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Page 1: Fitbit should buy smart mat

Fitbit is losing market share in growing market

Source: IDC.com

Fitbit38%

Others42%

Xiomi4%

Garmin

7%Samsung

9%

Fitbit27%

Others35%

Apple Watch15%

Xiomi15%

Garmin4%

Samsung4%

3x Market Growth

2014 Market Share

2015 Market Share

Page 2: Fitbit should buy smart mat

Profits suffer from increased competition and limited products

Source: Fitbit Annual Report, www.fitbit.com

Page 3: Fitbit should buy smart mat

Fitbit can leverage its brand strength to enter large and growing yoga market

Yoga market presents natural product line

extension within Fitbit’s healthy living mission

statement

yoga

...80% more Yoga Practitioners now than 2012

21.6M practice weekly

Group & individual activity

75% crossover into other athletic activities

Launch interactive Smart Mat followed by Fitbit-branded apparel line

80%

Source: http://www.yogajournal.com/yogainamericastudy/

Page 4: Fitbit should buy smart mat

Smart Mat Yoga Mats have pressure sensors to provide instant feedback and lessons through mobile devices

Company about to launch productAffordable Acquisition (~$20M)

Anticipated synergies from improved manufacturing and distribution yield $300M+ opportunity

Fitbit should acquire “Smart Mat”

Page 5: Fitbit should buy smart mat

Fitbit should then launch Yoga Apparel Line

Smart Mat establishes Fitbit in Yoga market

Fast growing, high margin, brand name, good entry point for apparel

Cross-selling opportunities: 75% of Yogis active athletes in other sportsProfit Forecast

Total 10 yr Profits (NPV) $ 749M

Shirt = $30 ✔ Good Margins+ Pants = $60 ✔ Growing Market

TR = $90 ✔ Brand Name

Source: http://www.yogajournal.com/yogainamericastudy/

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Estimated Profits from Fitbit Yoga products are Strong

Sources: See Fitbit Yoga DCF model in Appendix

Profit Forecast ($M)Fitbit ApparelFitbit Smart Mat

Smart Mat provides bold entry point and strong profits through

2019 until product life cycle decline

Apparel Line follows, driving sustained profits through end of

10-yr plan

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Fitbit should purchase Smart Mat, and enter the Yoga and Apparel Markets

• Fitbit has over $500 million in cash

• Investment wouldn’t require added debt or equity

• Yoga is a natural addition

• Helps diversify Fitbit and provide strong profits

yoga

Page 8: Fitbit should buy smart mat

Appendix featuring DCFs

Page 9: Fitbit should buy smart mat

SmartMat Proj Revs(All pop. numbers in millions, Practitioner growth rate of 15% per year for next 5 years, 10% after)

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025Total Practitioners 36.7 42.205 48.53575 55.81611 64.18853 73.81681 70.607382 81.19849 77.668121 89.318339% buying our mats 1% 2% 3% 3% 2% 1% 1% 0% 0% 0%SubTotal Buyers 0.367 0.8441 1.456073 1.674483 1.283771 0.738168 0.3530369 0 0 0

0 1 2 3 4 5 6 7 8 9 10Non-Practitioners 283.3 281.003 276.2883 270.632 263.8919 255.904 260.76202 251.82776 257.02326 247.0465% buying our mats 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01%SubTotal Buyers 0.02833 0.0281 0.027629 0.027063 0.026389 0.02559 0.0260762 0.0251828 0.0257023 0.0247047

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025Overall Buyers 0.39533 0.8722 1.483701 1.701547 1.31016 0.763758 0.3791131 0.0251828 0.0257023 0.0247047Price 219.00$ 219.00$ 199.00$ 199.00$ 179.00$ 179.00$ 149.00$ 149.00$ 149.00$ 149.00$

Annual Rev (M,FV) 86.58$ 191.01$ 295.26$ 338.61$ 234.52$ 136.71$ 56.49$ 3.75$ 3.83$ 3.68$ Est COGS 150.00$ 120.00$ 120.00$ 95.00$ 95.00$ 90.00$ 90.00$ 80.00$ 80.00$ 70.00$

Annual COGS (M, FV) 59.30$ 104.66$ 178.04$ 161.65$ 124.47$ 68.74$ 34.12$ 2.01$ 2.06$ 1.73$ Gross Profit per Mat 69.00$ 99.00$ 79.00$ 104.00$ 84.00$ 89.00$ 59.00$ 69.00$ 69.00$ 79.00$

Annual Gross Profit 27.28$ 86.35$ 117.21$ 176.96$ 110.05$ 67.97$ 22.37$ 1.74$ 1.77$ 1.95$ Est R&D, SGA Expenses 25.00$ 25.00$ 25.00$ 25.00$ 25.00$ 20.00$ 10.00$ -$ -$ -$

Annual Net Profit 2.28$ 61.35$ 92.21$ 151.96$ 85.05$ 47.97$ 12.37$ 1.74$ 1.77$ 1.95$ Disc Rate 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%PV Net Profits 2.07$ 50.70$ 69.28$ 103.79$ 52.81$ 27.08$ 6.35$ 0.81$ 0.75$ 0.75$ Cummulative Net Profits 2.07$ 52.77$ 122.05$ 225.84$ 278.65$ 305.74$ 312.08$ 312.89$ 313.64$ 314.40$ Est Purchase Price for Smart Mat (M) 20.00$ 10 Year Valuation of Deal 294.40$

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FitYoga Apparel Revenues2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Total Practitioners (M) 36.7 42.205 48.53575 55.81611 64.18853 73.81681 70.607382 81.19849 77.668121 89.318339% buying our clothing 1% 2% 3% 4% 5% 5% 5% 7% 7% 8%total buyerss 0.367 0.8441 1.456073 2.232645 3.209426 3.69084 3.5303691 5.6838943 5.4367684 7.1454671

1 2 3 4 5 6 7 8 9 10Non-Prac 283.3 281.003 276.2883 270.632 263.8919 255.904 260.76202 251.82776 257.02326 247.0465% Buying Clothing 0.10% 0.30% 1.00% 1.40% 1.80% 2.20% 2.60% 3.00% 3.40% 3.80%total buyers 0.2833 0.843009 2.762883 3.788849 4.750054 5.629888 6.7798126 7.5548329 8.738791 9.3877671

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025Overall Buyers 0.6503 1.687109 4.218955 6.021493 7.95948 9.320728 10.310182 13.238727 14.175559 16.533234

Yoga Pants (Wholesale Price) 30.00$ 30.00$ 30.00$ 30.00$ 30.00$ 30.00$ 30.00$ 30.00$ 30.00$ 30.00$ Yoga/Athletic Shirts (Wholesale Price) 20.00$ 20.00$ 20.00$ 20.00$ 20.00$ 20.00$ 20.00$ 20.00$ 20.00$ 20.00$

Additional apparel (socks, shorts, etc.) (Wholesale Price) -$ -$ 10.00$ 10.00$ 10.00$ 10.00$ 10.00$ 10.00$ 10.00$ 10.00$ Price 50.00$ 50.00$ 60.00$ 60.00$ 60.00$ 60.00$ 60.00$ 60.00$ 60.00$ 60.00$

Annual Rev (M,FV) 32.52$ 84.36$ 253.14$ 361.29$ 477.57$ 559.24$ 618.61$ 794.32$ 850.53$ 991.99$ Est COGS 25.00$ 25.00$ 30.00$ 30.00$ 30.00$ 30.00$ 30.00$ 30.00$ 30.00$ 30.00$

Annual COGS (M, FV) 16.26$ 42.18$ 126.57$ 180.64$ 238.78$ 279.62$ 309.31$ 397.16$ 425.27$ 496.00$ Gross Profit per Outfit Sale 25.00$ 25.00$ 30.00$ 30.00$ 30.00$ 30.00$ 30.00$ 30.00$ 30.00$ 30.00$

Annual Gross Profit 16.26$ 42.18$ 126.57$ 180.64$ 238.78$ 279.62$ 309.31$ 397.16$ 425.27$ 496.00$ Est SGA Expenses 12.19$ 31.63$ 94.93$ 135.48$ 179.09$ 209.72$ 231.98$ 297.87$ 318.95$ 372.00$

Annual Net Profit 4.06$ 10.54$ 31.64$ 45.16$ 59.70$ 69.91$ 77.33$ 99.29$ 106.32$ 124.00$ Disc Rate 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%PV Net Profits 3.96$ 9.73$ 24.32$ 31.47$ 37.96$ 40.88$ 40.52$ 48.33$ 46.23$ 50.68$ Cummulative Net Profits 3.96$ 13.69$ 38.00$ 69.48$ 107.44$ 148.31$ 188.83$ 237.16$ 283.39$ 334.07$ Starting Costs 10.00$ 10 Year Valuation of Deal 324.07$

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Extrapolation of Possible Cross-Selling Opportunities: Apparel->FitbitsApparel Buyers (Millions) 0.6503 1.687109 4.218955 6.021493 7.95948 9.320728 10.310182 13.238727 14.175559 16.533234

75% that are runners 0.487725 1.265332 3.164217 4.51612 5.96961 6.990546 7.7326363 9.9290454 10.63167 12.39992650% use a fitness tracker 0.243863 0.632666 1.582108 2.25806 2.984805 3.495273 3.8663182 4.9645227 5.3158348 6.1999628

33% buy a new trackers annually 0.080475 0.20878 0.522096 0.74516 0.984986 1.15344 1.275885 1.6382925 1.7542255 2.045987710% more will buy Fitbit 0.012071 0.031317 0.078314 0.111774 0.147748 0.173016 0.1913827 0.2457439 0.2631338 0.3068982

Added Fitbits Sold (Millions) 0.012071 0.031317 0.078314 0.111774 0.147748 0.173016 0.1913827 0.2457439 0.2631338 0.3068982Avg Price of Fit tracker 85 85 85 85 85 85 85 85 85 85

Prof Margin 50% 0.48 0.48 0.48 0.48 0.48 0.48 0.48 0.48 0.48 0.48Prof per unit 40.8 40.8 40.8 40.8 40.8 40.8 40.8 40.8 40.8 40.8

Added Profit per Year (Millions) 0.492505 1.277732 3.195226 4.560378 6.028112 7.059054 7.8084162 10.02635 10.73586 12.521445Disc Rate 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%

PV Annual Prof 0.45$ 1.06$ 2.40$ 3.11$ 3.74$ 3.98$ 4.01$ 4.68$ 4.55$ 4.83$ Cummulative Net Profits 0.45$ 1.50$ 3.90$ 7.02$ 10.76$ 14.75$ 18.75$ 23.43$ 27.98$ 32.81$ Net from Apparel Cross-Selling (PV) 32.81$

Increase due to exposure to fitbit athletic wear

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Extrapolation of Possible Cross-Selling Opportunities: Smart Mats -> FitbitsSmart Mat Crossover

Smart Mat Buyers (M) 0.39533 0.8722 1.483701 1.701547 1.31016 0.763758 0.3791131 0.0251828 0.0257023 0.024704725% already have fit bits 0.098833 0.21805 0.370925 0.425387 0.32754 0.19094 0.0947783 0.0062957 0.0064256 0.0061762

Smart Mat buyers less Fitbit Owners 0.296498 0.65415 1.112776 1.27616 0.98262 0.572819 0.2843348 0.0188871 0.0192767 0.018528530% of buyers will now buy fitbits 0.088949 0.196245 0.333833 0.382848 0.294786 0.171846 0.0853005 0.0056661 0.005783 0.0055585

Avg Price of Fit tracker 85 85 85 85 85 85 85 85 85 85Profit Margin 48% 0.48 0.48 0.48 0.48 0.48 0.48 0.48 0.48 0.48 0.48Profit per Unit 40.8 40.8 40.8 40.8 40.8 40.8 40.8 40.8 40.8 40.8Added Profit per Year (M) 3.629129 8.006799 13.62038 15.6202 12.02727 7.011303 3.4802584 0.2311779 0.2359474 0.2267887Disc Rate 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%

PV Annual Prof 3.30$ 6.62$ 10.23$ 10.67$ 7.47$ 3.96$ 1.79$ 0.11$ 0.10$ 0.09$ Cummulative Net Profits 3.30$ 9.92$ 20.15$ 30.82$ 38.29$ 42.24$ 44.03$ 44.14$ 44.24$ 44.33$ Net from Smart Mat Cross-Selling (M) 44.33$

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Total Additional Profits (FV in Millions) 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025Smart Mats and Additional Fitbits 30.91$ 94.35$ 130.83$ 192.58$ 122.08$ 74.99$ 25.85$ 1.97$ 2.01$ 2.18$

Apparel & Additional Fitbits 4.56$ 11.82$ 34.84$ 49.72$ 65.72$ 76.96$ 85.13$ 109.32$ 117.05$ 136.52$ Annual Profits 35.46$ 106.18$ 165.67$ 242.30$ 187.80$ 151.95$ 110.98$ 111.29$ 119.06$ 138.70$

Cummulative Profits 35.46$ 141.64$ 307.31$ 549.61$ 737.42$ 889.37$ 1,000.35$ 1,111.64$ 1,230.70$ 1,369.40$ Purchase Price for Smart Mat (20.00)$ Set Up Expenses for Apparel (10.00)$

Expenses in Year 0 (30.00)$ Net Value over 10 years $722.89