Party City’S December 31, 2015 Form 10-K and in Subsequent Reports Filed with Or Furnished to the SEC
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5.10 4.50 - logo 0.15 0.15 5.10 2.60 Bank of America Merrill Lynch Consumer & Retail Technology Conference 1.80 March 15, 2016 2.15 3.30 3.75 Disclaimer Forward Looking Statements Certain statements herein are ―forward-looking statements‖ made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements contained herein that are not clearly historical in nature are forward-looking. In many cases, you can identify forward-looking statements by terms such as ―may,‖ ―will,‖ ―should,‖ ―expects,‖ ―plans,‖ ―anticipates,‖ ―believes,‖ ―estimates,‖ ―predicts,‖ ―potential‖, ―targets‖, ―intends‖ or the negative of these terms or other comparable terminology. These forward-looking statements speak only as of the date hereof and are based on the Company’s current plans and expectations and are subject to a number of known and unknown uncertainties and risks, many of which are beyond the Company’s control. These risks and uncertainties include: our ability to compete effectively in a competitive industry; fluctuations in commodity prices; our ability to appropriately respond to changing merchandise trends and consumer preferences; successful implementation of our store growth strategy; decreases in our Halloween sales; disruption to the transportation system or increases in transportation costs; product recalls or product liability; economic slowdown affecting consumer spending and general economic conditions; loss or actions of third party vendors and loss of the right to use licensed material; disruptions at our manufacturing facilities; and the additional risk and uncertainties set forth in ―Risk Factors‖ in Party City’s December 31, 2015 Form 10-K and in subsequent reports filed with or furnished to the SEC. As a consequence, current plans, anticipated actions and future financial position and results of operations may differ significantly from those expressed in any forward-looking statements in the presentation. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented. Except as may be required by any applicable laws, we assume no obligation to update any of these forward-looking statements. Non-GAAP Financial Measures We present non-GAAP measures when our management believes that the additional information provides useful information about our operating performance. This presentation includes unaudited non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income, Adjusted EPS and Pro forma Adjusted EPS. Non- GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non-GAAP financial measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with GAAP. See our SEC filings for a reconciliation of the non-GAAP financial measures included in this presentation to the comparable GAAP measures. Industry Data This presentation also contains industry data, forecasts and other information that we obtained from industry publications and surveys, public filings and internal company sources. Statements as to our ranking, market position and market estimates are based on independent industry publications, third-party forecasts and management’s estimates and assumptions about our markets and our internal research. While we are not aware of any misstatements regarding our market, industry or similar data presented herein, such data involve risks and uncertainties and are subject to change based on various factors. We have not independently verified third-party information nor have we ascertained the underlying economic assumptions relied upon in those sources, and we cannot assure you of the accuracy or completeness of such information contained in this presentation. 2 Company Overview Company Overview: Nobody Has More Party For Less! Largest vertically integrated manufacturer, supplier and retailer of decorated party goods globally $2.3 billion in worldwide sales1,2 $380 million in Adjusted EBITDA1,3 / 16.6% Adjusted EBITDA margin1 Manufacturing Wholesale / Distribution Retail Canada 41 2 15 1 2 3 3 19 12 65 7 6 29 4 8 31 3 27 114 29 28 16 14 53 22 6 1 22 2 18 9 17 24 3 2 13 19 3 9 9 31 3 67 11 >40,000 SKUS Hawaii Puerto Rico 5 Largest global designer, manufacturer, and 71 distributor of decorated party supplies and 40,000 Retail Locations costumes #1 party goods retailer in North America ~900 locations across North America4 ~75% of products are sourced through The largest manufacturer of metallic balloons in wholesale business the world Party Independent Grocery Dollar Mass City Party Stores Stores Stores Merchant One stop shop for all party needs 1 Fiscal year 2015 2 Includes franchise royalties. 3 See SEC filings for reconciliation of Adjusted EBITDA to Net Income. 4 Includes franchise locations. 4 Timeline: A History of Party City’s Vertical Integration Evolution of the Business – Key Events Amscan Acquired Acquired Gags Acquired Acquired founded Party City and Games, Festival The Party Travis Factory Card Acquired party Acquired iParty SA Superstore Designs and Party Outlet goods division of and Party Channel Built a new & 85% of Party American Delights (online evolves distribution City Franchise Greetings retailer) facility Group 1947 1986 1989 1997 1998 2001 2002 2003 2005 2006 2007 2008 2010 2011 2013 2014 2015 2016 Became a Acquired Acquired Acquired Acquired vertically Party remaining Riethmuller, 23 integrated America interest in Party Latex Balloon franchise manufacturer City Franchise Manufacturing stores Group in Malaysia, Hong Kong and Party Acquired showroom Packagers in Acquired Christy’s Acquired M&D opened Canada Acquired Costumes and Christy Anagram Balloons ACIM Garments and Accessories Acquired U.S. Balloon Party City has developed into a fully integrated manufacturer and wholesaler with an Omni-Channel Retail Presence 5 2015 Highlights 2015 Highlights Revenues1,2 Adjusted EBITDA3 $2,334 $380 $2,242 $362 2014 2015 2014 2015 % margin 15.9% 16.6% Adjusted Net Income3 Pro Forma Adjusted EPS3,4 $114 $1.01 $87 $0.77 2014 2015 2014 2015 1 Adjusted for 53rd week impact in 2014 (extra week in 2014 contributed $29M of revenues) 2 Adjusted for constant currency (FX impact of $39M) 3 Results are presented on an adjusted basis; see reconciliation to GAAP in our SEC filings 4 Pro forma EPS has been adjusted for the additional shares issued in the April 2015 IPO for comparability purposes 7 2015 Highlights Progress on Key Growth Initiatives since IPO: Growth Initiative 2015/2016 Accomplishments Expand Retail Store Base Opened/acquired 33 new stores in the US and Canada (19 net of closures) Increase Share of Shelf Expanded from ~70% in FY 2014 to ~75% in 2015 Drive Same Store Sales 2015 brand comp of 1.5% despite Frozen headwinds and store resets Grow Third Party Wholesale Business 2015 wholesale sales growth of 5% (ex-currency) Grow Our Global Digital Platform YTD North American online comparable sales up 4%+ • Expanded presence into Mexico through master franchise agreement with Increase International Presence plan to open 80 stores by 2024 • 2015 international third party wholesale sales up 15% (ex-currency) Completed acquisitions of Travis Designs, ACIM, two franchise groups Pursue Accretive Acquisitions comprising 23 stores and Festival SA 8 2016 Recent Developments Acquired 23 franchise stores from two franchise groups in Arizona, New Mexico and Kansas for a combined net cash purchase price of $28 million representing a multiple of EBITDA of ~4.2X. Entered into an e-commerce agreement with Staples to be their ―white label‖ fulfillment partner for party goods sold on Stapes.com. We expect to roll this out to other online retailers in the future. Extended our portfolio licensing partnership with Warner Brothers to produce costumes and accessories for the Wizard of Oz, Harry Potter , Scooby-Doo, the Flintstone and more for our own Party City stores and partycity.com; in 2017 this will also include DC Comics Super Heroes including Batman, Superman, Wonder Woman, the Justice League and more. Acquired Festival SA, a costume manufacturer in Madagascar which, over the next few years will allow us to source as much as 15% of our costume requirements through this operation, and capture the full manufacturing to retail margin. 9 2016 Outlook Revenues expected to range from $2.35 billion to $2.42 billion Adjusted EBITDA expected to range between $390 – $405 million Adjusted Net Income expected to range between $140 - $150 million Adjusted diluted EPS expected to range between $1.17 to $1.25 Brand comparable sales expected to be flat to up slightly Frozen lapping effect and one less selling day due to Easter Sunday shifting into Q1 2016 as opposed to Q2 2015. We expect Q1 brand comparable sales to decline 1-2% with low single digit EPS for Q1. 10 Key Investment Highlights Investment Highlights 1 2 3 Unique Vertically Integrated Leading Market Position Broad and Innovative Operating Model with Controlled in a Growing Category Product Offering Distribution Channels Leading party goods supplier in the Combination of wholesale and retail Unmatched product breadth with over growing $10+ billion party goods enhances profitability through greater 25,000 SKUs in-store and 50,000 industry margin capture for majority of goods SKUs online Leading global designer, manufacturer Amscan has ~75% share