1 - Performance Sports Group

NYSE/TSX: PSG
INVESTOR PRESENTATION
JULY 2014
Forward-Looking Statements
NYSE/TSX: PSG
This presentation includes forward-looking statements within the meaning of applicable securities laws, including with respect to Performance Sports Group Ltd.’s (the
“Company” or “PSG”) growth strategies, anticipated benefits of the Easton Baseball/Softball acquisition and pro forma financial information. Forward-looking statements,
by their nature, are based on assumptions, including those described herein and are subject to important risks and uncertainties.
Many factors could cause the Company's actual results to differ materially from those expressed or implied by the forward-looking statements, including, without
limitation, the following factors: inability to maintain and enhance brands; inability to introduce new and innovative products; intense competition in the sporting
equipment and apparel industries; inability to introduce technical innovation; inability to ensure third-party suppliers will meet quality and regulatory standards; inability
to own, enforce, defend and protect worldwide intellectual property rights; seasonal fluctuations in the demand for our products resulting from adverse weather or
other conditions; decrease in ice hockey, baseball and softball, roller hockey or lacrosse participation rates; adverse publicity related to or reduced popularity of the
professional or amateur leagues in sports in which our products are used; reliance on third-party suppliers and manufacturers; disruption of distribution chain or loss of
significant customers or suppliers; cost of raw materials, shipping costs and other cost pressures; risks associated with doing business abroad; inability to accurately
forecast demand for products; insufficient sell through of our products at retail; inventory shrinkage or excess inventory; product liability claims and product recalls;
changes in compliance standards of testing and athletic governing bodies; departure of senior executives or other key personnel; litigation, including certain class action
lawsuits; employment or union-related disputes; restrictive covenants in the Company’s credit facilities; inability to generate sufficient cash to service all the Company’s
indebtedness; inability to successfully integrate new acquisitions; inability to realize growth opportunities or cost synergies that are anticipated to result from new
acquisitions; possibility that historical and pro forma combined financial information may not be representative of our results as a combined company; inability to
continue making strategic acquisitions; volatility in the market price for common shares; fluctuations in the value of certain foreign currencies, including the Canadian
dollar, Chinese renminbi, euro, Swedish krona, Taiwanese new dollar and Thai baht in relation to the U.S. dollar; inability to manage foreign derivative instruments;
general adverse economic and market conditions, as well as the factors identified in the "Risk Factors" section of the Company’s supplemented prospectus dated June 19,
2014.
Presentation of Financial Information
The pro forma information contained in this presentation should not be considered to be what the actual financial position or other results of operations would have
necessarily been had the Company and Easton Baseball/Softball operated as a single combined company, as, at, or for the periods stated.
This presentation makes reference to certain non-IFRS measures, including Adjusted Gross Profit, EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings Per
Share (EPS) and Free Cash Flow. These non-IFRS measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS, and are
therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement
those IFRS measures by providing further understanding of results of operations from management’s perspective. Accordingly, they should not be considered in isolation
nor as a substitute for analyses of financial information reported under the applicable accounting standards. For the relevant definitions and reconciliations to our
reported results, see the Appendix to this presentation, including “Non-IFRS Measures.”
All $ references in this presentation are to U.S. dollars unless otherwise stated.
This presentation is copyright 2014 Performance Sports Group Ltd. All rights reserved.
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NYSE/TSX: PSG
Who We Are…
• Performance Sports Group (PSG) is a leading
developer and manufacturer of high performance
sports equipment and related apparel
• We are the No. 1 global brand in hockey and No. 1
North American brand in diamond sports with an
expanding presence in the growing lacrosse market
• Our mission is to elevate player performance and
protection through athlete insight and superior
innovation
• Our brands have a rich history of innovation,
authenticity and market leadership, with BAUER
and EASTON dating back to 1927 and 1922,
respectively
• Our company produces predictable and significant
Free Cash Flow
We Are a Growth Company
$594
Revenue
Adj. EBITDA¹
$ Millions
$375
$400
$95
$306
$257
$44
$52
$62
$31
FY10
FY11
FY12
FY13
TTM@
Q3-14²
Fiscal year ends May 31.
¹See Appendix for a reconciliation of Adj. EBITDA.
²Represents pro-forma figures for the 12-months ended Dec 31, 2013 for
Easton Baseball/Softball and Feb 28, 2014 for PSG.
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NYSE/TSX: PSG
A Powerful Brand Portfolio
#1 in Hockey
(~53% Share)
#1 in Diamond Sports
(~30% Share)
Lacrosse Equipment
Leader (~25% share)
Soccer & Team
Apparel Engine
4
NYSE/TSX: PSG
A Large and Growing Addressable Market
• We target a $3B addressable wholesale market
($2B equipment, $1B apparel)¹
• U.S. sporting goods stores, including specialty
sporting goods stores, revenues expected to grow
at a 2.3% CAGR to $47.5B by 2018²
• Strong dollar value growth due to positive
underlying fundamentals and attractive
purchasing patterns
• Short replacement cycle driven by core youth
consumers outgrowing their equipment and
parents wanting highest performing products for
their children
• One to two year product cycles ensure relentless
flow of latest technologies
• Consistent innovation drives higher average
selling prices
¹Management estimates.
²IBISWorld Inc., Industry Report, November 2013.
2013 Estimated
Market Size¹
($ in millions)
Anticipated
Growth Percentage¹
Hockey equip.
(Global)
$650
Low-Single-Digit to
Mid-Single-Digit
Hockey apparel
(Global)
$390
Mid-Single-Digit to
High-Single-Digit
Baseball/Softball
equip.
(Global)
$1,000
Low-Single-Digit
Baseball/Softball
apparel
(Global)
$300
Low-Single-Digit
Lacrosse equip.
(U.S., Canada)
$120
High-Single-Digit to
Low-Double-Digit
Lacrosse apparel
(U.S., Canada)
$30
Mid-Single-Digit to
High-Single Digit
Soccer team
apparel
(U.S., Canada)
$300
Low-Single-Digit to
Mid-Single-Digit
Sport/Category
5
TSX: BAU
THE PSG PLATFORM
NYSE/TSX: PSG
PSG Platform Advantage
Independent Consumer & Customer-Facing Functions – Driving Growth
Product Development
Hockey
Sales
Lacrosse
Marketing
Baseball / Softball
Soccer
Authentic Brands / Consumer Insight / World Class R&D / Strong IP
PSG Functional Platform – Enabling Growth
R&D
Sourcing &
Manufacturing
Distribution &
Logistics
IT & HR
Finance & Legal
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NYSE/TSX: PSG
World-Class R&D is a Competitive Advantage
• ~4% of annual revenue spent on R&D
Innovative Technologies
• Strong track record of technical design
and product development through
five-year innovation cycle
TUUK Lightspeed Edge:
Revolutionary, trigger-based
system allows for immediate
replacement of steel and tighter
turns
• Portfolio of 627 global patents¹
• Team of more than 75 designers,
engineers and developers
• Legacy of redefining product
categories
• R&D, technology and materials
leveraged across multiple sports
• Utilize strategic partnerships to
enhance R&D (e.g. McGill University,
UPMC)
¹Includes design patents and patents pending.
EASTON Mako Bat:
Max barrel length with
minimum swing weight
Base Layer feat. 37.5™
Technology: Fast-drying
moisture management
delivers high level of
performance
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NYSE/TSX: PSG
Shared R&D Across Our Sports Platform
• Collaborative product
development process exemplifies
potential of our integrated
platform
• Multi-disciplinary approach to
product development is
organized by product categories
within each sport
• Takes advantage of our categorybased integrated R&D platform
• This approach has been
successful in leveraging
innovation, such as helmet
technology between BAUER and
CASCADE
Cross-Pollination Case Study – Helmets
BAUER RE-AKT 100
Hockey Helmet
CASCADE R
Lacrosse Helmet
Other examples of cross-pollinated
technology include:
• Lacrosse and hockey gloves
• Apparel development
• Under-protective gear
• Carbon fiber
9
Diversified and Balanced Business Model
Geography
Category
Season
Revenues Pre-Easton Transaction
Other
Sports
Rest of
World
U.S.
Canada
Hockey
Baseball/
Softball
Q4
Q1
Q3
• ~43% of pro forma
sales from outside the
U.S.
• Broad product offering
across all major
equipment categories
Q2
• Increasing team and
related-apparel offering
limits reliability on any
one product type, sport
season or geography
Q4
Q3
Distribution
• Low customer
concentration (no
customer >12% pro
forma)
• Most sales are to
independent/specialty
retailers, such as:
Revenues Post-Easton Transaction
• Presence in over 60
countries
NYSE/TSX: PSG
Q1
• Total Hockey
• Pro Hockey Life
• Lacrosse Unlimited
• Monkey Sports
Q2
• Baseball Express
• Diamond sports
acquisition has balanced
PSG seasonality and
smoothed quarterly
sales and profitability
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NYSE/TSX: PSG
Proven Acquisition Expertise
2008
Bauer acquires MissionItech, 4th largest hockey
equipment company,
providing entrance into
roller hockey & expansion
of ice hockey categories
2010
We acquire
lacrosse
equipment maker
MAVERIK & enters
2nd major sport
2012
We acquire Inaria,
establishing one-stopshop for team apparel
(hockey, lacrosse &
soccer)
2014
We acquire Easton
Baseball/Softball, No. 1
market share company in
North America,
significantly expanding
baseball presence
History of Successfully Identifying and Integrating Accretive Acquisitions
2009
We acquire IP
assets of Jock Plus,
entering
performance
apparel market
2012
We acquire lacrosse
helmet maker CASCADE,
significantly expanding
presence in lacrosse
2013
We acquire baseball
& softball bat
manufacturer
COMBAT, entering 3rd
major sport
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Seasoned Management Team
NAME & TITLE
YEARS AT
PSG
NYSE/TSX: PSG
PAST FIVE YEARS EXPERIENCE
Kevin Davis
Director, President and CEO
12
President and CEO, PSG
Amir Rosenthal
CFO and EVP of Finance and
Administration, and Treasurer
6
CFO and EVP of Finance and Administration, and Treasurer, PSG; CFO and
Treasurer, PSG
Paul Gibson
EVP, Product Creation and Supply Chain
26
EVP, Product Creation and Supply Chain, PSG
Clifford Hall
EVP, Easton Baseball/Softball
<1
EVP, Easton Baseball/Softball; Senior Director, Private Equity Services
Operations Group, Alvarez and Marsal
Rich Wuerthele
EVP, Bauer Hockey
<1
EVP, Bauer Hockey; President, Tools Business Segment, Newell Rubbermaid;
President, Industrial Products & Services, Newell Rubbermaid; President,
North American Sales Organization, Newell Rubbermaid
Angela Bass
VP, Global Human Resources
2
VP, Global Human Resources, PSG; DSVP Human Resources, Collective
Brands Performance + Lifestyle Group
Troy Mohns
VP, Lacrosse and New Business
18
VP, Lacrosse and New Business, PSG; VP of Category Management, PSG; VP
of Business Development, PSG
Michael Wall
VP, General Counsel and Corporate
Secretary
6
VP, General Counsel and Corporate Secretary, PSG
12
Predictable and Significant Free Cash Flow
PSG Free Cash Flow¹
$36.5M
$30.8M
NYSE/TSX: PSG
• Capex has averaged 1.6% of revenues²
• To support our growth initiatives, we
expect moderately higher levels of
capex
• Strong cash flow used for:
• R&D
• Debt reduction
• Growth initiatives (including acquisitions)
$17.5M
$13.3M
FY10
FY11
FY12
FY13
Note: Fiscal year ends May 31. Excludes impact from acquisition of Easton Baseball/Softball.
¹Free Cash Flow is a non-IFRS measure and means Adjusted EBITDA minus net interest expense, term loan amortization, net
cash taxes and capital expenditures. See Appendix for a reconciliation of Free Cash Flow.
²Fiscal 2010 through 2013 average.
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TSX: BAU
GROWTH OPPORTUNITIES
NYSE/TSX: PSG
Five Key Growth Opportunities
1
2
3
4
5
Significantly Grow Share • As we did with hockey, expand our
market share in baseball/softball by:
in Baseball/Softball
Continue to Grow in
Hockey
Grow Apparel Across All
Sports
Continue Rapid Growth
in Lacrosse
Continue to Pursue
Strategic Acquisitions
• Investment in product development
• Category management discipline
• Strong consumer connections
Category Market Share
Strong market share
growth in hockey...
53%
• Like hockey 6-7 years ago, Easton has:
• Market share of approx. 30%
• Very strong presence in a single
category (with strength in others)
• Fragmented market with approx. one
dozen competitors
35%
...with plan
to capitalize
on similar
opportunity
in baseball/
softball.
30%
• Leverage technologies of EASTON and
COMBAT
• Territorial expansion of both diamond
sports brands
• Grow apparel to include uniforms
FY07
FY13
Hockey
FY13
Baseball/
Softball
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NYSE/TSX: PSG
Five Key Growth Opportunities
1
2
3
4
5
Significantly Grow Share
in Baseball/Softball
Continue to Grow in
Hockey
Grow Apparel Across All
Sports
Continue Rapid Growth
in Lacrosse
Continue to Pursue
Strategic Acquisitions
• Grow sticks – the largest
ice hockey product
category
Our Hockey Performance
% Market Share
53%
• Expand market share in all
other categories
35%
• “Grow the Game” initiative
• Continue to innovate and
redefine product categories
through 5-year product
innovation cycle
FY07
FY13
Market Share by Category
#1
#1
65%+
65%+
Skates
Helmets
#1
#1
#1
40%+
40%+
40%+
Goalie
Sticks Protective
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NYSE/TSX: PSG
Five Key Growth Opportunities
1
2
3
4
5
Significantly Grow Share
in Baseball/Softball
Continue to Grow in
Hockey
• Apparel market highly fragmented
• Apparel revenues increased at
37% CAGR from FY09-FY13
• Inaria acquisition provided team
uniform capabilities
• Continue strong growth in hockey
apparel
Grow Apparel Across All
• Expand lacrosse uniform launch
Sports
• Grow soccer apparel and uniform
market share
Continue Rapid Growth
in Lacrosse
Continue to Pursue
Strategic Acquisitions
Sample Apparel Products
• Large opportunity in
baseball/softball
Apparel Market Size by Sport¹
~$390
($ in millions)
~$300
~$300
• Continue R&D investments in
apparel
¹Management estimates.
~$30
Hockey
Baseball/Softball
Soccer
Lacrosse
17
Five Key Growth Opportunities
1
2
3
4
5
Significantly Grow Share
in Baseball/Softball
Continue to Grow in
Hockey
Grow Apparel Across All
Sports
Continue Rapid Growth
in Lacrosse
Continue to Pursue
Strategic Acquisitions
NYSE/TSX: PSG
• CASCADE and MAVERIK enjoy ~25%
market share today
• Targeting market leadership by
2016
• Focus on core youth and high
school markets
• Maintain our factory customization
competitive advantage
• Grow in every category
• Expand into team apparel
• Expand women’s equipment
offering (launched in 2013)
• Deliver advancements in women’s
head protection
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Five Key Growth Opportunities
1
2
3
4
5
Significantly Grow Share
in Baseball/Softball
Continue to Grow in
Hockey
Grow Apparel Across All
Sports
Continue Rapid Growth
in Lacrosse
Continue to Pursue
Strategic Acquisitions
NYSE/TSX: PSG
• PSG is an acquirer of choice
• Global operating platform applicable
to many sports
• Steady cash flow generation and
strong balance sheet
• We’ve established an effective internal
process for identifying, acquiring and
integrating target companies
• Target acquisition parameters
 Ability to leverage world-class
performance sports platform
 Existing or potential market leaders
 Authentic brand equity and strong IP
assets
 Sports that demand high-quality,
innovative performance products
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NYSE/TSX: PSG
Easton Baseball/Softball Transaction
• In Apr 2014, PSG acquired Easton
Baseball/Softball from Easton-Bell
Sports for $330 million in cash¹
• Accretive to Adj. EPS in first year²
• Effective acquisition multiple of 9.0x
Adj. EBITDA², including the value of
tax benefit acquired as part of the
transaction
• Ongoing operations require minimal
Capex
• ~$10M incremental interest expense
after equity offering and related debt
payment
¹Consideration also involves a working capital adjustment and transaction fees. As a
result of the acquisition, PSG owns the EASTON brand and Easton Baseball/Softball,
while BRG Sports (formerly Easton-Bell Sports) retains its Easton Hockey and
Easton Cycling businesses and is licensed to use EASTON for these businesses.
²Adj. EPS is a non-IFRS measure. See Appendix for a definition.
Pro Forma
Financials
($ in millions)
TTM Feb-14
PSG Actual
TTM Dec-13
Easton Actual
Pro
Forma
Revenues
$420
$174
$594
Adj. EBITDA
$61.8
$33.6
$95.3
20
NYSE/TSX: PSG
PSG Key Takeaways
• World-class performance sports company with
proven platform
Revenue
Adj. EBITDA¹
$594
• Our brands have a rich history of innovation,
authenticity and market leadership
• #1 global ice hockey company and now #1 in
diamond sports in North America
• Leading lacrosse company with ~85% market
share in helmets
• Growing organically and via acquisitions in
attractive segments and new sport markets
• Predictable and significant Free Cash Flow
generation
$375
$400
$95
$306
$257
$44
$52
$62
$31
FY10
FY11
FY12
FY13
TTM@
Q3-14²
Fiscal year ends May 31.
¹See Appendix for a definition and reconciliation of Adj. EBITDA.
²Represents pro-forma figures for the 12-months ended Dec 31, 2013 for
Easton Baseball/Softball and Feb 28, 2014 for PSG.
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NYSE/TSX: PSG
APPENDIX
NYSE/TSX: PSG
Historical Financial Performance
Revenues
Strong Revenue
Growth, Stable
Gross Margins
Adjusted EBITDA¹
$400M
Predictable Cash
Flow Generation
Adjusted EPS¹
$62M
$375M
Earnings Growth
Exceeds Revenue
Growth
$0.98
$0.81
$52M
$306M
$44M
$257M
$0.55
$31M
$0.15
FY10
FY11
FY12
38.0%
Adj. Gross Margin¹
40.2%
38.7%
FY13
38.3%
FY10
11.9%
FY11
FY12
Adj. EBITDA Margin¹
14.2%
13.7%
FY13
15.6%
FY10
1.7%
FY11
FY12
Adj. Net Income Margin¹
5.6%
6.8%
Fiscal year ends May 31.
¹A reconciliation of Adj. Gross Profit, Adj. EBITDA, Adj. Net Income and Adj. EPS follows. Margin percentages are calculated by dividing applicable margin dollars by revenues.
FY13
8.9%
23
Consistent Revenue Growth Across
Four Seasons
NYSE/TSX: PSG
$ Millions
% Year-Over-Year Growth
$142.4
$148.3
4%
$154.0
4%
$100.3
$109.6
9%
$117.1
7%
$80.5
$51.5
$54.9
7%
FY12
FY13
Q1
FY14
FY12
FY13
Q2
FY14
FY12
FY13
$62.2
$68.2
18%
FY11
FY12
$86.7
8%
13%
FY14
Q3
Note: PSG Fiscal year ends May 31. Excludes impact of acquisition of Easton Baseball/Softball. Q4 results for FY14 have yet to be reported.
FY13
Q4
24
Adjusted Gross Profit
NYSE/TSX: PSG
PSG
25
Adjusted EBITDA Reconciliation
NYSE/TSX: PSG
PSG
¹Trailing 12-month Adj. EBITDA at Dec 31, 2013 for Easton Baseball/Softball was approximately $33.6 million.
26
Adjusted EPS Reconciliation
NYSE/TSX: PSG
PSG
27
Free Cash Flow Reconciliation
NYSE/TSX: PSG
PSG
28
Non-IFRS Measures
NYSE/TSX: PSG
This presentation uses the following non-IFRS measures: Adjusted Gross Profit, EBITDA and Adjusted EBITDA, Adjusted Earnings
per Share (EPS) and Free Cash Flow. The foregoing non-IFRS measures are defined as follows: Adjusted Gross Profit is defined as
gross profit plus the following expenses which are part of cost of goods sold: (i) amortization and depreciation of intangible
assets, (ii) non-cash charges to cost of goods sold resulting from fair market value adjustments to inventory as a result of
business acquisitions, (iii) reserves established to dispose of obsolete inventory acquired from acquisitions and (iv) other onetime or non-cash items. Adjusted EBITDA is defined as net income adjusted for income tax expense, depreciation and
amortization, losses related to amendments to the credit facility, gain or loss on disposal of fixed assets, net interest expense,
deferred financing fees, unrealized gains/losses on derivative instruments, and realized and unrealized gains/losses related to
foreign exchange revaluation and before restructuring and other one-time or non-cash charges associated with acquisitions,
other one-time or non-cash items, pre-IPO sponsor fees, costs related to share offerings, as well as share-based payment
expense. Adjusted Earnings per Share is defined as Adjusted Net Income/Loss divided by the weighted average diluted shares
outstanding. Adjusted Net Income/Loss is defined as net income adjusted for all unrealized gains/losses related to derivative
instruments and unrealized gains/losses related to foreign exchange revaluation, non-cash or incremental charges associated
with acquisitions, amortization of acquisition-related intangible assets for acquisitions since the Company's initial public
offering, costs related to share offerings, share-based payment expense and other non-cash or one-time items. Free Cash Flow
is defined as Adjusted EBITDA minus net interest expense, term loan amortization, net cash taxes and capital expenditures.
The Company believes that these non-IFRS measures provide useful information to both management and investors in
measuring financial performance. These measures do not have a standard meaning prescribed by IFRS and therefore, they may
not be comparable to similarly titled measures presented by other publicly traded companies, and should not be construed as
an alternative to other financial measures determined in accordance with IFRS. These non-IFRS measures are provided as
additional information to complement IFRS measures by providing further understanding of operations from management’s
perspective. Accordingly, non-IFRS measures should never be considered in isolation nor as a substitute to using net income as a
measure of profitability or as alternative to the IFRS consolidated statements of income or other IFRS statements.
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NYSE/TSX: PSG