Capstone Headwaters

RECREATIONAL PRODUCTS Q2 2019

TABLE OF CONTENTS MERGER & ACQUISTION OVERVIEW

 M&A Overview US outdoor activity has been robust in recent years, as consumers with heightened levels of disposable income pursue activities that promote healthy  Trend Highlight lifestyle trends. As a result of rising disposable incomes and increased  Select Transactions consumer confidence, retail sales in March increased 1.6% compared to 1  Public Company Data February and 3.6% year-over-year (YOY), according to the US Census Bureau. Continued sales growth and the pervasive impact of the health-conscious  Firm Track Record consumer are expected to bolster the Recreational Products industry by driving demand for products that support active, outdoor enthusiast lifestyles.

Strategic operators have continued to account for the majority of transaction volume in the Recreational Products industry, accounting for 79.2% of the 53 total transactions announced or completed year-to-date (YTD) 2019. The buyer breakdown in 2019 follows levels seen in the same period 2018, with strategic CONTRIBUTORS buyers accounting for approximately 80% of YTD 2018 deal volume. However, companies that appeal to a broader customer base and have established brand Sophea Chau recognition and trust have also attracted interest from private equity buyers. Director For example, KPS Capital Partners has acquired the fitness business of 617-619-3307 Brunswick Corporation (May 2019, $490 million). Brunswick’s fitness operations [email protected] consists of five brands, including Life Fitness, a global leader in commercial fitness and game tables. The acquired brands provide KPS with a holding that Jacob Voorhees has strong established brand-positioning, sales channels, and customer bases. Head of Global M&A 617-619-3323 Buyer Breakdown: Recreational Products [email protected] 5.7%

STRATEGIC 17.0% Public 15.1% Private

FINANCIAL Direct Add-on 62.2%

Year-to-date (YTD) ended May 6 Source: Capital IQ, Pitchbook, FactSet, and Capstone Headwaters Research www.capstoneheadwaters.com May 2019 Recreational Products | Q2 2019

TREND HIGHLIGHT: OUTDOOR ENTHUSIASM

AVERAGE YEAR-OVER-YEAR GROWTH Steady demand and subsequent sales in the Outdoor 4.7% IN LEADING OUTDOOR ACTIVITIES Activity industry have promoted acquisitions by leading operators seeking to expand and diversify their current product offerings in high-growth segments. Notably in A growing number of consumers have placed health at January, golf-centric company Callaway Golf Company the forefront of their lives, influencing spending habits (NYSE:ELY) closed its largest acquisition to-date, acquiring and leisure activities across the Recreational Products Jack Wolfskin for $473.3 million, equating to industry. Outdoor activity participation rates in the US are approximately 12.0x LTM EBITDA. Founded in 1981 and indicative of this as leading outdoor activities include based in Germany, Jack Wolfskin is a premium outdoor running, jogging, and trail running (19%), fishing (17%), apparel, footwear, and equipment brand.4 The purchase biking (16%), hiking (15%), and camping (14%), according allows Callaway to penetrate the outdoor activity end- to the Outdoor Industry Association’s 2018 Participation markets as well as reduce the seasonality of their Report.2 Notably, the most recent data reveals that these business. The acquisition is also indicative of Callaway’s YOY participation rates grew at a combined average of strategic initiative to expand beyond their primary 4.7% from 2016 to 2017. The expected expansion in segment in order to diversify both their customer and participants along with favorable macro dynamics have product base as well as capitalize on consumer trends. contributed to the robust state of the Recreational Products industry. Outdoor recreational products companies have utilized acquisition strategies to complement existing products, Further reflecting healthy participation and demand in the expand into new markets, and broaden their customer Outdoor Recreational Products industry was Clarus demographics. Notably, SRAM, a bicycle manufacturer, Corporation’s (Nasdaq:CLAR) Q1 2019 earnings report acquired the power meter brand PowerTap (April, which indicated a 15% YOY increase in revenue.3 Clarus is undisclosed) to expand its technology bicycle component an outdoor and consumer-branded products company business; Hala Gear, a designer of paddle boards for with brands that serve the outdoor enthusiast such as surfing, acquired e-commerce retailer Colorado Kayak Black Diamond (outdoor performance equipment and Supply (February, undisclosed) to expand its operations apparel), PIEPS (beacon technology for avalanche safety), beyond B2C sales; and power sport vehicle provider and Sierra (bullet manufacturer). Revenue of $61.2 Polaris Industries (NYSE:PII) acquired Larson Boat Group million, largely driven by 16% growth in Black Diamond, (January, undisclosed) to further establish itself in the and the subsequent 69% increase in adjusted EBITDA boating industry after its market entrance in 2018. were record-breaking figures for the company in Q1 2019.

Outdoor Activities Participation Rates Key Investment Considerations (% of US Population) Capstone Headwaters has identified key characteristics below that support improved valuation and attractiveness to potential buyers. 24.0%

20.0%

16.0% Brand Reputation Capturing Trends Brands with strong social media Capturing consumer trends and presences and renown product the ability to appeal to a 12.0% quality and durability. broadened customer base.

8.0% 2007 2009 2011 2013 2015 2017

Running/Jogging/Trail Running Bicycling Omnichannel Sales Inventory Management Fishing Hiking Diversified sales channels with a Minimal seasonality and Camping strong e-commerce network are efficient inventory management preferred for buyers looking to can reduce uncertainty of Source: Outdoor Industry Association (left) expand into new segments. projected earnings.

2 Recreational Products | Q2 2019

SELECT TRANSACTIONS

Enterprise EV / LTM Date Target Acquirer Target Business Description Value (mm) Revenue EBITDA Fitness Operations Produces branded commercial fitness equipment and 05/06/19 KPS Capital $490.0 - - of Brunswick game tables. Develops golf-centric technology, including GPS tablets in 05/03/19 IZON Network SoMo Audience - - - golf carts.

04/18/19 Parker Marine Correct Craft Manufactures and supplies boats. - - -

Operates four stores in Texas, selling boats, water sports 04/17/19 Sail & Ski Center MarineMax - - - products, and snow sports products.

04/15/19 Roadtrek RV Rapido Manufactures branded recreation vehicles. - - -

PowerTap brand Produces bicycle power meters, pedals, chainrings, and 04/11/19 SRAM - - - of Saris Cycling wheelsets. Grant Hill Partners; 04/04/19 Custom Ink Offers custom apparel for teams and groups. - - - HarbourVest Designs, markets, and distributes branded active and 04/02/19 VOLCOM Authentic Brands - - - streetwear products as well as boardsport products.

03/28/19 Labellamafia Pacífico Sul Provides activewear internationally for men and women. - - -

Operates retail stores as well as an e-commerce platform, 03/25/19 Kicks USA Deichmann - - - selling athletic apparel and footwear. Sugar Wheel 03/12/19 Breadwinner Cycles Manufactures bicycle wheels. - - - Works

03/08/19 Fly Pedals Spin Ventures Produces clipless bicycle pedals. - - -

Lake Union 03/07/19 Pacific Nautiques Manufactures wake boats and other water sport products. - - - Sea Ray Produces electric-powered two-wheel bikes designed for 03/05/19 StaCyc Harley-Davidson - - - children. Blue Ridge Operates shooting sports stores, providing firearms and 02/26/19 Blackfish Armory - - - Arsenal firearm accessories.

02/19/19 CytoSport Pepsi Produces sports-oriented nutritional products. $465.0 1.6x -

Colorado Kayak Twitch (dba: Hala Operates an e-commerce website which sells paddle 02/14/19 - - - Supply Gear) boards, kayaks, and other hiking and camping products. Levine Leichtman 02/05/19 Club Champion Provides nationwide club fitting services for golfers. - - - Capital

02/04/19 All Ball Pro Gladiator Lacrosse Manufactures and sells sports equipment for ball sports. - - -

02/01/19 Sports Illustrated TPG Capital Publishes a leading sports magazine. - - -

01/22/19 Larson Boat Group Polaris Industries Manufactures boats under five brands. - - -

Racetrackers Running Awards Supplies customized technical apparel as well as golf 01/17/19 - - - Enterprises and Apparel apparel. Designs and sells premium bicycle brands through a global 01/17/19 Advanced Sports HTM USA $21.8 - - distribution network. Camping World 01/08/19 Coates RV Center Operates as a recreation vehicles dealer. - - - Holdings Kialoa Canoe Produces canoe and paddle board paddles as well as water 01/05/19 Werner Paddles - - - Paddles board apparel.

Source: Capital IQ, Pitchbook, FactSet and Capstone Headwaters Research 3 Recreational Products | Q2 2019

PUBLIC COMPANY TRADING & OPERATING DATA

Price % 52 Wk Market Enterprise LTM EV / LTM Company 05/06/19 High Cap Value Revenue EBITDA Margin Revenue EBITDA Brunswick Corporation $52.78 75.6% $4,595.9 $5,827.7 $5,223.7 $673.2 12.9% 1.1x 8.7x

Callaway Golf Co. $17.37 70.4% $1,1647.0 $1,643.2 $1,242.8 $152.1 12.2% 1.3x 10.8x

Clarus Corporation $13.83 98.9% $411.5 $431.2 $212.1 $18.2 8.6% 2.0x 23.7x

Dorel Industries Inc. $8.79 43.5% $288.7 $749.3 $2,619.5 $119.0 4.5% 0.3x 6.3x

Escalade Inc. $12.05 79.0% $174.4 $174.6 $175.7 $16.5 9.4% 1.0x 10.6x

Johnson Outdoors Inc. $86.70 80.8% $864.8 $796.6 $544.1 $73.7 13.5% 1.5x 10.8x

Lafuma SA $23.52 84.0% $167.0 $147.4 $194.5 $12.2 6.3% 0.8x 12.1x

Mean 9.6% 1.1x 11.9x

EV = enterprise value; LTM = last twelve months Median 9.4% 1.1x 10.8x $ in millions, except per share data NM = Not Meaningful Harmonic Mean 8.4% 0.8x 10.3x

Last Twelve Month Margin Performance

60% 46.5% 50% 44.5% 40.6% 40% 35.4% 30% 26.1% 25.3% 21.6% 20% 12.9% 12.2% 13.5% 8.6% 9.4% 6.3% 10% 4.5% 0% Brunswick Callaway Golf Clarus Dorel Industries Escalade Johnson Outdoors Lafuma

Gross Margin % EBITDA Margin %

Last Twelve Month 1-Year Revenue Growth

30.0% 24.3% 25.0% 18.5% 20.0%

15.0%

10.0% 6.9% 5.8% 2.8% 5.0% 1.6% 0.0%

-5.0% -1.1% Brunswick Callaway Golf Clarus Dorel Industries Escalade Johnson Outdoors Lafuma

Source: Capital IQ and Capstone Headwaters Research as of May 6, 2019 4 Recreational Products | Q2 2019

FIRM TRACK RECORD

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 been acquired by

a portfolio company of

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

5 Recreational Products | Q2 2019

CITATIONS

1. US Census Bureau, “Advance Monthly Sales For Retail and Food Services,” https://www.census.gov/retail/marts /www/marts_current.pdf, accessed May 10, 2019. 2. Outdoor Industry Association, “2018 Outdoor Participation Report,” https://outdoorindustry.org/resource/2018-outdoor- participation-report/, accessed May 10, 2019. 3. Clarus Corporation, “Clarus Reports Record First Quarter 2019 Results,” https://www.claruscorp.com/press- releases/detail/173/clarus-reports-record-first-quarter-2019-results, accessed May 10, 2019. 4. Cision PR Wire, “Callaway Golf Company Completes Acquisition of Jack Wolfskin, A Premium Outdoor Apparel Brand,” https://www.prnewswire.com/news-releases/callaway-golf-company-completes-acquisition-of-jack-wolfskin-a-premium- outdoor-apparel-brand-for-418-million-300772897.html, accessed May 10, 2019.

Disclosure: This report is a periodic compilation of certain economic and corporate information, as well as completed and announced merger and acquisition 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 mate- rially. 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.

6 Recreational Products | Q2 2019

RECREATIONAL PRODUCTS REPORT CONTRIBUTORS

Sophea Chau Director & Head of Recreational Products [email protected] | 617-619-3307

Sophea has more than 13 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.

Jacob Voorhees Head of Global M&A [email protected] | 617-619-3323

Jacob brings over 15 years of experience to the Capstone Headwaters investment banking team. As one of the founding members of Capstone Partners, he helped build Capstone’s brand over the past decade until the merger with Headwaters MB in late 2017. Today, Jacob serves as the Co-Head of Investment Banking for Capstone Headwaters and is responsible for overseeing the Northeast Region. Jacob has proved himself to be a talented deal maker with an unyielding commitment to his clients and has established himself and our firm as a leader in various industries including education and training, consumer products and business services sectors. He is a highly accomplished leader and serves as a strong mentor and role model to our developing professionals.

Formerly, Jacob was with Andersen Corporate Finance LLC, where he focused his efforts on the software and direct marketing industries. He started his career in New York City with Rabobank International, a multi‐national Dutch investment bank in Utrecht, the Netherlands. While at Rabobank International, Jacob worked in the mergers and acquisitions group focusing on cross‐border transactions in South and Latin America in the consumer products, food & beverage industries. Additionally, Jacob founded Sophie’s Fund which provides college scholarships and financial support to homeless youth.

Jacob received an MBA from the Sloan School of Management at Massachusetts Institute of Technology (MIT) and a BS from Cornell University. He is qualified as a General Securities Representative.

2019 2019 2018 2018

TURNAROUND AWARDS MIDDLE-MARKET BOUTIQUE INVESTMENT BANKING FIRM US MIDDLE MARKETS US - DEBT FINANCING INVESTMENT OF THE YEAR INVESTMENT BANK OF THE YEAR ADVISORY OF THE YEAR BANK OF THE YEAR

7 BUILT FOR THE MIDDLE MARKET

UNITED STATES

160+ professionals 17 offices INTERNATIONAL Boston  Boise  Burlington  Chicago Dallas  Denver  Greenwich  Houston 450+ professionals Los Angeles  New York  Orange 60+ offices in 40 countries County  Philadelphia  San Diego San Francisco  St Louis  Tampa Asia: China  India  Japan Washington DC Latin America: Argentina  Brazil  Chile  Colombia  Mexico  Peru Africa: Congo  Egypt  Ghana  Ivory Coast  Mauritius  Morocco  Senegal  South Africa Europe: Belgium  Bosnia  Croatia  Czech Republic  Finland  France  Germany  Herzegovina Hungary  Ireland  Italy  London  Netherlands  Norway  Poland  Russia  Serbia  Slovenia Spain  Sweden  Switzerland  Turkey  United Kingdom

Capstone Headwaters is an elite investment banking firm dedicated to serving the corporate finance needs of middle market business owners, investors and creditors. Capstone Headwaters provides merger & acquisition, private placement, corporate restructuring and financial advisory services across 16 industry verticals to meet the life cycle needs of emerging enterprises. Headquartered in Boston, MA and Denver, CO, Capstone Headwaters has 19 offices in the US, UK and Brazil with a global reach that includes over 450 professionals in 40 countries.