DISCLAIMER

THIS PRESENTATION IS FOR INFORMATIONAL AND EDUCATIONAL

PURPOSES AT THE 2017 LATTICE WORK BEST IDEAS CONFERENCE ONLY AND

SHOULD NOT BE CONSIDERED INVESTMENT ADVICE.

WE MAKE NO REPRESENTATION OR WARRANTIES AS TO THE

ACCURACY, COMPLETENESS OR TIMELINESS OF THE INFORMATION,

TEXT, GRAPHICS OR OTHER ITEMS CONTAINED IN THIS PRESENTATION.

WE EXPRESSLY DISCLAIM ALL LIABILITY FOR ERRORS OR OMISSIONS IN,

OR THE MISUSE OR MISINTERPRETATION OF, ANY INFORMATION

CONTAINED IN THIS PRESENTATION.

• 15 years in sales, trading, banking and research roles on the buy and sell side• Sales experience covering hedge funds and mutual funds focused on small/mid cap names• Learned what not to do: focus on short term, trade frequently, over-diversify

• Additional experience in change management consulting• Learned the importance of people and culture, and that turn arounds often don’t turn

• Almost my entire net worth is invested in the strategy

• Former Vice Chair, New York Society of Security Analysts (NYSSA) Value Investing Committee

• Chartered Financial Analyst

About Matt Sweeney

About Laughing Water Capital

• Private partnership formed in February, 2016• Began managing family SMAs in 2013

• Concentrated value strategy: typically own 10-20 stocks• Common sense approach to investing – seek out good businesses that are dealing

with structural and/or operational problems that are likely easily solved by an incentivized management team given enough time

• Patience is essential: typically invest with a 3-5 year view• Volatility is NOT risk

Is it a Good Business?

Are Management’s

Interest’s Aligned?

Why Does the Opportunity Exist?

What Happens When Something

Goes Wrong?What is it worth?

LWC’s 5 Part Framework

2017

Easy To Understand

Attractive, Recession Proof Industry

Secular Tail Winds

Competitive Advantages

Strong FCFF Generation

No Sell Side Coverage

Underappreciated Recent Developments

Temporary Problems

Misleading GAAP Financials

Large Margin of Safety

Investment Basics

Stock Basics

*As of 12/28/2016

Stock Symbol REV

Stock Price $29.05

Shares Out (mm) 52.5

Market Cap (mm) $1,525

Cash (mm) $99

Debt (mm) $2,750

Enterprise Value (mm) $4,175

% Owned By Insiders 78%

Current Yield N/A

52 Week Range $24.50 – $37.97

$0

$5

$10

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16

Milestones

• Founded in 1932 by Charles Revson

• IPO in 1996

• 78% controlled by Ron Perelman

• Traditionally focused on mass market

• Expanded into Salon channel through 2013 purchase of Colomer Group

• Expanded into Prestige channel through 2016 purchase of Elizabeth Arden

• Stable of well known brands across major beauty categories

Latin America

5%

Asia Pacific12%

EMEA24%

North America

59%

Nail6%

Skin Care7%

Beauty Care10%

Color Cosmetics

31%

Haircare 18%

Fragrance28%

Category Mix1

Geographic Mix1

Company Basics

1. Combined company PF LTM sales

Foundation Eye Liner

Lipstick Lip Liner

Is it a Good Business: Revlon Brand Strength

source: WWD Ranking of Beauty’s Strongest Brands, Feb. 2016 / IRI

#1

#1 #1

#1

16

17

18

19

20

4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16

% M

arke

t Sh

are

#2 in Nail Polish1

20

21

22

23

4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16

% M

arke

t Sh

are

#3 in Lip Cosmetics1

0

5

10

15

4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16

% M

arke

t Sh

are

#4 in Eye Cosmetics1

Is it a Good Business: Portfolio of Brands

1. source: Deutsche Bank :US Scanned Channel Revenue

0

5

10

15

20

25

4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16

% M

arke

t Sh

are

#3 in Women’s & Men’s Fragrance1

W

M

Top 20 Global Beauty Companies2

Is it a Good Business: Industry

0

5

10

15

20

25

30

Glo

bal

Sal

es (

$B

)

1. Source: Company presentation 2. Source: BeautyPackaging.com – based on 2015 revenue & adjusted for pro forma REV/RDEN & COTY/PG

0

50

100

150

200

250

300

350

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Ret

ail S

ales

($

B)

Global Beauty Sales1

• Recession proof revenues• Above GDP growth• Attractive position in consolidating

industry• Big enough to be a buyer• Small enough to be bought

200

300

400

500

600

700

800

900

Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 PFQ3'16

Mill

ion

s ($

)

REV RDEN

Is it a Good Business: Profit & Growth

1. Source: Bloomberg T12M 2. CAGR from FY13 to PF T12M adjusted for periodicity

Select Comps: Adjusted EBITDA Margin1 Select Comps: Revenue CAGR2

Key Takeaway: Revlon generates peer level EBITDA margins while growing significantly faster

REV: Adjusted EBITDA Margin REV: Revenue Growth

10%

12%

14%

16%

18%

20%

22%

Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16

Bea

uty

Estee Lauder 19.5%Coty 18.5%L'Oreal 21.8%Average 19.9%

Div

ersi

fied

St

aple

s

Colgate 28.6%Procter & Gamble 27.0%Unilever 18.1%Average 24.6%

Bea

uty

Estee Lauder 3.2%Coty 22.5%L'Oreal 5.4%Average 10.4%

Div

ersi

fied

St

aple

s

Colgate -4.4%Procter & Gamble -7.0%Unilever 2.0%Average -3.1%

Structural Factors• Limited float

• MacAndrews & Forbes, Ron Perelman’s investment vehicle, owns 78% of the company

• Low liquidity• Average daily volume of less than

60,000 shares over last 2 years

• Almost zero ETF exposure

• No sell side analyst coverage

• Different capital structure and capital allocation profile than consumer product peers• LIBOR linked debt

Why Does the Opportunity Exist?Big Picture

Net Debt T12M Core adj. EBITDA

6.7x

Net Debt T12M PF adj. EBITDA inc. Synergies

4.9x

Leverage Profile

Controlling Shareholder

Macro Factors• A strong USD acts as a drag on international earnings

• Historically rising rates have actually led to a lower USD over time

• Rising rates will likely hurt valuation for many dividend paying consumer staples, which have been treated as bond proxies in a low rate world

• Rising oil prices lead to higher input costs

Trading Factors• Likely a victim of year end tax loss selling

• Rotation in shareholder base after rumors the company was for sale

• Market likely surprised by company’s decision to delay integration implementation until 2017

Why Does the Opportunity Exist?Small Picture

Key Takeaway: An investment in Revlon requires a multi-year time line, and the above factors have a way of smoothing themselves out over multi-year periods.

Recent Changes are Underappreciated

• Growth Profile• After decades of stagnant growth, revenue has doubled in the last 3 years1

• Acquisition of Elizabeth Arden• Not without challenges, but there are early signs of operational improvement

• Will take time to integrate, but improves mix and geography

• New Management• CEO Fabian Garcia

• CFO Juan Figuereo

Why Does the Opportunity Exist?Operational Picture

1. Pro forma for Elizabeth Arden transaction

History of Quickly Paying Down Debt

Current Debt Stack

A Brief Word on Leverage…• Many investors (especially quantitative

strategies) automatically rule out investments in levered companies

• Leverage needs to be viewed in relation to the consistency of cash flows, not in a vacuum

• Recession proof businesses are well equipped to carry debt, which increases volatility to equity, but when used effectively juices returns to equity

• In an ‘09 like debt crisis, Revlon has levers to pull to increase cash flow

• “Soft factors” are impossible to quantify, but have qualitative value• Perelman likely one of Wall Street’s most

valuable clients $0.6 Spanish Gov't Loan

$439.2 6.25% Senior Unsecured 2024

$493.5 5.75% Senior Unsecured

2021

$1,750.9 Term Loan Libor +350

$65.4 drawn on $400M ABL

Total Debt: $2,749.6M

5.1x 5.0x 4.4x 4.2x3.5x

5.0x 4.4x 4.1x4.9x

2008 2009 2010 2011 2012 2013Colomer

Close

2014 2015 2016 PF inc.synergies

Net Debt/Adj. EBITDA

• Shareholder outreach• Started doing 1 on 1 meetings with minority shareholders

• Street outreach• Started participating in sell side conferences

• Possible the company will focus on stock liquidity• Share split?

• Possible the company will attract sell side research coverage• RDEN previously had sell side coverage• Lots of M&A in the space – research coverage could help position banks to win

business• Mr. Perelman could leverage his debt business to attract attention from banks

What Else Might the Market be Missing?Increased Desire to Engage & Focus on Share Price

“my intention is to be as transparent as I can be and to engage with the stakeholders that of course include our investors. So the degree of that engagement and the frequency of that engagement will be different than what perhaps you have experienced more recently because, obviously, we want to all be sure that the Company is appropriately valued.”

~ CEO Fabian Garcia, Q1 2016 earnings call

• Fabian Garcia, CEO• Left high paying job as COO at

Colgate Palmolive (CL)

• Significantly higher salary than prior CEOs

• Company by-laws adjusted to allow for higher max annual bonus

• Company by-laws adjusted to allow for higher long term award bonus• $10M stock grant will be priced March

2017

• Juan Figuereo, CFO

• Gianni Pieraccioni, COO

MacAndrews & Forbes Management

• Ron Perelman• #33 on the Forbes 400

• On some level must realize REV is drastically undervalued• Recent moves show he is focused on

closing the gap

• Has not always been the best partner to minority shareholders

• Soft factors• 73 years old

• No heirs in the business

• Noted philanthropist

• Signer of “The Giving Pledge”

• Beginning to consider his legacy?

Are Management’s Interests Aligned?

Key Takeaway: Even if the RDEN transaction is a disaster, the company is still dramatically undervalued vs. peers

Current Valuation

1. Source: Company Presentation 2. Source: LWC Estimate *Bloomberg adjusted EBITDA and Earnings T12M except COTY

Select Comps Valuation*

Core Revlon @ Average Comp Multiple*

EV/adj.EBITDA P/adj.E

Bea

uty

Coty FY17 15.7x 65.5xEstee Lauder 13.7x 23.4xL'Oreal 16.3x 27.0xAverage 15.3x 38.7x

Div

ersi

fied

St

aple

s

Colgate 14.6x 43.1xProcter & Gamble 14.9x 22.8xUnilever 13.7x 22.2xAverage 14.4x 29.3x

Price Upside

REV @ 15x EV/Core adj EBITDA $59.19 115%

REV @ 25x P/Core adj E $43.18 49%

Shares Out 52.50

Price $29.05

Market Cap 1,525.1

Total Debt & Pension 2,924.4

Cash 99.2

Enterprise Value 4,350.3

T12M Core adj. EBITDA1 395.5

T12M Core adj. Net Income2 90.7

PF T12M adj. EBITDA inc. Synergies1 546.0

EV/ T12M Core adj. EBITDA 11.0x

P/T12M Core adj. EPS 16.8x

EV/PF T12M adj. EBITDA inc. Synergies 8.0x

• Business has been stagnant for 20 years

• You’ll never get a comp multiple under Perelman

• Management turnover has been high in recent years

• Highly levered

• Perelman may try to take advantage of minority shareholders

Bears: “Its Cheap, and Has Been for a Long Time”Point Counter-Point

• Revenue has PF doubled last 3 years

• EBITDA likely significantly higher in 3-4 years: no need for multiple expansion

• Perelman has paid up for quality management

• Recession proof business with a history of quickly paying down debt

• True – but DE law offers protection, and strong minority shareholders would surely sue

• Founded in 1910 by Elizabeth Graham “Arden”

• Formerly FFI Fragrance, which bought Elizabeth Arden from Unilever in 2001 and adopted the name

• Stable of well known brands across major beauty categories

• Has struggled in recent years due to over reliance on hit-driven celebrity fragrance business

• Core EA brands are underappreciated• 7 consecutive quarters of revenue growth

• Fragrance business showing signs of life in recent Qs• Growth at Designer & select Heritage brands

Category Mix

Geographic Mix

Background

RDEN: What Did We Buy?

EA Color Cosmetics

5%

Licensed Fragrances

59%

EA Fragrances

16%

EA Skin Care20%

Latin America

3%

Asia Pacific16%

EMEA

North America

60%

• Access to new channels (prestige, travel retail, spa, department store)

• Elizabeth Arden’s cosmetics and skincare businesses should easily hit Revlon’s system wide EBITDA margins• Combined margins may be higher, as Revlon had unused capacity

• Increased exposure to China• RDEN has succeeded where REV did not• REV brands are mass market – thus far China has been about luxury, but as the middle class

develops, REV should over index

• Increased exposure to fast growing (but less predictable) fragrance business• Global fragrance market expected to CAGR 8.6% through 2020

1

• IPAR & COTY provide evidence that mid-high teens EBITDA margins are possible

• Opportunity to drive sales of Elizabeth Arden products through improved digital / e-commerce presence

• RDEN’s Pre-acquisition internal improvement plan called for $132M in adj. EBITDA in 2019

RDEN: What Did We Get?Combined company greater than the sum of its parts

1. Euromonitor, company presentation

• Purchase price of approximately $870M• 6.2x expected cost synergies

• Elizabeth Arden brands including fragrance essentially justify entire purchase price, meaning non EA fragrance is essentially free

• Cosmetics & Skincare should easily hit REV margins, and justify 2/3rds of purchase price

• It will take time and work to match pure play fragrance co Inter Parfums, but eventually Fragrance by itself could justify the purchase price

EA Cosmetics & Skincare

Fragrance Stand Alone

EA Brand Including Fragrance

RDEN: What Did We Pay?

FY 16 Skin care sales $191.3FY 16 Cosmetics sales $50.4Combined Sales $241.7growth @ 5% $253.8Potential EBITDA margin 19%EBITDA $48.2Implied Value @ 12.0x $578.7Implied Value of Fragrance Stand Alone $291.3

FY 16 All Fragrance Sales $571.8IPAR EBITDA Margin 15%Implied EBITDA $85.8

IPAR P/Sales 2.0xIPAR EV/EBITDA 12.3x

Implied Value @ IPAR P/Sales $1,144Implied Value @ IPAR EV/EBITDA $1,055

FY 16 EA Brand Sales $394.9growth @4% $410.7Potential EBITDA Margin 17%EBITDA $69.8Implied Value @ 12.0x $837.8Implied Value of non EA Fragrance $32.2

• Official estimate of $140M in cost synergies• $100M expected to be realized in year 1• 60% SG&A, 40% COGS

• Reasons to believe $140M is achievable• Management has reconfirmed “at least

$140M”• $84M is <20% of RDEN’s SG&A

• Reasons to believe $140M is low• Revlon has a history of conservatism

when estimating synergies• RDEN’s pre-acquisition internal

improvement plan laid a path to $132M in standalone adj. EBITDA by 2019

• CEO stock grant incentives low-ball estimate

RDEN: Cost SynergiesHistory of Conservatively Estimating Synergies1

$25

$35

$20

$22

$24

$26

$28

$30

$32

$34

$36

Identified Realized

Mill

ion

s

2013 Colomer Acquisition

1. Source: Company presentation

NOTE: This presentation was finalized and recorded on 12/29/16. On 1/3/17 the company issued an 8K that noted, “the Company has identified incremental annualized synergies and cost reductions that are expected to significantly exceed the previously-disclosed $140 million in annualized synergies and cost reductions.

1 Morgan Stanley: http://www.morganstanley.com/ideas/china-beauty-market-consumer-boom 2 US Dept of Commerce

RDEN: Revenue SynergiesIncreased China Exposure1• Officially, the company is not

projecting any revenue synergies• Management is incentivized to

under-promise and over-deliver

• Reasons to believe there will be revenue synergies• Pre acquisition the 2 companies had

36% overlap in their customer base

• China exposure• Fastest growing global market

• Per capita cosmetics spend in China is estimated @ ~$25 vs ~$140 in US2

• Opportunity to improve Elizabeth Arden’s digital / e-commerce presence

Sales 3,165

EBITDA margin 18.0%

EBITDA 569.6

Multiple 10.0x 12.0x 14.0x

Enterprise Value 5,696 6,835 7,975

-Net Debt & Pension 2,525 2,525 2,525 Market Cap 3,171 4,310 5,449

Shares 55.7 55.7 55.7

Price / Share $56.91 $77.36 $97.81

Debt/EBITDA 4.1x 4.1x 4.1x

Upside 96% 166% 237%

CAGR 25% 39% 50%

Revlon: Back of Envelope 2019 ValuationRevlon 2019 Notes

We are almost certainly wrong about something, but there is a very large margin of safety, even with conservative assumptions and without meaningful multiple expansion

Assume 3% Annual Growth (no M&A, no revenue synergies, below expected industry growth rate)

Note: Peak Margins ~20% - fragrance likely detracts, but capacity utilization likely higher than historical including RDEN

Note: PF Adj. Combined EBITDA 9/30/16 = $546M

11.0x = Current Core multiple, 13x = Average personal care transaction multiple over last 5 years (per MS), 15.3x = Beauty comps, 16.0x = growth comps

Assume $300M cash generated net of integration costs

Assume 2% annual increase

Other: disregard RDEN's pre-acquisition internal improvement plan that predicted $132M in adj. EBITDA in 2019

As leverage profile comes down, multiple should go up

“Platform” Comps

Potential Organic Growth

Revlon: Platform Growth?• Not a base case, but not clear why Revlon

shouldn’t be grouped with other market darlings based on recent growth• Organic growth should be GDP+ • M&A growth is industry standard as

established players leverage scale and distribution

• We are not paying for inclusion in this cohort, so this is a free option that the market may get excited about Revlon at some point

• REV at a growth peer multiple = $116• Maybe 12x or 14x is attainable? • Global beauty market expected to CAGR @7.3%

through 20201

• Per capita spend in emerging markets remains well below mature markets

‘13-’16 Rev CAGR

EV/TTM adj/EBITDA

Recession Proof

MIDD Restaurant Supply 16.4% 17.3x No

FLT Payment Programs 26.8% 17.8x No

ZAYO Connectivity/Cloud 19.7% 14.4x No

CMPR Print / Customization 15.3% 15.5x No

TDG Aircraft Parts 18.1% 15.2x No

Average 19.3% 16.0x

REV PF Cosmetics 22.4% 7.6x Yes

1. Source: EuroMonitor, company presentation

• Bears argue that REV will only get a comp multiple in a sale

• That might be true… but would likely be worth the wait• Very rough estimates, guaranteed to be wrong can still be illustrative

• Point is that patience is usually rewarded in growing, slow changing businesses that are dramatically undervalued vs. comps and M&A multiples

A Sale is Likely…. Eventually….

Sale in 12 Years (Perelman 85) Sale in 7 years (Perelman 80)

Low Mid High

Revenue CAGR 4% 8% 12%

Exit EBITDA Margin 18% 19% 20%

Exit Net Debt/EBITDA 2.0x 3.0x 4.0x

Exit Multiple 12.0x 13.0x 14.0x

FDSO CAGR 2% 2% 2%

Exit Price $130 $215 $351

CAGR 13.3% 18.2% 23.1%

% Upside 347.5% 640.1% 1108.3%

Low Mid High

Revenue CAGR 4% 8% 12%

Exit EBITDA Margin 18% 19% 20%

Exit Net Debt/EBITDA 2.0x 3.0x 4.0x

Exit Multiple 12.0x 13.0x 14.0x

FDSO CAGR 2% 2% 2%

Exit Price $118 $162 $220

CAGR 22.2% 27.8% 33.5%

% Upside 306.2% 457.7% 657.3%

• Mr. Perelman’s future treatment of minority shareholders is a “known unknown”

• Despite recession proof cash flows, the company’s high leverage will likely drive considerable volatility in share price in the near term. A long term, patient capital base is necessary

• Consumer staples stocks have arguably become bond proxies in recent years – as rates move higher, it is possible that the sector will re-rate lower

• Interest payments on floating rate debt will be impacted by rising rates

• A strong USD will weigh on foreign earnings

Risks

If you are a patient, open minded investor that is not afraid to stand away from the crowd, we should talk. Please join our mailing list at:

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