overview
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
1 Capitalization Summary (S'sin mitons Cash and Cash Equivalents ABL Facility, maturing in 2022 Term Loan, maturing in 2022 Total 1: Lien Debt Deferred Cash Payment Obligations (Dec 2019) Total Debt Net Debt (Total Debt— Cash and Cash Equiv.) Equity Market Capitalization Enterprise Value GAAP Total
Slide 16: Working Capital Analytics / Other Cash Flow Drivers
as Working Capital Analytics / Other Cash Flow Drivers School Specialty. Accounts Receivable $69.3 $61.0 Inventories $772 $75.2 Prepaid Expense and Other Current Assets $18.4 $26.6 Accounts Payable $26.6 $22.4 (Other Current Liabilities $36.6 $20.7 Net Working Capital $101.4 $120.4 NWC (% of Revenue
Slide 17: Progress in Key Areas of Focus; Improving Outlook in 2018
Ni School Specialty. wv Progress in Key Areas of Focus; Improving Outlook in 2018 Strengthened competitive positioning heading into 2018. * Team-basedsales model providing better coverage, customer support and account penetration. + Transition (personnel & model) continued throughout 2017 with mixed
Slide 18: Progress Made in Key Areas; Improving Outlook in 2018
18 Ni School Specialty. Progress Made in Key Areas; Improving Outlook in 2018 Strengthened competitive positioning heading into 2018; progress in key areas of focus. TL acquisition strengthens product offering and sales reachin the high-margin I&l category. + Integration of TL field sales with SSI l
Slide 19: 2018 Key Business Objectives
Ni School * 2018 Key Business Objectives Specialty. + 218! Century Safe School Value Proposition Achieve Organic * Continued implementation of the Team-Sell model Revenue Growth * Leverage momentum in the Furniture, 1&1 and Science categories; improve AV Tech assortment; optimize pricing model; capi
Slide 20: Driving Growth — Combining Strategy with Opportunity
(| School 2 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. + Strengthwith Larger Districts (Tiers 1-4/ Largest 500/ ~
Slide 21: 2018 Public Guidance: Top- and Bottom-Line Improvements
Le School re . ' ’ : 2018 Public Guidance: Top-and Bottom-Line Improvements WE Specialty 2017 Actual vs. 2018 Outlook 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 S
Slide 22: 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 017 Includes ~$14M Based on current debt amortization schedu Term Loan $118.8 $109.1 draw te fail TL aegutalion ‘TTM Average ABL (Net)(? $24.2 $28.8 ~$5M of TL acquisi
Slide 23: Comparable Company Performance / Valuation Data
Of sera 2 Comparable Company Performance / Valuation Data | \ (S's ons) "Market Capitalization Enterprise Value LTM Sales EBITDA Margin EBIT Margin Operating Cash Flow (OCF) $34 $189 $34 OCF as % of Market Cap. 3.8% 10.4% 29.1% EV/LTM Sales 06x 1.0x 04x $33 EV/LTM EBITDA 10.3x 10.7x 53x $129 EV / OC
Slide 24: Appendix
Slide 25: Industry Trends — Stable with Areas of Opportunity
= Industry Trends — Stable with Areas of Opportunity - i = _—
Slide 26: Overall Education Funding
School 2 Overall Education Funding bssecn Specialty. 2016 and 2017 Budgetary Pressures Adversely Impacted our Business. Stat Local Federal Q State Funding represents the largest source of revenue for Public School budgets (~44% - 47% of total revenue between 2007-2017). 46.0% 45.6% 8.4% C1 Local Rev
Slide 27: Overall Education Funding (Cont'd)
7 Ni School Specialty. Overall Education Funding (Cont'd) SSI Sales were stable overall in 2017, despite budgetary pressures/ uncertainty across the U.S. 0 State revenue receipts have been hurt by a variety of factors: 1) Falling oil and natural resource prices; 2) Delayed sales of capital investmen
Slide 28: Overall Education Funding (Cont'd)
Ni School Specialty. 2 Overall Education Funding (Cont'd) Key Industry Trends Working in our Favor. Early Childhood & From 2002 to 2016, Federal Education funding in key areas that support the Early Childhood and Special Needs zy has grown steadily. In 2016/2017, 30 states increased funding for Pre-
Slide 29: 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 30: Condensed Consolidated Balance Sheet
ASSETS ‘Comet azset: Cash andcash anivalens. Acsountesreivabb, bes alow avemores. set Defers cate: ‘Prapeis epenses and othercurentazsste efensebe ncome nes ‘Telsomntenat fe doubt account Propany.slstand sesiomest. sat Goose Itanaibi seset cat Devalooaent cont endottar Defenes es lage ‘Teal aesets D
Slide 31: Condensed Consolidated Statement of Cash Flows
(| School 31 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 scon
Slide 32: Direct Cash Flow Calculations
i . School sx 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 C
Slide 33: Fiscal 2018 Outlook: Reconciliation to Non-GAAP
School Specialty. * 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 H
Slide 34: Comparable Company Information
OF scroo. 3s Comparable Company Information — Page 1 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. NYSE: BKS 36
Slide 35: Comparable Company Information
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Slide 36: Comparable Company Information
eo School wi 3s Comparable Company Information — Page 3 Specialty. uideline Public Enterprise Value to um > oom 7 Enterprise EBTDA EBT Company Ticker Value LEY Sales LFVSales .TM Seles FYs1Sees Maran _Mamin ‘ames & Noble, Ine Nyse: KS ag 33,598 $3,767 02x 0.2 Om 38% ~ 12% Blue Bird Corporation Nasda
Slide 37: Comparable Company Information
37 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 38: 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
Slide 39: Non-GAAP Financial Information
(| School Specialty. * 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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