Investor Presentation June 2016 NASDAQ: MFRM
Investor Presentation
June 2016
NASDAQ: MFRM
Forward Looking Statements and Non-GAAP Information
This presentation contains forward-looking statements within the meaning of federal securities laws, that are subject to risks
and uncertainties. All statements other than statements of historical fact included in this presentation are forward-looking
statements. Forward-looking statements give our current expectations and projections relating to our financial condition,
results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the
fact that they do not relate strictly to historical or current facts. These statements may include words such as "anticipate,"
"estimate," "expect," "project," "plan,“ "intend," "believe" or the negative of these terms, and other words and terms of similar
meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.
These forward-looking statements are based on assumptions that we have made in light of our industry experience and on our
perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate
under the circumstances. As you consider this presentation, you should understand that these statements are not guarantees
of performance or results. They involve risks, such as those stated in "Item 1A. Risk Factors" of our Annual Report on Form
10-K for the fiscal year ended February 2, 2016, filed with the Securities and Exchange Commission on April 4, 2016,
uncertainties (some of which are beyond our control) and assumptions. Although we believe that these forward-looking
statements are based on reasonable assumptions, you should be aware that many factors could affect our actual financial
results and cause them to differ materially from those anticipated in the forward-looking statements.
Because of these factors, we caution that you should not place undue reliance on any of our forward-looking statements.
Further, any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise from
time to time, and it is impossible for us to predict those events or how they may affect us. We have no duty to, and do not
intend to, update or revise the forward-looking statements in this presentation after the date of this presentation.
This presentation includes “As Adjusted” data, which excludes non-recurring charges relating to our ERP system
implementation costs, acquisition-related costs and impairment charges. Such “As Adjusted” data is considered a financial
measure not in accordance with the accounting principles generally accepted in the United States, or “GAAP,” and is not in lieu
of, or preferable to, “As Reported,” or GAAP, financial data. However, we are providing this information as we believe it
facilitates year-over-year comparisons for investors and financial analysts. Please refer to the reconciliation in our press
release issued on June 9, 2016 and the tables at the end of this presentation for a reconciliation of such non-GAAP financial
measures to the most directly comparable GAAP measures.
2
The #1 Mattress Specialty Retailer
3
#1Mattress specialty
retailer in the U.S.
Largest FootprintBest-in-Class Leading Market Share
Customer experience
Marketing reach
Product offerings
Distribution capabilities
Real estate
Omni-channel opportunities 3,594 locations(1)
Significant Scale Pro Forma for February 2016 Sleepy’s Acquisition
(1) Includes 124 franchise locations; as of May 3, 2016.
$3.8+ bn 3,500+ 48Fiscal 2016 projected
sales of approximately
$3.825-$3.875 billion
Over 3,500 locations… …in 48 states with 75
distribution centers
MFRM: Key Investment Highlights
4
CompellingIndustry
Dynamics
Best-in-Class Specialty Retailer
Proven Track Record of
Driving Growth
Building a Truly National
Chain
Strong Free Cash Flow Supports
Growth
Experienced & Aligned
Management
Industry has shown long-term stability and consistent growth
Specialty retailers continue to take share
Highly fragmented industry
Unique selling proposition, training and culture drive store productivity
Less than one year cash on cash payback with new Mattress Firm stores
Distribution network is a competitive advantage in an evolving omni-
channel world
History of developing markets through organic growth and acquisitions
Proven ability to capture synergies through acquisitions
Converting all acquired banners to Mattress Firm over the next ~12-18 months
Expect to realize cost savings and efficiencies in advertising, operations and
merchandising over time
Management team is invested and aligned with shareholders
Top executives have 10+ years of relevant experience
Strong free cash flow driven by low maintenance capex and working capital
needs
Supports growth capex and deleveraging
Proven ability to integrate acquisitions and reduce leverage
1
2
3
4
5
6
Compelling Industry Dynamics 1
6
Compelling Industry Trends
YOY
Growth
U.S. Wholesale Bedding Sales Significantly Rebound After Prior Recessions(1)
($ in billions)
Recession
Recovery
9% 5% -2% 16% 7% 6% 7% 9% 8% 2% 0% 3% 8% 8% 9% 5% 5% 8% 11% 9% 5% 0% 4% 8% 12% 12% 5% 1% -9% -9% 4% 8% 9% 2% 8% 7% 4% 7%
1% 5% 6% 5% 0% 4% 5% 4% 6% 2% -2% 1% 2% 3% 6% -1% -2% -11% -9% 6% 0% 4% 1% 4% 5% 2% 4%
2% 2% 2% 5% 5% 2% 3% 7% 3% 3% 2% 3% 5% 9% 6% 6% 4% 2% -1% -2% 8% 5% 1% 4% 2% 2% 3%
Dollar Value
Units
Avg. Unit Price (AUP)
Quick bounce back following recessions, as bedding sales are most correlated
with Consumer Sentiment and Gross Domestic Product growth
Replacement nature of bedding has also shielded specialty retailers from
volatility experienced in the housing market
Historical 5% long-term growth rate, with projected industry total sales growth
of 3.5% 2016 and 6.5% 2017(1) (2)
(1) Source: ISPA – Mattress Industry U.S. Market Forecast issued May 2016; mattress and foundation sales.
(2) Source: ISPA – 2009 and 2015 Mattress Industry Report of Sales & Trends. Long-term growth rate from 1980-2015.
0.327
0.3770.386
0.280
0.313
0.250
0.270
0.290
0.310
0.330
0.350
0.370
0.390
0.410
1995 2000 2005 2010 2015
(Units)
$93.7
$215.6
$75
$95
$115
$135
$155
$175
$195
$215
1994 1998 2002 2006 2010 2014
(Dollars)
Wholesale Mattress Shipments per Household(2) Wholesale Mattress and Foundation AUP(2) (3)
(1) Source: Better Sleep Council Study – January 2007.
(2) Source: ISPA – 2015 Mattress Industry Report of Sales & Trends.
(3) Source: ISPA – Mattress Industry U.S. Market Forecast issued May 2016.
A product everyone needs
Sales primarily replacement in nature with an approximately 10 year average
purchase cycle(1)
Units per household are increasing but remain below peak; average unit
prices have shown steady increases
Continued Price Growth with Unit Growth Potential
2017F
7
Specialty Retailers Taking Market Share
8
Consumers demand expertise and prefer destination shopping
Mass merchants not meaningful industry participants
Furniture Retailers
34%
47%
Department Stores
5%Other 14%
Furniture Retailers
56%19%
Department Stores
11%
Other 14%
1993 2014
Mattress
Specialty
Retailers
Mattress
Specialty
Retailers
Mattress specialty retailers have continued to take share
from furniture retailers and department stores (1)
(1) Source: Furniture Today, September 21, 2015.
9
2015 2015 Pro Forma
Top Mattress Specialty Retailers(1)
Sleepy’s acquisition further strengthens position as the #1 Mattress
Specialty Retailer
Over 25% pro forma market share in fragmented category
Leading Position in Very Fragmented Category
($ in millions) ($ in millions)
(1) Source: Furniture Today Top 100, May 2016. Mattress Firm store count includes franchised locations.
(2) Reflects net sales of the respective retailers divided by the estimated size of the U.S. mattress retail market in 2014; Furniture Today 2015
Bedding Yearbook.
(3) Pro forma for the February 5, 2016 Sleepy’s acquisition.
Rank Company
2015
Stores
2015
Sales
YoY
Growth
Market
Share (2)
1 Mattress Firm 2,481 $2,680 38.6% 17.8%
2 Sleep Number 488 1,184 5.8% 7.8%
3 Sleepy's 1,065 1,130 7.4% 7.5%
4 Mattress1One 248 178 41.3% 1.2%
5 America's Mattress 309 174 14.6% 1.1%
6 Sit'n Sleep 33 124 9.0% 0.8%
7 Mattress Warehouse 192 120 7.1% 0.8%
8 Innovative Mattress Solutions 156 109 3.8% 0.7%
9 American Mattress 105 71 4.4% 0.5%
Top 9 5,077 $5,770 20.7% 38.2%
Rank Company
2015
Stores
2015
Sales(3)
YoY
Growth
Market
Share (2)
1 Mattress Firm 3,546 $3,808 27.5% 25.2%
2 Sleep Number 488 1,184 5.8% 7.8%
3 Mattress1One 248 178 41.3% 1.2%
4 America's Mattress 309 174 14.6% 1.1%
5 Sit'n Sleep 33 124 9.0% 0.8%
6 Mattress Warehouse 192 120 7.1% 0.8%
7 Innovative Mattress Solutions 156 109 3.8% 0.7%
8 American Mattress 105 71 4.4% 0.5%
Top 8 5,077 $5,768 20.6% 38.2%
Best-in-Class Specialty Retailer
10
2
Focus on a consumer’s buying process, not a sales process, using our trademarked
Comfort by ColorTM process
Empowers customers to control process, creating a better experience
Increases conversion and average sales ticket
Buying Process Creates a Differentiated Customer Experience
FIRM
PLUSH
PILLOWTOP
CONTOURED
PERSONALIZED
Leading Talent Development and Retention Capabilities
12
Investments in training, culture and career development drive associate success and
decrease turnover
Focus on Training and Career
Development……and Culture… …Reduces Employee Turnover
First Year
Training
260+hours
Ongoing
Training
85+hours
Overall
Rating
Note: Turnover is an annualized metric for Mattress Firm.
Source: Glassdoor.com as of June 8, 2016.
<40%Total
Employee
Turnover
4.1 3.6
3.2 3.8 3.9
Strong New Store Economics
13
Note: Analysis applies only to Mattress Firm branded, company-operated stores based on historical averages.
(1) Includes approximately $40,000 in Year 1 for vendor funds collected upon store opening.
(2) Store 4-wall profitability divided by net store investment.
(3) Reflects midpoint of respective ranges and does not include additional market level costs or cannibalization.
Store 4-wall profitability drives improving leverage over market-level
costs as store penetration increases
Stores Typically Generate Cash on Cash Payback <1 Year
Representative New Store Investment
($ in thousands) Average
Investment
Buildout and Equipping Cost $202
Floor Sample Inventory 25
227
Less: Tenant Reimbursement (41)
Cash Requirement, Net $186
New Store Results(1)
($ in thousands) Year 1 Year 2
Sales $900 - 950 $950 - 1,000% Growth 0% - 10%
Store 4-Wall Profitability(2) $217 $229
% of Sales 22-25%23-26% 22-25%
Annual Cash on Cash Return(3) 117% 123%
Distribution Network is a Competitive Advantage
14
Distribution
Centers
75+
Same Day
Capacity
80% 35%
Best-in-Class Distribution Capabilities
Same Day or Next Day Delivery Capability Nearly Anywhere in the Continental U.S. and Hawaii
Delivery
Window
~3 hours
Transactions
Delivered
Note: Includes Mattress Firm , Sleepy’s, Sleep Train and third party distribution centers.
Proven Track Record of Driving Growth
15
3
Deep Experience Integrating Acquisitions
16Note: Back to Bed includes Bedding Experts and Mattress Barn. Sleep Train includes Sleep Train, Sleep Country, America’s Mattress
of Hawaii and Got Sleep? Excludes acquisitions prior to 2007 and acquisitions of fewer than 10 stores. Dates based on fiscal year
acquired.
Austin, Dallas, Houston,
San Antonio, Las Vegas
36 stores
2007
14 stores
Las Vegas
2007
10 stores
St. Louis
2007
Yotes
Franchise
40 stores
Atlanta, Miami, SW
Florida, Tampa
2012
27 stores
Charleston, Charlotte,
Columbia, Greensboro,
Greenville, Raleigh
2012
236 stores
Atlanta, Minneapolis,
St. Louis | Houston, Dallas,
Jacksonville, Miami, Orlando,
SW Florida, Tampa
2011, 2012
39 stores
Green Bay, Madison,
Milwaukee, Wausau
2013
Perfect Mattress
Franchise
Online Retailer
2013
Nationwide
55 stores
Dallas, Austin
2014
67 stores
Colorado Springs,
Denver, Phoenix,
Tucson
2014
15 stores
Pittsburgh
2014
131 stores
Chicago
Orlando
2014
314 stores
California, Hawaii,
Idaho, Nevada and
Washington
2014
25 stores
Virginia Beach
2010
45 stores
Phoenix, Tucson
2014
1,065 stores
Northeast, New
England, Mid-Atlantic,
Midwest
2016
34 stores
Colorado Springs,
Denver, Wichita
2014
Yotes
Franchise
Houston
13 stores
2007
Note: Market Level EBITDA is based on an estimate prepared by the Company. See appendix for details of actual EBITDA for
the latest twelve months.
Strong sales growth and market-level
EBITDA margin expansion since acquisition
o Sleep Train market-level margins have
improved to approximately the company-
wide average
Synergies achieved to date are ahead of
targets through:
o Purchasing
o Contracts
o Advertising (Mattress Discounters
conversions)
o Overhead savings
Based on synergies realized to date ($15
million in year one) we increased our year
three Sleep Train synergy target from $20
million to $25 million
17
Sleep Train Sleep Train Synergies – Year 1
Sleep Train Synergies – Year 3 Target
$20$25
$0
$10
$20
$30
Initial Year 3Target
Current Year3 Target
($ in millions)
$10
$15
$0
$10
$20
Year 1 Target Year 1 Actual
($ in millions)
Sleep Train Integration Progressing Ahead of Plan
$87.5
$121.0 $140.0
$190.2
$254.6 $249.8
2011 2012 2013 2014 2015 LTM Q1'16
Strong Historical Growth Rate
18Note: Fiscal year ended January of the following year.
Note: Not pro forma for Sleepy’s acquisition.
(1) Reflects Adjusted EBITDA; excludes expenses referenced in June 9, 2016 press release.
Strong historical sales growth through new store openings, same store sales growth
and acquisitions (prior to Sleepy’s acquisition)
Annual Adjusted EBITDA Performance(1)
($ in millions)
Annual Net Sales Performance($ in millions)
Building a Truly National Chain
19
4
Border-to-Border, Coast-to-Coast Footprint
20 Note: Includes 124 franchise locations, as of May 3, 2016.
Consolidating Under One Single National Brand
21
Consolidating under one single national banner (Mattress Firm) is expected to
provide significant benefits in operations, advertising, merchandising and sourcing
FY18FY17Q4’16Q3’16Q2’16Q1’16
Select National Banner
Convert Overlapping Markets
Store Optimization
System Conversions
Align Processes in Stores
National Advertising Campaigns
1
Consolidate Banners
COMPLETE
IN PROCESS
IN PROCESS
Brand Selection Process and Outcome
22
EconomicsCustomers Employees
Name appeal
Digital / social
presence
Appeal to key
demographics
Customer reaction
Local brand equity
Name preference
Name appeal
Estimated impact
on customers
Turnover
Productivity
Cost to re-banner
Disruption costs
Conversion benefits
Engaged third party to research brand selection through multiple lenses
All lenses clearly pointed to Mattress Firm for the national brand name
Benefits of a National Chain
23
Financials
Benefits
National advertising
Overhead efficiencies
Private label and
exclusive products
Store base optimization
Sourcing / purchasing
Customer
Benefits
Customer experience and
recognition
Product selection
Omni-channel
National distribution
Cultural
Benefits
Operational simplicity and
focus
Increased speed
to market
Unified culture
Eliminates distraction of
multiple banners
Operating under one national banner will provide an unmatched
experience to our guests and enhance our leading market position
Meaningful Private Label Growth Opportunity
24
Pillows &
Other
Accessories
Mattresses
Long-term private label potential ~25% to 30% of retail sales
15%
Estimated FY16 Private Label Volume
~$500 million
Headboards &
Footboards
Leverages buying power
Global sourcing opportunities
Enables margin expansion
Distribution Network is an Omni-channel Advantage
25
Endless Aisles & “Wish List” Future Initiatives
Store Reviews
Opportunity to increase store sales with
accessories
Drive expanded opportunities for customer
engagement
Rolled out to all Mattress Firm stores with first
product category
Focused on increasing the number of store
reviews
Increases natural search relevancy
Stores with more reviews see higher same store
sales
Buy-online, pick-up in-store (BOPIS)
Expand endless aisle assortment and training to
all banners
Roll out Dream Bed to additional markets
95% 4+ stars
(1) Source: Mattress Firm BazaarVoice rating data; based on over 50,000 reviews as of 5/31/16.
(1)
Nationwide distribution network of over 3,500 stores and 75 distribution centers
creates a unique competitive advantage
Rolling out new capabilities and using reviews to drive traffic and natural searches
Significant Future Growth Potential
26
Omni-
channel
Increase Store
Volumes and
Margins
Reposition Lower Volume Stores
Expand Store Base
Drive store volumes and margins through:
accessories, foundations, private label / exclusives
Supported by national advertising and branding
Real estate optimization review in process
Relocations upon lease maturity
Expand store base into new markets
and grow in underpenetrated markets
4,500 store U.S. potential
Distribution network is a unique competitive advantage
Leverage multiple unique eCommerce properties
Integrate with store network and sales associates
Multiple drivers of continued growth through unlocking the potential of a
national chain
Strong Free Cash Flow Supports Growth5
Free Cash Flow Supports Growth and Deleveraging
28
Low maintenance capex requirements:
‒ FY2015 maintenance capex: $25 million
‒ FY2016E maintenance capex: $35 million
Negative working capital model:
‒ Typical cash conversion cycle provides a
negative working capital business model
Cash tax deductions:
‒ Anticipate future annual cash tax
deduction of over $25 million from
completed acquisitions for over 10 years
Expect to de-lever through:
‒ Free cash flow generation and Adjusted
EBITDA growth
‒ Sale-leaseback of owned Sleepy’s
properties
Free Cash Flow Drivers Strong Recurring Free Cash Flow
$66
$55
$25
$0
$50
$100
$150
$200
FY2015
$146
($ in millions)
Note: Free cash flow (FCF) defined as cash flow from operations less capex.
One-time Acquisition Capex
Growth Capex
Free Cash Flow
Experienced and Aligned Management Team 6
Experienced and Aligned Management Team
30
Adam Blank
President,
Sleepy’s
Steve Stagner
Executive
Chairman &
Chairman of
the Board
Ken Murphy
President &
Chief
Executive
Officer
Karrie Forbes
Chief Business
Officer
Alex Weiss
Chief Financial
Officer
MFRM: Key Investment Highlights
Proven Track Record of
Driving Growth
Compelling Industry
Dynamics
Best-in-Class Specialty Retailer
Building a Truly National
Chain
Strong Free Cash Flow Supports Growth
31
Appendix
32
Mattress Firm EBITDA Reconciliation
.
Source: Page 33 of 2013 10-K, page 34 of 2014 10-K, and press release dated June 9, 2016
(1) We receive cash payments from certain vendors for each new incremental store that we open (“new store funds”). New store funds are initially recorded in
other noncurrent liabilities when received and are then amortized as a reduction of cost of sales over 36 months in our financial statements. Historically, we
have considered new store funds as a component of Adjusted EBITDA when received since new store funds are included in cash provided from operations.
The adjustment includes the amount of new store funds received during the period presented and eliminates the non-cash reduction in cost of sales included in
our results of operations
(2) Reflects both non-cash effects included in net income related to acquisition accounting adjustments made to inventories and other acquisition related cash
costs included in net income, such as direct acquisition costs and costs related to integration of acquired businesses
(3) See page 33 of 2013 10-K, page 34 of 2014 10-K, and press release dated June 9, 2016 for more detail
($ in millions)
LTM
FYE January of the following year 2011 2012 2013 2014 2015 5/3/16
Net Income (loss) $34.4 $39.9 $52.9 $44.3 $64.5 ($55.4)
Income tax (benefit) expense (8.8) 26.7 33.2 29.2 39.1 (34.2)
Interest expense, net 29.3 9.2 10.9 20.1 40.1 53.7
Depreciation and amortization 17.5 23.5 29.5 41.7 62.2 69.0
Intangible assets and other amortization 1.7 1.5 2.5 5.6 5.0 8.9
EBITDA $74.0 $100.8 $128.9 $140.9 $211.0 $41.9
Goodwill impairment charge 0.0 0.0 0.0 0.0 0.0 0.0
Intangible asset impairment charge 0.0 2.1 0.0 0.0 0.0 138.7
Loss on store closings and impairment of assets 0.8 1.1 1.5 1.8 7.5 17.9
Loss (gain) from debt extinguishment 5.7 0.0 0.0 2.3 0.0 (0.5)
Financial sponsor fees and expenses 0.6 0.1 0.0 0.0 0.0 0.0
Stock-based compensation 0.5 2.9 4.8 8.1 8.8 8.5
Secondary offering costs 0.0 1.9 0.0 0.6 0.5 0.2
Vendor new store funds (1) 3.2 1.0 0.8 (1.2) 1.9 2.1
Acquisition related expenses (2) 0.9 12.0 1.7 30.1 22.8 37.2
Other (3) 1.8 (0.8) 2.1 7.6 2.2 3.8
Adjusted EBITDA $87.5 $121.0 $140.0 $190.2 $254.6 $249.8