Financial Model

Widget Co. Incorporated

August 29, 2021

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Model
Widget Co. Incorporated
Levered 5-Year IRR of 31.1%

Sources of Capital Value Operating Model, In Millions 2015A 2016A 2017A 2018A 2019E 2020E 2021E 2022E 2023E 2024E
Equity $44.5
Senior Debt 3.0x EBITDA $47.4 Total Revenue $24.7 $27.4 $29.9 $32.3 $35.3 $38.6 $42.2 $46.1 $50.5 $55.2
Total Sources $91.9 Annual Growth 10.9% 9.1% 8.0% 9.3% 9.3% 9.3% 9.3% 9.3% 9.3%

Uses of Capital Metric Value COGS ($10.0) ($10.5) ($10.5) ($10.5) ($10.5) ($13.6) ($14.9) ($16.3) ($17.8) ($19.4)
Working Capital 0.0% of EV $0.0 % of Revenue 40.5% 38.3% 35.1% 32.5% 29.7% 35.2% 35.2% 35.2% 35.2% 35.2%
Transaction Fees 5.8% of EV $5.0
Enterprise Value 5.5x EBITDA $86.9 Gross Revenue $14.7 $16.9 $19.4 $21.8 $24.8 $25.0 $27.3 $29.9 $32.7 $35.7
Total Uses $91.9 Margin 59.5% 61.7% 64.9% 67.5% 70.3% 64.8% 64.8% 64.8% 64.8% 64.8%

Operating Assumptions SG&A ($5.0) ($6.0) ($7.0) ($8.0) ($9.0) ($8.9) ($9.8) ($10.7) ($11.7) ($12.8)
Revenue, Annual Growth 9.3% % of Revenue 20.2% 21.9% 23.4% 24.8% 25.5% 23.2% 23.2% 23.2% 23.2% 23.2%
COGS % of Revenue 35.2%
SG&A % of Revenue 23.2% EBITDA $9.7 $10.9 $12.4 $13.8 $15.8 $16.1 $17.6 $19.2 $21.0 $23.0
Taxes 15.3% Margin 39.3% 39.8% 41.5% 42.7% 44.8% 41.6% 41.6% 41.6% 41.6% 41.6%
Depreciation & Amortization (% of Sales) 14.7%
Capex (% of Sales) 4.1% Depreciation & Amortization ($4.0) ($4.2) ($4.4) ($4.6) ($4.8) ($5.7) ($6.2) ($6.8) ($7.4) ($8.1)
Net Working Capital (% of Sales) 5.0% EBIT $5.7 $6.7 $8.0 $9.2 $11.0 $10.4 $11.4 $12.4 $13.6 $14.8
Margin 23.1% 24.5% 26.8% 28.5% 31.2% 26.9% 26.9% 26.9% 26.9% 26.9%
Financing Assumptions
Senior Debt Amortization Period 20 Years Taxes ($0.9) ($1.0) ($1.2) ($1.4) ($1.7) ($1.6) ($1.7) ($1.9) ($2.1) ($2.3)
Senior Debt Interest Rate 8.0% Depreciation & Amortization $4.0 $4.2 $4.4 $4.6 $4.8 $5.7 $6.2 $6.8 $7.4 $8.1
Refinanced Debt Year 2022 Capex ($0.9) ($1.0) ($1.2) ($1.4) ($1.7) ($1.6) ($1.7) ($1.9) ($2.1) ($2.3)
Refinanced Debt Multiple 3.0x EBITDA Change in Net Working Capital ($0.4) ($0.6) ($0.8) ($0.9) ($0.1) ($1.9) ($2.1) ($2.3) ($2.5) ($2.8)
Refinanced Debt Amortization Period 20 Years Free Cash Flow $7.5 $8.3 $9.2 $10.1 $12.3 $10.9 $12.0 $13.1 $14.3 $15.6
Refinanced Debt Interest Rate 6.0%
Senior Debt Interest ($3.8) ($3.2) ($2.5) $0.0 $0.0
Salient Details Refinanced Debt Interest $0.0 $0.0 $0.0 ($2.8) ($2.2)
Company Name Widget Co. Incorporated Levered FCF Available for Debt Paydown $7.2 $8.7 $10.6 $11.5 $13.5
Acquisition Year 2019
Exit Year 2024 Senior Debt Mandatory Paydown ($2.4) ($2.4) ($2.4) $0.0 $0.0
Exit Multiple 6.5x EBITDA Senior Debt Optional Paydown ($4.8) ($6.4) ($8.2) $0.0 $0.0
Refinanced Debt Mandatory Paydown $0.0 $0.0 $0.0 ($2.4) ($2.4)
Returns Summary Refinanced Debt Optional Paydown $0.0 $0.0 $0.0 ($9.1) ($11.1)
5-Year IRR 31.1% Levered FCF Before Refinancing & Sale $0.0 $0.0 $0.0 $0.0 $0.0
5-Year MoIC 3.4x
Proceeds From Sale $0.0 $0.0 $0.0 $0.0 $149.2
Senior Debt Payoff From Sale $0.0 $0.0 $0.0 $0.0 $0.0
Refinanced Debt Payoff From Sale $0.0 $0.0 $0.0 $0.0 ($22.5)
Levered FCF $0.0 $0.0 $0.0 $0.0 $126.7

Working Capital $0.0 $0.0 $0.0 $0.0 $0.0

Equity Dividend $0.0 $0.0 $0.0 $0.0 ($126.7)
Ending Cash Balance $0.0 $0.0 $0.0 $0.0 $0.0

Senior Debt Schedule 2015A 2016A 2017A 2018A 2019E 2020E 2021E 2022E 2023E 2024E
Starting Balance $47.4 $40.2 $31.5 $0.0 $0.0
This Period Mandatory Paydown ($2.4) ($2.4) ($2.4) $0.0 $0.0
This Period Optional Paydown ($4.8) ($6.4) ($8.2) $0.0 $0.0
Paydown at Refinancing $0.0 $0.0 ($20.9) $0.0 $0.0
Paydown at Sale $0.0 $0.0 $0.0 $0.0 $0.0
Ending Balance $47.4 $40.2 $31.5 $0.0 $0.0 $0.0
Interest Payment ($3.8) ($3.2) ($2.5) $0.0 $0.0

Refinanced Debt Schedule 2015A 2016A 2017A 2018A 2019E 2020E 2021E 2022E 2023E 2024E
Starting Balance $0.0 $0.0 $0.0 $47.4 $35.9
This Period Mandatory Paydown $0.0 $0.0 $0.0 ($2.4) ($2.4)
This Period Optional Paydown $0.0 $0.0 $0.0 ($9.1) ($11.1)
Paydown at Sale $0.0 $0.0 $0.0 $0.0 ($22.5)
Ending Balance $47.4 $0.0 $0.0 $47.4 $35.9 $0.0
Interest Payment $0.0 $0.0 $0.0 ($2.8) ($2.2)

Levered Returns 2015A 2016A 2017A 2018A 2019E 2020E 2021E 2022E 2023E 2024E
Initial Investment ($44.5) $0.0 $0.0 $0.0 $0.0 $0.0
Proceeds From Refinancing $0.0 $0.0 $0.0 $26.5 $0.0 $0.0
Proceeds From Operations & Sale $0.0 $0.0 $0.0 $0.0 $0.0 $126.7
Levered Returns ($44.5) $0.0 $0.0 $26.5 $0.0 $126.7