Credit suisse case competition (1st place) 2016 by Bruin Asset Management

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LEVERAGED BUYOUT TRANSACTION

4/15/16

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TABLE OF CONTENTS

Executive Summary

Section II:

Company Overview

Section III:

Industry Overview

Section IV:

Investment Considerations

Section V:

Valuation

Section VI:

Transaction Overview

Section I:

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EXECUTIVE SUMMARY

TRANSACTION OVERVIEW

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Situation Overview

 Artemis Capital (“Artemis” or the “Sponsor”) has approached Debit Suisse (“DS”) to provide commitment papers to support an interim bid for the potential acquisition of GoPro, Inc. (“GoPro” or the “Company”)  A formal sell-side process is being administered by Goldman Stanley  The Sponsor has requested that we provide initial views on leverage, structure and pricing

 GoPro currently operates in the action camera market, offering its HERO line of mounted and wearable cameras along with video-editing and sharing software

Company Description

 The Company recently acquired two mobile video-editing apps, Splice and Replay, to facilitate a fullservice customer experience

Preliminary Structure

For illustrative purposes we have outlined the following structure: Revolver First Lien Term Loan  Amount: $100 million  Amount: $675 million  Leverage: NA  Leverage: 3.75x  Pricing: L + 375bps  Pricing: L + 375bps  LIBOR floor: 1.0%  LIBOR floor: 1.0%  Tenor: 5 years  Tenor: 7 years

Senior Notes  Amount:  Leverage:  Pricing:  Tenor:

$495 million 2.75x 10.0% 8 years

 GoPro is set to release its new “Karma” line of consumer drones in summer 2016  The Company is also seeking to diversify and expand into international markets

 Revolver: 2.5%  First Lien Term Loan: 2.5%  Senior Notes: 3.0%

Anticipated Fees

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COMPANY OVERVIEW

COMPANY OVERVIEW General Overview Founded

Strong Network of International Distributors

San Mateo, California 2004



Description

 

Highlights

Big Box Retail Mid Market Retail Specialty Retail

Nicholas D. Woodman – Founder, Chairman and CEO Anthony J. Bates – President and Director Brian T. McGee – CFO

  

Develops high-definition personal cameras used in extreme action video photography The HERO line offers versatile devices including mountable and wearable cameras, and accessories Provides software solutions such as GoPro Studio and the GoPro App for consumer video and photo editing Employees – 1,539 Market Cap – $1,888.7 Enterprise Value – $1,414.7

 

Revenue – $1,620.0 EBITDA – $83.7

Global Footprint 40,000+ Retail Locations, 100+ Countries

Key Management

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Headquarters

GoPro Worldwide Retailers

$ in millions, market data as of 4/14/16, LTM Financial Data of 12/31/15

Financial Summary

Key Metrics

 Revenue is up 16.0% YoY to $1,620 million in 2015

Revenue

200%

 Shipped 6.6 million cameras in 2015, up 27.0% YoY; approximately 20 million cameras shipped in total

150%

 24+ million cumulative downloads of the GoPro App and 15+ million cumulative GoPro Studio installations

GoPro’s revenue growth since Q1 2012 ($ in millions) YoY Revenue Growth

$700 $600

$500

100%

$400 $300

50%

 Nearly 5 years worth of content uploaded to YouTube with the keyword “GoPro”, up 22.0% YoY

$200

 Reached milestone of 1 billion cumulative views on YouTube during 2015

$100 $-

(50%) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2012 YoY – Year over Year Sources: Statista

2013

2014

2015

GOPRO BUSINESS SEGMENTS Product Overview

Strategic Marketing and Branding What GoPro Does

World’s most versatile capture devices

Enable engaging content

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 The Company’s marketing and advertising platforms are focused on engaging consumers by exposing them to compelling GoPro content

What GoPro Makes

 Social media plays a key role in consumer marketing strategy, as customers share their personal content on social media and content sharing platforms  GoPro’s lifestyle marketing programs focus on expanding their brand awareness through relationships with key influencers, event promotions, and other outreach efforts

 The Company’s core products are the HERO line of capture devices, the first HD version of which they introduced in 2009

 All products introduced prior to 2014 have been discontinued and in January 2016, the Company streamlined their product line to an offering of three core products: HERO4 Session, Silver, and Black

Software Overview

 GoPro also offers a wide range of mounts and accessories, either bundled with a capture device or sold separately, that enhance the functionality and versatility of their devices

 The Company develops two applications available to consumers at no charge that assist users in managing, editing, and sharing their content  GoPro Studio is a video editing tool that allows users to create professional quality videos from their content;

 Custom video-enabled point-of-purchase displays distributed over 40,000 retail locations globally 6.6

Capture Devices Shipped (in millions) 5.2

 GoPro App allows users to control their cameras remotely using any mobile device

3.8

GoPro Studio

GoPro App

44,000 average exports per day in 2015

24+ million cumulative downloads

20+ million cumulative units

6.6

3.8

2013 1

Sources: 10-K

5.2

2014 2

2015 3

HISTORICAL FINANCIALS For the year ending December 31, 2010A

2014A

2015PF

$234.2 263.4%

$526.0 124.6%

$985.7 87.4%

$1,394.2 41.4%

$1,620.0 16.2%

31.7 32.7 50.8%

111.7 122.6 52.3%

298.5 227.5 43.2%

624.0 361.8 36.7%

767.0 627.2 45.0%

946.8 673.2 41.6%

Operating expenses Operating income % m argin

20.9 $11.9 18.4%

83.5 $39.1 16.7%

173.9 $53.6 10.2%

263.1 $98.7 10.0%

440.2 $187.0 13.4%

618.5 $54.7 3.4%

Depreciation & amortization EBITDA % m argin

0.2 $12.0 18.7%

1.5 $40.6 17.3%

4.0 $57.6 10.9%

12.0 $110.7 11.2%

17.9 $205.0 14.7%

29.0 $83.7 5.2%

Adjustments Adj. EBITDA % m argin

0.7 $12.7 19.8%

12.3 $52.9 22.6%

17.7 $75.3 14.3%

22.9 $133.7 13.6%

88.4 $293.4 21.0%

95.6 $179.3 11.1%

$2.0 0.9%

$17.8 3.4%

$18.3 1.9%

$27.2 2.0%

$51.2 3.2%

As $0.6 0.9%

Capital expenditures % revenue

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Cost of sales Gross profit % m argin

2013A

$64.5

2012A

Total revenue % growth

2011A

Decline in revenue growth during 2014 and 2015 is due to diminishing returns to scale as GoPro addresses the entirety of the U.S. market



Shrinking EBITDA margins are largely attributable to increased sales expense aimed at sponsorships and marketing



Lack of product refreshment coupled with a streamlined product offering hindered 2015 revenue



Consistent devotion toward R&D – specifically with Karma drones in 2015 – temporarily limits margins



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INDUSTRY OVERVIEW

ACTION CAMERA INDUSTRY Camera Market Composition

Action Camera Product Competition Action Camera Market Share

Camera market share by type

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60%

2014

GoPro

2019

40%

20%

Ion

Action Camera

Sony

Traditional Camcorder

Fixed Lens

DSLR

Compact System Camera

 Unit sales of action cameras have grown at an impressive 90.6% CAGR over the past 6 years

10%

15%

20%

25%

30%

35%

40%

45%

50%

Competitive Landscape

 The action camera market is expected to achieve a 22.0% CAGR through 2019

Polaroid

High Quality

 The Company’s core product competitors are Ion, Sony and Polaroid

 GoPro and Ion currently hold the largest market share, 47.5% and 12%, respectively

 GoPro is unchallenged in the high-end video market, despite strong efforts by Sony

Traditional

Leisure

 In Q4 2015, GoPro accounted for 5 of the top 10 cameras sold in the US in units and 6 of the top 10 cameras in dollar sales in the combined digital camera/camcorder category

 Considerable barriers for competitors include lack of brand awareness, lack of specific focus on the action camera market, and lesser quality of products Low Quality CAGR – Compound Annual Growth Rate Sources: MarketRealist, NPD, NASDAQ

INDUSTRY COMPETITORS ($ in mm)

Profitability EBITDA Margin 19.2% 22.3% (8.0%) 10.5%

Median

50.6%

14.8%

GoPro, Inc.

41.6%

3-Yr Growth Rates

Valuation Metrics

189.8% 1.3% (25.1%) (1.6%)

NM (3.3%) NM (13.1%)

Enterprise Value $3,010 $6,981 $876 $1,920

(0.2%)

(8.2%)

$2,465

Revenue EBITDA

Fitbit Inc. Garmin Ltd. HTC Corporation TomTom NV

Gross Margin 48.5% 54.6% 18.0% 52.7%

5.2%

45.5%

13.3%

$1,428

Beta 0.00 1.12 1.02 1.10

EV/ P/E Ratio EBITDA 8.5x 22.7x 11.1x 17.71 (0.1x) NM 18.2x 110.0x

1.10

9.8x

22.7x

1.43

17.1x

55.6x

Company Name

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Publically Traded Wearable Technology Manufacturers

GoPro, Inc. is well-positioned to improve operations through leverage and sponsor equity  Impressive top-line growth over the past three years indicates potential for future performance

 Significantly discounted purchase price minimizes sponsor’s investment and maximizes exit returns

 EBITDA margins can be increased by cutting R&D and sales expenses over time

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INVESTMENT CONSIDERATIONS

INVESTMENT THESIS Situation

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• GoPro’s stock price has declined 80% in the last eight months due to inconsistent management guidance for Q4 2015 and drastically missed sales estimates. Despite recent market sentiment, the core fundamentals of the business remain strong

Recent Acquisitions

 The purchase of video and image editing apps Splice and Replay allows GoPro to integrate next-gen editing software into their

own apps, differentiate themselves from their hardware competitors. and provide a more user friendly experience

− Splice is an award winning app that allows users to quickly generate professional-quality videos for social media

networks

Replay automates the movement of images and video to the beat of music. It is a subscription-based service offering tiered plans for $5/month and $29/month

Strong Financials

−

 Robust operational and financial mobility due to GoPro’s clean balance sheet, allowing the business to raise capital by

applying additional leverage

 GoPro is growing at a revenue CAGR of 23% over the past three years and consistently maintains EBITDA margins of 11-15%

New Markets

 Recent 10K reports cite that the Company is seeking to move into international markets which will expand GoPro’s target

market as 60% of its current revenue stems from domestic markets

 Entry into the quickly expanding consumer/commercial drone market offers a $700+ million opportunity for GoPro’s “Karma”

drone while simultaneously increasing their core action camera sales

Investment Opportunity 

Due to potential integration of strong software products into GoPro’s existing editing applications and feasible entry into the rapidly growing drone and international action camera markets, we see GoPro as a strong candidate for a leveraged buyout transaction CAGR – Compound Annual Growth Rate

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RECENT ACQUISITIONS acquires for $105mm

 

Company Name: Replay Headquarters: Paris, France

 Company Name: Splice  Headquarters: Austin, TX



Ownership can enhance GoPro’s software offerings in order to create a simpler, end-to-end video creation process and sharing experience for action camera customers and billions of smartphone users The worldwide digital video content market is expected to grow at a CAGR of 15.4% over the period 2015-2019, and the global online video platform industry is forecasted to grow at a CAGR of 14.2% over the same period To increase the Company’s market share, these acquisitions serve as a stimulus for seamless sharing of personal experiences across content sharing platforms, which furthers GoPro’s strategic marketing and branding efforts



Business Description: Replay is an awardwinning application that transforms everyday photos and clips into epic videos instantly on a mobile device by synchronizing the video to the beat of a song

Strategic Rationale 



 Business Description: Splice is a mobile video editing application that streamlines the fragmented process of creating and sharing music, allowing artists to focus on the creative process

With the wide selection of editing options these intuitive applications offer, the Company can drive revenue up by offering “premium packages” and templates for videos at tiered levels to consumers

CAGR – Compound Annual Growth Rate Sources: Research and Markets

INTERNATIONAL DEVELOPMENT Worldwide Action Camera Market

GoPro Opportunities

Growth in Action Camera Market by Region



Major expansion efforts into mainland China will allow management to capitalize on exiting mature markets

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140%



120% 100% 80% 60%

40%



20% 0% Latin America

Western Europe

Eastern Europe

Middle East Asia-Pacific Worldwide & Africa



Accelerate ground infrastructure to expand into Latin America, given GoPro’s existing assembly plant in Brazil

North America

Aggressive push into Chinese e-commerce market by forging relationships with companies such as JD.com and Tmall  Aim to establish China as the primary growth target while North American markets approach saturation The Company opened a European HQ in Munich in 2014 positioning itself to promote GoPro as the premier action camera brand in Europe

GoPro accounted for 6 of the top 10 camcorders in Europe, including all of the top five spots in December



GoPro’s EMEA revenues surged 109.0% to $433 million and its APAC revenues surged 138.0% to $167 million, showing significant growth potential overseas



Struck a partnership with Marriott to provide HERO4 cameras for checkout to guests



$132.7 Revenue by Geography

International market represents a significant growth opportunity

$371.2

$215.9

9.5%

13.3%

$371.2 26.6% 63.9%

53.6%

33.1% $535.3

$132.7

$890.3

$868.8

$890.3

($ in millions) Americas

Sources: Financial Times, Fortune

Europe, Middle East and Africa

Asia and Pacific Area Countries

EMERGING DRONE MARKET Entry Into Developing Markets

Future Opportunities in the Commercial Market

 The Company’s Karma drone is set to debut within the first half of 2016  The rapidly evolving and fragmented drone industry provides incentive to speed up drone development and production  The drone market is estimated to approach $5.0 billion in 2017, more than tripling its current size of $1.4 billion  GoPro drones are likely to attract buyers within both the consumer and commercial segments due to its unparalleled quality and recognition

DJI is currently the leader in the drone market

Other

2.3%

Public Safety

4.2%

Precision Agriculture

9.3%

Mapping/Surveying

14.4%

Inspection/Monitoring

25.8%

Market share, 2014

Drone Exemptions by Use The FAA grants nearly twice as many commercial drones exemptions for photo and video use than any other market

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 GoPro’s expansion into drone hardware is a logical next step in horizontal product lines, given that there is an unaddressed opportunity for consumer drones

Film/Photo/Video

44.0% 10%

20%

30%

40%

50%

 ABI Research projects a $5.1B commercial sUAS (small unmanned aerial systems) market by 2019, a 5-year CAGR of 51%, 5x larger than the consumer drone segment

DJI

Parrot

3D Robotics

Others

GoPro Projected Drone Revenue Drone revenue projections are based off consensus estimates of a 10% consumer drone market for the Company $184

$200

$150

$115

$100

$66

$50

$15

2016

2017

$34

Sources: Statista, Federal Aviation Administration (FAA), ABI Research

2018

2019

2020

2021

OPERATIONAL IMPROVEMENTS 2015PF

2016E

2017E

2018E

2019E

2020E

2021E

2022E

2023E

$1,620.0 16.2%

$1,663.8 2.7%

$1,721.9 3.5%

$1,827.4 6.1%

$1,996.8 9.3%

$2,281.8 14.3%

$2,639.5 15.7%

$3,010.3 14.0%

$3,375.8 12.1%

Cost of sales % revenue

$946.8 58.4%

$998.3 60.0%

$1,015.9 59.0%

$1,069.0 58.5%

$1,158.1 58.0%

$1,312.0 57.5%

$1,504.5 57.0%

$1,745.9 58.0%

$1,991.7 59.0%

Gross profit

$673.2

$665.5

$706.0

$758.4

$838.6

$969.8

$1,135.0

$1,264.3

$1,384.1

40.0%

41.0%

41.5%

42.0%

42.5%

43.0%

42.0%

41.0%

Operating expenses % margin

$618.5 38.2%

$748.7 45.0%

$731.8 42.5%

$694.4 38.0%

$698.9 35.0%

$747.3 32.8%

$831.4 31.5%

$918.1 30.5%

$1,029.6 30.5%

Operating income % margin

$54.7 3.4%

($83.2) (5.0%)

($25.8) (1.5%)

$64.0 3.5%

$139.8 7.0%

$222.5 9.8%

$303.5 11.5%

$346.2 11.5%

$354.5 10.5%

Depreciation & amortization % revenue

$29.0 1.8%

$34.9 2.1%

$43.0 2.5%

$54.8 3.0%

$71.9 3.6%

$98.1 4.3%

$113.5 4.3%

$129.4 4.3%

$145.2 4.3%

EBITDA % margin

$83.7 5.2%

($48.2) (2.9%)

$17.2 1.0%

$118.8 6.5%

$211.7 10.6%

$320.6 14.1%

$417.0 15.8%

$475.6 15.8%

$499.6 14.8%

Adjustments

$95.6

–

Adj. EBITDA % margin

$179.3 11.1%

$118.8 6.5%

$211.7 10.6%

$320.6 14.1%

$417.0 15.8%

$475.6 15.8%

$499.6 14.8%

Capital expenditures % revenue

$51.2 3.2%

$62.4 3.8%

$64.6 3.8%

$64.0 3.5%

$69.9 3.5%

$74.2 3.3%

$85.8 3.3%

$96.3 3.2%

$108.0 3.2%

Free cash flow % margin

($53.1) (3.3%)

($102.2) (6.1%)

($129.3) (7.5%)

($26.0) (1.4%)

$49.0 2.5%

$135.2 5.9%

$201.7 7.6%

$249.7 8.3%

$268.8 8.0%

41.6%

($48.2) (2.9%)

$17.2 1.0%

% margin

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Total revenue % growth

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VALUATION

INTRINSIC VALUATION Discounted Cash Flow Model 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E

EBIT $150 $ (99) $ (42) $ 44 (-) Taxes 53 (35) (15) 16 (+) D&A 29 26 34 44 (-) Capital Expenditures 51 66 68 67 (+/-) Changes in Working Capital (78) 6 (0) 3 Unlevered Free Cash Flows

(2)

(98)

(61)

Levered Beta Market Risk Premium Risk-Free-Rate Interest on New Debt Total Debt WACC

1.1 8.9% 2.6% N/A $ 12.4%

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Year

Cost of Capital

$ 115 40 60 72 5

$191 67 83 76 9

$ 262 92 95 87 11

$ 296 104 107 97 16

$ 298 104 119 108 16

140

189

218

221

(1)

$417 9.8x 4,089

2023E EBITDA EV/EBITDA Terminal Value

Implied Share Price

6 $34

7 $37

8 $34

9 $27 $1,428

ui Br

$1,491 $474 $1,965 $139

Exit Multiple

5 $21

4 $4

Years Discounted 1 2 3 Discounted FCFs ($2) ($61) ($30) Discounted Terminal Value

Sensitivity Analysis

12.4%

Implied Enterprise Value (+) Cash (-) Debt Implied Equity Value Shares Outstanding

GoProâ&#x20AC;&#x2122;s lack of debt effectively makes WACC cost of equity

WACC 7.8x 8.8x 9.8x 10.8x 11.8x

10.4% $13.6 $14.8 $16.1 $17.3 $18.5

11.4% 12.4% 13.4% 14.4% $12.8 $12.0 $11.4 $10.7 $13.9 $13.1 $12.3 $11.6 $15.1 $14.1 $13.3 $12.5 $16.2 $15.2 $14.3 $13.4 $17.3 $16.2 $15.2 $14.3

$14.1

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TRANSACTION OVERVIEW

STRUCTURE Pro Forma Capitalization Table Amount

Cash from balance sheet $100 million revolver First lien term loan Second lien term loan Senior notes Sponsors equity Total sources

$279.7 – 675.0 – 495.0 1,015.1 $2,464.8

– 3.8x 3.8x 6.5x 12.2x 12.2x

% of Total Capitalization – 30.9% – 22.7% 46.5% 100.0%

Cash

$100 million revolver First lien term loan Total first lien debt

Existing debt Second lien term loan Senior notes Total debt

L + 375 bps L + 375 bps

L + 375 bps 10.0%

$279.7 – 2,147.0 38.1

Cash to balance sheet Refinance existing debt Equity purchase price Financing fees, OID & other expenses

Amount

Sponsor's equity Total capitalization

LTM 12/31/15PF operating statistics Adj. EBITDA Net cash interest expense Capital expenditures

Uses

$2,464.8

Total uses

Rate

Sources

EBITDA Multiple

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Sources and Uses Table

12/31/2015 $279.7 – 675.0 $675.0 – – 495.0 $1,170.0 1,015.1 $2,185.1

$179.3 80.7 51.2

LTM 12/31/15PF credit statistics First lien debt / Adj. EBITDA Total debt / Adj. EBITDA Net debt / Adj. EBITDA

3.8x 6.5x 5.0x

Adj. EBITDA / Net cash interest expense

2.2x

Total debt / Total capitalization

53.5%

TRANSACTION SUMMARY Fiscal year ended December 31,

2016E

2017E

2018E

2019E

2020E

2021E

$1,620 16.2%

$1,664 2.7%

$1,722 3.5%

$1,827 6.1%

$1,997 9.3%

$2,282 14.3%

$2,640 15.7%

Gross profit % margin

$673 41.6%

$666 40.0%

$706 41.0%

$758 41.5%

$839 42.0%

$970 42.5%

$1,135 43.0%

EBITDA Plus: Adjustments Adj. EBITDA % margin

$84 96 $179 11%

($48) – ($48) (3%)

$17 – $17 1%

$119 – $119 7%

$212 – $212 11%

$321 – $321 14%

$417 – $417 16%

$119 (89) (64) – 8 ($26) (258)

$212 (91) (70) (15) 14 $49 (209)

$321 (90) (74) (44) 24 $135 (73)

$417 (84) (86) (75) 29 $202 128

$102

Total revenue % growth

Capitalization Cash

($48) (81) (62) – 89 ($102) (102)

$17 (85) (65) – 3 ($129) (232)

$280

$271

$135

– 675 $675

$100 668 $768 (14%) (26%)

495 $1,170

$102

$100 655 $755 (12%) (65%)

$58 648 $706 (5%) (53%)

– 571 $571 15% (19%)

– 369 $369 45% 32%

495 $1,263 (8%) (11%)

495 $1,257 (7%) (26%)

495 $1,250 (7%) (29%)

495 $1,201 (3%) (23%)

495 $1,066 9% (8%)

495 $864 26% 14%

(15.9x) (26.2x) NM

44.2x 73.0x 65.2x

6.4x 10.5x 9.7x

3.3x 5.7x 5.2x

1.8x 3.3x 3.0x

0.9x 2.1x 1.8x

Adj. EBITDA / Net cash interest expense 2.2x (Adj. EBITDA - capex) / Net cash interest expense1.6x

NM NM

0.2x NM

1.3x 0.6x

2.3x 1.6x

3.5x 2.7x

5.0x 4.0x

Free cash flow / Total debt

(8.1%)

(10.3%)

(2.1%)

4.1%

12.7%

23.3%

Credit statistics First lien debt / Adj. EBITDA Total debt / Adj. EBITDA Net debt / Adj. EBITDA

Senior notes Total debt % paydown % net paydown

$100 662 $762 (13%) (59%)

3.8x 6.5x 5.0x

$100 million revolver First lien term loan Total first lien debt % paydown % net paydown

$179 (81) (51) (23) (78) ($53)

Adj. EBITDA Less: Net cash interest expense Less: Capital expenditures Less: Cash taxes Change, net working capital Free cash flow Cumulative free cash flow

Free cash flow

(4.5%)

 2016 growth rates based on analyst estimates, integration of new software, and initial drone sales  Future projections are derived by assuming a 10% share of the consumer drone market along with increased international action camera sales

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2015PF

 Low initial margins due to heavy capital investment in drone development and international distribution channels

 High sales/marketing expenses due to new products and channels curb free cash flow through 2018  Projected capital expenditure is utilized to increase production capacity and foster further technological development

SPONSOR RETURNS Fiscal year ending December 31, 2016

Full year Adj. EBITDA Exit mulitiple Enterprise value Less: Total debt Plus: Cash Equity value Sponsor cash flow Cash outflow Cash inflow, different exit years Total cash flows

2017

2018

2019

2020

2021

2022

2023

($48.2) 12.0x ($577.6)

$17.2 12.0x $206.1

$118.8 12.0x $1,422.0

$211.7 12.0x $2,533.9

$320.6 12.0x $3,838.0

$417.0 12.0x $4,992.7

$475.6 12.0x $5,694.0

$499.6 12.0x $5,981.3

($1,263.3) 270.7 ($1,570.2)

($1,256.5) 134.6 ($915.7)

($1,249.8) 101.9 $274.1

($1,200.8) 101.9 $1,435.0

($1,065.5) 101.9 $2,874.4

($863.8) 101.9 $4,230.7

($614.1) 101.9 $5,181.7

($495.0) 251.6 $5,737.9

(1,570.2) ($1,570.2)

(915.7) ($915.7)

1,435.0 $1,435.0

2,874.4 $2,874.4

4,230.7 $4,230.7

5,181.7 $5,181.7

5,737.9 $5,737.9

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2015

($1,015.1) ($1,015.1)

N/A (1.5x)

N/A (0.9x)

(35.3%) 0.3x

6 Year Exit Structure

23.1% 2.8x

26.8% 4.2x

26.2% 5.1x

24.2% 5.7x

IRR Sensitivity Analysis

15.0%

11.0x 28.9%

Exit Multiple 11.5x 12.0x 12.5x 30.1% 31.2% 32.2%

13.0x 33.2%

20.0%

26.7%

27.8%

28.9%

29.9%

30.9%

25.0%

24.7%

25.8%

26.8%

27.9%

28.9%

30.0%

22.9%

24.0%

25.1%

26.1%

27.0%

35.0%

21.3%

22.4%

23.4%

24.4%

25.4%

$4,230.7

Purchase Premium

$4,992.7

$2,209.4

$1,015.1 $890.3

9.0% 1.4x

IRR given different exit years MOIC given different exit years

274.1 $274.1

$762.0

Purchase

Exit Net Debt

Equity

EXIT OPPORTUNITIES Potential Strategic Buyers



Entrance into the drone market, penetration into new geographies, and cost-cutting efforts will allow GoPro to command a higher multiple



After operational changes are implemented, public investors will find GoPro as an attractive mainstay in the market



Baseline multiple of 12.0x has a very high upside due to GoPro’s exit strategy as an international hardware-software brand

Strategic Buyout



Potential acquisitions open up doors to areas where competitors have been investing heavily (e.g., drones, VR)



GoPro’s product offerings fit seamlessly within the expertise of these consumer technology companies

Action cameras uniquely intersect with these companies’ wearables devices, multimedia and software offerings

Content/Software

A strategic acquisition may yield a higher price as competition in the digital media and technology industry is intense



Content-oriented companies such as Google and Amazon can utilize GoPro’s capture-and-publish model to generate original content and integrate software with their current products



Facebook and YouTube can efficiently integrate the media content that the Company offers to generate greater revenue and carve out a larger market share for GoPro’s product selection



The Company’s cameras and digital platforms serve as a launchpad toward the VR and drone space



GoPro’s worldwide network caters toward modern consumer trends which demand greater original content



An acquisition by Apple would make sense as action cameras are uniquely categorized with the target’s wearable and multimedia offerings, implying potential to scale up operations



Consumer Electronics

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Initial Public Offering

RISKS AND MITIGANTS Diversification of Products/Markets

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Dependent on a Limited Number of Products

Expansion into international markets as well as entering the drone industry will diversify revenue outside of its core product offering

If sales were to weaken for any reason, macroeconomic or otherwise, there are no other products to fall back on. Most sales are driven by sports enthusiasts

Obsoletion of Technology

Strategic Acquisitions of Key Suppliers

Vertical integration of firms within GoProâ&#x20AC;&#x2122;s distribution channel will decrease supply chain risk while helping the Company to achieve economies of scale

Competitive Market

Business disruptions including logistical issues and natural disasters may limit availability of alternate suppliers and cripple high volume delivery efforts

Reliance on Third Party Suppliers

GoPro maintains a dominant 47% market share along with its strong brand name and qualitatively superior products

Existing competitors include well-established camera companies with great resources as well as advanced smartphones

Strong Market Position

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THANK YOU