2. Disclaimer
This presentation contains certain forward-looking statements, which may be identified by the use of forward-looking terminology, including the terms “may,”
“should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or, in
each case, their negative, or other variations or comparable terminology. The forward-looking statements involve risks and uncertainties, some of which cannot
be predicted or quantified. Further, certain forward-looking statements are based on assumptions of future events which may not prove to be accurate. The
Company derives many of its forward-looking statements from its operating budgets and forecasts, which are based upon detailed assumptions. While the
Company believes that its assumptions are reasonable, it is difficult to predict the impact of known factors and to anticipate all factors that could affect actual
results. As such, actual results may differ materially from those projected or implied and you should not place undue reliance on these forward-looking statements.
For a discussion concerning the factors that could cause these differences, please refer to the Company’s filings with the Securities and Exchange Commission
(the “SEC”).
This presentation makes no representations or warranties and no person has been authorized to make any representations or warranties on behalf of the
Company or any of its affiliates, or to give any information other than that contained in this presentation. Nothing contained in this presentation is, or shall be relied
upon as, a promise or representation or warranty, whether as to the past, present or the future. Certain of the economic and market information contained herein
has been obtained from published sources and/or prepared by other parties. None of the Company or any of its directors, partners, stockholders, officers,
affiliates, employees, agents or advisers nor any other person assumes any responsibility for the completeness of any information in this presentation, and we
expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in
expectations or events, conditions or circumstances on which such statements are based.
This presentation includes certain non-GAAP financial measures, including Adjusted Net Income, Adjusted Net Income per Share, Adjusted Net Income (Loss)
per Diluted Share, EBIT Margin, EBITDA and Adjusted EBITDA. These non-GAAP financial measures should be considered only as supplemental to, and not as
superior to, financial measures prepared in accordance with GAAP. Please refer to the Appendix of this presentation for a reconciliation of the non-GAAP financial
measures included in this presentation to the most directly comparable financial measures prepared in accordance with GAAP.
This presentation is confidential and may not be reproduced or otherwise distributed or disseminated, in whole or part, without the prior written consent of the
Company, which consent may be withheld in its sole and absolute discretion.
Any investment in the Company will be subject to certain risks related to the nature of the Company’s business and the structure and operations of the Company.
Any investment in the Company should be made only with an appreciation of the applicable risks, which will be described in the Company’s filings with the SEC.
1
3. Smart & Final Overview
2
Growth and value-oriented food retailer
− 323 non-membership, smaller-box, warehouse-
style stores(1)
− 2017 Sales(2): $4,571 million
− 2017 Adj. EBITDA(2): $184 million
Taking share from conventional grocery and specialty
retailers
Unique platform that appeals to both household and
business customers
− Two complementary and highly productive banners
− “Everyday Low Prices”
− 98% non-union(3)
Strong historic new store development
− FY2017 new stores (18) and Extra! conversions
and relocations (8)
− Expected development rate in 2018: New stores
(6-10) and Extra! expansions and relocations (3-4)
Annual Unit Growth 323 Locations in 8 States(1)
(1) As of December 31, 2017. Excludes 15 stores operated through a non-consolidated 50/50 joint venture in Mexico.
(2) For the 52 week fiscal year ended December 31, 2017.
(3) As of December 31, 2017.
Cash & Carry
Smart Foodservice
Extra!
2
5
13
20
33
14
1
2
4
4
2
5
14
22
37
18
2012 2013 2014 2015 2016 2017
4. Differentiated Go-to-Market Strategy
3
COMPELLING VALUEDIFFERENTIATED PRODUCTS CONVENIENCE
Targeted pricing substantially lower
than conventional grocers
Targeted pricing competitive with
Walmart, Costco and leading discount
grocers such as Food 4 Less (Kroger)
Consistently offer better value than
large discounters on produce
No membership fee
Smaller, easy-to-shop format stores
Located near customer’s home or
business
“2 shops in 1 stop”
Large variety of warehouse club sizes
Extensive selection of private label
Unique items for businesses
Broad appeal across household and business customers
5. Complementary Store Banners
4
FY 2017 Sales $3,558 million $1,013 million
0.7%FY 2017 SSS
Customer
Mix(1)
37%
63%
29%
71%
47%
53%
Store Footprint(1)
63 in CA, WA, OR, ID, NV, UT and MT194 in CA, NV and AZ 66 in CA, NV and AZ
Banner
Differentiator
~16,000 sq. ft.~28,000 sq. ft. ~20,000 sq. ft.
Merchandise
Mix (1)
Perishables
Grocery,
beverage,
paper &
packaging &
restaurant
supplies
Average Size(1)
“Two shops in one stop” “We sell ingredients”
Value Proposition Distinctive mix of household and business items at “Everyday Low Prices”,
including warehouse club pack sizes
No frills, focused on
business customers
Business: ~29% Household: ~71% ~90% ~10%
(1) As of December 31, 2017.
2.4%
6. The Experience
5
Smart & Final Banner Mix(1)
(1) Reflects estimated data for fiscal year 2017.
Common National Brands
Common Private Label
Unique Private Label
Unique National Brands
Broad Range of Product Sizes
Unique Items
Wide selection of quality private
label and national brands
Household & business products
side-by-side
“Everyday Low Prices”
Perishables
Emphasis on high-quality,
fresh products
Key Private Label Brands
Differentiated, value-focused merchandise mix in a convenient format
Value
22%
16%
12%
50%
38%
Unique
28%
Private
Label
~$3.6 billion Net Sales
8. The Experience
7
Convenience
Ingredients and Supplies
Broad selection of everyday
foodservice products
Accessible locations and no
minimum order size
Competitive pricing with no
membership fee
Ability to hand-select high
quality, fresh perishables
Convenient, no-frills shopping environment for the business customer
Value
Continuing Store GrowthDiverse Customer Base
Format serves a wide variety of
businesses and organizations
Perishables
Cash & Carry Smart Foodservice Cumulative
New Store Openings (1)
(1) Cumulative since the Company’s initial public offering on September 23, 2014
1
3
7
11
14-16
2014 2015 2016 2017 2018E
10. Executing a Multi-Year Growth Plan
9
Expansions & Relocations New Store OpeningsSame Store Sales
Cumulative Expansions and Relocations Cumulative New Stores
Continued new store growth in 2018
− 3-5 new Extra! Stores
− 3-5 new Cash & Carry Smart
Foodservice stores
Significant additional opportunities in
current markets
Potential for expansion of both banners
into adjacent / new markets; longer-term
national opportunity
Continue conversions and opportunistic
relocations in 2018
− 1-2 planned expansion
− 2-3 planned relocations
Target pre-tax cash-on-cash returns of
~20 - 25% in year 3 for Extra!
conversions
Grow margin accretive private label sales
Continue to evolve merchandising mix
Drive business customer growth
Enhance brand awareness to expand
customer reach
Online ordering offering delivery or in-store
pickup available through Instacart and/or
Google
- Available in over 85% of stores(1)
28%
29%
31%
33%
34%
35% 35%
2011 2012 2013 2014 2015 2016 2017
Smart & Final Banner Perishables
Penetration
Key Drivers of Smart & Final Stores, Inc. Growth
12 14
23
30
38
52
58
64 69 70
18
20
21
22
22
24
28
34
37 40
30
34
44
52
60
76
86
98
106
109-111
Expansions Relocations
(1) As of December 31, 2017
.
4 4 5 7 12
25
45
78
92 96
2 2 2 2
2
3
5
9
13
17
6 6 7 9
14
28
50
87
105
111-115
Extra! Cash & Carry Total
11. Compelling Store Development Opportunity
10
Cash investment of ~$1.5 million
Target pre-tax cash-on-cash returns of
~20 - 25% in year 3
Opportunistically grow Cash & Carry Smart
Foodservice stores
− 15 new stores in 2014 – 2018E
Cash investment of ~$3 million
Target pre-tax cash-on-cash returns of
~20 - 25% in year 3
Since 2008, have converted/expanded 69
locations to Extra!
− Add perishables and optimize
merchandising to maximize productivity
− Generating an average sales increase of
~25 – 30% in the first twelve months
following conversion
Typical cash investment of ~$3 million
Target pre-tax cash-on-cash returns of
~20 - 25% in year 3
Proven execution of model through 80 new
Extra! stores opened to date
Recent new store performance in line with
expectations
New Extra! Store Model Legacy Expansions to Extra! New Cash & Carry Store Model
Attractive Store Economics(1)
New Unit
Growth in
Existing and
Adjacent
Markets
Longer-term
Growth
Opportunities
Opportunity to open ~100 new Extra! stores in existing markets (2018 and
beyond)
− Potential for further growth from higher densities in key California market
Opportunistically grow Cash & Carry Smart Foodservice banner
Lower risk expansion utilizing distribution infrastructure
Flexible real estate strategy “new and adaptive reuse”
− Deep institutional knowledge of existing local markets
Pacific Northwest represents an actionable expansion opportunity
Broader U.S. market has potential to support additional Extra! stores
Growth opportunities in Mexico (currently 15 stores)
(1) As of October 8, 2017.
12. Delivering Solid Financial Results
11
$125
$139
$164 $176
$193
$180 $184
4.4% 4.6%
5.1% 5.0% 4.9%
4.1% 4.0%
2011 2012 2013 2014 2015 2016 2017
Adjusted EBITDA % Margin
Net Sales
$2,840
$3,043 $3,210
$3,534
$3,971 $4,342 $4,571
2011 2012 2013 2014 2015 2016 2017
($ in millions)
Adjusted EBITDA(1) and Margin
% SSS
($ in millions)
Increase in net sales attributable to strong growth in
both banners
SSS driven by increase in number of transactions
Significant contribution from new store growth
Merchandise initiatives provide product margin
flexibility
− Private label, produce, perishables and natural
and organic items
Opportunity for future EBITDA leverage
− Occupancy and distribution expense
− Fixed cost structure
6.3%
4.5%
4.5% -0.5%4.0%6.7%9.5% 1.0%
(1) Adjusted EBITDA defined as earnings (income or loss) before income tax provision, interest expense (net), depreciation and amortization, as adjusted for the items set forth in the
reconciliation schedule in the Appendix. 2012 amounts are pro forma for acquisition of Company by affiliates of Ares Management, L.P. (the “Ares Acquisition”).
13. 2018 Guidance(1)
12
(1) This information was provided by the Company on March 14, 2018. Actual results may differ materially from those projected or implied.
Full Year 2018
Net sales growth 4.0 - 5.0%
Comparable store sales growth 1.0 - 2.0%
Unit growth (net new stores)
3-5 Smart & Final Extra!
3-5 Cash & Carry Smart
Foodservice
Relocations of existing stores to Extra! format 2-3 Smart & Final stores
Expansions or conversions of legacy stores to Extra! format 1-2 Smart & Final stores
Adjusted EBITDA $180 - $190 million
Adjusted net income $31 - $35 million
Adjusted diluted EPS $0.42 - $0.47
Capital expenditures (net of tenant improvement allowances) $80 - $90 million
Fully diluted weighted average shares 74 - 75 million
14. What Makes Us Different?
13
Unique growth platform that appeals to
both household and business customers
Distinctive and value-focused merchandise
offering
Flexible real estate strategy to support new
store growth
Experienced and committed management
team with developed infrastructure
Two highly productive store banners
Positive same store sales
growth in 27 out of the last
29 years
Unique sizes and extensive
selection of private label at
highly competitive prices
Ample opportunities for
additional new stores in
existing and adjacent
markets
Sales per square foot of
$611(1)
(1) For the 52-week fiscal year ended December 31, 2017.
17. Reconciliation of EBITDA and Adjusted EBITDA
16
Smart & Final Stores, Inc. and Subsidiaries
Reconciliation of EBITDA to Adjusted EBITDA
(Unaudited)
(In Thousands)
Twelve Weeks
Ended December
31, 2017
Twelve Weeks
Ended January 1,
2017
Fifty-two Weeks
Ended December
31, 2017
Fifty-two Weeks
Ended January 1,
2017
Net (loss) income (146,556)$ (253)$ (138,914)$ 12,948$
Depreciation and amortization 23,324 22,500 98,373 87,015
Interest expense, net 8,732 7,925 36,470 32,654
Income tax (benefit) (24,462) (1,650) (24,043) (2,037)
EBITDA (138,962) 28,522 (28,114) 130,580
Adjustments to EBITDA
Net loss from closed stores and exit costs (a) 1,262 2,650 3,818 8,671
Goodwill impairment (b) 180,000 - 180,000 -
Loss from asset dispositions and impairment charges (c) 369 594 1,827 1,598
Share-based compensation expense (d) 3,057 2,555 11,560 9,803
Non-cash rent (e) 1,492 1,688 6,535 7,946
Pre-opening costs (f) 1,914 926 5,433 17,695
Loss on extinguishment of debt (g) - - - 4,978
Other items (h) (45) 377 3,390 (1,018)
Adjusted EBITDA 49,087$ 37,312$ 184,449$ 180,253$
(a) Represents costs associated with store closure and exit costs.
(b) Represents non-cash charge associated with goodwill impairment.
(c) Represents non-cash loss associated with asset dispositions and impairment charges.
(d) Represents expenses associated with the Company's equity-based incentive award program.
(e) Represents non-cash component of recognized rent expense.
(f) Represents new store and relocation opening costs consisting primarily of rent, utilities, distribution, store labor and advertising.
(g) Represents loss on the early extinguishment of debt in the fiscal year ended January 1, 2017 in connection with amendments to the Company's First Lien Term Loan Credit Facility.
(h) Represents (i) severance costs in the twelve and fifty-two weeks ended December 31, 2017 and the twelve and fifty-two weeks ended January 1, 2017 and (ii) death benefit income from a Company-owned life insurance policy in the
fifty-two weeks ended January 1, 2017.
18. Reconciliation of Net Income and Adjusted Net Income
17
Smart & Final Stores, Inc. and Subsidiaries
Reconciliation of Net Income to Non-GAAP Adjusted Net Income
(Unaudited)
(In Thousands, Except Share and Per Share Amounts)
Twelve Weeks
Ended December
31, 2017
Twelve Weeks
Ended January 1,
2017
Fifty-two Weeks
Ended December
31, 2017
Fifty-two Weeks
Ended January 1,
2017
Net (loss) income (146,556)$ (253)$ (138,914)$ 12,948$
Income tax (benefit) (24,462) (1,650) (24,043) (2,037)
(Loss) income before income taxes (171,018) (1,903) (162,957) 10,911
Adjustments to net (loss) income
Net loss from closed stores and exit costs (a) 1,262 2,650 3,818 8,671
Goodwill impairment (b) 180,000 - 180,000 -
Loss from asset dispositions and impairment charges (c) 369 594 1,827 1,598
Share-based compensation expense (d) 3,057 2,555 11,560 9,803
Non-cash rent (e) 1,492 1,688 6,535 7,946
Pre-opening costs (f) 1,914 926 5,433 17,695
Loss on extinguishment of debt (g) - - - 4,978
Other items (h) (45) 377 3,390 (1,018)
Adjusted income tax (benefit) (5,731) (1,890) (15,951) (18,363)
Adjusted net income 11,300$ 4,997$ 33,655$ 42,221$
Adjusted Net (Loss) Income Per Share
Net (loss) income per share - basic (2.03)$ 0.00$ (1.92)$ 0.18$
Per share impact of net income adjustments 2.19 0.07 2.39 0.40
Adjusted net income per share - basic 0.16$ 0.07$ 0.47$ 0.58$
Net (loss) income per share - diluted (1.99)$ 0.00$ (1.85)$ 0.17$
Per share impact of net income adjustments 2.14 0.07 2.30 0.37
Adjusted net income per share - diluted 0.15$ 0.07$ 0.45$ 0.54$
Weighted average shares - basic 72,068,998 71,962,127 72,352,102 72,727,071
Weighted average shares - diluted 73,828,639 76,552,257 75,182,134 78,026,159
(a) Represents costs associated with store closure and exit costs.
(b) Represents non-cash charge associated with goodwill impairment.
(c) Represents non-cash loss associated with asset dispositions and impairment charges.
(d) Represents expenses associated with the Company's equity-based incentive award program.
(e) Represents non-cash component of recognized rent expense.
(f) Represents new store and relocation opening costs consisting primarily of rent, utilities, distribution, store labor and advertising.
(g) Represents loss on the early extinguishment of debt in the fiscal year ended January 1, 2017 in connection with amendments to the Company's First Lien Term Loan Credit Facility.
(h) Represents (i) severance costs in the twelve and fifty-two weeks ended December 31, 2017 and the twelve and fifty-two weeks ended January 1, 2017 and (ii) death benefit income from a Company-owned life insurance policy in the
fifty-two weeks ended January 1, 2017.
19. Summary Historical Financials(1)
(1) 2012 amounts are pro forma for the Ares Acquisition.
(2) 2017 includes recording a $180M goodwill impairment charge
18
($ in millions)
2012 2013 2014 2015 2016 2017
Smart & Final 183 188 201 221 246 260
Cash & Carry 52 52 53 55 59 63
Total Stores 235 240 254 276 305 323
Smart & Final 7.10% 3.40% 5.00% 4.40% -0.60% 0.66%
Cash & Carry 5.40% 6.10% 10.00% 4.50% -0.30% 2.38%
Total SSS 6.70% 4.00% 6.30% 4.50% -0.50% 1.04%
Smart & Final $2,303 $2,425 $2,669 $3,037 $3,401 $3,558
Cash & Carry 740 785 865 934 941 1013
Total Sales $3,043 $3,210 $3,534 $3,971 $4,342 $4,571
% growth 7.10% 5.50% 10.10% 12.40% 9.30% 5.27%
Gross Margin 446 474 527 599 630 674
% of sales 14.70% 14.80% 14.90% 15.10% 14.50% 14.75%
Income from operations 70 87 89 95 47 17
% of sales 2.30% 2.70% 2.50% 2.40% 1.10% n/a
Goodwill Impairment -180
Net Income (Loss) $14 $8 $33 $38 $13 ($147)
% of sales 0.50% 0.30% 0.90% 1.00% 0.30% n/a
GAAP Basic EPS $0.25 $0.14 $0.54 $0.52 $0.18 ($1.92)
GAAP Diluted EPS $0.24 $0.14 $0.52 $0.50 $0.17 ($1.92)
Adjusted EBITDA $139 $164 $176 $193 $180 $183
% of sales 4.60% 5.10% 5.00% 4.90% 4.20% 4.01%
Adjusted Net Income $32 $47 $56 $42 $34
% of sales 1.00% 1.30% 1.40% 1.00% 0.73%
Adjusted Basic EPS $0.56 $0.76 $0.77 $0.58 $0.47
Adjusted Diluted EPS $0.54 $0.73 $0.73 $0.54 $0.45
Fiscal Year Ended
(2)
20. Consolidated Quarterly P&L Performance
19
($ in millions)
27-Mar-16 19-Jun-16 9-Oct-16 1-Jan-17 26-Mar-17 18-Jun-17 8-Oct-17 31-Dec-17
Net sales $908.5 $1,038.3 $1,394.4 $1,000.6 $967.0 $1,078.3 $1,457.4 $1,067.9
Cost of sales, distribution and store occupancy 780.1 881.1 1191.4 859.7 833.9 916 1243.5 903.5
Gross Margin 128.4 157.2 203 140.9 133.1 162.3 213.9 164.4
Operating and administrative expenses 125.1 138.8 183.4 135.2 135.7 143.1 195.3 327.1
Income (loss) from operations 3.3 18.4 19.6 5.7 -2.6 19.2 18.6 (162.6)
Interest expense, net 7.3 7.4 10 7.9 8.2 8.3 11.2 8.7
Loss on early extinguishment of debt 0 0 -5 0 0 0 0 0
Equity in earnings of joint venture 0.4 0.2 0.5 0.3 0.2 0 0.4 0.3
Income (loss) before income taxes (3.6) 11.2 5.1 (1.9) (10.6) 10.9 7.7 (171.0)
Income tax (provision) benefit 2.0 -3.4 1.9 1.7 6.0 -3.8 -2.6 24.5
Net Income (Loss) ($1.60) $7.80 $7.00 ($0.30) ($4.60) $7.10 $5.10 ($146.6)
Net income (loss) per share – basic ($0.02) $0.11 $0.10 $0.00 ($0.06) $0.10 $0.07 $2.03
Net income (loss) per share – diluted ($0.02) $0.10 $0.09 $0.00 ($0.06) $0.09 $0.07 $2.03
Weighted average shares - basic 73,189,149 73,197,064 72,601,724 71,962,127 72,287,891 72,573,681 72,446,404 72,068,998
Weighted average shares - fully diluted 73,189,149 78,907,184 77,705,917 71,962,127 72,287,891 76,251,510 74,253,374 72,068,998
Sales Growth 10.50% 14.70% 11.90% 0.30% 6.40% 3.90% 4.50% 6.70%
Gross Margin 14.10% 15.10% 14.60% 14.10% 13.80% 15.10% 15.00% 15.40%
EBIT Margin 0.40% 1.80% 1.40% 0.60% -0.30% 1.80% 1.30% -15.20%
Net Income Margin -0.20% 0.80% 0.50% 0.00% -0.50% 0.70% 0.40% -13.70%
Quarter Ended
(1) Quarter ended Dec 31, 2017 includes recording a $180M goodwill impairment charge
(1)
