You are on page 1of 32

Investor Summary

The Faction Collective SA


Q3 2011

Executive Summary
1. Unique selling proposition with award-winning product p4
-

Global ski brand entering its 5th season serving fast-growing and differentiated Freestyle and Freeride markets filling a market need left open by mainstream major brands Consistently leading-edge skis, winning awards in multiple countries Strong following and image serves as a platform for high-margin apparel and accessories launched in 2011/12 114% CAGR of ski sales to 2.8K skis in 2011/12 Company on track to generate over 10M in revenue and 3M in profit 160 Points-of-sale across 16 countries Scalable business model due to distribution model and platform yielding 100% CAGR gross profit vs. 25% CAGR Opex Inventory complete at end-August of which two-thirds are pre-sold (430 confirmed orders + 200k additional projected sales) $7B total market growing despite recession of which Factions segment is growing at 74%+ Market share shifting from snowboarding and traditional piste skis to freeskiing, touring and telemark where Faction is strong Industry changes in design, marketing, distribution and production enable Faction to grow faster than major producers Experienced co-founders with decades of retail, design, global growth & exit experience from Specialist skills in each function retail, sales, marketing, finance

2. Serious momentum in a growing market p8


-

3. Proven, experienced team p19


-

3. Global marketing & distribution p23


-

Comprehensive infrastructure in Europe + North America developed over five seasons Global distribution team and partners Videos, TV shows, PR, Facebook and offer global marketing access Interactive website and store provide fan interaction and revenues Two offerings > Inventory Finance > Equity raise

5. Attractive investment p26


-

6. Appendix p32

For more financial information or to further discuss investment opportunities, contact: alex@factionskis.com +44 7889 766 517 tony@factionskis.com +41 79 794 94 93
3

The Proposition

Innovative, Award-Winning Product


Our products inspire skiers and critics alike globally: The Agent awarded Palme DOr & Ski Remarquable by Ski Magazine, France The Royale awarded Editors Choice by Backcountry magazine 2010-11 The Royale 1st pick, powder section in the Fantasy Draft for Powder magazine. The best powder ski I rode all winter Tester quote. The 3.zero awarded Editors Choice by Backcountry magazine 2011-12

Delivering passion through innovation and quality


Full range of top quality wood-core skis in the high-growth freestyle & freeride segments Progressive designs, inspiring graphics Pioneering mainstream applications of rocker reverse-camber technology

Brand as a Platform for High-Margin Growth


Helmets & Poles: Helmet sales exceeded expectation for 2011/12 with minimum pre-sell Apparel: For 2012/13, Faction will expand into technical outerwear & broaden its lifestyle products based on Armada, which launched over 100 products in two years: Increase from 0 to 15% of revenue over next three years with more expected in the longer term Technical outerwear offers an opportunity, bringing core design elements to ski clothing
Average Margin

EQUIPMENT

APPAREL

ACCESSORIES 0% 20%

40%

60%
7

Company Momentum

Momentum
Tony produces first samples in France Tony & Alex found Faction SA Royale rocker ski launched Rocker on four models Agent rocker touring ski Rocker on 8 models STP technology

2003/4

04/05

05/06

06/07

07/08

08/09

09/10

10/11

11/12

12/13

Ski SKUs: Countries: Key new markets: Other:

4 2 CH, Canada

5 5 Norway

12 7 France

20 10 Japan Bindings, poles

32 13 Spain, Korea US subsidiary ERP system

43 16 Explosive US, DE Helmets In-house distribution

49 16 Italy, Finland, Benelux Apparel expansion

Ski Production Industry trends: Armada Launch

Austria

PL

Sunglasses

K2 Hellbent rocker ski launched

K2 launch sidecountry rockered touring ski

Serious momentum with accelerating growth


Ski volumes to date
Strong, steady growth due to: 2000 - new markets + new, attractive SKUs 1800 - deeper orders in existing stores - new sales lead in the USA 1600 - Old-fashioned hard work & client service
1400 1200 20000 1000 800 600 400 5000 200 0 0 2007/08 2008/09 2009/10 2010/11 Adults Kids Samples 15000 40000

Projected ski volumes


11/12 based on initial orders, pro deal execution in 10/11 & market feedback

34,444 +69%

Explosive growth from:


 Re-orders  New ski models  Kids skis with guaranteed demand from retailers  New points of sale in existing territories  New territories  Larger orders per POS  Timely delivery of stock and samples  Direct sales via pro deals, web store and Facebook site

35000

30000

25000

20,372 +92% 11,739 +92% 6,104 +125% 2,714 +50%


Major demand from stores for kids skis low cost, high impact producer engaged

Following year samples

10000

2011/12 2012/13 2013/14 2014/15 2015/16

*The late production delivery (2010/11), addressed in 11/12 through earlier manufacturing

10

P.O.S. growth
Points Of Sale
For 2011/12 Faction opened dozens of new accounts, primarily in North America, France and Germany
180 160 140 120 100 80 60 40 20 Total 0 2008/09 2009/10 2010/11 2011/12

POS growth Faction has driven point of sale growth across 16 countries and is in the process of both extending reach and depth of SKUs in each store
160
2010/11 POS CAGR

122
France Scandinavia

France Scandinavia Switzerland Australia/Asi a North America Other

43 29 14 25 29 20 160

121% 21% 52% 193% 39% 170% 64%

82

Switzerland Australia/Asia North America Other

36

Our POS growth reflects strong product and customer service & serves as a barrier to entry to new brands
11

The Market

12

Total addressable market is over $7 billion USD


Apparel & Apparel Accessories

$3.6 B

An established, inspired hardware brand offers brand extension opportunities into higher-margin products, e.g., Salomon, Ripcurl Faction helmets and glasses are in 2011/12 Equipment Accessories Accessories offer 50%+ margins and affiliation to equipment builds trust Snowboards Snowboarding built to nearly one third of snowsport hardgoods market, but is ceding market share to freeskiing Skis Ski revenues have grown for the past two years despite global recession issues

$0.8 B

$0.9 B

$2.0 B

$7.3 B

13
Source: Snowsport Industry Association reports, Amer and Jarden annual reports

Growing Market Segments


In a fast-growing market

North American 2010/11 revenues were up 12% for skis, equipment & apparel despite recession to $3.3B While snowfall plays an important role in each year s sales* the baseline also reflects equipment evolution Alpine skiing is stealing market share from snowboarding
3.5 3.0 2.5 2.0

2010/11 record year in North America with $3.3B in snowsports sales with Alpine taking market share from snowboarding North American Snowsport Industry
$2.7B +4% $2.8B +18% $3.3B

74%
Fat skis

Faction segment growing fastest


 Reverse camber a segment pioneered by Faction - up 134%  Reverse camber 10% of sales  Randonne (touring) up 90%  Women s skis growing at 26%  Helmets up 12%

134%
1.5 1.0 0.5 2008/09 2009/10 2010/11

Reverse Camber

90%
Touring

The market is growing Factions segment even faster


Europe makes up 65% of the global ski market, but industry figures are not readily available until annual reports from majors are released; Europe s weather will dampen overall growth but the underlying trends are consistent
14

Shifting Market
From snowboards to innovative skis
600,000

and from mainstream skis to innovative niches Freestyle

56.8%
500,000

50.6%
400,000

52.2%

300,000

Parabolic / Carvers

Freeride / Big Mountain Touring / Randone Telemark

200,000

100,000

 Diversification of markets
2008/09 Skis Snowboard 443,071 431,743 2009/10 452,787 414,699 2010/11 526,553 399,926

 Faction is close to the market, always a step ahead of the incumbents  Slopestyle becomes an Olympic event  Shorter runs of new models like Zara in fashion which produces in low-cost Spain

The market is growing - Factions segment is growing even faster


Europe makes up 65% of the global ski market, but industry figures are not readily available until annual reports from majors are released; Europe s weather will dampen overall growth
15

Why the Market Opportunity Exists


1. INNOVATiON OVERRUNNING MAINSTREAM

Camber & shape evolution Multi-niche: Freeride, freestyle, telemark, t ouring

2. MARKETING BARRIERS CRASHING


Social media, online access, videos and peer-to-peer communication and influence

FACTION OPPORTUNITY
3. MANUFACTURING SHIFTS

Vertically-integrated EU giants struggling China quality issues and turnaround not fast enough Zara for Snowsports

4. DISTRIBUTION EVOLVING
Online retailers now the largest POS s, changing floorspace dynamics

Major manufacturers have not kept pace with the segment needs and factors of production and distribution opened
16

The Team & Operations

17

Highly experienced co-founders


Tony McWilliam (L) CEO & Founder
Branding: 10 years corporate identity and brand management for clients including Ford, The Fosters Group, Coke, etc. Designer: Industrial design degree, graphic designer, product expert Entrepreneur: Co-founder Verbier Life and Planet SubZero Skier: Former big mountain competition skier and judge

Alex Hoye (R) Chairman & Founder


Entrepreneur: Co-founded internet-based auction company and subsequently led it to 18-country, publicly listed firm worth $100M; Angel investor in seven successful early-stage businesses based in both Europe and North America Business Experience: Brand building and M&A experience at Disney; supply chain and international market entry at McKinsey; Currently CEO of a leading European digital marketing firm Latitude Education: Harvard MBA, Stanford BA

Committed, ambitious co-founders with deep, complimentary skills

18

Proven management team

Jesse Cohen Operations Director

Rex Wehrman North American Sales

Andrew Campbell Finance


9 years PWC 12 years Patagonia 2 years Pure Fishing / Jarden (K2 parent) Chambery, Switzerland

15 years in retail in North America & Europe; Ex Head team manager, product development advisor Launched Verbier franchise & managed team for Surefoot and sales representative Former guide for backcountry and heli tours Mechanical Engineer 4th Faction year Former Freeride World Tour champion Breckenridge, Colorado

Josh Cohen Direct Sales Manager


3rd Faction year 13 years in retail Oregon & Switzerland

Ross Janzen N.A. Marketing


5th Faction year Powder Magazine Captain Powder Talent scout and product advisor 10-year ski technician

Jacobina Milne Home Marketing & Social Media


5th Faction year Ex-Pro Skier Magazine writer; Apparel brand marketer

Truly global sales & distribution by experienced industry veterans

19

Global Marketing & Distribution


Ad proof for double page spread - October 2011 issue of Powder Magazine, USA

20

Distribution in 16 countries, exceeding 20 in 2013

GM (%) CF Days

48% 150

16% 10

Direct allows strong control over brand and higher margins but longer cashflow cycle

Increased Gross Margin by moving towards Direct model. Improved cashflow by moving towards Distributor model.

21

Global marketing
Centralised, cost-effective international marketing via:
Regular press releases used by international snowsport media as well as mainstream lifestyle magazines and broadsheets Advertising in key media to secure inclusion in annual Buyers Guides Dedicated test fleets for ski magazines in Europe and North America Partnership with film company Voleurz with 10 stop film premiere-tour; poster signing sessions with athletes and product giveaways Involvement in International Freeski Film Festival annually in Montreal, CAN and FRA Short viral ads released quarterly Team riders placed into Norwegian television adventure series

http://www.factionskis.com/en/blog/?p=2342

High visibility through content generation & frequent dialogue. Exposure in film, TV, viral media and competitions taking off

22

Social Media
Community management
Community Manager collects, focuses and mediates all online brand touchpoints factionskis.com blog, Facebook, YouTube, forums Content supplied by athletes and photographers output through www.factionskis.com Interactive community section of website will be launched using Facebook Connect, with forum, rider and visitor profiles, etc. 8,000 person core market database growing weekly regular newsletter communication and strong clickthroughs to our website Extensive use of snowsport specific forums worldwide Online competitions to generate user content and promote online sales

Additional leverage
Co-founder Alex Hoye has years of experience on the leading edge of digital marketing Tony working with a team to develop games to expand reach and impact

Strong emphasis on digital media and viral marketing build brand awareness more planned for 2011/12

23

Attractive investment

24

Seasonal cycle and investment raise


DecFeb Dealers Pay Skis Ordered MarMay

Seasonal Cycle Distributors


Pay SeptNov Skis Shipped

Skis Produced

JunSept

We are here inventory complete by end August

Two processes - Near-term Inventory Finance - Equity raise

25

Attractive exit prospects


Sell in 4 years Volcom just sold at 14x in May 11 Major Brand / Conglomerate

Example EBITDA multiples 8x 10x 14x Nixon sold for 21x including earnout in year 8 Logic
Precedence: Action sport brands are able to become $B plays, like $400M revenue Ripcurl, $500M revenue Burton Timing: Vertiginous growth of adventure sports and growth in markets means a range of areas with limited incumbent advantage Experience: The team has experience across countries and including M&A

Logic

Precedence: Eight brands generating over 65% of total sales were acquired in the past two decades* Scarce Asset: Innovation, design, and loyal fans are hard to manufacture Synergy: Scale can generate extensive cost (production) and revenue (distribution) synergies overnight
Amer bought Atomic ( 93), Salomon ( 95), & Volant ( 03); Rossignol bought Dynastar; K2 bought Vlkl ( 04), & Line ( 06, Jarden bought K2 ( 07), a major share of Rossignol ( 08)

Faction offers a natural barbell strategy with strong returns

26

Shareholder value/exit options


Very Large Sports Conglomerates
Run as brand management companies in the model of P&G. 100% acquired brands

Europe-based US-based

Ski-driven Public Entities


Narrower base of mainstream ski brands to date, but some have acquired accessory companies

Jarden
NYSE Rev: $4.7B

Amer Sports Corp


Finnish Stock Ex Rev: 1.7B

Head NV
Viena Stock Ex Rev: 330M

Tecnicagroup Nordica Tecnica


Boots

Fischer Sports
Viena Stock Ex Rev: 132M

Elan
Slovenia

K2
Acquired 07 CHF1.2B

[minority stake in firms below acquired 08]

Atomic
Acquired 93

Head Tyrolia
Bindings

Fischer

Elan

Rossignol
Rev: CHF450M

Volkl
Acquired 04

Salomon
Acquired 05

Dynastar Look
bindings Acquired 93

Line
Acquired 06

Volant
Acquired 03

BLAX
Snowboards Acquired 99

Blizzard
Acquired 10/06

Marker
bindings

Mid-sized Mainstream Independent Brands


Brands which have strong global distribution but are focused on mainstream and may be interested in a core brand extension

Lange
boots Acquired 89

Scott

Stoeckli

Market is extremely acquisitive and only K2 has a brand comparable to Faction (Line)

27

Close
Recap of key immediate operational and financial points

Pre-sold 66% of skis, 65% of helmets and 69% of poles before manufacturing each a 50100% sales increase from Prior Year All skis, poles, helmets and bindings complete by end August and partially pre-paid Company achieving margin improvement due to wholesale distribution in four key markets USA, France, Canada, Germany and the UK and so can achieve breakeven in one more season

Appendix

29

Growing participation
Snowsport participation is growing and diversifying 000 s of snowsport participants (North America)

2008/09 Alpine / Downhill Freestyle Snowboarding Telemarking Cross Country Total 10,346 2,711 7,159 1,435 3,848 21,651

2009/10 10,919 2,950 7,421 1,482 4,157 22,772

2010/11 11,504 3,647 8,196 1,821 4,530 25,168

3-Year 5.4% 16.0% 7.0% 12.6% 8.5% 7.8%

Faction is strong in double-digit growth segments & largest segment alpine hyper-growth niches
30

Product positioning
The model lineup has 12 of multiple lengths, each specifically designed for a particular segment of the market

Range covers high-volume park and high-margin big mountain skis


31

Like what you see?

For more financial information or to further discuss investment opportunities, contact: alex@factionskis.com +44 7889 766 517 tony@factionskis.com +41 79 794 94 93