School Speciality Inc · OTC:SCOO
School Speciality — School Specialty — Q1 2018 Earnings Presentation
20 slides from School Speciality's earnings presentation, May 10, 2018
Slide 1: 2018 Q1 Investor Update
owt a Sis miom | fe ; , ire Th School ene Bh dp he 2018 Q1 Investor Update May 9, 2018
Slide 2: 2018 Key Business Objectives
2018 Key Business Objectives Achieve Organic Revenue Growth Complete Key Platform Investments Process Excellence Complete the TL Integration Increase Investor Awareness & Improve Liquidity NA School Specialty. 218 Century Safe School Value Proposition Continued implementation of the Team-Sell model
Slide 3: Q1 2018 — Key Updates
NA School Q1 2018 — Key Updates Specialty. Momentum Building with Key Areas of Success Heading into Peak Season First Quarter revenue up $2.2M or 2.2%, driven by Triumph Learning (“TL”) acquisition. Bookings momentum improving substantially through early May; 2018 overall growth objectives intact *
Slide 4: Q1 2018 — Key Updates
NA School Q1 2018 — Key Updates Specialty. Momentum Building with Key Areas of Success Heading into Peak Season Other key growth initiatives showing progress * Bookings with Channel Partners (etailers) and through other funding organizations such as Adopt-A-Classroom and Donors Choose are showing st
Slide 5: Q1 2018 — Key Updates
NA School Q1 2018 — Key Updates Specialty. Momentum Building with Key Areas of Success Heading into Peak Season Progress towards shareholder liquidity initiatives * During March and April, SSI management engaged in more than 30 investor meetings, teach-ins and presentations. * On April 9", the Compa
Slide 6: Financial Update
Slide 7: Fiscal Year 2018 — First Quarter Financial Review
NA School Specialty. 7 Fiscal Year 2018 — First Quarter Financial Review 2018 15 Quarter Income Statement Summary 2018 1 Quarter Revenue by Product Category _* Variance Be Huge Rena Actual Actual Revenue $99.3 $97.4 $2.2 Supptes $53.4 ena a Gross Profit $36.1 $345 $16 ae is Ge s CoseNaon 36.4% 35.6%
Slide 8: Fiscal Year 2018 — First Quarter Financial Review
NA School Specialty. Fiscal Year 2018 — First Quarter Financial Review SG&A expense of $57.1 million in Q1 2018 vs. $47.5 million in Q1 2017, an increase of $9.6 million. + The adoption of ASC 606 resulted in a $4.2 million acceleration of catalog expenses in Q1 2018; this is timing-related as ASC 6
Slide 9: Working Capital Analytics / Other Cash Flow Drivers
NA School » Working Capital Analytics / Other Cash Flow Drivers Specialty. Q1 2018 Q1 2017 Q1 2016 Q1 2015 Actual Actual Actual Actual (1) Accounts Receivable $54.3. $54.5, ‘$51.4 $50.1 Inventories $102.2 $98.1 $92.4 $87.8 Deferred Catalog Costs $- $9.0 $9.4 $8.7 Prepaid Expense and Other Current As
Slide 10: Capitalization Summary
NA School » Capitalization Summary Specialty. sia milion Q1 2018 Q1 2017 Q1 2016 Q1 2015 Bess Actual Actual Ge feo), Tetalblet Debt Increase Driven by: a) $19.4M related to TL acq) Cash and Cash Equivalents $10.3 $5.6 $87.9 $8.6 b) $4.0M related to refinancing fees c) $3.0M additional PIK note inter
Slide 11: Direct Cash Flow Calculations
u Direct Cash Flow Calculations Capex Prod Dev Unrealized FX (gain) loss Other Change in WC Unleveraged free CF Cash Interest Cash Taxes Leveraged free CF GAAP CF Operating Investing ont! March 31, 2018 (12,012) (7.033) (3,426) (3.241) (4,229) (546) 3 18 (2,192) (641) (18,294) (18,992) (37.050) (30,
Slide 12: Impact of the Adoption of ASC 606
Income Statement Impact: Impact of the Adoption of ASC 606 Revenues $98.6 $07 $09.3 Cost of revenues $627 $0.5 $63.2 Gross profit $26.9 $0.2 $36.1 | SCBA $629 $4.3 $67.4 Operating Profit (17.1) $(4.3) $(21.3) Lossbefore tax benefit _$(20.8) $(4.1) $(24.8) Tax benefit $6.2) $(1.0) $(6.2) Net loss $(1
Slide 13: 2018 Outlook: Significant Top- and Bottom-Line Improvements
School * 2018 Outlook: Significant Top- and Bottom-Line Improvements A Specialty 2017 Actual vs. 2018 Outlook 2018 Outlook Reaffirmed Revenue $658.4 $680 - $695 3.3% — 5.6% YOY growth Gross Profit $203.2 $252 - $261 ~$9M — $18M YOY improvement Gross Margin % 36.9% 37.0% - 37.6% Up to a 70 bps improv
Slide 14: Appendix
Slide 15: Consolidated Statement of Operations
NA School as Consolidated Statement of Operations Specialty. SCHOOL SPECIALTY, INC. ‘CONSOLIDATED STATEMENTS OF OPERATIONS {a Thousands, Except Per Share Amounts) For the Three Months Ended March 31,2018 April 1,2017 Revenues s 99287 $ 97,410 Cost of revenues 63,166 62,586 Gross profit 36,121 34,524
Slide 16: Condensed Consolidated Balance Sheet
as Condensed Consolidated Balance Sheet ASSETS (Coment assets: Cashand cash equivalents doubtilaccouats Refendable income tae ‘Total coment assets Property, plant and equipment, nat Gooérill. Intngble asset ast Development costs and other Jnvestmant in unconsolidated afliate Toul asset N/ Seeley CON
Slide 17: Condensed Consolidated Statement of Cash Flows
@ School wd » Condensed Consolidated Statement of Cash Flows Specialty. ‘SCHOOL SPECIALTY, INC. ‘CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOW S (ia Thousands) March 31,2018. April 1,2017 Cash fows fomoperting activities: Net income. s ase7 S$ 06,775) Adjustments to reconcile net income to net cash
Slide 18: Fiscal 2018 Outlook: Reconciliation to Non-GAAP
NA 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
Slide 19: Safe Harbor Statement
4 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 ob
Slide 20: Non-GAAP Financial Information
NA School »° Non-GAAP Financial Information Specialty. 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: provi