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8 5 DISCLAIMER 8 Transaction Disclaimer This investor presentation - - PowerPoint PPT Presentation

8 5 DISCLAIMER 8 Transaction Disclaimer This investor presentation (the Presentation) is being furnished to a limited number of parties who have expressed an inter ests in submitted proposals to acquire Party City Holdco Inc. (together with


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DISCLAIMER

Transaction Disclaimer This investor presentation (the “Presentation”) is being furnished to a limited number of parties who have expressed an interests in submitted proposals to acquire Party City Holdco Inc. (together with its subsidiaries, the “Company”), each of whom has entered into a Confidentiality Agreement to protect this and other confidential information relating to the Company (the “Confidentiality Agreement”). This Presentation is being provided solely in connection with the review of strategic alternatives for the Company to assist the recipient in deciding whether to proceed with further analysis and not for any other purpose. This Presentation is not, and shall not be construed as, an offering of securities or an invitation for the purchase

  • r sale of securities.

By accepting this Presentation, the recipient agrees to be bound by the terms of the Confidentiality Agreement, including the obligation to keep strictly confidential the information contained herein or made available in connection with any further investigation or analysis of the Company and not to use such information for any purpose other than the evaluation of the possible acquisition of the Company. The recipient should familiarize himself with the Confidentiality Agreement before reading, circulating or using this Presentation. You hereby acknowledge and agree that you are aware that the U.S. securities laws prohibit any person who has material non-public information concerning the matters which are the subject of this Presentation from purchasing or selling securities of the Company, or from communicating such material non-public information to any other person under circumstances in which it is reasonably foreseeable that such Person is likely to purchase or sell such securities. This Presentation may not be distributed, reproduced, summarized or distributed to any other party without the prior written consent of the Company or as otherwise provided in the Confidentiality Agreement. The Company does not make any express or implied representations or warranties as to the accuracy or completeness of the information contained in this Presentation or any other

  • ral or written information made available to any interested party or its advisors in connection with any further investigation or analysis of the Company. In furnishing this Presentation,

the Company does not undertake any obligation to provide the recipient with access to any additional information. Forward Looking Statements Disclaimer Some of the statements in this presentation are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. The Company generally identifies forward-looking statements in this presentation using words like “believe,” “intend,” “target,” “expect,” “estimate,” “may,” “should,” “plan,” “project,” “contemplate,” “anticipate,” “predict” or similar expressions. You can also identify forward-looking statements by discussions of strategy, plans or

  • intentions. These forward-looking statements are based on the Company’s expectations, assumptions, estimates and projections about its business and the industry in which it
  • perates as of the date of this presentation. These statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s or its industry’s actual

results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. 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 risks and uncertainties set forth in “Risk Factors” in the Company’s latest Form 10-K and in subsequent reports filed with or furnished to the Securities and Exchange Commission. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future events, outlook, guidance, results, actions, levels of activity, performance or

  • achievements. You are cautioned not to place undue reliance on these forward-looking statements. Except as may be required by any applicable laws, the Company assumes no
  • bligation to publicly update or revise such forward-looking statements, which are made as of the date hereof or the earlier date specified herein, whether as a result of new information,

future developments or otherwise. 2

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AGENDA

Agenda

1 2 3

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Our Company and the Strength of our Model Our Growth Platform Our Business Model and Financial Results

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OUR COMPANY AND THE STRENGTH OF OUR MODEL

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COMPANY OVERVIEW

World’s largest designer, manufacturer and distributor of consumer party products…..

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~200 person design team allows us to introduce over 8,000 new products each year

…that also owns the world’s largest retailer of party goods

Almost 80% of what we sell through

  • ur retail business is either sourced
  • r manufactured through our

wholesale business >45,000 SKUs sold into 100+ countries and in over 40,000 retail

  • utlets, including our own stores

#1 party goods retailer in North America with nationwide footprint of over 930 locations, including ~140 franchise locations #1 party goods global e-commerce platform

Design Manufacturing / Sourcing Distribution

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Party Specialty Retail Pet Supplies Sporting Goods Home Improvement Mattresses Toys / Crafts Party Goods Consumer Technology Athletic Cosmetics Mattresses Toys

CONSUMER PRODUCTS CATEGORY LEADERSHIP

Consumer Products Specialty Retail

(Consumer Products)

#1 vs. #2 player(1)

~1.2x ~1.6x ~2.5x ~1.2x ~1.0x +4.0x

1 Represents comparison of global sales of the #1 vs. #2 player Source: Company filings and websites and Management estimates

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POWERED BY OUR VERTICAL MODEL

A “Virtuous Circle of Strength”

Our vertical model and significant, global scale provide unique competitive advantages:

/ Enhanced profitability by capturing substantial portion of the 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

Rapid response to changes in consumer preferences Enhance design capabilities via retail insights Enhanced control

  • f inflation pressures

Design and innovation capabilities Cost competitive sourcing Ensures best products and inventory

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Increases speed to market

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Sales Mix EBITDA Mix (LTM EBITDA margin 17.4%)

Metallic Balloons 3% International Consumer Products 10% Domestic Consumer Products 35% Retail 52% Third party Consumer Products ~35% Retail - Non-vertical ~25% Vertically- integrated ~40%

DIVERSIFIED PROFIT SOURCES

Our unique Vertical Model drives our industry leading profitability

Note: Financials represent 2016, unless otherwise noted 1 Represents total net sales of each business unit, excluding the effects of intercompany eliminations to reflect stand-alone size and scale of each business Source: Company filings, management estimates

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Note: Financials represent 2016, unless otherwise noted 1 Represents total net sales of each business unit, excluding the effects of intercompany eliminations to reflect stand-alone size and scale of each business Source: Company filings, management estimates

VERTICALLY DRIVEN SALES AND PROFITS

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Sales Mix1

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2016 sales of $3.2bn on an entity stand-alone basis1

/

48% of sales generated by global consumer products business

Operating Income Mix

/

Diversified profit sources driven by vertical model

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~95% of operating income generated by manufacturing, sourcing and global distribution

/

2016 operating Income of $274mm

Metallic Balloons 3% International Consumer Products 10% Domestic Consumer Products 35% Retail 52% Third party Consumer Products ~ 35% Retail- Non-Vertical ~ 5% Vertically

  • integrated

~ 60%

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OUR CONSUMER PRODUCTS BUSINESSES

/ Over $1.2bn1 in sales, ~50% to owned retail

and e-commerce

/ Product sold in over 40,000 retail locations in

100+ countries

/ 60% U.S. / 40% International (3rd Party Sales) / Deep assortment with over 45,000 SKUs

across 5 product categories

/ 400+ party goods ensembles, which contain 5

to 50 design-coordinated items

/ Balanced, multi-channel customer base – no

single customer represents more than 10% of third party sales at wholesale

10 1 Based on total wholesale sales including intercompany sales to retail operations.

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/ Channel exclusivity on a vast majority of licensed product / 20% of consumer products business is licensed. 5% direct-to-retail licenses with major specialty suppliers / Deepest product assortment in the market, differentiating us from others / Over 30K SKUs1 sold in-store and 40K SKUs sold online / Speed to market - Vertical integration allows development team to test new products and rapidly respond to changes in consumer preferences / Avg. lead time from concept to delivery of ~10 months

BEST-IN-CLASS DESIGN CAPABILITIES WITH UNRIVALED PRODUCT BREADTH

Product Assortment Portfolio of Top Tier Licenses In-house Design & Innovation

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Tableware 26% Costumes & Accessories 26% Decorations 19% Favors, Stationery & Other 16% Metallic Balloons 13%

1 Includes Seasonal SKUs. Source: Company filings, company data

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UNPARALLELED GLOBAL CAPABILITIES

Sourcing and manufacturing excellence which fuels our vertical model

/ 35% of our wholesale

business is manufactured In- house, focused primarily on high-volume party essentials, generally manufactured through highly automated processes

/ Manufacturing and

distribution capabilities across 4 continents

/ Labor intensive products,

such as banners, favors and centerpieces, are principally sourced from Asia

/ Extensive sourcing operations

across 9 offices drive best-in- class sourcing capabilities

/ 20+ year relationships

with many of our key vendors

Sourcing Distribution Manufacturing

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WE MAINTAIN A DOMINANT RETAIL PLATFORM

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Top Choice To Purchase Party Supplies3 We Out Assort Our Competitors Best Positioned To Win With Customers

Top customer buying factors1  930+ stores nationwide2  Stringent quality control processes  ~30K4 SKUs in-store / ~40K SKUs online  “Nobody has more party for less”  ~400+ party goods ensembles / Location / Quality / Assortment / Price / Theme availability

High brand awareness of 78%

One-Stop-Shop For All Party Needs

28% 26% 8% 6% 6% 4%

(SKUs)

30,0004 <500 <500 Dollar Stores Mass Market 1 Customer survey of 1,000 participants answering question “When deciding where to buy party supplies how important are the following factors in making your decision?” 2 Includes franchised locations 3 Customer survey of 1,000 participants answering question “If you had to pick one store to purchase party supplies at, which store would you choose?” 4 Includes seasonal SKUs Source: Company filings, company data, Hill Holiday

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A HISTORY OF HIGHLY ACCRETIVE ACQUSITIONS

Increasing our capabilities and driving growth

Acquisition Strategy

Global and scalable infrastructure provides a strong platform for highly accretive acquisitions Emphasis on smaller, bolt-on acquisitions that add scale and / or unique capabilities Areas of focus have been: / Broadening and deepening product capabilities / Expanding retail presence, including domestic franchisee buyouts / Expanding international presence Significant synergy potential through leveraging existing distribution, production and marketing capabilities

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Our Business Model and Financial Results

DS

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CORE FUNDAMENTALS

Multiple levers for topline growth Gross Margin expansion Accelerated EBITDA growth Strong cash flow characteristics 1 2 3 4

/ Solid topline growth and vertical model

expansion

/ Strong cost management discipline

across the businesses

/ Consistent free cash flow generation

business model

/ Strong free cash flow conversion

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Breakdown of Retail Sales SINGLES DOUBLES TRIPLES

OUR VERTICAL MODEL

Multiple levers to drive margin growth

/ Gross margin expansion will continue to be driven through our vertical model / Will further expand our SOS / Manufactured SOS will more than double in the next 2-4 years based on leveraging of existing manufacturing assets / “Doubles” economics will improve as we further drive sourcing savings and focus on product re- engineering / “Triples” economics strengthen through manufacturing efficiencies and productivity gains

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Total Revenues ($mm) Adjusted EBITDA1 ($mm) and Adjusted EBITDA Margin1

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1 See SEC filings for reconciliation of Adjusted EBITDA to Net Income 2 Decrease in gross margin rate from 2011 to 2012, 2013 and 2014 principally due to non-cash purchase accounting adjustments related to the acquisition of the company by THL. 3 Free Cash Flow defined as Adjusted EBITDA less Cap Ex.

Free Cash Flow ($mm)3

STRONG PERFORMANCE

Consistent growth, with strong underlying performance

$1,872 $1,914 $2,045 $2,271 $2,295 $2,283

2011 2012 2013 2014 2015 2016

$275 $292 $321 $362 $380 $390

2011 2012 2013 2014 2015 2016

14.7% 15.3% 15.7% 15.9% 16.6% 17.1%

$231 $247 $260 $284 $301 $308

2011 2012 2013 2014 2015 2016

Total Gross Margin ($mm)2

$734 $685 $767 $876 $904 $916

2011 2012 2013 2014 2015 2016

39.6% 36.1% 37.9% 38.9% 40.4% 39.7%

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PERFORMANCE DEFINED BY CONSISTENTCY

Topline and EBITDA growth

Revenue

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2

Adjusted EBITDA

Note: All financials in $ millions. 2016 revenue includes ~$22M of negative FX impact.

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STRONG BALANCE SHEET AND LIQUIDITY

/ Strong free cash flow generation with ability to self-fund organic growth and

  • pportunistic acquisitions

/ Ample liquidity going forward supported by strong free cash flow generation and revolver of $640 million1

Acquisition by THL Dividend Payment

Net Debt / Adj. EBITDA2

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.

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OUR GROWTH PLATFORM

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OUR GROWTH PLATFORM

Differentiated by Multiple Levers for Sustained Growth

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GROWTH DRIVERS

▪ Marketplace for party

services that provides revenue stream and strong customer acquisition platform

KAZZAM

▪ Strong pipeline of

acquisitions across all areas of our business (Manuf/WS/Retail) Continued Acquisitions

▪ Further growth in retail

square footage

▪ More productive stores ▪ Strengthened digital

assets Retail Business

▪ Deeper penetration in

existing markets and further market expansion International Expansion

▪ New capabilities and

product offerings for wider channels of trade beyond specialty party stores New Channels of Trade

▪ Capitalizing on growing

consumer needs and highly fragmented industry (Print Appeal) Personalized products

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GROWTH IN OUR RETAIL BUSINESS

Improving productivity

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Further square footage growth Increase Store Productivity Strengthen our Digital Assets 1 2 3

/ We’ve consistently added 8% square footage per year, through a combination of white space and continued acquisition (franchise and independents) / Will continue to prioritize Franchise and Independent acquisitions in the near term (1-2 years) given strong economics and accretive impact

You’re Invited…

Invitation by Party City

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Casual Dining & Play Centers

EXPAND CONSUMER PRODUCTS BUSINESS

Leveraging Our Capabilities and Driving Product Innovation to Fuel Growth Outside of Traditional Party Channel

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Source: MPAA – Theatrical Market statistics, International Association of Amusement Parks and Attractions (IAAPA), BCG Market Study

Theme Park and Zoos Promotional Products Entertainment Venues Sports Venues Party Retail Channel CONSUMER PRODUCTS CAPABILITIES Printed Foil Extruded Plastics Injected Molded Plastics Print Paper $10bn+ market in the U.S. 3,200 arcades and Amusement parks Over 500 arenas and stadiums in U.S. 400+ Theme Parks and 200+ Zoos in the U.S. $30bn Industry 5,000+ Movie Theaters

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Dedicated party retail space in selected large retailers

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Lower required investment, staffed and managed by retailer

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Act as category manager of wholesale and manufactured products in partner retail locations

GROW OUR INTERNATIONAL BUSINESS

Regional Strategies, Localized Solutions

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Store-in-Store Strategy United Kingdom: Morrison’s Party Zone Master Franchisee Strategy Mexico: Granmark and Grupo Oprimax Europe and Australia: Store-in-Store Strategy Latin America: Master Franchisee Strategy

Morrison's Retail Presence

/ Acquisition of Granmark provides scale manufacturing

capabilities to service Latin American markets

/ Oprimax, a Mexico franchise operator, plans to open 80-100

stores in Mexico (4 currently)

/ Share of shelf to start at 50%+ of products sold in store, with

75%+ target

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Expands retail presence internationally without need for large initial investment

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Creates incremental demand for wholesale and manufactured products (economies of scale)

/

Opportunity to leverage strategy to expand across Central and South American markets

/ Morrison’s provides space, staffing and

customization of the consumer experience

/ Currently in 26 / 492 Morrison’s locations in

the U.K.

26 50 2015 2016 2017E

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Category Examples Outlook

/ Enter new markets through Master Franchisees with local sellers and leverage Granmark synergies / Focus on expanding wholesale through acquisitions opportunistically in select markets / Less focus on retail acquisitions given shop-in-shop regional strategy / Focus on acquiring broader capabilities to also drive increased gross margin through additional manufacturing share of shelf (20% to ~50%) / Acquire franchisees opportunistically and optimize store performance / Seek to convert independents to licensees as a pathway to future acquisitions

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Latin America Expansion European Expansion Capabilities / Vertical Integration Franchise / Licensee

Designware 3.5x Synergized Multiple Franchises 3 – 4x Synergized Multiple Mexican JV 2.0x Synergized Multiple 4.1x Synergized Multiple 1.5x Synergized Multiple ~8.0x Synergized Multiple 5.0x Synergized Multiple

CONTINUE OUR ACQUISITION STRATEGY

Strong pipeline of opportunities across all areas of our business

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EXPANDING SHARE OF PARTY WALLET

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/ Party services marketplace under the Party City brand / Consumer logs into Kazzam by Party City to plan a party and is connected to various party services providers (entertainment, activities, fun, food, decorations, etc.) / Generates fees for Party City both from consumers planning the party and from service providers paying to be listed on the platform / Represents the Uberization of the party services ecosystem into one, centralized, on- demand, digital marketplace exchange What is Kazzam? Primary Benefits of Kazzam / Expands share of Party Wallet beyond party good and into services / Disintermediates the customer buying process and inserts Party City earlier / Enhances Party City position as the only ‘real total party solution’ / Multiple additional revenue streams outside of traditional party goods

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Closing Thoughts

  • Don’t be fooled by the name……we are the leading designer,

manufacturer and wholesaler of party products in the world….and we happen to own the largest retail distribution channel

  • Additionally, three core characteristics set us apart from other retailers:
  • Strong free cash flow generation
  • Consistent gross margin accretion, largely driven by our unique

vertical model

  • Multiple sources of sustainable revenue growth
  • Our financial performance, both in its growth and consistency, remain

best in class

  • We remain confident in our ability to continue to deliver consistently

strong financial performance, based largely on the unique vertical model