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.
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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 of shelf at Best-in-class design capabilities and and distributor of decorated party Party City and manufactures ~20% of innovation track record creating new supplies and costumes product sold in our stores opportunities
#1 party goods retailer in North Global sourcing model assures lowest Brand portfolio of licenses supported America with over 900 superstore cost manufacturing for all products by market position at wholesale and locations retail Rapid response to changing consumer trends
4 5 6 Strong Financial Performance Multiple Levers for World-Class Management Team and And Free Cash Flow Generation Revenue + Margin Growth Experienced Sponsor Ownership
Sales of party goods have been Meaningful whitespace: 400+ new Seasoned management team with resilient in all economic cycles stores1 experience across wholesale and retail businesses and international and Repeat-purchase model, consumable Strong e-commerce growth through nature of products and predictable enhanced omni-channel initiatives e-commerce platforms selling patterns Track record of strong performance Grow wholesale business through operating with leverage Consistent margin expansion and top- increased share of shelf and line growth; superior to peers alternative markets Majority sponsor has a long history of success in C&R investments Exceptional free cash flow generation Select geographic and channel expansion opportunities
Expertise in tuck-in acquisitions
1 Includes franchise stores in Mexico
12 1 Leading Wholesale Business
One of the largest manufacturers, designers and Wholesale Revenue by Product Category1 distributors of decorated party supplies in the world
Metallic Ballons – Over $1.2bn in sales, ~47% to owned retail and 12% Costumes & Accerssories e-commerce 28% Favors, Stationery & Other Product sold in over 40,000 retail locations in 100+ 16% countries
– 59% U.S. and 41% International Decorations Tableware 20% 24% Deep assortment with over 40,000 SKUs across 5 product categories Wholesale Sales by Channel1
– 400+ party goods ensembles, which contain 5 to Other International International 50 design-coordinated items Balloon 20% Distributions 2% Balanced, multi-channel customer base – no single
customer represents more than 10% of third party Domestic Ballon Owned Stores & Distributors/ e-commerce sales at wholesale Retailers 47% 2 6%
Other Domestic Retailers 12% Party City Franchised Stores 13% 1 Reflects December 31, 2015 numbers. Based on total wholesale sales including intercompany sales to retail operations. 2015 total wholesale sales were $1,227 million and intercompany sales were $573 million. 2 Includes sales to Party City Canada and Party Delights.
13 1 Category Defining Omni-Channel Retail Concept
Retail Stores e-Commerce
Largest retail network of A leading operator of Largest party e-Commerce U.K. acquisition expanded decorated party supplies temporary Halloween platform with ~$140 million platform into Europe in North America stores in North America of revenue for 20151 – B2B capabilities Rolled out additional – Over 730 company- – Used to test locations country specific sites owned Party City for year round Party – Average basket 3x across Europe and superstores City stores retail beyond (including including ~50 Germany, France, and locations in Canada the Netherlands) and ~180 franchise
locations
Approx 300 e-Commerce ~900 Party Temporary currently ~10% of Superstores Stores Retail Sales
Nobody Has More Party for Less!
1 Includes Party Delights
14 1 Category Leadership Like No Other Specialty Retailer
Party Vitamin & Home Goods Supplements Crafts Pet Supplies Sporting Goods Improvement
Industry Leader
Stores ~7001 ~3,5001 ~1,300 ~1,400 ~700 ~2,270
NM
#2 Player
Stores — ~725 ~600 ~1,300 ~185 ~1,850
1 Excludes franchise locations. Source: Company filings and websites.
15 2 Unique Vertically-Integrated Operating Model
Breakdown of Retail Sales Product that PRTY buys from a third party and sells at Party City Singles corporate stores. Earns retail margin only
Examples: candy, greeting cards, helium, foil serving pans
25% 20% Product that PRTY’s wholesale division buys from a third party and sells at Party City corporate stores. Earns wholesale + retail 30% Doubles margin Examples: party favors, costumes and other wearables, table 55% 80% covers, cutlery 75% share share of shelf Product that PRTY’s wholesale division manufactures + distributes of shelf 50% + sells at Party City corporate stores. Earns manufacturing + Triples wholesale + retail margin 20% Examples: paper plates, bowls, cups & napkins, plastic cups, metallic and latex balloons, piñatas Today Goal (2-4 years)
Our vertical model and significant, global scale provide unique competitive advantages:
Enhanced profitability by capturing the full manufacturing-to-retail margin on a significant portion of the products sold in our retail stores
Enhance wholesale capabilities via retail insights
Enhance retail capabilities via wholesale insights
Cost competitive sourcing
Enhanced control of inflation pressures
Maintain greater control of every step from design and production through the sale of our products across channels: – Design and innovation capabilities – Ensures best products and inventory – Rapid response to changes in consumer preferences
16 2 Power of the Vertical Model Gross Margin Impact of Achieving Vertical Goals
Gross margin Today Goal
Hypothetical example Individual1 Cumulative Vertical % GM Vertical % GM Benefit
$ 1.00 Retail sales price
0.50 product cost
“Single” 0.50 product profit
0.20 occupancy
$0.30 net gross margin 30% 30% * 25% = 7.5% 20% = 6.0%
$0.50 WS sales price
0.25 product cost
“Double” 0.25 product profit
0.10 freight/distribution
$0.15 net gross margin 30% 45% * 55% = 24.8% 30% = 13.5%
$0.25 Mfg sales price
“Triple” 0.21 cost
$0.04 profit 15% 49% * 20% = 9.8% 50% = 24.5%
42.1% 44.0% ~200bps2
1 For ease of illustration purposes, a static product mix between vertical and 3rd party volumes as well as a static individual margin used. Actual results depend on range of individual margins by product line and mix of vertical and non-vertical volumes. 2 Does not reflect GM impact of other factors like FX, international sales and expense leverage.
17 2 Highly Efficient Manufacturing, Sourcing and Distribution Capabilities on a Global Footprint
In-house manufacturing focused on high-volume Sourcing Manufacturing Distribution party essentials that can be manufactured through Distribution Brooklyn (NY)
Distribution Amscan Europe Kircheim highly automated processes Amscan UK unter Teck (Germany) Milton Keynes, (England) Distribution Distribution – Examples: Paper and plastic tableware products
Elmsford (NY) and metallic balloons Anagram Eden Prairie (MN) Headquarters Manufacturing East Providence (RI) Amscan Asia Edina (MN) Manufacturing / Distribution Hong Kong (China) Distribution Harriman (NY) Distribution / Sourcing Ampro Manufacturing 6 Sourcing Facilities Capabilities are cost-competitive and provide rapid Tijuana (Mexico) Newburgh (NY) Manufacturing / Distribution Manufacturing Chester (NY) turnaround times on key product categories Distribution Louisville (KY) Everts Malaysia Melaka (Malaysia) Amscan Asia Pacific Manufacturing / Manufacturing / Baulkham Hills (Australia) Distribution Distribution Distribution Amscan De Mexico Naperville (IL) Guadalajara (Mexico) Labor intensive products, such as banners, favors Distribution and centerpieces, are principally sourced from Asia Manufacturing / Distribution Wholesale Sourcing Mix1 20+ year relationships with many of our vendors
Diversified sourcing, quality control and testing with In-House offices throughout Asia (China, Indonesia, India and Manufacturing Vietnam) 32%
Third Party 68% Warehousing and distribution facilities around the world
1 Reflects December 31, 2015 numbers. Based on total wholesale sales including intercompany sales to retail operations. 2015 total wholesale sales were $1,227 million and intercompany sales were $573 million.
18 3 Best-In-Class Innovation Capabilities And Broad Product Offering
Innovation License Portfolio
110 person in-house design team – Creative staff is constantly in the market identifying trends and new product concepts
Vertical integration allows development team to test new products and rapidly respond to changes in consumer preferences
Proprietary designs and licenses help differentiate products from those of competitors
Introduce approximately 7,000 new products and 50 new party goods ensembles annually
Product Offering Selected Merchandise Ensembles
Broadest assortment of merchandise – Organized by events and themes
Deep merchandise selection – Wide assortment including invitations, thank you cards, tableware, hats, horns, banners, cascades, balloons, novelty gifts, piñatas, favors and candy
19 3 Differentiated and Fun Retail Experience Insulates from Online Competition
One stop shop for all party needs Party Goods SKU Count Comparison1 – Greater assortment of merchandise than our national competitors, including mass merchants 25,000 – Fun destination shopping experience where customers can get inspired – Coordinated collections vs. individual items sold by other online retailers
Compelling Value <2,000 – ―Nobody has More Party for Less‖ pricing strategy <1,000 – Low price point and slow inventory turn makes it difficult Party City Dollar Stores Mass Market for other online retailers to profitably compete
Creating an Innovative and Fun Approach to Shopping
Color City Candy City Custom Invitations Favor City
1 Party City management estimates.
20 4 Strong Financial Performance and Free Cash Flow Generation
Sales of party goods have been resilient in all economic cycles
Rolling LTM Gross Wholesale Sales ($ in millions)
$1,231
$1,230
$1,227 $1,224
Recession Recession $1,213
$1,184
$1,140
$1,100
$1,081
$1,057
$1,023
$1,021
$1,015
$984
$963
$955
$940
$912
$838
$808
$769
$719
$674
$672
$656
$653
$651
$646
$640
$637
$633
$626 $626
$592
$557
$525
$508
$475
$445
$430
$412
$407
$404 $404
$403
$399 $399 $399 $399
$396
$393
$389
$386
$378
$365
$354
$345
$343
$339
$335
$326
$321
$313
$307
$306
$293
$281
$256
$235
$215
$212 $212
$210
$198
$193 $193
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
21 4 Superior Financial Performance
TotalRevenues Revenues ($mm)
$2,271 $2,295 $2,045 $1,872 $1,914
$1,560 $1,599 $1,487 $1,247 $1,015
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Adjusted EBITDA1 ($mm) and margin
$400 $380 17.0% $362 2006-2015: $350 $321 16.6% 16.0% 460bps margin $292 expansion $300 $275 15.0%
$250 $231 14.0% $192 $200 $187 13.0% 12.0% $152 $150 12.0% $122 $100 11.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Adjusted EBITDA Adjusted EBITDA margin
1 See SEC filings for reconciliation of Adjusted EBITDA to Net Income 22 4 Strong Free Cash Flow Generation
Free Cash Flow ($mm)1
$301 $284 $247 $260 $231 $181
2010A 2011A 2012A 2013A 2014A 2015A
FCF Conversion2
84.0% 84.6% 81.0% 79.3% 78.4% 78.5%
2010A 2011A 2012A 2013A 2014A 2015A
1 Free Cash Flow defined as Adjusted EBITDA less CapEx. 2 Free Cash Flow Conversion defined as (Adjusted EBITDA – CapEx) / Adjusted EBITDA.
23 4 Strong Balance Sheet and Liquidity
Majority of primary proceeds from IPO used to reduce existing indebtedness
Solid free cash flow generation with ability to self-fund organic growth and opportunistic acquisitions
1 Ample liquidity going forward supported by new revolver of $640 million
Target gross leverage YE 2016: <4.0x; YE 2017: 3.0x - 3.5x
Historical Net Debt / Adj. EBITDA2
6.7x 6.3x 5.8x
4.6x 4.2x 3.5x 3.0x - 3.5x
2010A 2011A 2012A 2013A 2014A 2015A Target (YE2017)
Acquisition Dividend by THL Payment
1 ABL revolver comprised of $500 million facility, $40 million FILO tranche, and $100 million seasonal facility increase. 2 See SEC filings for reconciliation of Adjusted EBITDA to Net Income.
24 5 Multiple Levers for Revenue + Margin Growth
Expand Our Retail Plan to open ~30 stores per year representing ~4% annual square footage growth Store Base New stores generate a ~3 year payback and 50% ROIC in year 3
Drive Additional Continue to improve brand image and awareness Growth and Pursue merchandising initiatives to drive increased units per transaction Productivity From Existing Stores Convert existing stores to new, more customer interactive format
Increase share of shelf at company-owned and third-party stores; increase % of self-manufactured product
Grow Wholesale Drive continued product innovation through new licenses and integration of new manufacturing acquisitions
Business Expand into adjacent business-to-business channel
Grow Our Enhance customer experience through integrated omni-channel strategy Global Digital Further develop international capabilities through country specific sites
Platform Currently represents only approximately 10% of retail sales
Increase Drive international growth through customization of products to local tastes and holidays International Expand retail presence through store-within-a-store concept with select international retailers
Presence Represents ~15% of revenues in 2015
Completed numerous successful acquisitions over the past 16 years Pursue Accretive Emphasis on smaller, bolt-on acquisitions that add scale and/or unique capabilities Acquisitions Significant synergy potential through leveraging existing distribution, production and marketing capabilities
25 5 Expand Our Retail Store Base
Current retail network includes approximately 900 party Company- Owned Stores superstores, including:
– Approximately 680 company-owned stores in the U.S. and approximately 50 stores in Canada 1,000+
674 693 712 – Approximately 180 franchised locations 600
1 Opportunity to add over 400 additional Party City stores in the U.S., Canada and Mexico
– 27 new stores opened in FY 2015 (19 net, including acquired and closed stores) 2012 2013 2014 2015 Potential New Stores Opened: 24 25 23 27
Net Openings2: 25 74 19 19
Target New Store Economics with Vertically- Integrated Model
Sales at Maturity ~$2 million
Initial Sales Growth 8 – 10% over 3 – 4 years
Year 3 EBITDA Margins ~18-20%
Average Total Net Investment $765k
Pre-Tax Cash-on-Cash Returns ~50% by Year 3
Payback Period ~3 Years
Through our vertical model, we are able to enhance our total profitability by capturing the manufacturing-to-retail margin on a significant portion of our retail sales and by leveraging our access to multiple channels. In this way, 1 Includes franchise stores in Mexico. we are like no other retailer. 2 2013 includes 54 stores acquired from iParty
26 5 Drive Additional Growth And Productivity From Existing Stores
Pursue merchandising initiatives to Continue to improve brand image and awareness drive increased units per transaction
Strong emphasis on price-value Broadening products within proposition – ―Nobody Has More existing license arrangements Party For Less‖ Added color coordinated dress-up Continual use of Party City and candy products website and social marketing to communicate products, party ideas, assortment, and value
Convert existing stores to new, Increase share of shelf of vertical products in more customer interactive format redesigned party stores
Expect to have all 150 remaining stores converted by 2018
Remodeled stores expected to generate sales growth 5-6% higher than non-remodeled in the first year
New store management model increases employee engagement and improves customer service
27 5 Grow Wholesale Business
Wholesale growth driven by our leading scale, Wholesale Share of Shelf1 vertical operating model and strong innovation
Product portfolio initiatives include: ~80% ~75%
– Building out wearable / costume business to 30% capitalize on recent acquisitions 55% ~25% – Acquisition of new licenses and expansion into 50%
new categories under existing licenses 20%
Expansion into adjacent business-to-business 2005 2015 Long-term goal (2-4 years) channel Triples Doubles
– Targeting under-served consumer segments Gross Wholesale Sales – Expansion into adjacent ―alternative markets‖
– B2B opportunities with restaurants, bars, $1,213 $1,227 $1,081 $1,023 children’s activity centers and sports arenas $940 $769 $567 $573 $488 White label partnership opportunities with other $355 $440 online retailers $298
$585 $583 $593 $646 $654 $471 Benefit from expansion in Mexico via master
franchise agreement with Groupo Oprimax 2010 2011 2012 2013 2014 2015 3rd Party Wholesale Intercompany Sales
1 Based on product COGS.
28 5 Grow our Global Digital Platform
E-commerce today represents ~10% of total retail sales
– Mobile currently 50% of e-commerce traffic and 20% of e-commerce sales
– Much broader offering online: ~50K SKUs online vs. ~25K in store
– Linking stores to online with perks like free Wi-Fi and in-store ordering for free shipping
– Increasing engagement through social media sites and user-generated content
Insulated from other online retailers (breadth of offering, competitive pricing)
Initiatives for 2016 to drive e-commerce:
Buy online and pick up in stores (pilot program with balloon bouquets)
Expanding our Party Ideas section of the website to harness partner and user generated content
Expanded assortment of SKUs only available online (party kits, web-only party patterns) and personalization options
―Shoppable pins‖ on Pinterest
Adding additional country specific sites
29 5 Grow our International Presence
Initiatives by Country/Region:
Mexico:
Franchise agreement with Grupo Oprimax to open 80 stores by 2024
First three stores to be opened by 2Q16; five by end of 2016
Target 50% share of shelf
United Kingdom:
1st retail location up and running; 2nd location to open in 2Q16
Store-in-store concepts currently in ~40 Woody’s locations
Dedicated party retail space in ~400 Clinton’s locations
Australia:
Store-in-store concepts currently in ~140 Big W stores
Plan to add additional 50 locations in 2016
Continental Europe:
Dedicated space in large retailers in several countries, including Spain, Germany, Belgium, Switzerland
30 6 Pursue Accretive Acquisitions Across the Value Chain
Acquisition Strategy History of Strategic Bolt-on Acquisitions
Global and scalable infrastructure provides a Festival Franchises strong platform for future acquisitions – Manufacturer – Two – US custom – U.K. based – US – German – U.K. based of costumes franchise injection designer, distributor of distributor of costume located in groups molded sourcer and metallic party goods company Description Emphasis on smaller, bolt-on Madagascar comprising plastics distributor balloons acquisitions that add scale 23 stores manufactur high-end and / or unique capabilities er costumes
Potential areas of focus Date of Mar. 2016 Jan.2016 Aug. 2015 Mar. 2015 Oct. 2014 Jan. 2011 Sep. 2010 include: acquisition
– Broaden and deepen product capabilities Size $5mm $28mm $11mm $12mm $10mm $47mm $34mm
– Expand retail presence, including domestic franchisee buyouts – Will allow the – Market – Provides – Provides – Creates – Expanded – Provided Company to consolidation opportunity significant ability to European costume source up to , widening to earn full sourcing and capture full reach and design and – Expand international 15% of its company- manufacturi vertical manufacturin enabled sourcing presence costumes owned retail ng to retail integration g-to-retail direct supply capabilities and capture territory, margin on synergies, as margin on of latex as well as the full improve plastic well as balloons balloon additional Rationale Significant synergy potential manufacture- management products access to a that PRTY requirements resources in through leveraging existing to-retail and brand including higher-end manufacture previously the U.K. and distribution, production and margin on integrity of drinkware, costume s and sells at sourced from European marketing capabilities these these serveware, customer company- 3rd party markets products locations, and cutlery owned stores vendors realize cost synergies
31