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Skullcandy Investor Presentation

Safe Harbor Statement
Forward Looking Statements This presentation contains forward-looking statements. The words “believe,” “expect,” “anticipate,” “intend,” “estimate” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Although forward-looking statements reflect management’s good faith beliefs, reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements speak only as of the date the statements are made. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise. These forwardlooking statements are subject to numerous risks and uncertainties, including, but not limited to: our comments relating to maintaining existing sales levels with our current customers while attracting new ones; operating in international markets and expanding into adjacent markets while strengthening our market share in our existing markets; initiating effective cost cutting initiatives; and financial projections. The Company derives many of its forward-looking statements from its operating budgets and forecasts, which are based upon many detailed assumptions. While the Company believes that its assumptions are reasonable, you are cautioned that it is very difficult to predict the impact of known factors, and it is impossible for the Company to anticipate all factors that could affect its actual results. Important factors that could cause actual results to differ materially from expectations are disclosed under the “Risk Factors” section of the 2012 10K filed with the Securities and Exchange Commission on March 13, 2013. All written and oral forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements in the prospectus as well as other cautionary statements that are made from time to time in the Company’s public communications. You should evaluate all forward-looking statements made in this presentation in the context of these risks and uncertainties.

Non-GAAP Financial Measures This presentation contains certain information that has not been derived in accordance with generally accepted accounting principles ( “ GAAP” ). Reconciliations of such information to the most directly comparable information derived in accordance with GAAP are contained in this presentation. This information should not be considered a substitute for any measures derived in accordance with GAAP.

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Company Overview
Who We Are

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A Leading performance audio brand rooted in action sports and lifestyle cultures Revolutionized the headphone market by reinventing a uninspired category Pioneered the distribution of headphones in specialty retailers focused on action sports and the youth lifestyle Set-up international direct sales office in Europe; products are now sold in more than 80 countries Built a world-class product development and advanced concept engineering platform Implementing a multi-brand strategy to expand into new audio segments and adjacent categories Acquired Astro Gaming, the premier headset brand in the gaming category Select Financial Information $M
Net Sales YoY % Growth Gross Margin % Adjusted EBITDA (non-GAAP) (1) Adjusted EBITDA Margin % (non-GAAP) Adjusted Net Income (non-GAAP) (2) Adjusted Diluted EPS (non-GAAP) (3) 2012 $297.7 28.1% 47.3% $50.6 17.0% $28.0 $1.00


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Announced yesterday new Company leadership

1) Non-GAAP adjusted EBITDA is adjusted for bad debt expense associated with a major retailer and litigation and settlement expense of $2.8M 2) Non-GAAP Adjusted net income is adjusted for bad debt expense associated with a major retailer and litigation and settlement expense of $2.1M, net of tax benefit 3) Based on YE 2012 share count of 28M Note: See the attached appendix for a reconciliation of adjusted net income to net income, adjusted EBITDA to net income, and adjusted diluted EPS to diluted EPS.

Confidential

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The Epicenter Of Youth Culture Confidential 3 .

Wide Range Of Innovative Performance Audio Products Confidential 4 .

Strong Platform Of Brands Across Multiple Categories Confidential 5 .

Key Investment Highlights Large and growing headphone market Evolving market and competitive dynamics In-house design team Proprietary sound and technology 1 2 3 4 5 Portfolio of leading brands 6 Significant growth opportunities Confidential 6 .

Pillars Of Our Business Leading Audio Sound Quality Proprietary and Innovative Designs Scalable Operating Platform Confidential Authentic Brand 7 .

0% Additionally.4 2011 2012E Confidential 8 .0% over the past 12 months (YE 2012) $2.4% • • • • • The US audio headphone market grew ~23.The Global Headphone Market Is Large And Growing Rapidly U. NPD Consumer Data.0% from 2011 to 2016 Sources: IDC.0 billion at retail $B 23. Headphone Market at Retail • We estimate the global audio headphone market to be over $5. Skullcandy estimates $2.S. worldwide smartphone shipments are excepted to grow at a CAGR of over 18.9 Growth in headphones and other mobile accessories is being driven primarily by demand for smart devices and digital content Demand for smartphones and tablets has proven very inelastic despite broader consumer uncertainty Worldwide smartphone shipments will post a year-over-year increase of over 30.

Evolving Headphone Market And Competitive Dynamics Current Competitive Dynamics Our View of the Future • • • Growth in premium priced headphones outpacing growth in earphones The competitive landscape is crowded. but there is high degree of churn as new entrants are quickly forced out Many new entrants lack brand authenticity and commitment to product development • • • Growth in headphones and earphones will be dependent on new. higher focus on mobility) Large big box retailers will garner more market share in CE space • • • Earphone category becoming more feature and price sensitive Amazon and other internet retailers changing the way consumers shop Retail landscape is struggling and will be forced to change business model to survive • • • Confidential 9 . barriers to entry are increasing Internet will become a primary location of purchase for consumer electronics Brick and mortar business model will evolve (smaller footprint. compelling feature sets and different use cases Headphone market will consolidate around the top three or four leading brands New brands will not survive long-term.

fit.Leading Audio Sound Quality Skullcandy has spent two years building a leading in-house product design and development platform Product Development Transformation • Built strong team of: – – – – Industrial designers Mechanical engineers Graphic designers Audio engineers – Category managers • • • • • • Invested in materials and equipment Developed a proprietary sound profile Developed customized headphone drivers Moved to a dual-sourcing model Created a new product roadmap Continued focus on quality. and ideation Confidential 10 . sound.

Roadmap Of New Skullcandy Products Product strategy will focus on new products between $50 and $150. where performance. style and brand come together Confidential 11 .

2013 Key Skullcandy Product Stories Confidential 12 .

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2013 Key Skullcandy Product Stories Confidential 14 .

Our Brand DNA Convergence Of Product And Lifestyle Product Brand + Style + Innovation + Lifestyle = Performance DNA Confidential 15 .

Improve packaging Upgrade retail experience Reduce off-price sales 3 4 5 6 7 Enter new. B. distribution Drive higher sell through in existing domestic distribution while market consolidates A. C.Growth Opportunities 1 2 Execute on dual brand gaming strategy Aggressively expand in key international markets Expand into premium audio segments of the market Extend into new consumer audio segments Expand U. adjacent categories Confidential 16 .S.

evidenced by games like League of Legends (free to play. audio.0% market share in U. multiplayer interaction) Popularity of online multiplayer games 55% • Reinvigorate a category absent of brand and lifestyle • Gamers represent large portion of current SKUL consumer base • Own premium segment of market • Reach new consumer segments • Continue global retail expansion Factors Driving Growth • • Sources: NPD.S. Opportunity to extend into other gaming peripherals We estimate the total global gaming accessories market is ~$6. but pay for additional content) Increasing quality of game play (graphics.0 billion (inclusive of gaming headsets) The Future: Mobile gaming could represent a large market opportunity Upcoming launch of next generation consoles will drive new growth in console accessory purchases Rising popularity of mobile gaming A resurgence in PC gaming and the success of the "freemium" model. Skullcandy estimates 17 Confidential .0+ billion as of YE 2012 One brand owns ~50.Growth Opportunity Gaming Gaming Market Overview and Opportunity x • • • • • • • • Dual Brand Plan of Attack Gaming headset market estimated to be $1. The Ananya Group.

Dual Brand Gaming Strategy Astro Gaming Premium Positioning Confidential 18 .

Dual Brand Gaming Strategy Skullcandy Brand Extension Confidential 19 .

model to export the brand globally Product.Growth Opportunity International strategy: Replicate the U. Japan. and Canada in 2013 Key International Markets EUROPE CHINA CANADA JAPAN Confidential 20 . Marketing and Channel Alignment • • • • Unify brand message and communicate globally Coordinate global product launches Optimize distribution strategies Proliferate in-store listening stations and brand experience Expand to serve select markets directly.S. through joint ventures or via high-quality distributors • • • • Acquired European distribution rights in August 2011 Built direct European office Leverage tax efficiencies Direct business in China.

Financial Review .

6 million diluted weighted shares) • Strong Balance Sheet – Working capital at Q4 growing slightly ahead of full year sales – Nearly $28.0 million • Adjusted diluted EPS (non-GAAP) was $1.Summary Of 2012 Financial Results • Net sales increased 28.1% to $297.00 (based on 23. or flat to last year (based on 28.3% to $28.4 million • Adjusted net income (non-GAAP) increased 19.0 million diluted weighted shares) – 2011 adjusted diluted EPS (non-GAAP) was $1.3 million – International net sales increased to $47. year-over-year – North America net sales increased to $250.0M of credit availability – Completed multi-buyer credit insurance program in November – New credit facility in Q2 2013 Confidential 22 .00.7 million.

3% 19.3% 78.0 $21.4 $9.8% 47.4 $50.7 $46.0 $30.8% 28.6 $118.8% 44.0% Confidential 23 .6% 26.3 $9.0% 24.0% 26.9 $35.8 $160.5 $39.0% 28.2 92.1% 35.6 2006 2007 2008 2009 2010 2011 2012 YoY % Growth 287. EBITDA % margin 11.7% 127.1 2006 2007 2008 2009 2010 2011 2012 $1.8% $232.3 $80.1% Adj.Strong Track Record Of Growth And Profitability Net Sales Growth $M Adjusted EBITDA Growth $M $297.9% 17.

reverse logistics.S. product warranty and compliance to improve (back-end operating efficiencies and competitive position) Target supply chain savings through cost down efficiencies and volume discounts to improve margins and offset any unfavorable trends in China – All products now dual sourced – Large quality control and sourcing team in China and the U.Initiatives To Reset Business And Get Back On Track • Renewed focus on sell through and customer profitability – Improve packaging and point-of-sale retail experience – Enhance and expand activation of marketing assets – Reduce off-price channel sales – Work with existing customers to reduce sales returns and allowances – Discontinue relationships with unprofitable customers and improving pricing discipline • • • Expanding global retail presence for both the Astro Gaming and the Skullcandy Gaming brands Investments in serialization. – Evaluating the transfer of some production out of China Confidential 24 .

0M+ in 2012 – Positive operating income • Provides gateway for Skullcandy brand to enter the gaming space Confidential 25 .Successful Acquisition And Integration Of Astro Gaming • • Purchased Astro Gaming in April 2011 for $10.8M Through 2011. Astro Gaming products were sold exclusively online – Strong brand with dedicated following among core gamers – Gross margins were initially challenged – Company was operating at a loss • Strong performance in 2012 – Dominant player in the high end premium segment of gaming category – Retail ASP over $200 – Cost improvements resulted in ability to enter retail channel – Retail expansion resulted in an incremental $10.

1% at YE 2012 • Confidential 26 .5% in FY 2011 to 36.6M (including inventory) Expand to serve select markets directly.Further Build-Out Of International Platform Support global expansion and new growth opportunities • • • Conversion of international distribution through acquisition and “green field” Acquired European distribution rights through acquisition in August 2011 for $18. or high-quality distributors Ability to leverage effective tax rate from 43. through joint ventures.

Diversified Growth Across All Business Segments Quarterly Sales Growth $M International Domestic 38.3 $72.4 $56.9 $9.6 $36.1 $82.4 $53.7 Q1 '12 Q2 '11 Q2 '12 Q3 '11 Q3 '12 Q4 '11 Q4 '12 Confidential 27 .6 Q1 '11 $10.1 $16.0 $52.6 $71.3 $52.0 $83.7 $73.4 $10.0 $42.4 48.4 $28.0 $18.3 $60.1% $101.6 $14.1% $18.6 $46.0 $7.2% 17.8 $42.2% 21.

Financial Highlights And Statistics • Unit volume up +25.0%+ of Skullcandy headphone sales were mic’d products compared to less than 40. our top 15 customers made up approximately 50.0%.0%. as of YE 2012 – Geographic mix – Mid single digit Increase in unit growth above $50 price point • As of YE 2012. down from approximately 60. year-over-year • As of YE 2012. year-over-year. 50.0% of gross revenues. as of YE 2012 • Significant mix shift to over ear and on ear products in 2012 over 2011 • ASP up high teens.0%. year-over-year • Astro Gaming opened retail doors with major big box retailers Confidential 28 . year-over-year.

25 .Q1 2013: Reset And Get Back on Track • Q1 2013 Revenue down ~30% from Q1 2012 – Challenging year-over-year comparison – High channel inventory levels and low sell through heading into Q1 2013 – Reducing off-price sales – Impact of bankruptcy with major UK retailer • Gross margins in-line with Q4 2012 • Projected a loss of $0.30 per share – $0.$0.03 cents per share associated with departure of former CEO – Investments in demand creation (Crusher launch) – Higher operational costs to support Astro and International expansion Confidential 29 .

2013 – Back in the business focusing on customer advocacy and retail experience – Winning at point of sale / sell through – New products / brand extensions Confidential 30 . founder and board member appointed interim CEO on February 7.Skullcandy Announces new Management • Hoby Darling appointed CEO on March 18. Volcom • Rick Alden. Nike Affiliates – SVP Strategic Development and General Counsel. 2013 – General manager. Nike+ Digital Sport – Head of Strategy & Planning.

Thank You .