School Speciality Inc · OTC:SCOO
School Speciality — School Specialty — Investor Presentation (March 2018)
33 slides from School Speciality's investor presentation, Mar 15, 2018
Slide 1: 2017 Year-End Investor Presentation
eee eB School co Ss 2017 Year-End Investor Presentation March 14, 2018
Slide 2: School Specialty At-a-Glance
Ni School School Specialty At-a-Glance Specialty. 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 and
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. + Broad spectrum of preK-12 customers; strong presence on state / regional contracts and regional / national purchasing cooperatives + 13,000+ active district customers rep
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: 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 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 2046 Operational and Foundation for Pre-2013 Performance Decline 2017-2021 Significant Upside Structural Change Profitable Growt
Slide 9: Financial Overview
Slide 10: 2017 Financial Performance Summary
Ni School Specialty. 1 2017 Financial Performance Summary 2017 Income Statement Summary 2017 Revenue Breakdown (Sin mitions) — nie Variance (sin mitions) pike Variance Revenue $658.4 $656.3 $2.4 ‘Supplies $305.4 $316.0 $10.6 SESE $243.2 $239.9 = Furniture $190.8 $183.1 77 Arcs Mans 36h 366% abe Inst
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
Slide 13: 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 14: Capitalization Summary
(| School « 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 to refi
Slide 15: Progress Made in Key Areas; Improving Outlook in 2018
Ni School Specialty. 1s 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
Ni School as 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 as 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 se
Slide 19: 2018 Outlook: Significant Top- and Bottom-Line Improvements
Le School # 2018 Outlook: Significant Top-and Bottom-Line Improvements © & 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 improveme
Slide 20: Business Transformation: Meaningful & Positive Financial Trends
Ni School 2 Business Transformation: Meaningful & Positive Financial Trends Specialty. Revenue Gross Profit $700 $688 $260 $257 $680 $660 $656 $658 $250 $638 an o cial LI OJ $620 $230 $600 $580 $220 2014 «20152016. 20172018 2014 LJ 2016 ©2017-2018 376% 364% 366K 36.9% © 37.3% Total SG&A Adjusted EBI
Slide 21: 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 Based on current debt amortization schedule; 2017 Includes ~$14M Term si188 $109.1 erm Loan ° draw to fund TL acquisition TTM Average ABL (Net)! $24.2 $28.8 ~$5M of TL
Slide 22: Industry Trends — Stable with Areas of Opportunity
= Industry Trends — Stable with Areas of Opportunity - i = _—
Slide 23: 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 24: Overall Education Funding (Cont'd)
2 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 investmen
Slide 25: 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, 30 states increased funding for Pre
Slide 26: Appendix
Slide 27: Consolidated Statement of Operations
Ni School » 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 28: 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 29: 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 30: Direct Cash Flow Calculations
i . School 30 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 31: Fiscal 2018 Outlook: Reconciliation to Non-GAAP
School Fiscal 2018 Outlook: Reconciliation to Non-GAAP Specialty. 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 32: 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 33: Non-GAAP Financial Information
(| School Specialty. 3° 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: provi
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