UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d)
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Emerging growth company ☒
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Item 7.01 – Regulation FD Disclosure
On September 14, 2022, representatives of Snap One Holdings Corp. (the “Company”) will begin using materials included in Exhibit 99.1 to this Current Report on Form 8-K (the “Investor Presentation”) in connection with presentations to existing and prospective investors. The Investor Presentation is incorporated into this Item 7.01 by this reference and will also be available on the Company’s website at https://investors.snapone.com. The information contained on the Company’s website shall not be deemed part of this Current Report on Form 8-K.
The Investor Presentation includes financial information not prepared in accordance with generally accepted accounting principles (“Non-GAAP Financial Measures”). A reconciliation of the Non-GAAP Financial Measures to financial information prepared in accordance with generally accepted accounting principles (“GAAP”), as required by Regulation G, is included in Exhibit 99.1 to this report.
The information contained in Item 7.01 of this Current Report on Form 8-K and Exhibit 99.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act except to the extent expressly stated in such filing.
The Company makes no admission as to the materiality of any information in this report that is disclosed solely by reason of Regulation FD. The Company undertakes no duty or obligation to publicly update or revise the information contained in this report.
Item 9.01 – Financial Statements and Exhibits
(d) Exhibits
| Exhibit No. | Description | |||||||
| 99.1 | ||||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized on this 14th day of September, 2022.
| Snap One Holdings Corp. | |||||
| By: | /s/ Michael Carlet | ||||
| Name: Michael Carlet | |||||
| Title: Chief Financial Officer | |||||
Analyst & Investor Day September 14, 2022
Disclaimer / Safe Harbor This material includes certain historical performance information and "forward-looking statements" regarding estimations, forecasts, targets and plans in relation to the results of operations, financial conditions and other overall management of the Snap One Holdings Corp. (the “Company”). Terms such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "possible," "potential," "predict," "project", "should," "will," "would," or similar expressions may identify forward-looking statements, but the absence of these words does not mean the statement is not forward-looking. Forward-looking statements with respect to revenues, earnings, performance, strategies, prospects and other aspects of the businesses of the Company to which this presentation relates are based on information currently available to the Company as of the date of this material and on current expectations that are subject to known and unknown risks and uncertainties, which could cause actual results or outcomes to differ materially from expectations expressed or implied by such forward-looking statements. These determinations and assumptions are inherently subjective and uncertain. These forward- looking statements are not guarantees of future performance, and actual operating results may differ substantially due to a number of factors. Such forward-looking statements are as to future events and are not to be viewed as facts, and involve significant known and unknown risks, uncertainties and other factors, many of which are outside the control of the Company and their respective representatives. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various risks and uncertainties that affect our business and specifically those factors discussed from time to time in our public reports filed with the SEC, such as those discussed under the heading, “Risk Factors,” in our 2021 Annual Report and as may be updated in our subsequent SEC filings. There can be no assurance that the information contained in this presentation is reflective of future performance to any degree. Recipients are cautioned not to place undue reliance on forward-looking statements as a predictor of future performance. The forward-looking statements in this presentation speak as of the date of this presentation. Although Company may from time to time voluntarily update its prior forward- looking statements, the Company disclaims any commitment to do so whether as a result of new information, future events, changes in assumptions or otherwise. This presentation may include certain financial measures not presented in accordance with generally accepted accounting principles ("GAAP"), including, but not limited to, Contribution Margin, Free Cash Flow, Adjusted Net Income, Adjusted Operating Expenses, Adjusted SG&A, Adjusted EBITDA, and Adjusted EBITDA less Purchases of Property and Equipment. (Reconciliations of these non-GAAP to GAAP measures can be found in the Appendix.) These non-GAAP financial measures are not measures of financial performance in accordance with GAAP and may exclude items that are significant in understanding and assessing the Company's financial results. Therefore, these measures should not be considered in isolation or as an alternative to net income, cash flows from operations or other measures of profitability, liquidity or performance under GAAP. In addition, historical financial measures included in this presentation have not been audited and are subject to review and adjustment accordingly. You should be aware that the Company's presentation of these measures may not be comparable to similarly titled measures used by other companies. The Snap One design logo, "Snap One," "Control4" and our other registered or common law trademarks, service marks or trade names appearing in this presentation are our property. Solely for convenience, our trademarks, tradenames, and service marks referred to in this presentation may appear without the®, TM, and SM symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks, tradenames, and service marks. This presentation contains additional trademarks, tradenames, and service marks of other companies that are the property of their respective owners. We do not intend our use or display of other companies' trademarks, trade names or service marks to imply relationships with, or endorsement or sponsorship of us by, these other companies. Nothing in this presentation shall be deemed to constitute legal, business, tax or other advice. You should consult with your own advisors as needed regarding the matters described herein. By reading this presentation, you will be taken to have represented, warranted and undertaken that you have read, understood and agreed to be bound by the terms and limitations set forth in the disclaimer above. If you are unable to agree to the foregoing, please read no further and promptly return these materials to the Company or its advisers and destroy all copies in your possession. Page | 2
Disclaimer Summary Page | 3 ▪ Our presentation contains forward-looking statements, and we may make additional forward-looking statements in response to your questions, including but not limited to statements of expectations, future events, or future financial performance ▪ These statements are based on current expectations of the company's management and involve inherent risks and uncertainties, including those identified in the Risk Factors section of our Annual Report on Form 10-K for the annual period ended December 31, 2021 ▪ Although we believe these expectations are reasonable, actual events or results could differ materially ▪ We undertake no obligation to revise any statements to reflect changes that occur in the future
Welcome and Agenda Review Eric Steele, SVP Finance 9:00AM ET Snap One – Our Key Differentiators John Heyman, CEO 9:05AM – 9:45AM ET Go-to-Market Strategy Jeff Hindman, Chief Revenue Officer 10:00AM – 10:45AM ET Product & Platform Vision G Paul Hess, Chief Product Officer Graham Jaenicke, VP New Ventures: Recurring Revenue 11:00AM – 11:45AM ET Integrator Panel Moderated by SNPO 12:15PM – 1:15PM ET Scaling Platform with Profitable Growth Mike Carlet, CFO 1:30PM – 2:15PM ET Partner Showroom Experience Webcast not available 2:45PM – 5:00PM ET Analyst & Investor Day Agenda Page | 4
Snap One – Our Key Differentiators
Page | 6 What You Will Hear Today: Our Investment Highlights Snap One Today How we became a leader in our industry What Makes Snap One Special? Our greatest asset is our relationship with our partners (integrators) Our Addressable Market Attractive and growing Our Long-Term Growth Algorithm Our pillars for achieving long-term, profitable growth and our proven track record of execution Revolutionizing the Industry Launching innovative products and non-hardware services
A Look Back at How We Became Snap One Page | 7 Disruptive e-commerce Distributor Focused on Serving Professional Integrators (Early – Mid 2000’s) Omni- Channel and Integrator Diversification (2018 – 2019) Integrated Solution to Drive Smart Living (2019) First Year as Public Company: Build credibility through strong operational and financial execution despite volatile backdrop (Today / Future) Poised to lead and capture massive market opportunity • Strengthened supply chain through COVID shutdowns • Integrated Control4 and local assets • Rebranded as Snap One and introduced “Only Here” • Became public: SNPO Our Vision: Bringing together people, partners, and products to deliver joy, connectivity, and security in our everyday lives
What is Our Business Model? Page | 8 End customer seeks a smart living experience End customer finds and contacts a professional integrator Integrator visits customer location and provides project quote Integrator purchases product through e-commerce portal or local branch Integrator completes project and monitors system Integrator leverages SNPO workflow solutions to manage project from start to finish
Defining ‘Smart Living’ Experiences Page | 9 Enjoy Direct-to- Streaming Movie Releases Efficient Collaboration in the Connected Office Customizable Control of Pro Entertainment Summer BBQ with Family & Friends
Smart Living is Enabled by Professional Integrators… Page | 10 Professional integrators are technicians at primarily small and medium sized businesses (SMBs) that create smart living experiences for end customers across residential and commercial settings • Median # of Employees: 8 • Avg. Annual Revenue: $1.7M • Avg. Jobs per Year: 50 – 100 • Project Types: 33% New Resi, 33% Remodel Resi, 33% Light Commercial • Asset light Sources: Frost & Sullivan, CE Pro 2022 State of the Industry report, management estimates. Excludes Security focused integrators Typical Integrator Profile Challenges Integrators Face • Highly fragmented supplier base with disparate products • Labor shortage / talent • Training • Inventory sourcing • Workflow tools • Support • Truck rolls, working nights & weekends • Scaling their business Helps to Solve These Integrator Pain Points
…Who Highly Value Snap One as a Business Partner Page | 11 NET PROMOTER SCORE 1 55 ~75% of e-commerce Portal Net Sales From Integrators Who Have Been Snap One Partners For 5+ Years 2 Notes: 1. Source: Frost & Sullivan. Among domestic integrators who have purchased from Snap One between March 2020 and March 2021. 2. As of FY 2020 and as represented by integrators whose first purchase was made in fiscal 2015 or prior 2022 CE Pro Quest for Quality Awards Recognizes excellence in workflow solutions & support Best Technical Support Best Customer Service Best Dealer Programs / Incentives Best Shipping Policies Best Warranty Policies Best RMR Support Programs 21 12 7 8 48 10 #1 Brand #2 Brand #3 Brand All Other TOTAL Next Closest Competitor 2022 CE Pro Brand Leader Awards Recognizes excellence across 62 product categories Home Networks Remote Managed Services Universal Remotes & Tablets Power Conditioners Whole- House Automation / Integration Multi-room AV / Distribution Systems ~5X Next Closest Competitor ~3X Next Closest Competitor9 3 4 1 17 6 Platinum (#1) Gold (#2) Silver (#3) Category Kudos TOTAL Next Closest Competitor
Integrators Love Us Because Our Vertically Integrated Strategy Makes Their Lives Easier Page | 12
Smart Living Tailwinds Trend of living, working, playing from home here to stay Proliferation of connected devices More complexity drives demand for professional installation Growing Demand for Housing Historic under-building of homes and low inventory of available homes to purchase Aging housing stock: ~40-year average age Millennial generation entering prime household formation years Increased demand for space and migration from cities to suburbs Health & Growth of Small Businesses Requiring Commercial Space 32.5M SMB’s in the U.S. Record 5.4M new business applications in U.S. in 2021 Nonresidential building starts +21% YoY for LTM July 2022 period Resilient, Large- Ticket Repair & Remodel Leading indicator of remodeling activity (LIRA) pointing to continued residential remodel spend growth Larger ticket projects likely to outpace small/DIY projects completed during COVID Accelerated Technology Replacement Cycles Technology advances in networking, video resolution, surveillance, etc. creating shorter replacement cycles to avoid obsolete technology Large and Growing Smart Living TAM Supported by Favorable Long-Term Secular Trends Page | 13 Sources: NAHB, John Burns Real Estate Consulting, FRED, Joint Center for Housing Studies of Harvard University, US Census Bureau, Dodge Construction Network and management estimates
We Play a Critical Role in the Smart Living Value Chain Page | 14 Critical Business Partner Hundreds of Smart Living Vendors 20,000+ Integrators e-commerce Portal Local Branch Support & Inventory Broad, Curated Product Portfolio Workflow Solutions Award Winning Loyalty Program Technical Training Best-in-Class Technical & Partner Support Access to 20K+ integrators Inclusion in SNPO loyalty program Distribution through leading omni-channel platform Sales & marketing support Training support for integrators Focused marketing and data-driven insights on product assortment and purchasing behavior Integration with SNPO software platforms Software Platforms SNPO provides:
Our Business Model Reflects the Key Attributes of Best-in-Class Specialty Distributors… Page | 15 Singularly Focused ‘Category Leader’ in Fragmented Industry Omni-Channel Presence Private Label Offering Proven M&A Playbook Value-Added Services & Workflow Solutions Diversified, Resilient Business Model Dedicated to serving professional integrators addressing the Smart Living industry Established industry leader in attractive space with large consolidation opportunity Best-in-class e-commerce portal complemented by nationwide local branch footprint Significant proprietary product portfolio representing ~70% of total net sales Successfully invested $750MM+ across 10+ acquisitions in recent years Full suite of software, tools, and support for integrators across the project lifecycle 25+ product categories, ~20,000 (and growing) SMB integrators serving diversified end markets
…And Our Financial Profile Supports Valuation Upside to Align with Best-in-Class Specialty Distributor Peer Group Page | 16 Growth Profitability ’19A-’22E Revenue CAGR ’19A-’22E EBITDA CAGR 11% 26% 19% 22% Specialty Distributor Index Median ‘22E Gross Margin % ‘22E EBITDA % 35% 39% 14% 10% Specialty Distributor Index Median Notes: Distribution peer index includes Fastenal, Ferguson, Grainger, Hillman, Pool Corp, Site One, and Watsco. Index represents median based on actual financial results and consensus estimates as of August 31, 2022. 2022/2023 represents analyst consensus estimates. 0.0x 5.0x 10.0x 15.0x 20.0x SNPO Specialty Distributor Index 2023E EBITDA Multiples 13.1x 10.0x Trading at a 3+ turn discount to Specialty Distributor Index SNPO in early innings of driving operating leverage, with LT target of mid-teens
Go-to- Market Strategy
Who Do We Serve? Page | 18 Focus of remaining Go-to-Market Strategy pages. Sources: TAM per Frost & Sullivan U.S. Integrators Geographic Disaggregation U.S. Other International Audience Served DIFM Integrators Home Technology Commercial Security National Accounts, Amazon, Retailers, etc. DIFM Integrators Large Int’l Distributors 82% % of 2021 Net Sales 6% 12% ~$43.0B TAM Opportunistic ~$106.2B
Leader in Serving Home Technology Integrators, with Ongoing Efforts to Increase Penetration in Commercial & Security Page | 19 Similar Needs of Integrators and Playbook in Home Tech Drives Commercial and Security Growth Strategy Consistent integrator needs with rest of business Core growth playbook being applied to these adjacent markets • One-stop shop • Workflow solutions for support • Omni-channel access New Commercial and Security integrator acquisition Cross-sell to drive wallet share Introduce new 1P and 3P products / categories Targeted sales, marketing, and new integrator onboarding initiatives M&A to accelerate capabilities Home Technology Commercial Security ~13,000 / 75% ~3,000 / 15%~4,000 / 12% ~$50,000 / 13% ~$34,000 / 5%~$19,000 / 3% 2021 Domestic Transacting Integrators / Market Penetration Spend per Integrator / Implied Wallet Share SNPO Product Category Applicability Notes: Market metrics per Frost & Sullivan
Demonstrated Progress Expanding in Commercial and Security Markets Page | 20 Commercial Security Focused R&D Investments & Product Overlaps Strategic Theme Hired new leader focused specifically on Commercial and SecurityLeadership Dedicated GTM Teams Created awareness and target specific sub-segments of Commercial and Security markets through trade events, publications, and sponsorshipsFocused Marketing and Partner Segmentation Expanded omni-channel offering and convenience to Commercial and Security partners through local branch openingsLocal / Omni-Channel M&A Tailored products to specifically apply to Commercial and Security end markets Hired dedicated sales reps with significant ramp up in past two years Acquired Clare in August 2022 and continuously evaluating opportunities to accelerate Commercial through M&A
Large, Attractive, and Growing Addressable DIFM Domestic Integrator Market Page | 21 Domestic Integrators Avg. Spend per Integrator DIFM Domestic Integrator TAM Profile of Our Best Integrators How Do We Drive Growth? Ecosystem Adoption Control4 certified OvrC Omni-channel x = Add New Integrators Increase Wallet Share Notes: Market metrics per Frost & Sullivan. Commercial Security Ecosystem adoption <10% of total domestic integrators; meaningful conversion opportunity ~$261K avg. spend per; >6x avg. spend of domestic integrators in total Introduce new / relevant products 70,000 $614,000 $43.0B Expected to grow at 9% long-term CAGR
~6.0M Estimated Annual Addressable Projects (1 every 5 years) 3 Domestic TAM Reinforced by Large Addressable Homes and Small Businesses Opportunity Page | 22 ~29.8M Addressable Homes and Small Businesses Notes: 1. Statista Research 2021 2. U.S. Small Business Administration (2021 Small Business Profile) 3. Management estimates 4. Frost & Sullivan (April 2021) Less than 20 Employees Over $150K HH Income ~$15K Estimated End Customer Average Project Spend 4 ~$89.5B Estimated End Customer Project Spend ~65% of spend related to products 4 ~$40.7B Estimated SNPO Domestic TAM U.S. Commercial ~32.5M Small Businesses 2 U.S. Residential ~130M Households 1 (17% / 5.4M)(19% / 24.4M) X (1-30% integrator margin) 4
Across All the Integrators We Serve, We Understand the Challenges They Face Throughout the Job Lifecycle Page | 23 Research & Learn System Design & Quote Order & Fulfillment Install, Set-up, & Program Business Administration Ongoing Support • Real-time access to detailed product info • Ease of self- service • Broad product selection • Training resources • Custom solution design • Proposal creation, design, reviews & quotes • ‘Just in time’ businesses • Real-time and future inventory status • Fast and flexible delivery/pickup options • Product installation guides and resources • Rapid access to product experts • Centralized platform for doing business • Lead generation and customer job lifecycle mgmt. capabilities • Limit service calls and truck rolls • Ability to fix problems remotely and rapidly • Recurring maintenance job solutions
We Serve Our Domestic Integrators Through an Efficient Go-To-Market Model Page | 24 Digital Experience 1 Local Branch Network 2 Software, Support, & Services 4 Specialized Sales Resources 3 SNPO Deployment of Resources We Engage Our Partners Through an e-commerce Led, Omni-Channel Go-to-Market Strategy… …and Support Them Like No One Else in the Industry
Best-in-Class e-commerce Portal Drives Meaningful Growth and Adoption Page | 25 e-commerce Portal Supports Integrators… …and Drives SNPO Growth… Seamless transaction experience 1 We Make it Easy for Integrators to Do Business >90% of visits focused on leveraging rich site functionality beyond ordering 1 Low touch-point and low- cost integrator acquisition Robust business management tools and content Leverage interaction data to deploy automatic relationship deepening strategies that drive wallet share growth …in an Efficient Manner Easy to use, low-hassle digital tools that scale Self-service learning, designing, account management, and service 62 NPS score for e- commerce portal 11 # of years consecutively ranked as #1 CE Pro manufacturer website Non-ordering visits include… • Account management • Research or support activity • Workflow tool usage Notes: 1. LTM as of June 2022.
Lucrative Rewards Program Attracts Integrators and Encourages Wallet Share Growth Page | 26 Attract new integrators Low-cost partner acquisition Drives platform adoption Incentivize wallet share Partners who spend more, earn more Enabled by comprehensive product suite Consolidate rewards across proprietary/third-party products and storefronts Structured to incentivize proprietary offering adoption Empowers the integrator to transact how they want 1
Local Branches Enhance Ability to Serve Integrators Page | 27 33 Domestic local branches 1 ~99% Delivery within 2 days 1 2 Delivery Within 1 Day 3 Delivery Within 2 Days 3 Delivery Within 3 Days 3 Distribution CentersDistribution Center HubExisting Local Branches Notes: 1. As of September 14, 2022. Represents domestic branches only. 2. In the contiguous U.S. 3. Based on operational data ~$4-$6M Year 1 Inc. Revenue ~$10-$12M Year 5 Inc. Revenue Cash Flow Positive in ~1 year ~25%+ IRR ~$450K – $650K Capex Buildout Target Unit Level Economics 2
Domestic Sales Coverage Model Further Strengthens Integrator Partner Relationships Page | 28 Description # Employees Home Technology Commercial / Security Coverage Emphasize retention campaigns, revenue expansion and management of partner relationships ~100 (ex. Local) Bridge technical gaps that inhibit adoption or drive attrition ~30 Notes: Employee counts as of June 2022 SNPO Deployment of Resources 3 Digital Experience 1 Local Branch Network 2 Specialized Sales Resources 3 Inside / Outside Sales & Business Dev. Mgr. Sales Engineers
Tech Support Focus on install, set-up, & programming Support, Software & Services That Integrators Depend On Page | 29 ~80% Calls answered within 20 seconds ~20 seconds Average speed of answer 2022 CE Pro Quest for Quality Best Customer Service Notes: 1. From July 1, 2021 – June 30, 2022 *More detail to be shared in following sections 84 NPS 4 As Manufacturer Platinum As Distributor Gold 2022 CE Pro Quest for Quality Best Customer Service As Manufacturer Platinum As Distributor Silver Partner Support Focus on order, fulfillment, & account mgmt. Partner Support 1 ~75% Calls answered within 3 minutes ~1.5 minutes Average speed of answer 92 NPS Tech Support 1 Software & Services* Focus on ongoing support Remote Management System Design Ongoing Live Support #1 #2 #1 #3
Product & Platform Vision
Page | 31 Smart Living Continues to Evolve… Smart living is about simple and reliable interactions with technology to deliver exceptional experiences that “just happen” Continued evolution, enhancement, and ease of use of connected technology Increasing desire for seamless experiences DIY, Big Tech, and interoperability standards create awareness of possible experiences Security and privacy are top of mind for physical and virtual interactions
Page | 32 …and Elevated Experiences are Best Delivered Through Professional- Grade Products Installed by Professional Integrators Addressing segment of users seeking enhanced holistic experiences beyond what DIY point products can provide High performance multi- room audio systems Seamless connectivity throughout the home or business, indoors and out Highly customized scenes and routines with significant flexibility across different applications Immersive media systems beyond smart TVs and sound bars Pro grade surveillance and security systems for full property and family/business protection Significant breadth of integrated and connected devices and subsystems
Platform & Product Ecosystem Intentionally Built to Meet the Needs of Integrators & End Customers, with Seamless Integration Across 1P & 3P Products Page | 33 Product and Software Ecosystem Built from the Outside In ~47% of Net Sales Curated 3P Product Portfolio Across Categories ~12% of Net Sales ~41% of Net Sales Control & Connected Infrastructure Entertainment Notes: % of Net Sales based on 2021 results
The Snap One Platform Enables Seamless Smart Living Experiences Page | 34 A platform is an ecosystem of products, systems, tools, services, and support solutions that creates value by facilitating better experiences Elements of a Platform The Snap One Platform OS3 #1 Whole-House Integration Platform 2022 CE Pro 100 Brand Analysis #1 Remote-Managed Services 2022 CE Pro 100 Brand Analysis Open ecosystem Extensive driver library facilitates interoperability Curated product from ~150 3P vendors 1 Robust Product Suite Interoperability Operating System Cloud Management Back-End Integration Notes: 1. Includes 3P vendors with >$10K in sales YTD through August 2022
Our Product and Platform Ecosystem is Delivered by Our World Class Product Development Organization Page | 35 Notes: Metrics as of fiscal year ended 2021 as shown in 10K filed March 23, 2022 Dedicated product development organization focused on delivering next generation products and software Strategy of “fast following” major technology standards while investing in differentiation with in-house and JDM partners Partner with a worldwide network of contract manufacturing and JDM suppliers to produce proprietary products 335+ Product Development Employees 150+ Software Engineers ~$65M+ Annual R&D Investment ~300+ Annual 1P Product Introductions 80+ JDM Suppliers 3 Centers of Excellence (Charlotte, Salt Lake City, Serbia) 48 Times Recognized in 2022 CE Pro Brand Leader Awards; ~5x competition
We are Emerging from a Period of Integration and Entering Into a Period of Innovation as a Combined Entity Page | 36 Since the acquisition of Control4 in 2019, we have made meaningful progress… …and we are poised to deliver exciting new products and services in the future 12 updates to OS3 since 2019 Re-engineered Cloud Services for reduced connection times Contemporary & Essential Lighting Where Pros Buy Audio Veranda 3 Smart TV Core Controllers Araknis Wifi 6 Luma X20 Episode Radiance Control4 Vibrant Lighting Halo Remotes
Our Journey Has Led Us to this Point: Customers and Partners Want More From the Smart Living Industry Page | 37 Empowerment to adjust and use their systems Support that is easily accessible when they want and need it Updated & secure systems Increasing profitability Developing recurring revenue Enabling greater capacity Creating better employee experiences Leveraging scalable solutions Solution selling Customers want better experiences, including: Partners want to improve their businesses by:
Snap One is Uniquely Positioned to Improve Customer & Partner Experiences Through Software & Services Page | 38 Deliver on Integrator & Customer Wants to Transform the Industry Established Foundation OS3 OvrC 4Sight Parasol Enables Snap One to provide solutions to our channel such as: Extended support hours Billing & marketing infrastructure Software system improvements Industry leadership & credibility as seen through: CE Pro Awards High NPS scores Annual touchpoints with tens- of-thousands of Professionals Scale & Leadership
Our Platform Journey Has Positioned Us To Revolutionize Smart Living Page | 39 2005-2010 Launched Infrastructure products 2011-2015 Launched Entertainment and Connected products Introduced 2016-2021 Expanded 3P partnerships Acquired Today Interoperability Operating System Cloud Management Continue to onboard new 3P vendors Extensive driver library facilitates seamless connections Consolidated legacy remote management solutions Launched OvrC Connect OS3 releases CORE controllers launched; backbone of future product introductions First mile delivery enhanced Back-end Integration Integration of legacy company infrastructures enhances integrator efficiency and end customer experiences Invested in Initiated omni- channel strategyIntroduced
Integrator Panel
Integrator Panelists Page | 41 27 Jim Shapiro Audio Video Intelligence Boston, MA Years in Business Robert Eng Tech Life Media Systems Long Island & NY Metro David Mills Kraus Hi-Tech NYC, Hamptons, South FL Kevin Vallerie Untangled Wilton, CT Annual Revenue Focus Areas 20 18 12 ~$5M ~$1.5M ~$5M - $7M ~$3M Luxury Residential, Custom and Light Commercial Home Theater, Audio Systems, Control, and Lighting in Resi/Commercial settings Luxury, MDU Development Residential & Commercial Automation, Control, AV and IT Infrastructure Relationship with Snap One 16 years 9 years 13 years 10 years
Scaling Platform with Profitable Growth
$591 $814 $1,008 $1,109 2019 2020 2021 2022 Q2 LTM $236 $339 $408 $437 2019 2020 2021 2022 Q2 LTM $65 $94 $111 $113 2019 2020 2021 2022 Q2 LTM Notes: 1. For a reconciliation of non-GAAP financial measures to GAAP, see the Appendix provided herewith 11% 12%Adj. EBITDA Margin:40% 40%Contribution Margin: Reported Net Sales Contribution Margin 1 38%YoY Growth: 24% 42% 11% Adjusted EBITDA 1 ($Millions) ($Millions) ($Millions) Page | 43 CAGR: 29% CAGR: 28% CAGR: 25% 39% 10%20% Our Financial Profile: Scaling Platform With History of Profitable Growth
Our Playbook to Drive Growth Extends Over Our History and Guides Our Go-Forward Plan Page | 44 Ecosystem Adoption ▪ Introduce new products and software ▪ Partner with leading third-party vendors ▪ Deliver new and enhanced technology-enabled workflow solutions ▪ Local branch expansion ▪ Product ecosystem and loyalty program encourages integrator adoption and standardization ▪ Disciplined pricing strategy as a lever Grow Integrator Network ▪ Apply learnings and ongoing track record of growing penetration in Residential Home Technology to adjacent markets, including: ▪ Security ▪ Commercial ▪ International Software Services and Revenue Models ▪ Introduce new non-hardware and solution selling revenue models, including: ▪ Remote management (OvrC, Parasol) ▪ 4Sight expansion ▪ Data and vendor services ▪ Surveillance-as-a-service ▪ Cybersecurity Strategic M&A ▪ Execute accretive acquisition strategy, including: ▪ Complementary products and technology ▪ Targeted local branch expansion ▪ Geographic expansion X + Long-Term Growth Algorithm Spend per Integrator # of Integrators New Revenue Models M&A+ Strategy How? 1 2 3 4
$5K $34K $121K $261K Trial 1 Ecosystem 2 Ecosystems 3 Ecosystems Drive Spend per Integrator Through Ecosystem Adoption Page | 45 1 OvrC Control4 OS3 Local Local Branch Opening Release Innovative Products and Software Introduce New Curated Third- Party Offerings Develop Tech Enabled Workflow Solutions Attract and Retain Through Loyalty Program Strategies to Drive Adoption Ecosystems 2021 Spend per Domestic Integrator Notes: Spend per Domestic Integrator across ecosystems defined as spending $4K annually across OvrC (defined as a Domestic Integrator who has spent > $4K on Araknis and/or Wattbox product in 2021, as those are OvrC enabled), Control4 branded product, or a local storefront. *Trial implies a Domestic Integrator spends less than $4K annually through any one ecosystem. 1. Calculated as 2021 Spend per Domestic Integrator divided by Avg. Spend per Integrator of $614K. $4K minimum annual ecosystem spend threshold Meaningful conversion opportunity >6x 2021 average Marketing Integrated Solutions Trial * 1 Ecosystem 2 Ecosystems 3 Ecosystems % of Total Integrators 52% 31% 11% 6% % of Total Domestic Integrator Sales 6% 26% 33% 35% Implied Wallet Share 1 1% 6% 20% 43% Avg. Integrator Spend: $41K
Disciplined Pricing Strategy Drives Spend per Integrator and Protects Margins Page | 46 1 2021 2023 March 2021 Annual Mkt Adj. 1.2% August 2021 Commodity Adj. 5.8% February 2022 Annual + Loyalty 6.0% June 2022 PPV Adj. 9.0% Pricing Philosophy ✓ Protect integrator margins ✓ Protect SNPO margins ✓ Provide integrators with ample notice before a price increase ✓ Ensure value positioned vs. competition, across all categories Historical Proprietary Pricing Actions (Blended Average) 2022
2 History of Increasing Our Integrator Base With Significant White Space for Continued Growth Page | 47 Notes: 1. Integrator counts presented on pro forma basis Demonstrated Ability to Grow Integrator Count 1 Home Technology Commercial Security ✓ Add product categories ✓ Launch new products ✓ Develop new software offerings ✓ Execute strategic M&A ✓ Partner with new 3P vendors ✓ Open local branches ✓ Invest in GTM resources ✓ Target through direct marketing ✓ Attract through loyalty program How We Add Integrators 13,000 2019 2021 TAM 4,000 2019 2021 TAM 3,000 2019 2021 TAM +7% CAGR +8% CAGR +19% CAGR 17,500 32,500 20,000
3 Early Innings of Delivering Software & Services to Create New Revenue Models at Scale Page | 48 OS 3 2021 2025+ Software & Services Revenue % Net Sales <1% 5%+ target We established an RMR base with our investments that laid the groundwork for future scalable offerings Future Software & Services Offerings
Strong Track Record of Accretive M&A With Robust Pipeline Page | 49 4 Notes: 1. Acquired by Control4 prior to Snap One’s acquisition of Control4 With Over ~$750MM+ Invested Across 10+ Acquisitions in Recent Years We Have a Proven M&A Platform Focus Sourcing Financial Integration Value Creation Platform Networking1 Outdoor display 2015 2016 2017 2018 2019 High-end speakers1 Video switches1 High-end surveillance Next-gen remote1 2020 2021 2022 Local distribution High-end networking Local distribution Local distribution Security / Control Future M&A Disciplined and Strategic M&A Criteria Product Platform Acquisitions Support Buy-and-Build Strategy Supplemented by Targeted Local Branch Expansions
Notes: 1. Reflects management estimates Disciplined Approach to M&A to Advance Strategy and Accelerate Growth Page | 50 300+ Acquisition Targets1 • Highly fragmented market with numerous M&A opportunities • Targets span both product and distribution companies • Largely bolt-on opportunities with some larger deals • Dedicated M&A resources to source, track, analyze and execute opportunities • Disciplined financial criteria with focus on driving synergies Completed Acquisitions Analyzed Opportunities Qualified Opportunities Total Opportunities Local Expansion Snap One’s M&A Funnel M&A Review Key Investment Focus Areas 4 Existing Product Category Bolt-ons New Product Categories Security, Commercial & Int’l Focused Subscriptions Services
Financial Strength Underpinned by Resiliency of Integrators Supported by SNPO and Diversified SNPO Business Model Page | 51 Resilient Integrator Base Support from SNPO in Complicated Times Diversified SNPO Business Model Attractive SNPO Financial Profile Find the work Capital light Flex between end markets Pivot jobs within residential environment Strategic use of balance sheet to ensure product availability Pricing model prioritizes integrator margins Provide workflow solutions for efficiency Provide training resources Provide award winning partner and technical support Supports SNPO Flywheel (shown earlier) Omni-channel Diversified partner base Geographically diversified 25+ product categories portfolio Diversified end markets Low double-digit growth CAGR Consistent contribution margin rate Growing Adj. EBITDA margin rate Attractive free cash flow Strength through cycles Notes: Attractive SNPO financial profile based on long-term targets
$Millions 2020 2021 1H'22 Net Sales 814 1,008 574 % Net Sales Contribution Margin 42% 40% 39% 1P Product Mix 71% 70% 69% Air Freight NM 1% 1% PPV Impact Minimal Some Significant GAAP SG&A 33% 35% 32% Non-GAAP Adjusted SG&A 30% 30% 29% Variable Operating Expenses 6% 6% 5% Adj. Non-Variable Operating Expenses 24% 23% 24% Adjusted EBITDA 12% 11% 10% • Adj. Non-Variable Operating Expenses includes fixed and activity-based costs. Includes R&D, Sales & Marketing, Operations, G&A, and reflects continued investments in organic growth and public company costs • Anticipate generating meaningful operating leverage against these expenses, with long-term target of ~15% Adj. EBITDA margins Historical Results Impacted by Dynamic Macro – Meaningful Opportunity to Generate Operating Leverage in Future Page | 52 Notes: For a reconciliation of non-GAAP financial measures to GAAP, see the appendix provided herewith 1 2 3 3 • Contribution margin impacted by: • Product Mix: intentional acceleration of 3P growth through new local branch openings and new vendor onboarding results in mix shift • Air Freight & PPV Impact: strategic actions taken to ensure product availability for integrator partners, resulting in margin degradation • Variable Operating Expenses includes credit card processing fees, warranty expense, outbound shipping, bad debt expense. 5-6% of net sales historically, which we expect in future 1 2
2022 Guidance Reminder Page | 53 • In Q2, 2022 annual guidance was reaffirmed from previous quarter • Net Sales guidance of $1,160M - $1,180M positions Snap One for 17% – 19% Net Sales annual growth on a 52-week adjusted basis • ~12% – 14% YoY organic growth • ~5% YoY growth from recently completed M&A (Access Networks and Staub Electronics) • Adjusted EBITDA guidance of $116M - $121M $Millions FY’21 Actuals Post-Q1 FY’22 Outlook Post-Q2 FY’22 Outlook Low High Low High Net Sales $1,008 $1,160 $1,180 $1,160 $1,180 % Growth (Reported) 15% 17% 15% 17% % Growth (52 Wk. Adj.) 17% 19% 17% 19% Adj. EBITDA $111 $116 $121 $116 $121 Adj. EBITDA Margin % 11.0% 10.0% 10.3% 10.0% 10.3% % Growth (Reported) 5% 9% 5% 9% Given market environment remains dynamic, team is focused on execution to drive Adj. EBITDA performance in-line with guidance notwithstanding potential net sales headwinds
Long-Term Financial Targets Page | 54 Organic Net Sales Growth Contribution Margin Adj. EBITDA Margin Cash Flows • Transacting Integrators • Home Technology • Commercial • Security • International • Local • Spend per Integrator • Ecosystem adoption • New product intros • Pricing • Local • Software & Services Low Double-Digit Growth CAGR Consistent % of Net Sales • Return to ‘Normalized’ Macro Operating Environment • New Product Introductions • Software & Services • Pricing • Merchandising • 3P vendor negotiations • Product mix shift Growing % of Net Sales • Stable Contribution Margin as % of Net Sales • Operating Leverage • Recent investments in LT growth; expect to moderate • Unified operating system efficiencies • Leverage against public company costs Significant Cash Flow Conversion • Capex Light: ~10% of Adj. EBITDA • Working Capital: Anticipate working capital growing in line with sales growth • Other Considerations: • TRA & tax attributes • Seasonality • Capital allocation • Target Net Leverage: ~3x + Accretive M&A
$Millions 2020 2021 1H'22 Adjusted EBITDA 94.5 110.8 55.3 (-) Purchases of PP&E (10.2) (10.0) (6.4) % Adj. EBITDA 11% 9% 12% Change in Inventory (ex M&A) 8.2 (50.9) (54.7) Change in Other Net Working Capital 18.6 (30.0) 5.1 + / (-) Change in Net Working Capital 26.8 (80.9) (49.6) FCF pre Investing & Financing Activities 111.0 19.9 (0.8) Sales Growth % 38% 24% 21% Working Capital Growth (29%) 126% 110% Historical Cash Flow Profile Impacted by Dynamic Macro; Anticipate Normalization in Mid to Long-Term Page | 55 Notes: Net Working Capital defined as sum of accounts receivable, inventory, prepaid and other current assets, net of accounts payable and accrued liabilities. Change in inventory excludes impact of acquisitions of Access Networks and Staub 1 2 3 1 2 3 • COVID impacted • Took proactive measures to push out PO’s and terms with vendors, resulting in meaningful cash flow generation 2020 2021 1H’22 • Actions taken in 2020 reversed out and rise of global supply chain challenges • To meet integrator demand, took proactive measures to ensure product availability, resulting in meaningful use of cash through inventory increases and increases in prepaid vendor deposits • Continued investments in inventory to ensure product availability for integrators, also reflects higher carrying costs • Believe inventory is at appropriate level to satisfy existing demand and will moderate inventory investment moving forward
Disciplined and Balanced Capital Allocation Policy Page | 56 2 Organic Growth Investment in S&M, Local and R&D capabilities 3 M&A Consolidator of choice in highly fragmented industry 1 Liquidity Maintain healthy balance sheet 4 Capital Markets Debt paydown, share repurchases, etc. Continued Investments in Growth While Returning Capital to Shareholders
Closing Remarks
Page | 58 As a Reminder: Our Investment Highlights Snap One Today How we became a leader in our industry What Makes Snap One Special? Our greatest asset is our relationship with our partners (integrators) Our Addressable Market Attractive and growing Our Long-Term Growth Algorithm Our pillars for achieving long-term, profitable growth and our proven track record of execution Revolutionizing the Industry Launching innovative products and non-hardware services
Partner Showroom Experience Overview Page | 59 ▪ At the conclusion of this session, our in-person attendees will depart to Gilmore’s Sound Advice ▪ Gilmore’s Sound Advice is one of our NYC-based integrator partners who has graciously allowed us to use their amazing showroom where they host their clients ▪ The showroom experience is designed to highlight various smart living experiences that our integrator partners create for end customers ▪ When you arrive at Gilmore’s Sound Advice, feel free to explore until the full group arrives ▪ Once everyone has gathered, we will kick off with opening remarks and then provide a more formal walkthrough of the space
Appendix
Page | 61 Reconciliation of Net Loss to Adjusted Net Income Notes: a. Represents provision for credit losses on notes receivable related to the Company's unsecured loan to Clare. b. Represents noncash gains and losses recorded from fair value adjustments related to contingent value right (“CVR”) liabilities. Fair value adjustments related to CVR liabilities represent potential obligations to the prior sellers in conjunction with the acquisition of the Company by investment funds managed by Hellman & Friedman in August 2017 and are based on estimates of expected cash payments to the prior sellers based on specified targets for the return on the original capital investment. c. Represents expenses incurred related to deferred payments to employees associated with our Control4 acquisition and other historical acquisitions. The deferred payments are cash retention awards for key personnel from the acquired companies and are expected to be paid to employees through 2023. Management does not believe such costs are indicative of our ongoing operations as they are one-time awards specific to acquisitions and are incremental to our typical compensation costs incurred and we do not expect such costs to be reflective of future increases in base compensation expense. d. Represents non-recurring expense related to payments to certain pre-IPO owners in lieu of their participation in the TRA. Management does not believe such costs are indicative of our ongoing operations as they are one-time awards specific to the establishment of the TRA. e. Represents costs directly associated with acquisitions and acquisition-related integration activities. These costs also include certain restructuring costs (e.g., severance) and other third-party transaction advisory fees associated with the acquisitions. f. Represents an adjustment related to the fair value of deferred revenue related to the Control4 acquisition. g. Represents expenses related to professional fees in connection with preparation for our IPO. h. Represents professional service fees associated with the preparation for Sarbanes-Oxley compliance, the implementation of new accounting standards and accounting for non-recurring transactions. i. Represents non-recurring expenses related to consulting, restructuring, and other expenses which management believes are not representative of our operating performance. j. Represents the tax impacts with respect to each adjustment noted above after taking into account the impact of permanent differences using the statutory tax rate related to the applicable federal and foreign jurisdictions and the blended state tax rate. 2019 2020 2021 2022 $Millions FY '19 FY '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 FY '21 Q1 '22 Q2 '22 Net loss (34.5)$ (25.2)$ (6.0)$ (1.1)$ (21.5)$ (7.8)$ (36.5)$ (2.3)$ (1.3)$ Amortization 31.5 47.5 11.9 12.1 12.3 12.3 48.6 12.7 12.6 Equity-based compensation 3.7 4.3 1.1 1.2 14.4 4.9 21.5 5.6 6.8 Foreign currency loss (gains) (1.1) (0.2) (0.0) (0.1) 0.5 (0.1) 0.1 (0.2) 0.2 Gain (loss) on sale of business 0.6 (1.0) - - - - - - - Loss on extinguishment of debt - - - - 6.6 5.4 12.1 - - Provision for credit losses on notes receivable (a) - - - - - - - - 5.9 Fair value adjustment to contingent value rights (b) 0.3 0.8 1.3 1.5 (1.6) 3.7 4.9 (2.8) (3.3) Deferred acquisition payments (c) 13.6 9.6 2.2 1.4 1.6 1.4 6.5 0.7 0.3 Compensation expense for payouts in lieu of TRA participation (d) - - - - 10.6 0.3 10.9 0.3 0.3 Acquisition and integration related costs (e) 20.2 5.3 0.0 0.2 0.1 0.1 0.4 0.2 0.1 Deferred revenue purchase accounting adjustment (f) 0.8 1.0 0.1 0.1 0.1 0.1 0.5 0.1 0.1 Initial public offering costs (g) - 0.5 1.7 1.2 1.6 0.2 4.8 - - Other professional services costs (h) - - - - - - - 0.8 0.4 Other (i) 0.2 0.8 0.7 1.1 0.8 0.6 3.2 0.0 0.0 Income tax effect of adjustments (j) (15.6) (15.2) (3.9) (3.8) (8.8) (7.1) (23.5) (4.5) (5.4) Adjusted Net Income 19.7$ 28.3$ 9.0$ 13.9$ 16.7$ 13.9$ 53.6$ 10.7$ 16.5$ Net Sales 590.8$ 814.1$ 220.5$ 253.3$ 260.7$ 273.5$ 1,008.0$ 277.4$ 296.9$ Adjusted Net Income Margin 3.3% 3.5% 4.1% 5.5% 6.4% 5.1% 5.3% 3.9% 5.6%
Page | 62 Reconciliation of Net Loss to Adjusted EBITDA Notes: a. Represents provision for credit losses on notes receivable related to the Company's unsecured loan to Clare. b. Represents noncash gains and losses recorded from fair value adjustments related to contingent value right (“CVR”) liabilities. Fair value adjustments related to CVR liabilities represent potential obligations to the prior sellers in conjunction with the acquisition of the Company by investment funds managed by Hellman & Friedman in August 2017 and are based on estimates of expected cash payments to the prior sellers based on specified targets for the return on the original capital investment. c. Represents expenses incurred related to deferred payments to employees associated with our Control4 acquisition and other historical acquisitions. The deferred payments are cash retention awards for key personnel from the acquired companies and are expected to be paid to employees through 2023. Management does not believe such costs are indicative of our ongoing operations as they are one-time awards specific to acquisitions and are incremental to our typical compensation costs incurred and we do not expect such costs to be reflective of future increases in base compensation expense. d. Represents non-recurring expense related to payments to certain pre-IPO owners in lieu of their participation in the TRA. Management does not believe such costs are indicative of our ongoing operations as they are one-time awards specific to the establishment of the TRA. e. Represents costs directly associated with acquisitions and acquisition-related integration activities. These costs also include certain restructuring costs (e.g., severance) and other third-party transaction advisory fees associated with the acquisitions. f. Represents an adjustment related to the fair value of deferred revenue related to the Control4 acquisition. g. Represents expenses related to professional fees in connection with preparation for our IPO. h. Represents professional service fees associated with the preparation for Sarbanes-Oxley compliance, the implementation of new accounting standards and accounting for non-recurring transactions. i. Represents non-recurring expenses related to consulting, restructuring, and other expenses which management believes are not representative of our operating performance. 2019 2020 2021 2022 LTM $Millions FY '19 FY '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 FY '21 Q1 '22 Q2 '22 Net loss (34.5)$ (25.2)$ (6.0)$ (1.1)$ (21.5)$ (7.8)$ (36.5)$ (2.3)$ (1.3)$ Interest expense 35.2 45.5 9.5 9.5 7.5 6.6 33.2 6.7 7.7 Income tax (benefit) expense (13.4) (4.4) (0.8) 0.1 (2.7) (3.3) (6.6) (0.4) (0.2) Depreciation and amortization 39.7 58.0 13.7 14.2 14.3 14.4 56.6 14.9 15.0 Other expense (income), net (1.0) (1.8) (0.2) (0.3) 0.3 (0.7) (0.9) (0.4) (0.1) Loss on extinguishment of debt - - - - 6.6 5.4 12.1 - - Equity-based compensation 3.7 4.3 1.1 1.2 14.4 4.9 21.5 5.6 6.8 Provision for credit losses on notes receivable (a) - - - - - - - - 5.9 Fair value adjustment to contingent value rights (b) 0.3 0.8 1.3 1.5 (1.6) 3.7 4.9 (2.8) (3.3) Deferred acquisition payments (c) 13.6 9.6 2.2 1.4 1.6 1.4 6.5 0.7 0.3 Compensation expense for payouts in lieu of TRA participation (d) - - - - 10.6 0.3 10.9 0.3 0.3 Acquisition and integration related costs (e) 20.2 5.3 0.0 0.2 0.1 0.1 0.4 0.2 0.1 Deferred revenue purchase accounting adjustment (f) 0.8 1.0 0.1 0.1 0.1 0.1 0.5 0.1 0.1 Initial public offering costs (g) - 0.5 1.7 1.2 1.6 0.2 4.8 - - Other professional services costs (h) - - - - - - - 0.8 0.4 Other (i) 0.3 0.7 0.7 1.1 0.9 0.6 3.3 0.1 0.1 Adjusted EBITDA 64.9$ 94.5$ 23.3$ 29.3$ 32.1$ 26.0$ 110.8$ 23.6$ 31.7$ Net Sales 590.8$ 814.1$ 220.5$ 253.3$ 260.7$ 273.5$ 1,008.0$ 277.4$ 296.9$ Adjusted EBITDA Margin 11.0% 11.6% 10.6% 11.6% 12.3% 9.5% 11.0% 8.5% 10.7%
Page | 63 Additional Non-GAAP Reconciliations Contribution Margin Free Cash Flow – As defined in 10-Q Notes: a. Cost of sales, exclusive of depreciation and amortization, for the three months ended June 25, 2021 and the three months ended July 1, 2022 excludes depreciation and amortization of $14,198 and $14,966, respectively. Adjusted EBITDA Less Purchases of Property and Equipment 2019 2020 2021 2022 $Millions FY '19 FY '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 FY '21 Q1 '22 Q2 '22 Net Sales 590.8$ 814.1$ 220.5$ 253.3$ 260.7$ 273.5$ 1,008.0$ 277.4$ 296.9$ Cost of sales, exclusive of depreciation and amortization (a) 354.8 474.8 128.9 152.1 151.3 167.6 599.9 172.3 180.4 Net sales less cost of sales, exclusive of depreciation and amortization 236.0$ 339.3$ 91.6$ 101.2$ 109.5$ 105.9$ 408.1$ 105.1$ 116.5$ Contribution Margin 39.9% 41.7% 41.5% 39.9% 42.0% 38.7% 40.5% 37.9% 39.2% 2019 2020 2021 2022 $Millions FY '19 FY '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 FY '21 Q1 '22 Q2 '22 Net cash (used in) provided by operating activities (4.1)$ 64.2$ (23.9)$ 19.3$ (6.6)$ (19.2)$ (30.4)$ (23.0)$ 3.5$ Purchases of property and equipment (4.5) (10.2) (2.1) (2.4) (2.4) (3.2) (10.0) (3.3) (3.1) Free Cash Flow (8.6)$ 54.0$ (25.9)$ 16.9$ (9.0)$ (22.4)$ (40.4)$ (26.3)$ 0.4$ 2019 2020 2021 2022 $Millions FY '19 FY '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 FY '21 Q1 '22 Q2 '22 Adjusted EBITDA 64.9$ 94.5$ 23.3$ 29.3$ 32.1$ 26.0$ 110.8$ 23.6$ 31.7$ Purchases of property and equipment (4.5) (10.2) (2.1) (2.4) (2.4) (3.2) (10.0) (3.3) (3.1) Adjusted EBITDA Less Purchases of Property and Equipment 60.5$ 84.2$ 21.3$ 26.9$ 29.7$ 22.8$ 100.8$ 20.3$ 28.6$
Page | 64 Reconciliation of Operating Expenses to Adjusted Operating Expenses Notes: a. Represents provision for credit losses on notes receivable related to the Company's unsecured loan to Clare. b. Represents noncash gains and losses recorded from fair value adjustments related to contingent value right (“CVR”) liabilities. Fair value adjustments related to CVR liabilities represent potential obligations to the prior sellers in conjunction with the acquisition of the Company by investment funds managed by Hellman & Friedman in August 2017 and are based on estimates of expected cash payments to the prior sellers based on specified targets for the return on the original capital investment. c. Represents expenses incurred related to deferred payments to employees associated with our Control4 acquisition and other historical acquisitions. The deferred payments are cash retention awards for key personnel from the acquired companies and are expected to be paid to employees through 2023. Management does not believe such costs are indicative of our ongoing operations as they are one-time awards specific to acquisitions and are incremental to our typical compensation costs incurred and we do not expect such costs to be reflective of future increases in base compensation expense. d. Represents non-recurring expense related to payments to certain pre-IPO owners in lieu of their participation in the TRA. Management does not believe such costs are indicative of our ongoing operations as they are one-time awards specific to the establishment of the TRA. e. Represents costs directly associated with acquisitions and acquisition-related integration activities. These costs also include certain restructuring costs (e.g., severance) and other third-party transaction advisory fees associated with the acquisitions. f. Represents expenses related to professional fees in connection with preparation for our IPO. g. Represents professional service fees associated with the preparation for Sarbanes-Oxley compliance, the implementation of new accounting standards and accounting for non-recurring transactions. h. Represents non-recurring expenses related to consulting, restructuring, and other expenses which management believes are not representative of our operating performance. 2019 2020 2021 2022 $Millions FY '19 FY '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 FY '21 Q1 '22 Q2 '22 GAAP Selling, General and Administrative Expenses 210.0$ 267.2$ 75.4$ 78.7$ 105.0$ 91.2$ 350.3$ 86.5$ 95.4$ Components of GAAP SG&A Variable operating expenses (Non-GAAP) 39.7 48.5 14.7 17.1 16.1 17.3 65.2 13.3 16.8 Non-variable operating expenses (Non-GAAP) 170.2 218.8 60.7 61.5 88.9 74.0 285.0 73.2 78.6 Adjustments to Non-Variable Operating Expenses Equity-based compensation 3.7 4.3 1.1 1.2 14.4 4.9 21.5 5.6 6.8 Provision for credit losses on notes receivable (a) - - - - - - - - 5.9 Fair value adjustment to contingent value rights (b) 0.3 0.8 1.3 1.5 (1.6) 3.7 4.9 (2.8) (3.3) Deferred acquisition payments (c) 13.6 9.6 2.2 1.4 1.6 1.4 6.5 0.7 0.3 Compensation expense for payouts in lieu of TRA participation (d) - - - - 10.6 0.3 10.9 0.3 0.3 Acquisition and integration related costs (e) 20.2 5.3 0.0 0.2 0.1 0.1 0.4 0.2 0.1 Initial public offering costs (f) - 0.5 1.7 1.2 1.6 0.2 4.8 - - Other professional services costs (g) - - - - - - - 0.8 0.4 Other (h) 0.3 0.7 0.7 1.1 0.9 0.6 3.3 0.1 0.1 Adjusted Non-Variable Operating Expenses (Non-GAAP) 132.2$ 197.4$ 53.7$ 54.9$ 61.3$ 62.8$ 232.7$ 68.3$ 68.1$ % Net Sales 22.4% 24.2% 24.4% 21.7% 23.5% 23.0% 23.1% 24.6% 22.9% % YoY Growth 49.4% 9.2% 21.7% 24.4% 16.4% 17.9% 27.1% 24.1% Non-GAAP Adj. Selling, General & Administrative (Variable opex + Adj. Non-Variable opex) 171.9 245.9 68.4 72.0 77.5 80.0 297.9 81.6 84.9 % Net Sales 29.1% 30.2% 31.0% 28.4% 29.7% 29.3% 29.6% 29.4% 28.6%
Capital Position and Debt Terms Page | 65 • Original loan amount: $465M • Quarterly principal payments: $1.2M (0.25% of original loan amount) • Maturity date: 12/8/2028 • LIBOR Floor: 0.50% • Spread (current*): 4.50% Notes: Spread based on consolidated first lien debt to consolidated EBITDA ratio. If >3.5x then 4.5%, if 3.0x – 3.5x then 4.25%, if <3.0x then 4.0% 2021 2022 $Millions Q1 Q2 Q3 Q4 Q1 Q2 Revolving Credit Line -$ -$ -$ -$ 35.6$ 45.6$ Current Maturities of Long-Term Debt 6.8 6.8 2.9 3.5 3.5 4.7 Long-term debt, net of current portion 644.4 644.6 438.7 449.3 449.6 447.7 Total Debt 651.2 651.5 441.6 452.7 488.7 498.0 (-) Cash 48.9 35.8 60.6 40.6 25.1 31.3 Net Debt 602.3 615.6 381.0 412.2 463.6 466.7 LTM Adj. EBITDA 104.7 109.6 110.4 110.8 111.0 113.4 Gross Leverage 6.2x 5.9x 4.0x 4.1x 4.4x 4.4x Net Leverage 5.8x 5.6x 3.5x 3.7x 4.2x 4.1x Undrawn Revolver 100.0 63.0 53.0 Letters of Credit 4.9 4.9 5.3 Total Liquidity (Cash + Undrawn Revolver, net of Letters of Credit) 135.7 83.2 79.1