OUTDOOR RECREATION & ENTHUSIASTS PANDEMIC A BOOM TO TACTICAL GOODS AND AT-HOME GAMING

CONTACTS KEY HIGHLIGHTS

Kenneth Wasik • Early in the pandemic, industry participants Managing Director, focused on internal operations to meet demand Head of Consumer & Retail • Public equity valuations have rebounded substantially following early COVID-19 headwinds Sophea Chau • Private equity buyers are searching for platform Managing Director, and add-on acquisitions in the sector Outdoor Recreation & Enthusiasts • Capstone expects M&A activity to increase in 2021 as the economy continues to open and consumer Peter Bailey confidence rises Director, Tactical & Sporting Technology

October 2020

3 Outdoor Recreation & Enthusiasts Pandemic a Boom to Tactical Goods and At-Home Gaming

TABLE OF CONTENTS INDUSTRY OUTLOOK

 Industry Outlook COVID-19 lockdowns and social distancing protocols have driven consumers  COVID-19 Impacts to increasingly pursue recreation and leisure activities, contributing to heightened demand for outdoor, sporting goods, and tactical product  M&A Overview manufacturers. Notably, bicycle sales have increased dramatically, rising 63%  Notable Transactions year-over-year (YOY), amounting to $679 million, with mountain bikes and 1  Select Transactions road bike sales up 92% and 87% in June, respectively, according to NPD. The pandemic has also introduced a new wave of consumers into the Outdoor  Public Company Spotlight Recreation & Enthusiasts industry as individuals seek new forms of outdoor  Public Company Data and indoor entertainment amid lockdowns and social distancing rules. As a  Key Takeaways result, demand has surged for tactical goods and gaming applications, with industry players recording strong revenue growth (see following pages).  Firm Track Record However, industry participants struggled during the onset of the pandemic to meet elevated demand, evidenced by lower inventory levels, with YETI (NYSE:YETI) noting a 23% YOY decline in inventory, according to its earnings release.2 Long term ramifications may manifest into a decreased reliance on overseas manufacturing to reduce supply chain complexity and achieve greater flexibility to meet demand surges.

While post-pandemic demand is likely to normalize, favorable long-term tailwinds are expected to be supported by the passing of the Great American Outdoors Act. Signed into law on August 4th, the act allocates $1.9 billion for the next five years for maintenance to critical facilities and infrastructure in CONTACTS national parks, forests, wildlife refugees, and recreation areas, according to the National Park Service.3 It also provides $900 million in annual funding for the Kenneth Wasik Land and Water Conservation Fund which invests in conservation and Managing Director, recreation opportunities across the U.S. Head of Consumer & Retail 917-434-6124 Outdoor Recreation & Enthusiasts Public Company Total Return [email protected] Tactical Products & Outdoor Recreation Sporting Goods & Active Lifestyle Gaming & Entertainment Tourism & Leisure Sophea Chau 200 Managing Director, Outdoor Recreation & Enthusiasts 150 617-619-3307 [email protected] 100

Peter Bailey = 100 Index 50 Director, 0 Tactical & Sporting Technology Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 310-740-3286 [email protected] Tactical Products & Outdoor Recreation: AAXN, BC, ELY, CWH, CLAR, DII.B, ESCA, JOUT, LAF, OLN, SWBI, SPWH, RGR, THULE, CFC, VSTO, YETI; Gaming & Entertainment: ATVI, EA, SLGG, DKNG, EGLX, PENN, SPO; Sporting Goods & Active Lifestyle: DKS, FRAS, BGFV, HIBB; Tourism & Leisure: BKNG, CCL, EXPE, HLT, MAR, RCL, MTN Source: FactSet and Capstone Research 2 Outdoor Recreation & Enthusiasts | October 2020

COVID-19 IMPACTS: TACTICAL PRODUCTS & OUTDOOR RECREATION

Tactical and outdoor recreation products have products & outdoor recreation manufacturers have experienced dramatic increases in demand as consumers struggled to procure inventory to meet demand as have increasingly embraced outdoor recreation activities workforce capacity constraints and hiring freezes have led amid COVID-19 social distancing measures. This has to delays throughout the production process. Inventory been evidenced by substantial increases in camping among firearm manufacturers fell sharply, as Sturm, Ruger equipment and binocular sales which have risen 31% and & Company experienced a 127,000-unit decline in 21% YOY, respectively. Firearms and ammunition, which combined inventories in its warehouses and distributors represent a key component of this subsegment, have also during Q2. The entrance of new consumers to the Tactical benefited from heightened interest in hunting and Products & Outdoor Recreation space extends beyond shooting sports, with leading manufacturers reporting firearm and ammunition purchases. Notably, leading significant revenue increases. Notably, leading firearm boat manufacturer Brunswick (NYSE:BC) reported that manufacturer Sturm, Ruger & Company (NYSE:RGR) has 40% of its new boat sales in June 2020 were to first-time experienced a YOY revenue increase of 35.2% in Q2 2020, boat purchasers, according to its earnings release.7 according to its earnings release.4 In addition, during the However, heightened boating usage has also been met spring 2020 hunting season, license and tag sales with production challenges as Brunswick experienced its increased 35%, according to Vista Outdoor. Elevated lowest mid-season pipeline levels in nearly 20 years with demand can also be seen in the number of National 34% fewer boats in dealer inventory YOY. As supply chain Instant Criminal Background Check System (NICS) firearm challenges mounted throughout the industry in Q2 2020, background checks, which serve as a nationwide proxy for brand recognition and customer retention remained gun sales, which have increased nearly 72% YOY with a critical aspects to drive sales growth. With many record 3.9 million background checks conducted in June consumers hesitant to visit physical stores, e-commerce 2020, according to NICS.5 capabilities have emerged as a crucial channel for tactical products & outdoor recreation providers. Notably, Vista In recent months, civil unrest across the U.S. has also Outdoor experienced a 40% increase in its e-commerce fueled gun sales. Through July 2020, five million new business compared to the prior year, according to its Americans purchased a gun for the first time, according to earnings release.8 National Shooting Sports Foundation.6 The significant increase in new gun buyers, who accounted for 40% of Public companies in the Tactical Products & Outdoor firearm sales, represents a notable shift in the Firearms Recreation subsegment have displayed resilience through and Ammunition industry, expanding the demographics Q2 2020 following headwinds at the onset of the and range of buyers in the gun-owning community. The pandemic. EBITDA multiples have rebounded nearly 60% influx of consumers and heightened backlog has driven since the World Health Organization (WHO) declared strong sales growth among industry players but has also COVID-19 a pandemic on March 11, standing at 14.2x as presented formidable supply chain challenges. Tactical of August 31st. products

Peter Bailey, Director, Tactical & Sporting Technology “A new and increasingly diverse base of consumers that is purchasing firearms, ammunition, and outdoor products may have a significant impact on the industry for years to come after the 2016 election. While the industry slumped after the 2016 election, many expect that consumers will continue to have strong demand to purchase additional firearms, ammunition, and shoot at ranges after the 2020 election. Many consumers expect political and social tensions to continue after the 2020 election and have increasingly become attentive to their personal safety and security. Business owners and executives in the industry have acknowledged that the 2016 election year was an optimal year to sell their company or raise capital and have shown increased interest in M&A as a strategic goal in 2020 that is expected to extend into 2021 given the current environment."

3 Outdoor Recreation & Enthusiasts | October 2020

COVID-19 IMPACTS: SPORTING GOODS & ACTIVE LIFESTYLE

The Sporting Goods & Active Lifestyle subsegment has Dick’s Sporting Goods Q2 2020 Key Metrics garnered heightened demand as health and fitness has become paramount amid the pandemic. As consumers have sought socially distant activities, sporting goods equipment has experienced increased sales, with paddle 250% board sports and golf equipment witnessing YOY 194.0% increases of 56% and 51%, respectively, according to 200% NPD. While the pandemic closed many retail locations, sporting goods providers with robust omnichannel 148.0% capabilities were able to capture increased revenue as a 150%

result of elevated consumer interest. Notably, leading Change % Year -

sporting goods retailer DICK’s Sporting Goods (NYSE:DKS) 100% over recorded a 20.1% increase in net sales in Q2 with e- -

commerce sales rising 194%, according to its Q2 Year 50% earnings release.9 20.1%

Trading metrics among public companies in the Sporting 0% Goods sector have improved since the onset of the Revenue E-Commerce Sales EPS pandemic, with EBITDA multiples trading slightly below year-end 2019 levels. Effective inventory management is likely to remain key as companies look to forecast Source: Company press release financial performance and increase budget clarity.

COVID-19 IMPACTS: GAMING & ENTERTAINMENT

While outdoor recreation has increased, many consumers Year-over-Year Revenue Growth have also spent more time on screens and mobile devices during the lockdown periods, lending to increased activity in the Gaming & Entertainment sector. Video games have experienced heightened usage, increasing 75% during peak gaming hours since quarantine first went into effect, according to Verizon.10 Shelter at home conditions have Electronic Arts 21.4% bolstered engagement for top video game and content producers as Electronic Arts (Nasdaq:EA),11 Activision Blizzard (Nasdaq:ATVI),12 and Super League Gaming (Nasdaq:SLGG)13 have recorded YOY revenue increases Activision Blizzard 38.8% exceeding 21%, according to their most recent earnings releases. In addition, as more interaction is done on digital platforms, consumers have migrated towards online content. Super League Gaming, a leading esports Super League Gaming 45.3% and content platform provider recorded over one billion digital channel views through July 2020, representing a 700% increase from the entirety of 2019. 0% 20% 40% 60%

Gaming and entertainment providers’ ability to capture sustained customer engagement will likely dictate sales patterns in the following quarters. Providers that Source: Company press releases demonstrate strong customer retention, diversified offerings, and a growing audience are poised to attract interest in the merger and acquisition (M&A) market. 4 Outdoor Recreation & Enthusiasts | October 2020

M&A OVERVIEW

M&A activity has slowed through year-to-date (YTD) 2020 Transaction Volume with 132 transactions announced or completed compared to 140 transactions in YTD 2019. As the pandemic 2019 2020 intensified through the end of Q1 and into Q2, industry 35 participants focused on internal operations, preserving 30 24 cash flows, and drawing down on credit facilities to 22 25 20 18 provide ample liquidity. Strategics have comprised the 20 16 17 17 14 14 14 15 14 majority of deal activity at 77.3% while private equity has 15 12 11 13 12 9 10 accounted for 22.7%, predominantly pursuing add-on 10 acquisitions. Despite lower transaction volume through # of Transactions 5 the YTD, Capstone expects buyers to return to the table, 0 with a potential resurgence in deal activity towards the end of the year and into 2021.

Top subsegments within the Outdoor Recreation & Enthusiasts industry have demonstrated robust 2020 Buyer Breakdown consolidation, as buyers have sought to capitalize on heightened consumer interest towards recreation activities. The Gaming & Entertainment subsector has 14.2% outpaced 2019 transaction volume with 40 deals STRATEGIC 15.6% announced or closed, compared to 23 in YTD 2019. Public 8.5% Notably, Facebook (Nasdaq:FB) acquired leading virtual Private reality and console game manufacturer Ready at Dawn for FINANCIAL an undisclosed sum (June). Tactical Products and Outdoor Direct Recreation has also drawn elevated demand in 2020, with Add-on 44 transactions YTD 2020, compared to 36 in YTD 2019. In 61.7% addition, military technical products and apparel have drawn strong buyer appetite, evidenced by National Safety Apparel’s August acquisition of military gear and apparel manufacturer Wild Things (undisclosed). Source: Capital IQ, FactSet, PitchBook, and Capstone Research

Sophea Chau, Managing Director, Outdoor Recreation & Enthusiasts “Overall M&A activity slowed in the sector during the early stages of the pandemic as companies adapted to a new environment with increasingly remote workforces and e-commerce. Many companies focused on internal operations to meet a surge in demand for products in Q2 and Q3 as consumer preferences evolved. However, tactical products and outdoor recreation companies have continued to draw robust buyer interest through the pandemic.”

Peter Bailey, Director, Tactical & Sporting Technology “As strategic buyers and private equity groups continue to analyze the growth and change in consumer demand and trends in the sector, they are increasingly focused on tuck-in and add-on acquisitions to complement their targeted business mix and portfolio diversification in the sector. We expect a significant increase of M&A activity in the market in 2021 after a tactical pause in 2020.”

5 Outdoor Recreation & Enthusiasts | October 2020

NOTABLE TRANSACTIONS

Several notable transactions have been announced or completed in the industry in 2020. Select transactions are outlined below, followed by a more comprehensive list on the following page.

Lululemon athletica, Inc. acquires Mirror (June 2020, $500 Million)

Transaction Description: Lululemon (Nasdaq:LULU) has acquired leading at-home fitness startup Mirror (legal name Curiouser Products) for a purchase price of $500 million. Launched in 2018, Mirror offers a tech-enabled, wall-mounted mirror device with speakers and cameras that provides live and on-demand fitness classes. The device retails for $1,495 and subscribers pay $39 per month to stream fitness and yoga classes. Mirror is expected to generate $100 million in sales in 2020.14

The transaction marks Lululemon’s first acquisition and entry into the rapidly-growing Connected Fitness market, supporting its ongoing transformation from an apparel to lifestyle brand. Mirror had Acquires previously raised a total of $72 million in funding with its most recent financing of $34 million completed in October 2019 led by Point72 Ventures with contribution from Lululemon. Lululemon will leverage Mirror to diversify its revenue stream and expand its customer base. In addition, the 50% customer overlap between the two companies offers synergistic sales potential and Mirror is forecast to be meaningfully incremental to sales and earnings over the long-term, according to Barclays.15 “In 2019, we detailed our vision to be the experiential brand that ignites a community of people living the sweatlife through sweat, grow and connect. The acquisition of MIRROR is an exciting opportunity to build upon that vision, enhance our digital and interactive capabilities, and deepen our roots in the sweatlife,” commented Calvin McDonald, CEO of Lululemon in a press release.16

Trend: Social distancing and lockdown measures have encouraged consumers to adopt at-home fitness through virtual and connected products. Health and wellness participants have experienced heightened demand as consumers have become increasingly health-conscious as a result of the pandemic. Competitors to Mirror such as Peloton have witnessed a surge in consumer interest with the Connected Gym Equipment market is forecast to grow at a compound annual rate of 22% from 2020 to 2024, according to Technavio.17

Compass Diversified Holdings LLC acquires Marucci Sports LLC (March 2020, $200 Million)

Transaction Description: Compass Diversified (NYSE:CODI) has acquired premier manufacturer and distributor of baseball and softball equipment, Marucci Sports, for an enterprise value of $200 million and equivalent to 13.3x EBITDA. Founded in 2009, Marucci bats are one of the most popular in baseball with a loyal brand following. Marucci achieved approximately $14-$15 million of adjusted EBITDA for the trailing 12-month period ending December 31, 2019, according to a press release.18

Compass Diversified is a leading investment and holding company that has completed 20 platform and Acquires 27 add-on acquisitions since its founding in 1998. Compass’ investment criteria targets leading niche industrial or branded consumer companies with annual EBITDA of at least $15 million. “We are pleased to announce the successful completion of this transaction in a challenging market environment. We are excited about the future strategic opportunities for Marucci as we expect to accelerate their growth and expansion in the years to come,” commented Elias Sabo, CEO of Compass Group Diversified Holdings in a press release.

Trend: The April 2020 closing of the transaction comes as several sports leagues and organized recreational activities have just begun to resume, albeit with COVID-19 precautions. Specifically, the resumption of Major League Baseball provides a healthy backdrop for demand as Marucci bats are among the most popular brands used by professional players. Marucci will benefit from Compass’ expertise and capital resources to expand its customer base, diversify product offerings, and increase its international presence to new markets including Japan and South Korea. 6 Outdoor Recreation & Enthusiasts | October 2020

SELECT TRANSACTIONS

Enterprise EV / LTM Date Target Acquirer Target Business Description Value (mm) Revenue EBITDA Assets of Remington Comprises an ammunition manufacturing facility 09/28/20 Vista Outdoor $81.4 0.4x Outdoor and related intellectual property.

Manufactures closure systems for shoes including laced 09/22/20 Boa Technology Compass Diversified shoes, buckles, and sports shoes, $454.0 4.5x 15.1x

National Safety Designs and manufactures technical outwear and 08/20/20 Wild Things - - - Apparel gear serving U.S. Marines and special forces.

Take-Two Interactive 08/18/20 Playdots Develops mobile games. $192.0 - - Software

Cold Iron Provides mobile, console, and personal computer 08/11/20 Daybreak Game - - - Studios games including shooter and other action games.

Trade Bill’s Outdoor 07/28/20 Southern Reel Offers fishing rods and equipment online. - - - Sports

Bridge Lake 07/14/20 Siege Sports Supplies custom athletic uniforms and apparel. - - - Partners

Instinct Binovi Provides eyewear for sport and tactical 07/10/20 $3.2 - - Performance Technologies disciplines including military.

06/30/20 Total Value RV Lazydays Offers recreational vehicles and parts. - - -

Provides a connected fitness system that streams live 06/29/20 Mirror lululemon and on-demand classes. $500.0 - -

06/23/20 Haas-Jordan Dynamic Brands Manufactures umbrellas for golf and other specialties. - - -

Facebook 06/22/20 Ready At Dawn Develops video games. - - - Technologies

Provides bicycle motocross products including 06/02/20 Race American BMX retro and modern bike frames. - - -

Duke’s Sporting 06/01/20 H&W Sports Shop Operates as a sporting goods store. - - - Goods

Northland Fishing 05/27/20 Bagley Bait Provides fish baits in the U.S. and Canada. - - - Tackle

Lone Wolf Manufactures and distributes aftermarket glock parts 05/22/20 Vigilant Gear - - - Distributors and accessories.

05/19/20 Desert Autoplex RV Lazydays Offers recreational vehicle dealerships. - - -

04/28/20 Pure Fix Cycles JBI Manufactures and sells bicycles. - - -

Vanquish Century Designs and builds premium day boats including 04/23/20 - - - Boats Boats center console and dual console.

04/23/20 Candywriter Stillfront Group Develops and publishes mobile games. $196.4 7.3x 12.7x

Outdoor Manufactures and sells rugged audio and power 04/21/20 Protempo - - - Technology products including earbuds and headphones.

Provides outer wear, rainwear, and camouflage for 04/14/20 Compass 360 Exxel Outdoors fishing, hunting, and camping. - - -

Miranda University 03/31/20 Manufactures outdoor recreation games. - - - Games Games

Source: Capital IQ, PitchBook, FactSet, and Capstone Research 7 Outdoor Recreation & Enthusiasts | October 2020

PUBLIC COMPANY SPOTLIGHT: VISTA OUTDOOR DRIVES NEW CUSTOMERS

Ticker: NYSE:VSTO Headquarters: Anoka, MN Key Segments: Shooting Sports, Outdoor Products

Valuation & Trading Metrics

52-Week Pricing (10/26/20) EV/Revenue EV/EBITDA Adjusted EPS

Price Low High Q2 2020 Q2 2019 % Q2 2020 Q2 2019 % FY Q1 2021 FY Q1 2020 % $20.83 $4.80 $23.00 0.8x 0.6x +33.3% 11.4x 12.7x -10.2% $0.51 -$0.08 +737.5%

Operating Metrics

Net Sales Shooting Sports Outdoor Products

FY Q1 2021 FY Q1 2020 % FY Q1 2021 FY Q1 2020 % FY Q1 2021 FY Q1 2020 % FY21 Q1 Totals (millions) $479 $459 +4.2% $334 $309 +8.0% $145 $151 -4.0%

FY Q1 2021 ended June 28, 2020 Sources: Company press releases, Capital IQ

Earnings Report Insights As lockdowns were lifted, stores were “ flooded with consumers, who wanted to Results: recreate in safe and socially distant ways. • Sales increased 4% YOY to $479 million in fiscal year Outdoor recreation quickly became the go- 2021 Q1 to form of exercise in entertainment, which • Gross profit amounted to $125 million, an increase of drove stronger-than-expected sales in 32% compared to the prior year quarter most categories. • E-tail and DTC revenue increased by over 40% compared to the prior year - Christopher” T. Metz, CEO & Director19 Analysis: Vista Outdoor has benefited from an influx of new customers towards its shooting sports segment which has Vista Outdoor Pricing and Volume experienced an 8% sales increase YOY. In addition, while Volume (mm) Price overall sales declined in the outdoor products segment YOY, Vista noted a threefold increase in adult bicycle sales $25 8.0 and have leveraged their Bell and Giro brands to bolster $20 customer acquisition. With many consumers increasing 6.0 screen time during the pandemic, Vista has focused on its $15 digital and marketing capabilities, tripling the frequency of 4.0 email marketing campaigns to inform customers of new $10 2.0 products. It has also secured enhanced near-term revenue $5 visibility, entering into a $112 million five-year contract with the Department of Homeland Security to provide $0 0.0 duty heavy ammunition for the Customs and Border Jan-20 Apr-20 Jul-20 Oct-20 Patrol, which represents the single largest contract issued Source: FactSet by federal law enforcement. 8 Outdoor Recreation & Enthusiasts | October 2020

PUBLIC COMPANY DATA: TACTICAL PRODUCTS & OUTDOOR RECREATION

Price % 52 Wk Market Enterprise LTM EV / LTM Company 10/19/20 High Cap Value Revenue EBITDA Margin Revenue EBITDA Axon Enterprise, Inc. $107.62 95.2% $6,831.2 $6,278.9 $591.1 NM NA NM NM

Brunswick Corporation $62.77 84.8% $4,969.0 $5,781.4 $3,847.5 $626.8 16.3% 1.5x 9.2x

Callaway Golf Company $19.85 88.9% $1,869.1 $2,620.3 $1,477.4 $83.2 5.6% 1.8x NM

Camping World Holdings, Inc. $31.13 73.3% $1,179.4 $3,430.3 $4,986.9 $477.3 9.6% 0.7x 7.2x

Clarus Corporation $14.90 94.7% $445.3 $454.3 $204.8 $13.5 6.6% 2.2x NM

Dorel Industries Inc. $11.09 94.2% $361.5 $921.0 $2,643.8 $125.6 4.8% 0.3x 7.3x

Escalade, Incorporated $20.79 97.8% $294.3 $279.0 $213.6 $23.7 11.1% 1.3x 11.8x

Johnson Outdoors Inc. $88.92 91.7% $889.9 $746.8 $533.5 $64.4 12.1% 1.4x 11.6x

Lafuma SA $21.09 89.3% $149.8 $132.3 $180.2 $13.7 7.6% 0.7x 9.6x

Olin Corporation $17.66 89.1% $2,787.8 $7,002.1 $5,630.0 $696.9 12.4% 1.2x 10.0x

Smith & Wesson Brands, Inc. $16.86 60.7% $942.5 $951.4 $832.7 $173.8 20.9% 1.1x 5.5x

Sportsman's Warehouse Holdings $16.50 89.4% $719.5 $994.0 $1,128.4 $99.1 8.8% 0.9x 10.0x

Sturm, Ruger & Company, Inc. $65.59 72.3% $1,147.6 $923.4 $454.0 $88.5 19.5% 2.0x 10.4x

Thule Group AB (publ) $33.58 95.7% $3,511.4 $3,708.2 $718.2 $128.2 17.8% NM 28.9x

V.F. Corporation $72.54 72.4% $28,265.1 $32,411.4 $8,942.8 $1,490.8 16.7% 3.6x 21.7x

Vista Outdoor Inc. $20.52 87.3% $1,191.4 $1,681.7 $1,775.2 $166.9 9.4% 0.9x 10.1x

YETI Holdings, Inc. $52.16 94.8% $4,538.5 $4,747.5 $948.1 $150.4 15.9% NM NM

Mean 12.2% 1.4x 11.8x

EV = enterprise value; LTM = last twelve months Median 11.6% 1.3x 10.0x $ in millions, except per share data NM = Not Meaningful Harmonic Mean 10.1% 1.0x 9.9x

PUBLIC COMPANY DATA: SPORTING GOODS & ACTIVE LIFESTYLE

Price % 52 Wk Market Enterprise LTM EV / LTM Company 10/19/20 High Cap Value Revenue EBITDA Margin Revenue EBITDA Big 5 Sporting Goods Corporation $8.89 91.5% $189.3 $500.3 $955.9 $126.6 13.2% 0.5x 4.0x

DICK'S Sporting Goods, Inc. $61.15 96.6% $5,449.2 $7,640.6 $8,617.5 $1,435.2 16.7% 0.9x 5.3x

Frasers Group plc $4.73 68.1% $2,374.3 $3,674.3 $4,880.3 $714.9 14.6% 0.8x 5.1x

Hibbett Sports, Inc. $49.78 89.0% $823.5 $858.4 $1,299.9 $205.8 15.8% 0.7x 4.2x

Mean 15.1% 0.7x 4.6x

Median 15.2% 0.7x 4.7x

Harmonic Mean 15.0% 0.7x 4.6x

Source: Capital IQ as of October 19, 2020

9 Outdoor Recreation & Enthusiasts | October 2020

PUBLIC COMPANY DATA: GAMING & ENTERTAINMENT

Price % 52 Wk Market Enterprise LTM EV / LTM Company 10/19/20 High Cap Value Revenue EBITDA Margin Revenue EBITDA Activision Blizzard, Inc. $80.08 91.3% $61,811.5 $58,028.5 $6,988.0 $2,417.0 34.6% NM 24.0x

DraftKings Inc. $44.58 69.5% $16,862.0 $15,617.8 $357.4 NM NA NM NM

Electronic Arts Inc. $129.87 88.1% $37,506.0 $32,780.0 $5,787.0 $1,772.3 30.6% NM 18.5x

Enthusiast Gaming Holdings Inc. $1.22 70.9% $126.2 $142.1 $19.4 NM NA NM NM

Penn National Gaming, Inc. $64.84 84.6% $10,829.8 $21,597.3 $4,117.3 $1,117.1 27.1% NM 19.3x

Sportech PLC $0.22 48.9% $41.9 $32.4 $64.8 NM NA 0.5x NM

Super League Gaming, Inc. $1.70 26.2% $25.6 $20.5 $1.2 NM NA NM NM

Mean 30.8% 0.5x 20.6x

Median 30.6% 0.5x 19.3x

Harmonic Mean 30.5% 0.5x 20.3x

PUBLIC COMPANY DATA: TRAVEL & LEISURE

Price % 52 Wk Market Enterprise LTM EV / LTM Company 10/19/20 High Cap Value Revenue EBITDA Margin Revenue EBITDA Booking Holdings Inc. $1,653.02 78.9% $67,688.9 $69,596.9 $11,297.0 $4,230.5 37.4% NM 16.5x

Carnival Corporation & Plc $14.15 27.2% $12,443.0 $30,620.0 $10,342.0 NM NA 3.0x NM

Expedia Group, Inc. $92.14 66.1% $13,012.6 $20,124.6 $9,080.0 $237.0 2.6% 2.2x NM

Hilton Worldwide Holdings Inc. $87.55 75.8% $24,278.4 $32,448.4 $2,738.0 $1,203.0 43.9% NM NM

Hyatt Hotels Corporation $54.19 57.1% $5,481.6 $6,936.6 $1,733.0 $217.0 12.5% 4.0x NM

Marriott International, Inc. $93.94 61.2% $30,466.2 $40,952.2 $3,861.0 $1,601.0 41.5% NM NM

Royal Caribbean Group $59.71 44.1% $13,315.4 $29,357.1 $7,912.6 $1,167.8 14.8% 3.7x NM

Vail Resorts, Inc. $230.67 90.3% $9,267.5 $11,666.2 $1,963.7 $509.9 26.0% NM 22.9x

Mean 25.5% 3.2x 19.7x

Median 26.0% 3.3x 19.7x

Harmonic Mean 10.9% 3.1x 19.1x

Source: Capital IQ as of October 19, 2020

10 Outdoor Recreation & Enthusiasts | October 2020

KEY TAKEAWAYS

Sophea Chau, Managing Director, Outdoor Recreation & Enthusiasts • Public equity valuations in the sector have rebounded significantly since March 2020, and we expect continued momentum in 2021 with strong consumer demand tailwinds.

• Strategic buyers in the sector are well capitalized and increasingly focused on M&A to propel further growth in 2021.

• Private equity buyers have diligently attended to existing portfolio companies in 2020 and are on the hunt for platform and add-on acquisitions for companies with strong brands and a competitive edge in attracting and maintaining new consumers.

• We expect the new year will see a strong mix of private equity buyers coming off the sidelines and strategics looking to capitalize on sector growth, making for a very attractive seller’s market in 2021.

11 Outdoor Recreation & Enthusiasts | October 2020

OUTDOOR RECREATION & ENTHUSIASTS REPORT CONTRIBUTORS

Kenneth Wasik Managing Director [email protected] | 917-434-6124

Ken joined Capstone Headwaters to lead the Consumer & Retail practice. He brings nearly 25 years of investment banking experience including domestic and international mergers & acquisitions, initial and secondary offerings of public companies, debt raises and private placements for his clients. He has helped raise over $10 billion in capital for clients during his career. Over the last 10 years, he has pursued his passion for advising high growth, middle market consumer product companies and retailers of which a large percentage are family and entrepreneurial owned. Ken regularly presents at consumer industry conferences and has testified twice as an expert witness on consumer brands. He joins Capstone Headwaters from Stephens Investment Bank, where he started and led the Consumer Products Group. Prior to Stephens, Ken was with Jefferies and Co. as Managing Director of Consumer Products. Before Jefferies and Co., he was Head of the Consumer, Food and Retail Group at Houlihan, Lokey, Howard, and Zukin, and was responsible for building out Houlihan’s consumer and retail coverage universe, as well. Kenneth began his career in Investing Banking at UBS in New York, NY, where he supported execution of large packaged goods companies. Ken is a Series 79 Registered Investment Banking Representative and holds an MBA in Finance from Columbia University and a BS in Accounting from St. Joseph’s University.

Sophea Chau Managing Director [email protected] | 617-619-3307

Sophea has 15 years of experience in mergers & acquisitions, private placements and financial advisory services. Her responsibilities include asset positioning and strategy articulation, providing financial and valuation analysis, and performing due diligence. Prior to joining Capstone Headwaters, Sophea was an analyst at FTN Midwest Securities, a full-service investment banking firm based in Cleveland. While working in their New York office, she focused on M&A advisory for middle-market companies in a variety of industries, including consumer products, healthcare, and marketing & advertising.

The M&A Advisor named Sophea to its prestigious “Emerging Leaders” (previously, “40-UNDER-40”) deal makers list in 2018. Sophea is on the Board of the Columbia Alumni Association of Boston and holds a BA in Economics from Columbia University.

2020 2020 2019 2019 2019

MIDDLE MARKET US MIDDLE MARKET INVESTMENT BANKING FIRM INVESTMENT BANKING FIRM INVESTMENT BANKING FIRM INVESTMENT BANK INVESTMENT BANK OF THE YEAR OF THE YEAR OF THE YEAR OF THE YEAR OF THE YEAR

INTERNATIONAL AWARDS TURNAROUND AWARDS

12 Outdoor Recreation & Enthusiasts | October 2020

OUTDOOR RECREATION & ENTHUSIASTS REPORT CONTRIBUTORS (CONTINUED)

Peter Bailey Director [email protected] | 310-740-3286

Pete has 14 years of experience executing M&A and capital markets transactions in a variety of industries including consumer. His investment banking coverage includes the tactical & outdoor products and sports technology sectors. Prior to joining Capstone Headwaters, Pete worked as an investment banker at Stephens Inc., Wells Fargo & Company, and Citigroup, Inc.

He also served over five years as a U.S. Army intelligence officer, which included two tours to Bosnia- Herzegovina in support of peacekeeping and counter-terrorism operations, and deployment to Kuwait and Iraq in support of Operation Iraqi Freedom. He holds a BS in General Management from the U.S Military Academy and an MBA from Harvard Business School.

Connor McLeod Research Associate [email protected] | 617-619-3319

Connor is a Research Associate at Capstone Headwaters primarily specializing in Consumer & Retail, Building Products & Construction Services, Healthcare, and Cybersecurity.

Prior to joining Capstone Headwaters, Connor was a specialist with the Investor Services team at BlackRock where he worked with mutual funds, closed end funds, and exchange traded funds and communicated fund performance, relevant market dynamics, and facilitated trades for shareholders, financial advisors, and institutional clients. Connor holds a BA in Economics from Bates College and is a Series 7 Registered Securities Representative.

2020 2020 2019 2019 2019

MIDDLE MARKET US MIDDLE MARKET INVESTMENT BANKING FIRM INVESTMENT BANKING FIRM INVESTMENT BANKING FIRM INVESTMENT BANK INVESTMENT BANK OF THE YEAR OF THE YEAR OF THE YEAR OF THE YEAR OF THE YEAR

INTERNATIONAL AWARDS TURNAROUND AWARDS

13 Outdoor Recreation & Enthusiasts | October 2020

FIRM TRACK RECORD

has been acquired by has been acquired by has been acquired by has been acquired by

a portfolio company of

has been acquired by has been acquired by has been acquired by has been acquired by

a portfolio company of

strategic joint venture has been acquired by has been acquired by has acquired

a portfolio company of

has divested has been acquired by has been acquired by financial advisory

14 Outdoor Recreation & Enthusiasts | October 2020

CITATIONS

1. NPD, “America Outdoors: Consumers Are Flocking to These 5 Activities,” https://www.npd.com/wps/portal/npd/us/news/thought- leadership/2020/consumers-are-flocking-to-these-5-activities/, accessed August 23, 2020. 2. YETI, “YETI Reports Second Quarter 2020 Results,” https://investors.yeti.com/news/news-details/2020/YETI-Reports-Second-Quarter-2020- Results/default.aspx, accessed August 31, 2020. 3. National Park Service, “Great American Outdoors Act,” https://www.nps.gov/subjects/legal/great-american-outdoors-act.htm, accessed August 26, 2020. 4. Sturm, Ruger & Company, “Sturm, Ruger & Company, Inc. Reports Second Quarter Diluted Earnings of $1.05 Per Share, Declares Special Dividend of $5.00 Per Share and Declares Quarterly Dividend of 42¢ Per Share,” https://ruger.com/corporate/PDF/ER-2020-07-29.pdf, accessed August 24, 2020. 5. National Instant Criminal Background Check System, “NICS Firearm Checks: Month/Year,” https://www.fbi.gov/file-repository/nics_firearm_checks_- _month_year.pdf/view, accessed August 25, 2020. 6. National Shooting Sports Foundation, “First-Time Gun Buyers Grow To Nearly 5 Million in 2020,” https://www.nssf.org/first-time-gun-buyers-grow- to-nearly-5-million-in-2020/, accessed August 26, 2020. 7. Brunswick, “Brunswick Reports Second Quarter Results,” https://d1io3yog0oux5.cloudfront.net/_e61fa58c780aef38599f0b89d651bf39/brunswick/db/672/6396/file/Brunswick+Reports+Second+Quarter+20 20+Results.pdf, accessed August 26, 2020. 8. Vista Outdoor, “Vista Outdoor Announces FY21 First Quarter Operating Results,” http://news.vistaoutdoor.com/2020-08-06-Vista-Outdoor- Announces-FY21-First-Quarter-Operating-Results, accessed August 23, 2020. 9. DICK’S Sporting Goods, “DICK'S Sporting Goods Reports Record Quarterly Sales and Earnings in Second Quarter 2020; Delivers 20.7% Increase in Same Store Sales,” https://s23.q4cdn.com/425278312/files/doc_financials/2020/q2/DKS-2020.08.01-Ex.-99.1-Earnings-Release.pdf, accessed August 26, 2020. 10. World Economic Forum, “How COVID-19 is taking gaming and esports to the next level,” https://www.weforum.org/agenda/2020/05/covid-19- taking-gaming-and-esports-next-level/, accessed August 23, 2020. 11. Electronic Arts, “Electronic Arts Reports Strong Q1 FY21 Financial Results,” https://s22.q4cdn.com/894350492/files/doc_financials/2021/q1/Q1-FY21- Earnings-Release-Final.pdf, accessed August 26, 2020. 12. Activision Blizzard, “Activision Blizzard Announces Record Second-Quarter 2020 Financial Results,” https://investor.activision.com/static- files/926e411c-7d05-49f8-a855-6dc7646e84c4, accessed August 26, 2020. 13. Super League Gaming, “Super League Gaming Reports Second Quarter 2020 Results,” https://ir.superleague.com/news-events/press- releases/detail/75/super-league-gaming-reports-second-quarter-2020-results, accessed August 26, 2020. 14. Wall Street Journal, “Lululemon Buys Mirror, an At-Home Fitness Startup for $500 Million,” https://www.wsj.com/articles/lululemon-to-buy-at-home- fitness-company-mirror-for-500-million-11593465981, accessed August 24, 2020. 15. Barclays, “lululemon athletica inc: Gaining a Toehold in Connected Fitness with Mirror,” https://www.investmentbank.barclays.com/research/equity- research.html, accessed August 24, 2020. 16. Lululemon, “Lululemon Athletica Inc. To Acquire Home Fitness Innovator MIRROR,” https://investor.lululemon.com/news-releases/news-release- details/lululemon-athletica-inc-acquire-home-fitness-innovator-mirror, accessed August 24, 2020. 17. Business Wire, “Analysis on COVID-19 Related Markets - Connected Gym Equipment Market 2020-2024 | Technological Advances in Connected Gym Equipment to Boost Growth | Technavio,” https://www.businesswire.com/news/home/20200701005486/en/Analysis-COVID-19-Related-Markets--- Connected-Gym, accessed August 24, 2020. 18. Globe Newswire, “Compass Diversified Holdings to Acquire Baseball Equipment Company Marucci Sports,” https://www.globenewswire.com/news- release/2020/03/09/1997216/0/en/Compass-Diversified-Holdings-to-Acquire-Baseball-Equipment-Company-Marucci-Sports.html, accessed August 24, 2020. 19. Vista Outdoor, “Q1 2021 Vista Outdoor Inc Earnings Call,” https://investors.vistaoutdoor.com/event-calendar/default.aspx, accessed August 26, 2020.

Disclosure: This report is a periodic compilation of certain economic and corporate information, as well as completed and announced merger and acquisi- tion activity. Information contained in this report should not be construed as a recommendation to sell or buy any security. Any reference to or omission of any reference to any company in this report should not be construed as a recommendation to buy, sell or take any other action with respect to any security of any such company. We are not soliciting any action with respect to any security or company based on this report. The report is published solely for the general information of clients and friends of Capstone Headwaters. It does not take into account the particular investment objectives, financial situation or needs of individual recipients. Certain transactions, including those involving early-stage companies, give rise to substantial risk and are not suitable for all investors. This report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Prediction of future events is inherently subject to both known and unknown risks and other factors that may cause actual results to vary materially. We are under no obligation to update the information contained in this report. Opinions expressed are our present opinions only and are subject to change without notice. Additional information is available upon request. The companies mentioned in this report may be clients of Capstone Headwaters. The decisions to include any company in this report is unrelated in all respects to any service that Capstone Headwaters may provide to such company. This report may not be copied or reproduced in any form, or redistributed without the prior written consent of Capstone Headwaters. The information contained herein should not be construed as legal advice.

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