NASDAQ: SIC August 2018 Company Highlights September 2018
Disclaimer Forward-Looking Statements Certain statements in this presentation may constitute forward-looking statements, including statements regarding the Company s financial position, business strategy and plans, and objectives of management for future operations. These statements, which contain words such as "believe, expect, anticipate, intends, estimate, forecast, project, will, may, should and similar expressions, reflect the beliefs and expectations of the Company and are subject to risks and uncertainties that may cause actual results to differ materially. These risks and uncertainties include, among other factors, our dependency upon the residential construction and repair and remodel market, the achievement of the anticipated levels of profitability, growth, the ability to anticipate consumer preferences and demand, the impact of competitive pricing, and the impact of general business and economic conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described herein. The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Forward-looking statements are not predictions of future events. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, and results of operations may vary materially from those expressed in our forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Use of Non-GAAP Financial Measures Management believes the non-gaap financial measures discussed in this presentation are useful to both management and investors in their analysis of the Company s financial position and results of operations. Further, management uses these non-gaap financial measures for planning and forecasting future periods. This non-gaap financial information is provided as additional information for investors, is not in accordance with or an alternative to GAAP, and should not be used as a substitute for the Company s operating results presented in accordance with GAAP. These non-gaap measures may be different from similar measures used by other companies. For reconciliations of these non-gaap financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP, see the appendix of this presentation. 1
Table of contents Section Page number Introduction Page 3 Residential Design Services Page 10 Architectural Surfaces Group Page 15 Growth opportunities Page 20 Financials & conclusion Page 24 Appendix Page 29 2
Introduction
History of SIC 1988 RDS was founded Feb 2015 RDS acquired assets of PT Tile Feb 2017 AG&M acquired Pental Nov 2017 SIC was restructured into a holding company for RDS and ASG Aug 2018 SIC acquired all assets of Tuscany Collection 1992 AG&M was founded June 2015 Acquired AG&M July 2016 AG&M acquired Modul Oct 2017 AG&M acquired Cosmic; AG&M, Pental, Modul and Cosmic were combined to form ASG Dec 2017 Jan 2018 SIC acquired SIC acquired Greencraft Bedrock Aug 2018 SIC acquired all assets of Summit Stoneworks Key financials 2016 2017 LTM 6/30/2018 Net revenue $234 $353 $424 Adj. EBITDA ($mm) 27 47 52 Total design centers / showrooms 15 / 7 16 / 15 18 / 22 Total acquisitions 1 3 4 4
Complimentary businesses with common vendor channels and cross-selling opportunities Highly trained and specialized interior designers with proprietary interior design software In-house labor force supplemented by subcontractors Sophisticated global supply chain complemented with product design, development and marketing Efficient hub-and-spoke distribution Strong merchandising and sourcing capabilities Significant customer value add through optional upgrades Constantly evolving service offering with proactive customer service RDS products and services Bes t Qu a li ty 22 strategically located design showrooms and warehouses Exclusive vendor agreements with factories and high quality quarries Strong relationships with diverse channels (fabricators, builders, designers, dealers and architect firms) ASG products Tile Flooring Door Hardware Engineered Stone Counters Cabinetry Granite Marble Tile Porcelain 5
($ in millions) ($ in millions) Select Interior Concepts at a glance Diversified building products and services company focused on high-value, high-margin home interior products LTM 6/30/2018 sales mix Installer and distributor of interior building products with leading positions in residential interior design services Product category RDS 46% R&R 22% End market 1 R&R 22% Construction sector 1 Scalable platform that can be replicated across geographies, product categories, and services ASG 54% Multi-family 2% Commercial 3% Single family 73% New construction 78% Key financials Net revenue Adj. EBITDA $500 $400 $300 $200 $100 $234 $353 $424 $60 $50 $40 $30 $20 $10 $27 11.7% $47 13.3% $52 12.3% 30% 25% 20% 15% 10% 5% $0 2016 2017 LTM 6/30/2018 $0 2016 2017 LTM 6/30/2018 0% Adj. EBITDA % margin Source: Management estimates Notes 1 Repair and remodel 6
Our strategy: building the leading platform for home design Continue to grow by acquisition Expand geographically through greenfield investment Identify and pursue new customer segments Offer new products and services Accelerate penetration of existing markets 7
Contributing to growth through recent acquisitions SIC acquires Tuscany Collection Architectural Surface Group (ASG) acquired substantially all the assets of Tuscany Collection, a distributor of natural stone, quartz and tile in Las Vegas, Nevada The acquisition will expand ASG s footprint to 22 locations across the United States Customers will benefit from superior distribution capabilities throughout the Western United States SIC acquires Summit Stoneworks Residential Design Services (RDS) acquired substantially all the assets of Summit Stoneworks, a leading provider of high-quality flooring and countertops to its national and local builder and fabricator customers The acquisition will expand RDS operations in the Austin, San Antonio and Houston, TX markets Grows RDS s footprint to 29 locations, including 19 design centers across the United States 8
Key investment highlights Critical partner between homebuilder and homebuyer Positioned to benefit from continued construction cycle expansion Market leadership promotes high barriers to competition Strong customer relationships Scalable platform to grow by acquisition Strong and experienced management team 9
Residential Design Services
Residential Design Services overview Overview Leading provider of turnkey interior design centers and installation services for residential and commercial builders Product suite includes flooring, countertops, wall tile, cabinets, window treatments, shower doors and mirrors, and other interior finishes Facilities & capabilities 18 professionally staffed design centers that cater to the homebuyer Private label design centers for select homebuilders Full Service Capabilities For residential homebuilders, RDS operates homebuyer-centric design centers and fulfillment / installation services For commercial builders, RDS provides interior surface installation services for multi-family and light commercial projects Design center management Option sales and services Distribution Complex and time-sensitive installation and labor management Key strengths Financial Profile Critical link between homebuilders and homebuyers Exceptional value proposition for homebuilders through upsell execution and high-level of customer satisfaction in installation ($ in M) 2016A 2017A LTM 6/30/2018 Net revenue $175.8 $193.2 $231.2 % growth n.a. 9.9% n.a. In-house fabrication capability enabling broad offering and timely completion Adj. EBITDA $16.1 $18.8 $23.4 % margin 9.2% 9.8% 10.1% 11
RDS is a critical link between homebuilders and homebuyers Homebuilders Home buyers Design studio Style discussion Installation 18 design centers with consultants Option management software In-house fabrication Installation expertise and labor pool 12
Importance Design centers reinforce exceptional value proposition for homebuilders through superior upsell execution Builder key factors when selecting partners Upsell conversion rate Upsell Execution Geographic Footprint Customer Experience Product Breadth Supplier Relationships Installation Capabilities Typical Industry Participant Limited Limited Varies Varies Varies Varies (FY2017 % of design center appointments) ~100% ~75% ~50% ~25% ~0% We believe that high-margin upgrade sales occur more frequently within RDS design centers ~50% -60% Typical design center (Last 12-mos. TTM Q2 2018, Average Revenue per Order, $ in Actual) 1 Revenue per lot order 2 ~85% RDS design center RDS exceptional value proposition Significantly influences the upgrade process Increases revenue per order $30,000 $20,000 RDS upgrade orders generate ~220%+ more revenue per order than standard orders (revenue shared with homebuilder) $27,515 Minimizes costly construction delays $10,000 $9,392 Drives RDS profitability and increases builder profitability $0 Standard sale Upgrade sale in RDS design center Source Management estimates Notes: 1 Estimated 2 Single housing lot typically has more than one order per lot 13
In-house fabrication capability and dedicated labor 3 fabrication facilities to perform in-house fabrication of natural and engineered stone countertops Mix of in-house and third-party resources provides flexibility and ensures consistent, quality service, including during periods of high demand Ensures access to fabricated products and on-time delivery Highly skilled installer network and in-house fabrication capability results in short lead times and highly accurate execution In-house skilled labor across various trades Provides competitive advantage with increased breadth of product offerings and labor access 14
Architectural Surfaces Group
Architectural Surfaces Group overview Overview Portfolio of brands Leading importer and distributor of natural stone, engineered stone, and related products used in residential construction, commercial construction and remodeling across the U.S. Robust engineered stone offering across range of price points Products include slabs (granite, marble, quartz), tile, sinks, commercial cut-to-size services, and other related products for countertops, backsplash, flooring, and exterior cladding Operates a hub-and-spoke distribution model to effectively manage logistics and inventory between locations Utilizes a single-quarry sourcing model which results in higher product consistency and increases customers fabrication yield Key strengths Financial Profile One-stop-shop for design purchases Highly sophisticated sourcing model ($ in M) 2016A 2017A LTM 6/30/2018 Net revenue $58.8 $161.1 $192.7 % growth n.a. 173.9% n.a. Proven greenfield strategy Adj. EBITDA $11.3 $28.3 $30.2 % margin 19.2% 17.6% 15.6% 16
Customers ASG s value-add Suppliers One-stop-shop for product offering and customer selection Tile Natural stone Engineered stone Product development Marketing & merchandising Consultative selling Logistics One-stop-shop for product & customer selection Builders Dealers Fabricators Commercial 17
Highly sophisticated sourcing model Strategically located ports to facilitate sourcing from across the globe Tacoma Boston Anaheim Kansas City New Jersey Norfolk Basic natural stone Long Beach Raleigh Austin Houston Exotic natural stone, high-end quartz and porcelain Premium engineered stone and sinks Full range natural stone High quality natural stone and engineered stone 18
Proven greenfield strategy 1 2 3 4 Identify markets with attractive characteristics Secure initial customer support Assess logistics from ASG hub Identify strategic location for the warehouse in the greenfield vicinity Greenfield site economics Average fixed investment ~ $1.0m Average EBITDA break even period 12 months Average run rate EBITDA @ 15 months ~ $1.0m 19
Growth opportunities
Pillars for SIC growth Expand geographically Potential to open new greenfield facilities based on our market assessment Target markets where we already have footprint Diversify product and service offering Diversify into additional product lines such as cabinets, appliances, doors and windows Additional materials, e.g. porcelain surfaces Increase share in current markets Target the multi-family housing market, where we see significant growth potential Increase cross-selling of products and identify new customers Expand coverage to new segments Pursue additional opportunities in the Repair and Remodel (R&R) market, with significant margin increase potential Design centers well positioned for the initiative without material incremental capex needs Expand through dedicated M&A strategy Pursue acquisitions to bolster existing geographic reach and provide new product or services Increase direct contact with homebuyers and homeowners Potential to purchase adjacent businesses to add industry vertical(s) 21
M&A growth strategy Acquisition track record Completed 6 acquisitions in the last two years Well-established integration playbook Standardized approach to human resources, labor management and vendor relationships Switch pricing and supply agreements to RDS and ASG standards within first 60 days Implement standard KPIs and integrate into SIC management reporting process Target acquisition criteria Expanded geographic reach, new channels or new product / service capabilities Smaller owner/operator businesses with generational exit planning $10-100m annual revenue 10-15% EBITDA margin Synergy potential based on corporate cost overlap Efficient and accretive transactions as multiples are negotiated in favor of SIC SIC maintains an active pipeline of potential acquisition targets 22
New channels New products New channels New products Growth opportunities: new products and channels RDS ASG Products Description Products Description Cabinets Address cabinet supply and installation needs in the industry Appliances Tile & backsplash Engineered stone slabs for backsplash and wall tile applications and ceramic and porcelain for flooring applications Introduce new colors in Metro Quartz Sinks line and Natural stone SinksSinks Facilitate cross-selling Cross-sell existing customers looking for a one-stop-shop Doors & windows Address dearth of adequate suppliers and installers in the industry Porcelain slabs Cross-selling opportunity via ASG brands to meet shifts in market demand toward engineered stone Multi-family housing Assisted living Commercial Targeting high end commercial segment through Pental brand for designing and delivering high end stone products Pental s pre-fabrication capabilities at low cost facilities Estimated $20,000+ per house in additional interior finish products that SIC can readily provide and effectively sell through its design centers 23
Financials & conclusion
($ in millions) ($ in millions) ($ in millions) ($ in millions) Track record of strong financial performance Net revenue Gross profit $500 $400 $300 $200 $100 $234 $353 $424 $150 $100 $50 $67 28.6% $104 29.4% $119 28.1% 50.0% 40.0% 30.0% 20.0% $0 2016 2017 LTM 6/30/2018 $0 2016 2017 LTM 6/30/2018 Gross profit % revenue 10.0% Adj. EBITDA Cash flow conversion $100 50.0% $60 85.4% 91.3% 81.1% 100.0% $80 $60 $40 $27 $47 $52 40.0% 30.0% 20.0% $40 $20 $23 $43 $42 80.0% 60.0% 40.0% $20 $0 11.7% 13.3% 12.3% 2016 2017 LTM 6/30/2018 Adj. EBITDA % margin 10.0% - $0 2016 2017 LTM 6/30/2018 Adj. EBITDA - CapEx CF conversion 20.0% - Notes 1 Cash flow = EBITDA less CapEx 25
SIC s first half 2018 focus areas & second half initiatives First Half - 2018 1 Execute on Core Business 2 Expedite Growth & Funding 3 Transition to Public Company Both business units (RDS and ASG) reflecting YoY growth RDS growth tracking inline with operating plan with solid backlog ASG growth behind operating plan as greenfield locations are being ramped-up and market driven product mix is different Continued execution on strong building project backlogs in RDS Focus and Execute management initiatives in ASG to complete greenfield ramp-up Product mix and pricing enhancements in ASG Successfully completed / integrated four acquisitions Sourced additional M&A targets for pipeline Upsized ABL revolver to facilitate additional M&A deals Second Half - 2018 Consider debt refinancing / capacity expansion to facilitate M&A Investments in M&A / Corp development organization to support rapid and efficient deal execution Investment in resources to further expedite acquisition integration process Initiated leadership recruiting and investments in SIC holding company to create foundation for a publicly listed company Began trading on NASDAQ on August 16, 2018 Continue required investments in SIC holding company to build out foundation for all public company functions, SEC reporting requirements, internal controls and deployment of BI analytic software Initiate all customary public company reporting requirements 26
SIC: building the leading platform for home design Critical partner between homebuilder and homebuyer Positioned to benefit from continued construction cycle expansion Market leadership promotes high barriers to competition Strong customer relationships Scalable platform to grow by acquisition Strong and experienced management team 27
Contact information Select Interior Concepts website: http://www.selectinteriorconcepts.com 28
Appendix
Statement of profit and loss (in thousands, except share data) Three Months Ended June 30, Six Months Ended June 30, Consolidated Statement of Operations Information: 2018 2017 2018 2017 Net Revenue $ 124,861 $ 90,361 $ 229,247 $ 158,086 Cost of Revenue 90,455 63,850 166,892 111,104 Gross Profit 34,406 26,511 62,355 46,982 Sales and Marketing 6,316 4,800 11,773 13,523 General and Administrative 24,480 14,655 46,022 25,709 Operating Expenses 30,796 19,455 57,795 39,232 Interest Expense 2,757 3,623 5,280 5,730 Loss on extinguishment of debt 42-42 748 Other Expense, net 932 207 1,171 318 (Loss) income before tax expense (121) 3,226 (1,933) 953 Income Tax Expense (35) (170) (538) 142 Consolidated net (loss) income (86) 3,396 (1,395) 811 Loss per common share Basic and Diluted Class A common $ (0.00) $ - $ (0.05) $ - Basic and Diluted Class B common $ (0.00) $ - $ (0.05) $ - Weighted average shares outstanding Basic and Diluted Class A common 21,750,000-21,750,000 - Basic and Diluted Class B common 3,864,626-3,864,626 - Source: Company filings 30
Balance sheet (Dollars in thousands) ASSETS June 30, 2018 December 31, 2017 Cash and cash equivalents $ 6,111 $ 2,547 Restricted cash 3,000 3,000 Accounts receivable, net 51,422 45,284 Inventory 110,514 87,629 Income Tax recievables 1,181 1,520 Other current assets 2,646 2,625 Total Current Assets 174,874 142,605 Property and equipment, net 17,110 13,226 Goodwill 66,984 66,326 Intangibles assets, net 77,100 82,263 Deferred tax assets, net 12,668 11,569 Other assets 1,204 4,257 Total Assets 349,940 320,246 LIABILITIES AND EQUITY Accounts payable 37,947 38,491 Accrued expenses 26,513 19,840 Current Portion of Long-Term Debt 1,424 1,449 Current Portion of Capital Leases 382 229 Customer Deposits 6,421 5,320 Total Current Liabilities 72,687 65,329 Long-Term Debt (less current portion) 92,518 86,897 Long-Term Captial Leases 1,013 664 Line of Credit 35,382 19,269 Total Liabilities 201,600 172,159 Shareholder Equity 148,340 148,087 Total Liabilities and Shareholder Equity 349,940 320,246 Source: Company filings 31
Statement of Cash Flows (Dollars in thousands) Three Months Ended June 30, Six Months Ended June 30, Condensed Statement of Cash flows 2018 2017 2018 2017 Operating Activities Net cash provided by (used in) operating activities 1,359 450 (99) 3,708 Purchase of property and equipment (4,341) (868) (6,399) (1,666) Acquisitions - - (11,782) (88,000) Net cash used in investing activities (4,341) (868) (18,181) (89,666) Distributions - (554) - (34,859) Contributions - - - 30 Proceeds from line of credit, net 3,538 (415) 16,591 23,998 Proceeds from Term Loan - - 6,250 116,500 Principal payments on Term Loan (525) (1,460) (525) (20,218) Deferred debt issuance costs (486) - (517) (2,826) Proceeds/(payments) on notes payable 594 (165) 38 (311) Net cash provided by financing activities 3,121 (2,594) 21,836 82,314 Net increase (decrease) in cash 139 (3,012) 3,556 (3,644) Cash and restricted cash, beginning of period 8,972 4,095 5,547 4,727 Cash and restricted cash, end of period 9,111 1,083 9,111 1,083 Source: Company filings 32
Reconciliation of adj. EBITDA to net income (Dollars in thousands) Three Months Ended June 30, Six Months Ended June 30, Reconciliation of adj. EBITDA to net income 2018 2017 2018 2017 Consolidated net (loss) income $ (86) $ 3,396 $ (1,395) $ 811 Income tax (benefit) expense (35) (170) (538) 142 Interest expense 2,799 3,622 5,322 6,478 Depreciation and amortization 4,985 3,712 9,669 6,553 EBITDA 7,663 10,561 13,058 13,984 Consulting Fees to Trive Capital - 305-516 Share Based and Transaction Incentive Compensation 2,006-3,986 381 Nonrecurring Costs 4,142 997 7,444 5,088 Adjusted EBITDA 13,811 11,863 24,488 19,969 Source: Company filings Note: EBITDA is defined as consolidated net income before interest, taxes and depreciation and amortization. Adjusted EBITDA is defined as consolidated net income before (i) income tax expense, (ii) interest expense, (iii) depreciation and amortization expense, and (iv) adjustments for costs that are deemed to be transitional in nature or not related to our core operations, such as severance, facility closure costs, and professional and legal fees related to business acquisitions, or similar transitional costs and expenses related to integrating acquired businesses into our Company. Adjusted EBITDA is a non-gaap financial measure used by us as supplemental measure in evaluating our operating performance. 33