Slides
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Notes: KONTOOR BRANDS ACQUIRES ICONIC OUTDOOR AND WORKWEAR BRAND HELLY HANSEN
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Safe Harbor Forward-Looking Statements Certain statements included in this presentation and attachments are "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements are made based on our expectations and beliefs concerning future events impacting the Company and therefore involve several risks and uncertainties. You can identify these statements by the fact that they use words such as “will,” “anticipate,” “estimate,” “expect,” “should,” “may” and other words and terms of similar meaning or use of future dates. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. We do not intend to update any of these forward-looking statements or publicly announce the results of any revisions to these forward-looking statements, other than as required under the U.S. federal securities laws. Potential risks and uncertainties that could cause the actual results of operations or financial condition of the Company to differ materially from those expressed or implied by forward-looking statements in this presentation include, but are not limited to: macroeconomic conditions, including elevated interest rates, moderating inflation, fluctuating foreign currency exchange rates, global supply chain issues and inconsistent consumer demand, continue to adversely impact global economic conditions and have had, and may continue to have, a negative impact on the Company’s business, results of operations, financial condition and cash flows (including future uncertain impacts); the level of consumer demand for apparel; reliance on a small number of large customers; potential difficulty in completing the acquisition of Helly Hansen, in successfully integrating it and/or in achieving the expected growth, cost savings and/or synergies from such acquisition; supply chain and shipping disruptions, which could continue to result in shipping delays, an increase in transportation costs and increased product costs or lost sales; intense industry competition; the ability to accurately forecast demand for products; the Company’s ability to gauge consumer preferences and product trends, and to respond to constantly changing markets; the Company’s ability to maintain the images of its brands; changes to trade policy, including tariff and import/export regulation; disruption and volatility in the global capital and credit markets and its impact on the Company's ability to obtain short-term or long-term financing on favorable terms; the Company maintaining satisfactory credit ratings; restrictions on the Company’s business relating to its debt obligations; increasing pressure on margins; e-commerce operations through the Company’s direct-to-consumer business; the financial difficulty experienced by the retail industry; possible goodwill and other asset impairment; the ability to implement the Company’s business strategy; the stability of manufacturing facilities and foreign suppliers; fluctuations in wage rates and the price, availability and quality of raw materials and contracted products; the reliance on a limited number of suppliers for raw material sourcing and the ability to obtain raw materials on a timely basis or in sufficient quantity or quality; disruption to distribution systems; seasonality; unseasonal or severe weather conditions; potential challenges with the Company’s implementation of Project Jeanius; the Company's and its vendors’ ability to maintain the strength and security of information technology systems; the risk that facilities and systems and those of third-party service providers may be vulnerable to and unable to anticipate or detect data security breaches and data or financial loss or maintain operational performance; ability to properly collect, use, manage and secure consumer and employee data; legal, regulatory, political and economic risks; the impact of climate change and related legislative and regulatory responses; stakeholder response to sustainability issues, including those related to climate change; compliance with anti-bribery, anti-corruption and anti-money laundering laws by the Company and third-party suppliers and manufacturers; changes in tax laws and liabilities; the costs of compliance with or the violation of national, state and local laws and regulations for environmental, consumer protection, employment, privacy, safety and other matters; continuity of members of management; labor relations; the ability to protect trademarks and other intellectual property rights; the ability of the Company’s licensees to generate expected sales and maintain the value of the Company’s brands; volatility in the price and trading volume of the Company’s common stock; anti-takeover provisions in the Company’s organizational documents; and fluctuations in the amount and frequency of our share repurchases. Many of the foregoing risks and uncertainties will be exacerbated by any worsening of the global business and economic environment. More information on potential factors that could affect the Company's financial results are described in detail in the Company’s most recent Annual Report on Form 10-K and in other reports and statements that the Company files with the SEC Disclosures Financial estimates for the Helly Hansen business are based on Kontoor’s expectation of future performance. These estimates are based on Helly Hansen’s historical accounting practices under Norwegian Generally Accepted Accounting Principles, which are not anticipated to materially differ from U.S. GAAP. All figures are in USD unless otherwise noted.
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3 We Remain Committed to Enhancing Our TSR Model ACCELERATING FUNDAMENTAL GROWTH + INCREASING CASH FLOW OPTIONALITY ENHANCED TSR COMMITMENT=
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4 KTB Continues to Deliver Against Our Strategic Vision HORIZON 1 HORIZON 2 GROWTH ACCELERATION TSR Drivers Strong organic performance and now in an advantaged position to accelerate our model through accretive M&A DRIVE LONG-TERM ACCELERATION Dividend Driven Dividend, De-leverage of Balance Sheet and Margin Driven Cash Flow Optionality, Revenue and Margin Growth
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Helly Hansen Checked All the Boxes in Our Acquisition Framework Authentic Brand in Structurally Attractive Addressable Markets Immediately Accretive to Our Financial Profile Retain Balance Sheet Flexibility; Strong Cash Generation & Returns on Capital Complementary to Our Portfolio; Leverages Kontoor Strengths & Operating Model Strong Cultural Fit and Alignment of Values Significant Synergy Potential ACQUISITION CRITERIA
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6 Acquisition Provides Compelling Value Creation Opportunity • Accelerates Kontoor’s revenue, earnings growth and cash flow profile • Diversifies portfolio in large, growing markets globally • Increases DTC and International penetration • Offers iconic brand with deep heritage rooted in performance, quality and innovation • Provides access to new consumer base and attractive geographic markets • Benefits from Kontoor’s scale and operational capabilities • Leverages Kontoor’s expertise in the U.S. market to more fully capture growth opportunity • Provides complementary growth opportunity in China and Asia Pacific • Benefits from Kontoor’s global, multi-brand operating model and deep management expertise • Accelerates profitability and cash flow improvement opportunity under synergistic Kontoor ownership
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Acquisition Strengthens Presence in Attractive Markets with Tailwinds Kontoor Brands’ Existing Category Focus Helly Hansen Unlocks Significant Market Opportunity in Structurally Attractive Categories Outdoor / Active WorkwearDenim Global Market Size ~$300Bn +HSD% Annual Growth Global Market Size ~$30Bn +MSD% Annual Growth • Steady replenishment business year round • High loyalty with B2B customers and consumers • Long product lifecycles that build product and margin efficiencies • Massive TAM opportunity and category tailwinds • High loyalty with broad consumer base worldwide • Functional category insulated from discretionary volatility Sources: Circana, Statista, Grandview Research, Euromonitor, Kontoor Brands Estimates
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8 Helly Hansen Fits Kontoor Brands’ Investment Thesis • U.S. Opportunity with Complementary, Diversified Distribution Footprint • Elevates and Strengthens Presence in Workwear • International Brand Strength and Presence • Large Runway for Global Expansion with Focus on U.S. and Asia Pacific Opportunities • Acceleration of DTC Channel • Global DTC Presence and Strong Digital Platform Margin & Cash Flow ExpansionGeographic & Channel Expansion Diversification in Higher-Growth Categories Enhance / Accelerate the Core • Diversification into Large and Growing $300B Outdoor and $30B Workwear Categories • Strong Historical and Projected Growth for Both Categories • Double Operating Margins by Leveraging Kontoor’s Global Operating Platform • Significant Synergy Opportunity • Net Working Capital Opportunity to Drive Increased Cash Generation
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Notes: Experts in Innovative, Outdoor Professional- Grade Gear Delivering Workwear for the World’s Harshest Environments Two Distinct Business Segments HH Sport | HH Workwear
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10 Helly Hansen Has Separated Itself From the Pack Revenue USD $1B 2024 2018 2013 Sources: Company Reports, Kontoor Brands Estimates
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11 Helly Hansen is a Global Brand With Deep Heritage and Compelling Financial Profile ~3x Growth Over the Last 10 Years ~$650MM 2024 Revenue ~$75MM 2024 EBITDA Strong management team with long track record of success ~75% Outdoor and Active Mix ~75% International Sales Mix
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12 Helly Hansen Growth Fueled by Large Opportunity in the U.S. 2019 2024 ‘24: $150M HH Competitor A Competitor B Competitor C Competitor D U.S. ’19-’24 CAGR ~20% Significant Growth Opportunity in the U.S. to Capture Share in Growing Categories Global Revenue Growth 2019-2024 +10% CAGR(1) Revenue $651M 1 Helly Hansen global CAGR in local currency (NOK)
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13 Helly Hansen Is Just Getting Started in China 1 BCG Helly Hansen brand health and market study (2025) Significant growth opportunity in China Helly Hansen entered the China market in 2021 through a joint venture ‒ Accelerating store and digital growth ‒ Strong profit improvement China is one of the fastest growing Outdoor markets in the world ‒ 19% market growth expected from 2024-20271 2021 2022 2023 2024
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TRANSACTION SUMMARY
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Transaction Summary PURCHASE PRICE • $1,276 million CAD (equivalent to ~$900 million USD) enterprise value VALUATION MULTIPLE • 11x full year 2025E adjusted EBITDA, excluding synergies ESTIMATED CLOSING • Expected closing in Q2 2025 subject to satisfaction of customary closing conditions and regulatory approvals EXPECTED FINANCING • ~$700 million of new debt financing and ~$200 million of excess cash on hand • Pro forma net leverage under 3x post-closing; expect to be <2.0x 12 months post-closing and back to pre-deal leverage within 18-24 months CAPITAL ALLOCATION • Pausing share repurchase activity to accelerate debt repayment and reduce financial leverage • Expect to continue to support and grow the dividend in-line with earnings growth over time ACCRETION • Immediately accretive to 2025E adjusted EPS, excluding synergies ADDITIONAL TERMS • Includes multi-year brand commitments with Canadian Tire (CTC) retail banners
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Acquisition Significantly Enhances and Diversifies Our Portfolio Revenue (2024) $3,259MM Diversification Across Channel, Category And Geography $2,608 $651 $3,259 KONTOOR HELLY HANSEN PRO FORMA KONTOOR + KONTOOR PRO FORMA KONTOOR 15% 85% Wholesale DTC CHANNEL 32% 60% 8% Denim Outdoor CATEGORY 74% 19% 7% 85% 9% 6% GEOGRAPHY Workwear 12% 88% 22% 75% 4% Figures based on 2024; Kontoor Outdoor includes outdoor, outerwear, tops and t-shirts; Pro-Forma revenue includes China JV North America Europe APAC
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Significant Synergy Potential and Cash Flow Optionality Significant Working Capital Opportunity Drives Incremental Cash Flow Optionality + We Anticipate Synergies Across the Business Supply Chain Efficiencies ‒ Sourcing and Logistics Optimization ‒ Distribution Efficiencies Operational Efficiencies ‒ Real Estate Optimization ‒ Technology Capabilities ‒ Indirect Procurement and Other Support Function Efficiencies Tax Platform Efficiencies $15M+ Synergies Expected
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Transaction Enhances our Total Shareholder Return Commitment Revenue Growth Margin Expansion Dividend Yield Organic Total Shareholder Return Share Repurchase Multiple Expansion M&A Total Shareholder Return 15% >15%
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Materially increases revenue and earnings growth model and combined cash flow profile Immediately accretive to shareholder returns Expands opportunity in structurally attractive markets with strong growth characteristics and secular tailwinds Diversifies portfolio across channels, geographies, categories and consumers Summary Value Drivers Acquisition Will Drive Significant Value For Kontoor and Our Shareholders
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Notes: 4