Working Capital Management Supply Chain Financing and Dynamic Discounting

Foundation Concepts

Procure-to-Pay Process Invoice Matching Purchase Order Created (Procurement) Good or Services Received Invoice Received Invoice Approved Payment Terms (i.e. 2/10 Net 30) Many sales people will need to understand the procure-to-pay process and where SCF fits in Invoice Paid Purchase Order Sent to Vendor

The Cash Flow Statement Free Cash Flow Operating cash flow less capital expenditures (investments in the business) Cash that can be returned to investors

- - Free Cash Flow Drivers - - - + Free Cash Flow Free Cash Flow Seen as most important driver of shareholder value 81% of the F500 focus on working capital mgmt** Debt reduction Acquisitions Share re-purchases Dividends Free Cash Flow Net Income - CapEx & Other - Working Capital Revenue - COGS - SG&A Other AR Inventory + - AP * Depreciation addition not included since it’s not influenceable ** PWC survey

Working Capital Ratios – Cash Conversion Cycle Day 0 Receive Material & Invoice Day 70 Deliver Product Days Inventory Held Until Product Sold DIO = 70 Days Day 20 Approve Invoice Payment Terms With Suppliers Day 45 Pay Suppliers DPO = 45 Days Day 120 Paid By Client DSO = 50 Days Payment Terms With Customers Gap Between Cash To Paid Supplier & Cash Received From Customer Cash Conversion Cycle = 75 Days PO To Supplier

How Supply Chain Finance Creates Value

Guiding Principles of Reverse Factoring Companies want to increase Free Cash Flow Increasing AP is best option for some companies to increase FCF Companies have many levers they can pull to increase FCF However, some (e.g. increasing revenue) may not be an option in the short term Negative effects of increasing AP (supplier terms) offset by Reverse Factoring Increasing AP negatively impacts supplier cash flow & costs This is where Reverse Factoring can help Reverse Factoring completely offsets the cash flow impact and offsets some, or all, of the cost impact SCF rate vs Sources of funds (i.e. various forms of debt) Uses of funds (What could I do with the funds and what is that return).

Guiding Principles of Dynamic Discounting Companies want to improve Gross Margin Buyer’s earn low interest rates on short-term cash Interest rates are still low by historical standards Some Suppliers will pay Buyer more for FCF than Buyer’s current returns SCF rate vs Sources of funds (i.e. various forms of debt) Uses of funds (What could I do with the funds and what is that return).

How Supply Chain Finance Creates Value Debt reduction Acquisitions Share re-purchases Dividends Free Cash Flow $1M impact per $1 Billion of spend Net Income - CapEx & Other - Working Capital $50M impact per $1 Billion of spend Revenue - COGS - SG&A Other AR + Inventory - AP Dynamic Discounting has a negative impact on AP, working capital and cash flow Dynamic Discounting Reduces COGS, increases gross margin and net income Reverse Factoring helps extend supplier payment terms which positively impacts AP, working capital and cash flow $1B COGS/365 X 19 days extended is $52M RF and DD Reduce AR for suppliers -increases free cash flow * Depreciation addition not included since it’s not influenceable

Supply Chain Finance Prospect Prioritization

The Ideal Reverse Factoring Scenario - Business Characteristics How Do We Identify Them? Metric Companies With Poor Options To Grow FCF Low revenue growth Low FCF / revenue High impact 15 day term ex vs FCF < 5% < 10% > 25% High % Spend With Suppliers Low gross margin < 50% High Cash Flow Needs High Cap Ex / Sales, WC/Sales Shareholder returns Turnarounds, M&A Upstream SCF > 10% Leverage Over Suppliers Industry concentration Suppliers Value SCF Highly High % spend with SIG suppliers Common characteristics Low revenue growth (5% or below) Low free cash flow to revenue ($1 of revenue to generate $.05 of free cash flow vs. $1 of revenue to generate $.30 of free cash flow). The latter would focus on generating revenue (less than 10%) High level of spend with suppliers – Supplier spend is a high % of revenue (Gross margin < 50%) Companies with a high need of cash flows – They have a high level of commitments High capital expenses relative to sales Dividend commitments Buyers have leverage over suppliers (i.e. automotive, applied mfg, diy retail) – Bob has an industry slide Suppliers have worse credit ratings COGS/365 * 15 (extended payment terms in days) > 30% of their free cash flows – demonstrates where extending payment terms have a big impact SIG = Sourcing Industry Group

Business Characteristics Example - Welbilt Preliminary SCF Measurements 2017 2016 2015 Revenue Growth -1% -7% Free Cash as a % of Revenue 8% 7% Gross Margin 37% 32% Impact of 15-day DPO Increase $37M   2017 2016 2015 From Financials Net Sales $ 1,445.40 $ 1,456.60 $ 1,570.40 Cost of Sales $ 908.50 $ 923.80 $ 1,068.40 SG&A $ 278.20 $ 290.10 $ 291.60 Cash from Ops $ 137.80 $ 125.80 $ 143.00 Capital Expenses $ 20.70 $ 16.00 $ 13.20 Ending AP $ 103.60 $ 108.40 $ 121.70 Ending Cash $ 128.40 $ 53.80 Calculated Free Cash Flow $ 117.10 $ 109.80 $ 129.80 Average AP $ 106.00 $ 115.05 DPO 42.59 45.46 Benchmark Verification Benchmark Revenue Growth <5% Free Cash as a % of Revenue <10% Gross Margin <50% Impact of 15-day DPO Increase >25% Common characteristics Low revenue growth (5% or below) Low free cash flow to revenue ($1 of revenue to generate $.05 of free cash flow vs. $1 of revenue to generate $.30 of free cash flow). The latter would focus on generating revenue (less than 10%) High level of spend with suppliers – Supplier spend is a high % of revenue (Gross margin < 50%) Companies with a high need of cash flows – They have a high level of commitments High capital expenses relative to sales Dividend commitments Buyers have leverage over suppliers (i.e. automotive, applied mfg, diy retail) – Bob has an industry slide Suppliers have worse credit ratings COGS/365 * 15 (extended payment terms in days) > 30% of their free cash flows – demonstrates where extending payment terms have a big impact

Limited Levers – WelBilt Example Debt reduction Acquisitions Shareholder returns Free Cash Flow Significant headwinds for these levers Net Income - CapEx & Other - Working Capital Revenue - COGS - SG&A Other Margin goals require CapEx AR + Inventory - AP Low payment terms relative to peers + Nat’l Restaurant Association current situation index is weak Already improved 450 bps 2016-2017. including 940 bps from cost reductions Interest expense rising 19% effective tax rate (2014-2016) will rise to 29% - 32% per 2017 Q4 earnings call Reverse Factoring helps extend payment terms

Reverse Factoring Solution

Reverse Factory Workflow Buyer Supplier 1 2 Buyer uploads approved payables data to Kyriba’s Platform. Supplier views payables online, chooses to sell some or all invoices At invoice maturity date, the Buyer pays either: Funder if supplier chose to receive early payment or Supplier if supplier did not choose early payment 4 3 Funder receives and processes early payment requests , provides funding to supplier Funder

Reverse Factoring Solution Elements Whole Product All products/services required by client to meet objective Each “feature” can be provided by us, partners or client Term Ex Success Free Cash Flow 3 4 1 2 5 Payables Portal Payments

Reverse Factoring Solution Elements Funder(s) 3 4 Term Ex Success Free Cash Flow 1 2 Payables Portal Payments 5

Reverse Factoring Solution Elements Funder(s) Legal 3 4 Term Ex Success Free Cash Flow 1 2 Payables Portal Payments 5

Reverse Factoring Solution Elements Funder(s) Legal 3 4 Term Ex Success Free Cash Flow 1 2 Payables Portal Payments 5 Supplier Onboarding

Working Capital Analysis Reverse Factoring Solution Elements Funder(s) Legal 3 4 Term Ex Success Free Cash Flow 1 2 5 Payables Portal Payments Program Design Working Capital Analysis Procurement Services Supplier Onboarding Procurement Training Program Management Solution design Payment terms benchmarking Buyer/Supplier impact Stakeholder alignment Supplier prioritization Supplier messaging Program Mgmt – monitor results through dashboards, KPIs

Reverse Factoring Business Value Buyer Extend DPO to increase free cash flow Enhance productivity with fewer AP inquiries Reward Banks Secure business critical supplier relationships Supplier Reduce DSO to increase Free Cash Flow Reduce interest expense Predictable cash flow Address offsets / credit memo issues much sooner which improves Free Cash Flow Automated collections Full remittance information at no cost

Dynamic Discounting Solution

Dynamic Discounting Workflow Buyer Supplier 1 2 Buyer uploads approved payables data to Kyriba’s SCF Platform. Supplier views payables online, chooses to sell some or all invoices At invoice maturity date, the Buyer pays the Supplier if supplier did not choose early payment 4 3 Buyer receives and processes early payment requests , provides funding to supplier Buyer

Working Capital Analysis Dynamic Discounting Solution Elements Funder(s) Legal 3 4 Term Ex Success Free Cash Flow 1 2 5 Payables Portal Payments Program Design Working Capital Analysis Procurement Services Supplier Onboarding Procurement Training Solution design Payment terms benchmarking & optimized terms Buyer/Supplier impact Stakeholder alignment through analytics Supplier prioritization Supplier messaging Much easier than Reverse Factoring No KYC or Lien filings

Dynamic Discounting Business Value Buyer Improve return on excess cash Enhance productivity with fewer AP inquiries Improve supplier relationships Secure business critical supplier relationships Supplier Transparency to AR invoices Predictable cash flow Reduce DSO, Improve working capital & reduce interest expense Payment on demand

Overall Reverse Factoring Value Proposition Increase Free Cash Flows by extending days payable outstanding (DPO) and optimizing working capital in a single portal that is integrated with your liquidity management, banks and suppliers

Overall Dynamic Discounting Value Proposition Through a single portal, integrated with your overall liquidity management and suppliers, reduce Cost of Goods Sold and earn better return on excess cash by paying your suppliers early in exchange for a discount on the goods and services you purchase

Competitive Landscape Many providers Primarily focused on large company (>$5B), investment grade market Funders Tier 1 – own SCF technology Tier 2 – private label SCF technology Tier 3 – co-sell with fintech SCF provider Tier 4 – purchase assets from others Fintechs SCF only Purchase to Pay B2B Marketplaces Treasury Management

Payables Finance Portal Payments / Treasury Mgmt Competitive Landscape Funders FinTech Payables Finance Portal Banks Funder(s) Payments / Treasury Mgmt P2P / Marketplaces Non-Banks Own Platform Re-sell Co-sell Buy Assets

Q&A Thank You!