Clement Bigot - eportfolio

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1 Clement Bigot - eportfolio Tell the story behind the numbers EXECUTIVE SUMMARY COMPANY: GOPRO INDUSTRY: CAMERA & MEDIA FINANCIAL SKILLS Will GoPro realise its true value as a global media platform? GoPro, the manufacturer of high definition personal capture devices, is rapidly gaining share in the digital capture market. The company recently joined the Nasdaq stock market in June 2014 and is growing in both the camera and camcorder markets, with 27% and 5% share respectively. The overall digital capture market has fallen by 44% - GoPro however has grown by 240%. It is among the most viewed brands on Youtube today. GoPro s current and future growth may come from Virtuous Cycle. People filming content with social currency which is shared -> more people view content and are then compelled to buy a GoPro which repeats. As a media platform it could have the ability to curate the best content and gain advertising/royalties etc. However the market seems very optimistic about GoPro s media platform opportunity which is at least 2-3 years from materialising. It is perhaps too early for long-term investors to be able to tell whether GoPro will have staying power or will be out-competed by larger counterparts like Sony, Google, or Apple. COMPLETED PROJECTS BOOKS Company Valuation Financing M&A Financial Modelling Hyperlink(s) GoPro Financial Model & Valuation GOPRO Outlook Report TECHNICAL STRATEGY ACCOUNTING Sources 1. GoPro company website 2. GoPro 10-Q Filings, S-1 IPO Prospectus Filing 3. Website sources: Financial Times, Google Finance FINANCIAL ANALYSIS

2 GOPRO A GLOBAL MEDIA BRAND Tell the Story Behind the Numbers

3 Table of Contents Recent Capital Markets Activity Online Camera Market Overview Company Considerations Share price performance Recent Corporate Actions (eg. M&A, news announcements) Operating Performance Valuation

4 Executive Summary GoPro, the manufacturer of high definition personal capture devices, is rapidly gaining market share in the digital capture market. Current and future revenues will come from Virtuous Cycle People film content with social currency which is shared -> more people view content and are then compelled to buy a GoPro which repeats As a media platform it could have the ability to curate the best content and gain advertising/royalties etc. The market seems very optimistic about GoPro s media platform opportunity which is at least 2-3 years from materialising. Based on our valuation analysis, the company is not trading on fundamentals: Based on forecasts, a 5-year discounted cash flow model yields a per share valuation of $21.30 GoPro currently trades at $68.2 on NYSE an implied 3x market premium to the fundamental DCF value Looking at a trading multiples valuation we see that GoPro has a 286% market premium on its P/ E multiple and an 88% premium on its EV/Sales It is far too early for long-term investors to be able to tell whether GoPro will have staying power or will be out-competed by larger counterparts like Sony, Google, or Apple.

5 RECENT CAPITAL MARKETS ACTIVITY

6 Investor Sentiment Quotes We believe GoPro is an atypical consumer electronics company, because it has successfully differentiated through the content and engaging experiences it enables, not through the wearable capture device itself. (Citi) One thing that surprised us is just how large and profitable the company already is for a start-up. (Barclays) If their cameras continue to evolve, then narcissistic thrill seekers might not be GoPro's ultimate market at all.

7 Investor Sentiment Quotes It is far too early for long-term investors to be able to tell whether GoPro will have staying power or will be outcompeted by larger counterparts like Sony, Google, or Apple. The social media video sharing aspect to GoPro is an interesting one, but far too early to consider it a viable revenue stream. The commoditization of action cams is inevitable, decreasing margins.

8 CAMERA MARKET OVERVIEW

9 Camera Market Overview GoPro is gaining market share in both the camera and camcorder markets, with 27% and 5% share respectively. The overall digital capture market has fallen by 44% - GoPro however has grown by 240%. Revenue growth in APAC has been slow. US and EMEA have been strong Camera market is trending towards the selfie culture Camcorder market 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% GoPro Share of Camera & Camcorder market camcorder market camera Market 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Camera market Camera & Camcorder Market Units shipped Comparison GoPro 1, GoPro total Revenue by Geography (1000 s) Americas EMEA APEC total 0 Total (1000 s)

10 GoPro Market Overview GoPro is among the most viewed brands on Youtube As a media platform it can curate the best content and gain advertising/royalties etc Redbull is currently the leader in this genre of branded marketing Partnerships such as Stratos jump Only 36% of US have seen GoPro videos Youtube channel is consistently gaining in views and subscribers Top performing channels in Outdoor activities & adventure sports category (m) redbull discovery gopro dcshoes xtreme vid Subsrcibers (mil) Gopro channel - # Subscribers and Uploaded video views Uploaded video views (mil) Have you seen GoPro branded content? (Citi) 36% 14% 50% No, and I have never heard of GoPro before, Yes, I have seen GoPro content before, No, but I have heard of GoPro before, subscribers Uploaded Video views

11 Competitive Landscape Cameras Sony Garmin Polaroid Ion JVC Panasonic Drift Consumer irobot Corp Lululemon athletica Chipotle Mexican Grill Michael Kors Holdings Hain Celestial Group Annies inc Online RedBull Discovery Channel

12 COMPANY CONSIDERATIONS

13 Key Company Considerations Hardware will lead growth in near term Possible upside should media platform deliver (2016 expected) Advertising opportunities Licensing (Getty images platform) Software and studio initiatives (investments in video editing) Secured deals with Virgin Atlantic, Microsoft Xbox and BMW idrive Current and future revenues will come from Virtuous Cycle People film content with social currency which is shared -> more people view content and are then compelled to buy a GoPro which repeats Citi research suggests only 36% of US consumers have seen GoPro videos suggesting the market still offers significant upside Strong management team. Nicholas Woodman Highly regarded CEO, holds a majority stake Tony Bates hired just prior before IPO. Ex-Microsoft/Skype and former board member of Youtube Jack Lazar Corporate development and general manager at QUALCOMM

14 Key Company Considerations Highly competitive market Direct competitors are established and have the revenue and influence to gain back market share. GoPro market share will fall as low end category growth increases. Action cameras will only be adopted by so many people. Google glass style technology and better mobile phones will limit mainstream sales. GoPro suggests mobile might actually be complementary so this is contentious. Cool factor may not work on mainstream Consumer may rather just look at price and ease of use. To break APAC market a lower cost unit needed which will depress margins Likely product model similar to Apple Ipod touch/nano/shuffle Media will be difficult to monetize as they do not own content

15 Share Price Performance vs Competitors (Last 12 Months) Garmin Sony Apple Netgear Nike Tesla UnderArmour 200 Price index (re-based September) GPRO IPO 26/6/2014 Current date 12/09/2014 IPO Price - $24 High $70.9 Peer group growth- 8.4% GPRO growth 184.5% Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

16 GoPro Financial Forecasts Sales & Growth ( 14-18) EBIT (1000 s) Lower cost units required to penetrate mass market eg. APAC Sales growth should continue in near term due to strong market presence % 134 EBIT & Margin ( 14-18) EBIT EBIT Margin (%) 12% % % % % 14% 12% 10% 8% 6% 4% 2% EBIT margin Units sold (mil) Sales Growth (%) E 2015E 2016E 2017E 2018E Growth in sales E 2015E 2016E 2017E 2018E 0%

17 Media Platform as Potential Catalyst Media Platform could prove lucrative if online viewership continues its growth The two main revenue sources we forecast for this business model is advertising and licensing GoPro s demographic is YO which is the most sought after from advertisers Based on a forecast 4 billion video views at $10 and 40,000 videos sold at $500, incremental $60 million annual revenues can be achieved from the media opportunity. Revenues from advertising.($millions) Net revenue per 1000 views (CPM $ ) Avg $6.00 $7.60 $8.00 $10.00 $12.00 $14.00 $ $6.00 $7.60 $8.00 $10.00 $12.00 $14.00 $ $12.00 $15.20 $16.00 $20.00 $24.00 $28.00 $32.00 Number of views 3 $18.00 $22.80 $24.00 $30.00 $36.00 $42.00 $48.00 Billions 4 $24.00 $30.40 $32.00 $40.00 $48.00 $56.00 $ $30.00 $38.00 $40.00 $50.00 $60.00 $70.00 $ $36.00 $45.60 $48.00 $60.00 $72.00 $84.00 $ $42.00 $53.20 $56.00 $70.00 $84.00 $98.00 $ Revenues from licencing based on Getty images ($ millions) Average price per video ($) ,000 $1.00 $2.00 $5.00 $10.00 $25.00 $ ,000 $2.00 $4.00 $10.00 $20.00 $50.00 $ ,000 $3.00 $6.00 $15.00 $30.00 $75.00 $ Number of videos sold 40,000 $4.00 $8.00 $20.00 $40.00 $ $ ,000 $5.00 $10.00 $25.00 $50.00 $ $ ,000 $6.00 $12.00 $30.00 $60.00 $ $300.00

18 Key Financial Metrics - Gearing Net Debt / EBITDA 2013A 2014E 2015E 2016E 2017E -0.03x -0.63x -1.11x -1.46x GoPro s down payment of long standing debt of $53,315 using the proceeds of the IPO means its financing will become cash and equity based x Net Debt / (Cash) (1000 s $) A 2014E 2015E 2016E 2017E 2018E

19 Key Financial Metrics - Liquidity Payables Days The company overall has demonstrated positive liquidity management metrics since 2012 which is forecast to continue Payables days has been falling but is forecast to rise Receivables are expected to increase slightly 2012A 2013A 2014E 2015E 2016E 2017E 2018E Inventory Days Receivables Days A 2013A 2014E 2015E 2016E 2017E 2018E 2012A 2013A 2014E 2015E 2016E 2017E 2018E

20 Headline Operational Metrics GoPro is showing robust growth, and has potential for this to continue, especially in the US Profit margins are forecast to rise and meet the 40-42% margin target R&D is growing as competition increases Sales Growth Americas EMEA APEC Total $000s R&D Spend Net Profit ($m) and Margins (%) Net income Profit Margin (%) % 40% 42% 43% % 35% 40% % % % 0 0% 2014E 2015E 2016E 2017E 2018E

21 Acquisition History Announced Date Target Description Cost March 30 th 2011 CineForm Codec Software October 2013 GeneralThings Web development (content management) $9.9 million $2.9 million

22 Potential M&A Target - Fullscreen Buying out a network such as Fullscreen could accelerate the push towards a full-scale content platform Headquarters Culver City, California Founded Date Jan 2011 No. Employees >150 Geographic Mix International Sales Channels Youtube Product Overview A network of content creators and brands on Youtube. Over 3 billion monthly views.

23 COMPANY VALUATION

24 Discounted Cash Flow Analysis Years Financial Year (Dec. Year end) Terminal Period Total Turnover 985,737 1,335,981 1,696,251 2,008,230 2,349,086 2,750,466 growth (%) 35.5% 27.0% 18.4% 17.0% 17.1% EBIT 98, , , , , ,674 margin (%) 10.0% 7.6% 11.9% 14.7% 17.5% 19.0% Depreciation & Amortisation 10, , , , , , % ( ) ( ) ( ) ( ) ( ) ( ) Capital Expenditure Capex/Sales (%) -1.9% -3.0% -6.0% -7.0% -8.0% -9.0% Working Capital ( ) ( ) ( ) ( ) ( ) Working Capital / Sales (%) -3.3% 6.5% 2.4% 1.2% 1.0% 1.5% Free Cash Flow Discount Factor Terminal Value 4,520,624 Present Value ,579,892 Enterprise Value (m) 2,851 Net Debt as at Market Capitalisation (m) 2,678 No. Shares (m) 126 Share Price ($) 21.30

25 Relative Valuation - Trading Competitor Market Cap Enterprise Value ($m) EV/Sales P/E irobot Corp x 1.4x 1.2x 33.0x 25.8x 21.5x Garmin Ltd x 2.8x 2.8x 19.1x 17.6x 16.5 Lululemon athletica x 2.8x 2.4x 19.9x 22.2x 18.6 Chipotle Mexican Grill x 4.1x 3.7x 47.9x 37.3x 31.9 Michael Kors Holdings x 3.7x 3.0x 25.2x 20.5x 17.3 Hain Celestial Group x 2.0x 1.9x 27.2x 23.2x 21.5 Annies inc x 1.9x 1.6x 35.0x 27.9x 27.8 Mean 3.1x 2.7x 2.4x 29.6x 24.9x 22.2x Median 3.0x 2.8x 2.4x 27.2x 23.2x 21.5x Gopro Implied Market Cap Mean 3,931 4,359 4,590 1,916 3,462 4,564 Median 3,835 4,577 4,647 1,760 3,222 4,429 Current Market Cap 7400 Min 1,760 Max 4,647 Market Premium (%) 88% 70% 61% 286% 114% 62% 93% 62% 59% 321% 130% 67% # of shares 126 Share price $31.26 $34.66 $36.50 $15.24 $27.53 $36.30

26 Valuation Commentary Based on above forecasts, a 5-year discounted cash flow model yields a per share valuation of $21.30 GoPro currently trades at $68.2 on NYSE an implied 3.2x market premium to fundamental DCF value Looking at a trading multiples valuation we see that GoPro has a 286% market premium on its P/E multiple and an 88% premium on its EV/Sales Only 14% of total shares were floated, creating an implicit valuation premium an effect which may be eliminated if insiders such as CEO Woodman sell their shares The market seems very optimistic about GoPro and is not trading on fundamentals

27 APPENDIX

28 Income Statement GoPro Hist. Hist. Hist Proj. Proj. Proj. Proj. Proj. Income Statement 31-Dec Dec Dec Dec Dec Dec Dec Dec-18 Net Sales 234, , , ,335, ,696, ,008, ,349, ,750,465.8 COGS 111, , , , ,051, ,204, ,362, ,567,765.5 SG&A 83, , , , , , , ,026.3 EBIT 38, , , , , , , ,674.0 Depreciation , , , , , , ,692.1 Amortization EBITDA 56, , , , , , ,366.2 Non-recurring items , Interest Income , ,944.1 Interest Expense , , , Profit before taxes 38, , , , , , , ,618.2 Taxes 14,179 20,948 30,751 29, , , , ,385.5 Profit after tax 24, , , , , , , ,232.7 Discountinued Operations (Profit) Net income 24, , , , , , , ,232.7 Shareholder information Diluted weighted average shares outstanding 125, , , , , ,745.0 Diluted earnings per share $0.73 $0.51 $1.10 $1.64 $2.30 $2.92 Dividends per share $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Dividends Gross Margin 52.3% 43.2% 36.7% 35.0% 38.0% 40.0% 42.0% 43.0% EBIT Growth 38.3% 84.1% 2.8% 98.3% 46.8% 39.6% 26.6%

29 Balance sheet Balance Sheet Hist. Hist. Hist. Proj. Proj. Proj. Proj. Proj. 31-Dec Dec Dec Dec Dec Dec Dec Dec-18 Cash and cash equivalents 36, , , , ,539.0 Accounts receivable 80, , , , , , ,560.6 Inventories 60, , , , , , ,908.4 Prepaids 21,724 21,967 33, , , , ,016.8 Total current assets 198, , , , , , ,196,024.8 Net PP&E 22,440 32,111 59, , , , ,580.1 Goodwill & Intangibles 8,449 17,365 17, , , , ,365.0 Other intangibles Other assets 16,958 32,155 44, , , , ,765.4 Total assets 246, , , , , ,282, ,744,735.3 Short term debt 15,782 60,297 16, , Accounts payable and accruals 109, , , , , , ,579.2 Accrued income taxes 3,578 19,702 19, , , , ,726.7 Total current liabilities 129, , , , , , ,305.9 Total long-term debt 113,613 53,315 53, Other long-term liabilities 6,455 13,930 18, , , , ,506.5 Total liabilities 249, , , , , , ,812.4 Common stock 77, , , , , , ,716.0 Retained earnings (80,220.0) (19,884.0) 44, , , , ,046,206.9 Treasury stock Total equity (2,603.0) 71, , , , , ,137,922.9 Total Liab.& Equity 246, , , , , ,282, ,744,735.3 Balance? OK OK OK OK OK OK OK

30 Cash Flow Statement GoPro Hist. Hist. Hist. Proj. Proj. Proj. Proj. Proj. Cash Flow Statement 31-Dec Dec Dec Dec Dec Dec Dec Dec-18 Net Income Depreciation Amortisation Change in OWC Change in other assets Change in other liabilities Cash from Operating Activities Capex Cash from Investing Activities Change in Common Stock Change in Treasury Stock Dividends Long Term Debt Repayment Cash from Financing Activities Net Cash Flow Beginning Cash Ending Cash 41,

31 Financial Assumptions Hist. Hist. Hist. Proj. Proj. Proj. Proj. Proj. 31-Dec Dec Dec Dec Dec Dec Dec Dec-18 Sales growth 124.6% 87.4% 35.5% 27.0% 18.4% 17.0% 17.1% COGS as % of sales 47.7% 56.8% 63.3% 65.0% 62.0% 60.0% 58.0% 57.0% Annual depr. as % of previous PPE 0.0% 0.0% 40.0% 40.0% 40.0% 40.0% 40.0% SG&A as % of sales 35.8% 33.1% 26.7% 27.0% 27.0% 27.0% 27.0% 27.0% Amortization of other intangibles amount Non-recurring items amount , Effective tax rate 36.5% 38.8% 31.6% 30.0% 30.0% 30.0% 30.0% 30.0% Diluted weighted average shares outstanding , , , , , ,745.0 Dividend per share growth rate 0.0% 0.0% 0.0% 0.0% 0.0% Accounts receivable as % of sales 0.0% 15.2% 12.4% 13.0% 13.0% 13.0% 13.0% 13.0% Inventories % of COGS 0.0% 20.2% 17.9% 18.0% 19.0% 20.0% 21.0% 22.0% Prepaids % of sales 0.0% 4.1% 2.2% 2.5% 3.0% 3.2% 3.4% 3.6% Capital expenditures % of sales 0.0% 0.0% 1.9% 3.0% 6.0% 7.0% 8.0% 9.0% Other assets % of sales 0.0% 3.2% 3.3% 3.3% 3.3% 3.3% 3.3% 3.3% Accounts payable and accruals % of COGS 0.0% 20.9% 22.4% 18.0% 17.0% 17.0% 17.0% 17.0% Accrued income taxes % of tax expense 0.0% 17.1% 64.1% 64.0% 64.0% 64.0% 64.0% 64.0% Other long-term liabilities % of sales 0.0% 1.2% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% Common stock amount , , , , , , ,716.0 Share repurchases $ amount (show as positive) Loans due for repayment , Other long-term debt repayment Short term debt 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% Loans due for repayment 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% Other long-term debt repayment 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% 4.00% Cash 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%

32 Revenue forecasts Revenue Growth a 2013a 2014e 2015e 2016e 2017e 2018e Americas 86.5% 77.4% EMEA 207.0% 97.8% APEC 275.5% 115.1% Total 124.6% 87.4% 30% 25% 20% 20% 20% 40% 25% 15% 15% 15% 50% 40% 20% 10% 10% 36% 27% 18% 17% 17% Revenue Forecasts a 2013a 2014e 2015e 2016e 2017e 2018e Americas 168, , , , ,588 1,086,706 1,304,047 1,564,856 EMEA 51, , , , , , , ,530 APEC 14,460 54, , , , , , ,079 Total 234, , ,737 1,335,981 1,696,251 2,008,230 2,349,086 2,750,466

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