Party City Goldman Sachs Retail Conference September 2017 OUR COMPANY YOU MAY KNOW US FOR OUR RETAIL BUSINESS…. Category Leadership Like No Other Specialty Retailer
Party Home Goods Crafts Pet Supplies Sporting Goods Improvement
Industry Leader
Stores ~7901 ~1,350 ~1,430 ~750 ~2,270
NM
#2 Player
Stores — ~600 ~1,400 ~200 ~1,860
1 Excludes franchise stores (~150) 3 Source: Company filings and websites. …BUT WE ARE SO MUCH MORE Our unique vertical model sets us apart from other retailers
We are the world’s largest designer, manufacturer and distributor of party goods
We have a large and growing manufacturing base – primarily located in the USA
Our business has several unique barriers to entry
4 1 YOU MAY NOT KNOW: We are the world’s largest designer, manufacturer and distributor of party goods
/ Over a third of our total profits are generated by third party wholesale customers
/ Our products are sold into 100+ countries
/ Over 40,000 retail locations worldwide sell our products: Grocery retailer in the U.K. / Independent party stores / Grocery stores / Dollar stores / Mass merchants / Our own Party City stores
Card and gift store
5 2 YOU MAY NOT KNOW: We have a large and growing manufacturing base – primarily located in the USA
We have built a foundation of state-of-the-art manufacturing capabilities prioritizing domestic production… / Over 20% of products sold in Party City are self manufactured: ▪ Metallic balloons (next page) ▪ Paper napkins, plates, cups Made in the U.S. (94% of 2016 manufactured COGS) ▪ Plastic plates, cups, bowls ▪ Custom injection-molded plastics ▪ Costumes ▪ Latex balloons ▪ Piñatas / Our goal is to increase this to 50% self-manufactured product
…and an efficient, world-class sourcing engine / Of the products we source internationally, we have been diversifying away from China to take advantage of lower wages and duties in Vietnam, India, Indonesia / We are reducing sourcing agents and increasingly going direct to factory
6 2 YOU MAY NOT KNOW: We are the world’s largest manufacturer of metallic balloons (and they’re produced in the U.S.)
Foil balloon industry overview: Social / Anagram has ~60% global market share expression Novelty Party / Anagram sales distribution: ▪ International: 35% ; Domestic: 65% Foil / Sales of licensed product: >30% Toy balloon Gift / Biggest category is Every Day (>80%) uses / Opportunities to expand beyond customary retail channels Floral Add On Decoration
P.O.P.
Anagram: Our metallic balloon manufacturing facility in MN Examples of balloon formats
7 3 YOU MAY NOT KNOW: Our business has several unique barriers to entry
Difficult Category for Online Retailers to We are Entrenched in the Party Goods Portfolio of Top Tier Licenses Steal Market Share Industry
/ We have strong, decades-long / We offer a fun and unique destination / We have a 70-year history in our relationships with our licensors shopping experience creating a strong product category and growing need for brick & mortar / Many of our retail competitors are our wholesale customers because we are the leading supplier
Innovative Product with our 130-Person Unmatched Product Breadth 85% Unaided Brand Awareness In-House Design Team
/ Over 30,000 SKUs1 in-store and 80,000 SKUs online
1 Includes seasonal SKUs 8 OUR UNIQUE VERTICAL MODEL A “Virtuous Circle of Strength”
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 / Maintain greater control of every step from design and production through the sale of our products across channels
Design and Enhanced control innovation of inflation capabilities pressures
Ensures best Cost competitive products and sourcing inventory
Rapid response to Enhance wholesale Retail changes in capabilities via retail consumer insights preferences
9 OUR VERTICAL GOALS
Breakdown of Retail Sales Definitions
Product that PRTY buys from a third party and sells 20% 25% at Party City corporate stores. Singles Earns retail margin only / Examples: candy, greeting cards, helium, foil serving pans
30% Product that PRTY’s wholesale division buys from a third party and sells at Party City corporate stores. Doubles Earns wholesale + retail margin 55% 80% / Examples: party favors, costumes and wearables, table 75% share covers, cutlery share of of shelf shelf Product that PRTY’s wholesale division manufactures 50% + distributes + sells at Party City corporate stores. Triples Earns manufacturing + wholesale + retail margin 20% / Examples: paper plates, bowls, cups & napkins, plastic cups, metallic and latex balloons, piñatas, costumes
Today Goal (2-4 years)
10 KEY INVESTMENT HIGHLIGHTS
Leading Market Position with Category Defining Retail Concept
Unique Vertically Integrated Operating Model
Highly Efficient Global Sourcing with Controlled Distribution Channels
Broad and Innovative Product Offering
Strong Financial Performance and Free Cash Flow Generation
World Class Management Team and Experienced Sponsor Ownership
11 OUR RESULTS STRONG PERFORMANCE Consistent results, with strong underlying performance
Total Revenues ($mm) Adjusted EBITDA1 ($mm) and Adjusted EBITDA Margin1
17.1% 15.7% 15.9% 16.6% $2,271 $2,295 $2,283 14.7% 15.3% $2,045 $321 $362 $380 $390 $1,872 $1,914 $275 $292
2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016
Free Cash Flow ($mm)2 Free Cash Flow Conversion3
$301 $308 84.0% 84.6% $260 $284 $231 $247 81.0% 79.3% 78.5% 79.0%
2011 2012 2013 2014 2015 2016
1 See SEC filings for reconciliation of Adjusted EBITDA to Net Income 2 Free Cash Flow defined as Adjusted EBITDA less CapEx. 13 3 Free Cash Flow Conversion defined as (Adjusted EBITDA – CapEx) / Adjusted EBITDA. SOLID PERFORMANCE TO DATE Focused on our Core Fundamentals
Summary Results Year to Date Y-o-Y / Revenue growth of ~4.6% ($ in millions) 6/30/2017 $ % CC% (reported) and 5.3% in constant currency Total Revenues $1,022 $45 4.6% 5.3% / Comp Sales growth of 0.9% Gross Profit $395 $21 % Margin 38.9% 30 bps / Gross margin expansion of +30bps, driven by continued Share Operating income $75 ($3) (3.4%) of Shelf gains and sourcing % Margin 7.4% (60) bps efficiencies Adj. EPS $0.33 $0.05 17.9% / Operating Margins consistent with Adj. EBITDA $146 $14 10.7% % Margin 14.3% 80 bps prior year when excluding investment in Kazzam / Adjusted EBITDA $146M, 10.7% higher than YTD 2Q16 / Adjusted EPS of $0.33, $0.05 higher than YTD 2Q16 / Healthy free cash flow generation of $115M
14 A STRONG OUTLOOK BEYOND 2016
/ Sustainable long-term comp store sales growth / Retail Store expansion in North America of 401 stores/yr. over the next 3-5 years / Manufacturing share of shelf growing to 50%, fueling ~200bps gross margin expansion / Continued EBITDA margin growth
1 Includes Mexico stores and potential franchise acquisitions 15 GROWTH OPPORTUNITIES OUR GROWTH PLATFORM Multiple levers for sustained growth
1 / Increase share of shelf at company-owned and 3rd party stores • SOS Gains of over 900bps since 20131 Grow Wholesale / Drive continued product innovation Business • CAGR sales growth of 4% since 2013 on / Expand into adjacent business-to-business channel a CC basis1
2 / Drive international growth through customization of products Grow our • Market expansion (e.g. Mexico) / Expand retail presence through store-within-a-store concept with International select international retailers • CAGR sales growth of 13% since 2013 on Presence 1 / Represents ~15% of consolidated revenues in 2016 a CC basis
3 / Completed numerous successful acquisitions • Manufacturing & distribution Pursue Accretive / Emphasis on smaller, bolt-on acquisitions that add scale and/or acquisitions Acquisitions unique capabilities • Franchise groups (36 stores YTD 2017) / Significant synergy potential with existing business 4 Expand Our / Plan to open ~302 stores per year representing ~4% annual Retail Store square footage growth Base / New stores generate a ~3 year payback, 50% ROIC in year 3
5 Drive Additional / Continue to improve brand image and awareness Growth and / Pursue merchandising initiatives to drive increased units per • Take work out of our stores Productivity transaction From Existing • Focus on service and engagement Stores / Convert existing stores to new, more customer interactive format / Enhance customer experience through integrated omni-channel 6 strategy Grow Our • NA web comp sales up 6% YTD 2017 Global Digital / Further develop international capabilities through country specific Platform sites • Customer conversion levels growing / Currently represents only approximately ~9% of retail sales
1 2013 – 2016 17 2 Includes potential franchise acquisitions 6 GROW OUR INTERNATIONAL PRESENCE
INITIATIVES BY COUNTRY/REGION:
Mexico: / Franchise agreement with Grupo Oprimax to open 80 stores by 2024 / Target 50% share of shelf
United Kingdom: / Two retail locations up and running / Store-in-store concepts currently in ~40 Woodies locations / Dedicated party retail space in ~400 Clinton’s locations / 20+ store-in-store concepts in Morrison’s / ASDA footprint in 300+ locations Australia: / Store-in-store concepts currently in ~140 Big W stores / Dedicated space in 130 Spotlight stores across Australia and New Zealand / Licensed Tableware Program active in ~1,200 grocery stores (Coles and Woolworths) Continental Europe: / Dedicated space in large retailers in several countries, including Spain, Germany, Belgium, Switzerland
International represents ~15% of total consolidated revenues today
18 CLOSING THOUGHTS
• We are much more than just a Retailer….. • Our ability to drive vertical integration provides unique competitive advantages • The core fundamentals of our business model are inherently strong • We have delivered consistent financial results • We remain excited about our future growth opportunities
19 Appendix: COMPANY OVERVIEW COMPANY OVERVIEW
Largest vertically integrated manufacturer, supplier and retailer of decorated party goods globally $2.3 billion in worldwide sales1,2 $390 million in Adjusted EBITDA1,3 / 17.1% Adjusted EBITDA margin1,3
Manufacturing Wholesale / Distribution Retail
2 Canada 50
15 1 2 3 3 19 12 65 7 6 29 4 8 31 3 27 114 28 16 14 53 22 29 6 1 2 18 9 22 17 24 3 2 13 19 3 9 9 31 3 67 11 Hawaii Puerto Rico 5 Products we manufacture: metallic and latex >45,000 SKUS 71 balloons; paper plates, cups, napkins and bowls; plastic cups, plates and bowls; #1 party goods retailer in North America costumes (new in 2016) 40,000 Retail Locations ~940 locations across North America4
>75% of products are sourced through We are the largest manufacturer of metallic wholesale business balloons in the world Party Independent Grocery Dollar Mass City Party Stores Stores Stores Merchant One stop shop for all party needs
1 2016 2 Includes franchise royalties. 21 3 See SEC filings for reconciliation of Adjusted EBITDA to Net Income. 4 Includes franchise locations. HISTORY OF VERTICAL INTEGRATION Evolution of the Business – Key Events
Acquired Acquired ACIM Acquired 36 Amscan Acquired Acquired Gags 23 franchise founded Party City and Games, franchise stores The Party Factory Card Acquired party Acquired iParty stores Superstore 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 2017
Became a Acquired Acquired Hong Kong vertically Acquired remaining Riethmuller, Acquired showroom integrated Party interest in Latex Balloon U.S. opened manufacturer America Party City Manufacturing Balloon Acquired in Malaysia, Franchise Acquired M&D and Party Group Granmark Acquired Balloons Packagers in Anagram Canada Acquired Christy’s Acquired Costumes and Christy Festival Garments and SA Accessories
Party City has developed into a fully integrated manufacturer and wholesaler with an Omni-Channel Retail Presence
22 WHOLESALE We are one of the largest manufacturers, designers and distributors of decorated party supplies in the world
Wholesale Revenue by Product Category1
Metallic Ballons 13% Costumes & Accerssories 26% / Over $1.3bn1 in sales, ~50%3 to owned retail and Favors, Stationery & Other e-commerce 16%
/ Product sold in over 40,000 retail locations in 100+ countries Decorations Tableware 3 3 / Third-party sales: 64% U.S. / 36% International 19% 26%
/ Deep assortment with over 45,000 SKUs across 5 Wholesale Sales by Channel1 product categories International Other International / 400+ party goods ensembles, which contain 5 to Balloon 16% Distributions 50 design-coordinated items 2% / Balanced, multi-channel customer base – no single Domestic Ballon Owned Stores & e- Distributors/ commerce customer represents more than 10% of third party Retailers 50% 2 sales at wholesale 7% Other Domestic Retailers 13% Party City Franchised Stores 12% 1 Reflects 2016 numbers. Based on total wholesale sales including intercompany sales to retail operations. 2 Includes sales to Party City Canada and Party Delights. 23 3 2016 WHOLESALE Global sourcing, manufacturing and distribution
/ In-house manufacturing focused on high- Sourcing Manufacturing Distribution
volume party essentials that can be Manchester (England) Distribution Brooklyn (NY) manufactured through highly automated Distribution Kircheim unter Teck (Germany) Milton Keynes, (England) Distribution processes Distribution
• Examples: Paper and plastic tableware Elmsford (NY) Eden Prairie (MN) Headquarters products and metallic balloons Manufacturing East Providence (RI) Edina (MN) Manufacturing / Distribution Hong Kong (China) Distribution Harriman (NY) Distribution / Sourcing Manufacturing 6 Sourcing Facilities Tijuana (Mexico) Newburgh (NY) / Capabilities are cost-competitive and provide Manufacturing / Distribution Manufacturing Chester (NY) Distribution rapid turnaround times on key product Louisville (KY) Albuquerque (NM) Manufacturing / Melaka (Malaysia) Manufacturing Distribution Manufacturing / Baulkham Hills (Australia) Distribution categories Distribution Naperville (IL) Guadalajara (Mexico) Distribution Manufacturing / Distribution Madagascar / Labor intensive products, such as banners, Manufacturing favors and centerpieces, are principally sourced Wholesale Sourcing Mix1 from Asia
/ 20+ year relationships with many of our vendors In-House Manufacturing 35% / Diversified sourcing, quality control and testing Third Party with offices throughout Asia (China, Indonesia, 65% India and Vietnam)
24 1 Reflects 2016 numbers. Based on total wholesale sales including intercompany sales to retail operations. RETAIL Innovative & Fun In-Store Experience
One stop shop for all party needs
Largest retail network of A leading operator of / Greater assortment of merchandise than our national decorated party supplies temporary Halloween competitors, including mass merchants in North America stores in North America / Fun destination shopping experience where customers can get new ideas and be inspired / ~790 company-owned / Used to test locations for Party City superstores year round Party City / Deep merchandise selection with high in-stock positions including ~50 locations stores in Canada Compelling Value / ~250 - 300 temporary / “Nobody has More Party for Less” pricing strategy / ~150 franchise stores locations / Low price point and slow inventory turn makes it difficult for other online retailers to profitably compete Color City Candy City Party Goods SKU Count Comparison1
30,0002
Custom Invitations Favor City
<2,000 <1,000
Dollar Stores Mass Market
1 Party City management estimates. 25 2 Includes seasonal SKUs. RETAIL + WHOLESALE Best in Class Innovation and Broad Product Offering
Innovation License Portfolio
/ Over 130 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 8,000 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
26 RETAIL Differentiated Online Platform
Sample Comparison – Dora the Explorer / Largest party supplies e-Commerce platform with $150 million birthday party search of sales in 2016
/ Coordinated product sets (by color, theme) make it fast and easy for the customer to get everything they need
• Simplifies mobile browsing – 50% of online traffic is mobile # of items 113 500+ 36
• Limited risk that different products don’t “match” 2 16 1 / Curated offering with multiple search refinement options allows # of webpages customers to quickly find specific products
/ Average basket size is 3x retail Refine by dept (tableware, Yes No Yes favors, etc)? Online competitor challenges / Non-curated product offering makes it difficult to find what you Yes No Yes want – they are too many options to look through Sold in kits?
/ Duplicate products from multiple vendors appear in search results Party inspiration • Different vendors = different designs Yes No No ideas provided? • Difficult to create a matching product set across all products $75+ order for Yes Yes / Low price point baskets with multiple items is not very profitable Free shipping? free shipping / Party supplies are not add-on purchases to a typical basket
Online inspiration also helps drive in-store traffic – 50% of online visitors use website to plan in-store purchases
27 POWER OF THE VERTICAL MODEL Gross margin impact of achieving our vertical goals Illustrative
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. 28 2 Does not reflect GM impact of other factors like FX, international sales and expense leverage. STRONG BALANCE SHEET AND LIQUIDITY
/ Majority of primary proceeds from 2015 IPO used to reduce existing indebtedness / Solid free cash flow generation with ability to self-fund organic growth and opportunistic acquisitions / Ample liquidity going forward supported by new revolver of $640 million1 / Target gross leverage: YE 2017: 3.5x
Historical Net Debt / Adj. EBITDA2
6.7x 6.3x 5.8x
4.6x 4.2x 3.5x 4.1x
2010 2011 2012 2013 2014 2015 2016
Acquisition Dividend by THL Payment
1 ABL revolver comprised of $500 million facility, $40 million FILO tranche, and $100 million seasonal facility increase. 29 2 See SEC filings for reconciliation of Adjusted EBITDA to Net Income.