School Speciality Inc · OTC:SCOO
School Speciality — School Specialty — Investor Presentation (March 2018)
38 slides from School Speciality's investor presentation, Mar 23, 2018
Slide 1: 2017 Year-End Investor Presentation
ree eB School ei | Ss 2017 Year-End Investor Presentation March 23, 2018
Slide 2: School Specialty At-a-Glance
Ni School Specialty. 2 School Specialty At-a-Glance Leading provider of products and services to 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 a
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 Special Needs (5 @& Suet Qa Physical Education Science (Curriculum & Supplies) Early Learning Furniture f% ones = eae) (WORDLY WIS
Slide 4: Diverse and Growing Customer Base
Diverse and Growing Customer Base Large, national customer base with limited revenue concentration risk. School Specialty. + Broad spectrum of preK-12 customers; strong presence on state / regional contracts and regional / national purchasing cooperatives + 13,000+ active district customers represen
Slide 5: Slide 5
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 Compellin
Slide 7: 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 improve our offering and leverage our scalable operating platform. Sales Transformation Operations Pursue
Slide 8: Transformation of the School Specialty Platform
(| School Specialty. Transformation of the School Specialty Platform SSI is at an inflection point; strong near term opportunities to increase shareholder value. 2014-2015 2016 Operational Foundation for and Profitable Growth Pre-2013 Performance Decline 2017-2021 Significant Upside + Underperformin
Slide 9: Financial Overview
Slide 10: 2017 Financial Performance Summary
Ni School 10 2017 Financial Performance Summary Specialty. 2017 Income Statement Summary 2017 Revenue Breakdown (sin mil a EG Variance (S'sin mii a. Fae Vari (Sin mitions) pao Aone (Sin mitions) hal jo fariance Revenue $658.4 $656.3 $24 ‘Supplies $305.4 $316.0 $10.6 Gross (oft $243.2 $2399 $33 Fumit
Slide 11: Solid Performance in 2017 / Improving Outlook in 2018
School Specialty. Solid Performance in 2017 / Improving Outlook in 2018 Despite challenging industry conditions, stable top-line performance and bottom-line/free cash flow expectations met. + Top-line growth of $2.1M or 0.3%, aided by Triumph Learning (“TL”) acquisition; base business down 0.8%. + R
Slide 12: 2017 Financial Performance Comments
(| School 2 2017 Financial Performance Comments Specialty. Key Factors Impacting 2017 Results (Positives) > FOSS momentum building with Next Gen Elementary and Middle School offerings; continued success in open territories. > Instruction & Intervention (I&!) portfolio is strengthening, aided by TL a
Slide 13: Working Capital Analytics / Other Cash Flow Drivers
Working Capital Analytics / Other Cash Flow Drivers \ Speolty, Accounts Receivable $69.3 $58.4 $61.0 Inventories $772 $76.2 $75.2 Prepaid Expense and Other Current Assets $18.4 $19.6 $26.6 Accounts Payable $26.6 $20.1 $22.1 (Other Current Liabilities $36.6 $28.0 $20.7 Net Working Capital $101.4 $106
Slide 14: Capitalization Summary
ig : (| School a4 Capitalization Summary Specialty. (S's in mittions 2017 2016 2015 2014 Actual Actual Actual Actual Total Net Debt increase driven by: Cash and Cash Equivalents: $31.9 $35.1 $12.9 $12.0 a) $19.0M related to TL acquisition ABL Facility, maturing in 2022 ae a a $6.9 b) $4.0M related t
Slide 15: Progress Made in Key Areas; Improving Outlook in 2018
Ni School Specialty. a5 Progress Made in Key Areas; Improving Outlook in 2018 Strengthened competitive positioning heading into 2018; progress in key areas of focus. * Team-basedsales model providing better coverage, customer support and account penetration. + Transitioned (personnel & model) contin
Slide 16: Progress Made in Key Areas; Improving Outlook in 2018
15 Ni School Progress Made in Key Areas; Improving Outlook in 2018 Specialty. Strengthened competitive positioning heading into 2018; progress in key areas of focus. * TLacquisition strengthens product offering and sales reachin the high-margin l&l category. * Integration of TL field sales with SSI
Slide 17: 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 18: Driving Growth — Combining Strategy with Opportunity
(| School a 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 + As we realigned our sel
Slide 19: 2018 Outlook: Significant Top- and Bottom-Line Improvement
Le School * 2018 Outlook: Significant Top-and Bottom-Line Improvemé, Specialty 2017 Act Revenue 9658.4 $680 - $695 3.3% - 5.6% YOY growth Gross Profit $243.2 $252 - $261 ~$9M - $18M YOY improvement Gross Margin % 36.99% 37.0% ~ 37.6% Up to 270 bps improvement Variable SG&A % “17% ity improvements of
Slide 20: Business Transformation: Meaningful & Positive Financial Trend
School Specialty. 20 Business Transformation: Meaningful & Positive Financial Trek Revenue Gross Profit $700 $688 $260 $257 $680 658 $250 $660 ; $555 _ 8 go 28 638 $640 $240 $620 o al oI $600 $230 $580 $220 2014 «20152016 2017-2018 2014 o 2016 «2017-2018, 376% 364% 366K 36.9% © 37.3% Total SG&A Adju
Slide 21: 2018 Outlook: Significant Opportunity for Equity Value Creation
School pecialty. 2018 Outlook: Significant Opportunity for Equity Value Crea: Current Valuation: 2017 Actual vs. 2018 Outlook Based on current debt amortization schedule; 2017 Includes ~$14M $109 dem toot SHES oa draw to fund TL acquisition TTM Average ABL (Net)! $24.2 $28.8 ~$5M of TL acquisition f
Slide 22: Comparable Company Performance / Valuation Data
Of sera Comparable Company Performance / Valuation Data “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 / OCF (OCF = EBITDA
Slide 23: Industry Trends — Stable with Areas of Opportunity
~ = ay Industry Trends — Stable CC with Areas of Opportunity
Slide 24: Overall Education Funding
2s Overall Education Funding (| School Specialty. 2016 and 2017 Budgetary Pressures Adversely Impacted our Business. 46.0% 45.6% 8.4% Income and sales Property tax Federal - Dept tax driven driven of Ed & HHS, Education Funding Supports spending on SSI products /solutions Source: Center on Budget an
Slide 25: Overall Education Funding (Cont'd)
2s Overall Education Funding (Cont'd) Ni School Specialty. 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 investme
Slide 26: Overall Education Funding (Cont'd)
Ni School Specialty. 2s 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, 20 states increased funding for Pre
Slide 27: Appendix
Slide 28: Consolidated Statement of Operations
28 Consolidated Statement of Operations SCHOOL SPECIALTY, INC (CONSOLIDATED STATEMENTS OF OPERATIONS (da Thousands. Except PerShare Ameosts) For the Three Months Ended For the Tshe Months Ended December 30,2017 _ December 31,2016 _ December 30,2017 __ December 31,2016 Revenues, s mms § 5170S 6838S 6
Slide 29: Condensed Consolidated Balance Sheet
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 en
Slide 30: Condensed Consolidated Statement of Cash Flows
30 Condensed Consolidated Statement of Cash Flows 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 sconcilenet income tonet
Slide 31: Direct Cash Flow Calculations
31 Direct Cash Flow Calculations 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 $ 29581 = § 44,789 Cas
Slide 32: 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 Hi
Slide 33: Value Calculation
Value Calculation Comparable Company Information — Page 1 % School Specialty. (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:
Slide 34: Comparable Company Information
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Slide 35: Comparable Company Information
Comparable Company Information — Page 3 OF scroo. Enterorse Value to um um > Enterprise Fy-t EBTDA Eel Company Ticker Value LEY Seles _LTM Sales __Sdles__LFY Sales ITM Seles _FY+1Sdes Margin _Marain ‘ames & Noble, Ine NYSE BKS 33.898 02x 0.2 om 38% 12% Blue Bird Corporation NasdagGlt: BLED $91 08x 0
Slide 36: Comparable Company Information
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Slide 37: 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 obj
Slide 38: 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: provisio
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