Fossil Group, Inc. · NASDAQ:FOSL
Fossil — Debt Investor Presentation (February 2020)
23 slides from Fossil's debt investor presentation, Feb 26, 2020
Slide 1: Amendment Discussion Materials February 2020
Preliminary Draft - Confidential A m e n d m e n t D i s c u s s i o nM a t e r i a l s F e b r u a r y2 0 2 0
Slide 2: This presentation has been prepared solely for informational purposes only and the exclusive use
Preliminary Draft - Confidential This presentation has been prepared solely for informational purposes only and the exclusive use of the party to whom the presentation has been delivered (such party, together with its subsidiaries and affiliates, the “Recipient”). This presentation does not purport
Slide 3: Table of Contents
Preliminary Draft - Confidential Table of Contents I. Executive Summary II. Q4 2019 Update III. 2020 Budget IV. Overview of Amendment V. Appendix
Slide 4: Executive Summary
Preliminary Draft - Confidential Executive Summary
Slide 5: Executive Summary
Preliminary Draft - Confidential Executive Summary Fossil Group (Fossil or the Company) has agreed in principle to the terms of an amendment to its Term Loan B with the Required Lenders necessary to effectuate such amendment The Company anticipates that it will fall short of midpoint guidance on Q41
Slide 6: Q4 2019 Update
Preliminary Draft - Confidential Q4 2019 Update
Slide 7: Q419 Financial Performance – Overview
Preliminary Draft - Confidential Q419 Financial Performance – Overview ($ in millions) Commentary Q4 performance generally in line with expectations, with notable exception of Gen 4 / Sport Connected performance Going into holiday season, we anticipated that our previous generation Connected product
Slide 8: Q419 Financial Performance vs. Guidance
Preliminary Draft - Confidential Q419 Financial Performance vs. Guidance ($ in millions) Operating income miss driven predominantly by Connected inventory challenges Underperformance vs. mid-point guidance on sales, gross margin, and operating income driven primarily by: Connected Gen 4 / Sport unde
Slide 9: Q419 Connected Performance Review
Preliminary Draft - Confidential Q419 Connected Performance Review Several issues converged to create our Q4 underperformance and over-inventory situation. We have identified the root causes and are aggressively addressing each of them Product Strategy Going into 2019, management believed that the G
Slide 10: Key Q419 Trends by Category / Geography / Channel
Preliminary Draft - Confidential Key Q419 Trends by Category / Geography / Channel ($ in millions) Wholesale / E-Comm. / Retail Sales1 E-commerce and APAC continue to be areas of strength, with double-digit year-over-year growth Y-o-Y Core2 sales growth: Successful turnaround of previous challenges
Slide 11: 2020 Budget
Preliminary Draft - Confidential 2020 Budget
Slide 12: 2020 Strategic Goals
Preliminary Draft - Confidential 2020 Strategic Goals Deliver value / Build equity / Be fast: • Storytelling Excellence: Using analytics, craft winning product and brand stories, targeting key consumer segments with the right marketing mix • Segment to Win: Build product assortments to maximize marg
Slide 13: 2020 Budget – Key Metrics
Preliminary Draft - Confidential 2020 Budget – Key Metrics ($ in millions) Revenue Revenue declines flatten as increased scale in growth categories (Asia, Connected, e-commerce) begins to outweigh legacy category softness Gross Margin Removal of one-time impact from Connected inventory in 2019 along
Slide 14: 2020 Budget – Key Drivers
Preliminary Draft - Confidential 2020 Budget – Key Drivers ($ in millions) Wholesale / E-Comm. / Retail Sales1 Moderating revenue decline in 2020 driven by growth in key focus areas partially offsetting declines in challenged legacy segments Y-o-Y Core2 sale growth: Continued double digit core sales
Slide 15: New World Fossil Update
Preliminary Draft - Confidential New World Fossil Update ($ in millions) Efficiency and cost reduction initiatives continue to progress on or ahead of schedule Includes fully-actioned NWF 1.0 program for $200mm annual run-rate savings; NWF 2.0 program for additional $200mm being implemented currentl
Slide 16: Overview of Amendment
Preliminary Draft - Confidential Overview of Amendment
Slide 17: Terms of Amendment to Term Loan Credit Agreement
Preliminary Draft - Confidential Terms of Amendment to Term Loan Credit Agreement 10 Maximum Net Leverage Ratio Reset to: 2.75x for Q1 – Q4 FY2020 2.25x for Q1 – Q3 FY2021 Remains at 1.50x thereafter Pricing Permanently increased by 150bps to L + 800 Amendment Fee 300bps, paid upfront to all lenders
Slide 18: Pro Forma Leverage Covenant Projection
Preliminary Draft - Confidential Pro Forma Leverage Covenant Projection ($ in millions) Significant cushion to pro forma covenant levels Pro Forma Leverage Covenant Projection 1Q'20 2Q'20 3Q'20 4Q'20 LTM Adj. EBITDA Estimate $117 $107 $111 $124 Cash 150 150 150 188 Total Debt $273 $311 $298 $186 (-)
Slide 19: Appendix
Preliminary Draft - Confidential Appendix
Slide 20: Connected Gen Product Features
Preliminary Draft - Confidential Connected Gen 5 Product Features Enhanced product features and software experiences put Fossil Group devices on parity with key competitors Product Features Software Enhancements HEART RATE + FITNESS TRACKING Track heart rate during workouts and throughout the day NO
Slide 21: FY2020 Budget – Summary Output
Preliminary Draft - Confidential FY2020 Budget – Summary Output ($ in millions) Actual Forecast Actual Fcst. 4Q'19 1Q'20 2Q'20 3Q'20 4Q'20 FY2017 FY2018 FY2019 FY2020 Total Sales % YoY Growth (-) COGS Gross Profit % Gross Margin (-) OpEx Operating Income (+) D&A (+) Other Incom e (+) Res tructuring
Slide 22: 2019A-2020E Gross Margin Bridge
Preliminary Draft - Confidential 2019A-2020E Gross Margin Bridge Clear line-of-sight into significant year-over-year improvement in gross margin Region / product mix and continuing New World Fossil efforts deliver 100 bps of improvement Non-recurrence of Q4 2019 Gen 4 / Sport one-time inventory rese
Slide 23: FY2020 Budget – Working Capital Detail
Preliminary Draft - Confidential FY2020 Budget – Working Capital Detail ($ in millions) Q4 2019 Q1 2020 Q2 2020 Cash and cash equivalents Accounts receivable - net Inventory - net Prepaid expenses and other current assets Accounts payable Accrued expenses Q3 2020 Q4 2020 Ame rica s EMEA APAC Ame ric
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