GoPro Announces Second Quarter 2018 Results
SAN MATEO, Calif., Aug. 2, 2018 /PRNewswire/ -- GoPro, Inc. (NASDAQ: GPRO) announced financial results for its second quarter ended June 30, 2018.
"GoPro is executing," said founder and CEO Nicholas Woodman. "We are on track; sell-through is solid in all regions indicating strong demand, and we believe GoPro will be profitable in the second half of 2018. Our plan is to exit the year with an improved margin profile we believe translates into a profitable 2019."
Recent GoPro Highlights
-- Revenue for Q2 2018 was $283 million, down 5% year-over-year and up 40%
quarter-over-quarter.
-- GAAP gross margin for the quarter was 29%, up from 22% in Q1 2018.
Non-GAAP gross margin for the quarter was 31%, up from 24% in Q1 2018.
-- Q2 2018 GAAP net loss of $37 million represents a 51% sequential
improvement- resulting in a $0.27 loss per share and a non-GAAP net loss
of $21 million, or $0.15 loss per share.
-- Cash and investments totaled $140 million at the end of Q2 2018.
-- Inventory decreased by $47 million from Q1 2018, GoPro's lowest level
since Q2 2014.
-- GoPro reduced GAAP operating expenses by $16 million, or 13%,
year-over-year. GoPro reduced non-GAAP operating expenses by $13
million, or 11% year-over-year. In 2018, GoPro is targeting non-GAAP
operating expenses below $400 million.
-- HERO5 Black sold more than four million units since its launch in 2016 -
making it the best-selling GoPro of all time, achieving the record three
months sooner than the previous record holder, HERO4 Silver.
-- In the US, GoPro held 97% dollar share of the action camera category.
The top five cameras sold by unit volume were all GoPros in Q2 2018
according to the NPD Group.
-- In the US, Fusion captured 48% dollar share of the spherical camera
market according to the NPD Group.
-- In Europe, GoPro held four of the top five selling action cameras in Q2
2018 according to GfK.
-- In Asia, GoPro held four of the top five selling action cameras. In
Japan, GoPro's share of the action camera market increased to 58% by
unit volume. In Korea, sell-through grew by 22% by dollar volume
year-over-year according to GfK.
-- 'Plus' subscription service has 160,000 active paying subscribers at the
end of Q2 2018, up 9% quarter-over-quarter.
-- Social followers increased by more than 760,000 to more than 36 million
across all platforms, driven primarily by quarter-over-quarter increases
on YouTube and Instagram.
-- Ty Ahmad-Taylor was appointed to GoPro's Board of Directors. Mr.
Ahmad-Taylor brings decades of experience in the media and consumer
electronics industries and is currently Vice President of Product
Marketing at Facebook.
-- For the 18th straight quarter, GoPro is the number one selling camera by
unit volume in North America. In Q2 2018, GoPro sold its 30 millionth
camera since the first HD Hero in 2009.
Results Summary:
Three months ended June 30,
($ in
thousands,
except per
share amounts) 2018 2017 % Change
---- ---- --------
Revenue $282,677 $296,526 (4.7)%
Gross margin
GAAP 29.5% 35.6% (610) bps
Non-GAAP 30.8% 36.2% (540) bps
Operating loss
GAAP $(30,836) $(24,983) (23.4)%
Non-GAAP $(16,719) $(9,250) (80.7)%
Net loss
GAAP $(37,269) $(30,536) (22.0)%
Non-GAAP $(20,843) $(12,914) (61.4)%
Diluted net
loss per share
GAAP $(0.27) $(0.22) (22.7)%
Non-GAAP $(0.15) $(0.09) (66.7)%
Adjusted EBITDA $(8,697) $5,120 (269.9)%
Conference Call
GoPro management will host a conference call and live webcast for analysts and investors today at 2 p.m. Pacific Time (5 p.m. Eastern Time) to discuss the Company's financial results.
To listen to the live conference call, please dial toll free (800) 406-5345 or (719) 457-2644, access code 7705510, approximately 5 minutes prior to the start of the call. A live webcast of the conference call will be accessible on the "Events & Presentations" section of the Company's website at http://investor.gopro.com. A recording of the webcast will be available on GoPro's website, http://investor.gopro.com, approximately two hours after the call and for 90 days thereafter.
About GoPro, Inc. (NASDAQ: GPRO)
GoPro helps the world celebrate and share itself in immersive and exciting ways.
GoPro, HERO, Karma, Quik, QuikStories and their respective logos are trademarks or registered trademarks of GoPro, Inc. in the United States and other countries.
For more information, visit www.gopro.com. GoPro users can submit their photos, raw clips and video edits to GoPro Awards for social stoke, GoPro gear and cash prizes. Learn more at www.gopro.com/awards. Connect with GoPro on Facebook, Instagram, LinkedIn, Pinterest, Twitter, YouTube, and GoPro's blog The Inside Line.
GoPro's Use of Social Media
GoPro announces material financial information using the Company's investor relations website, SEC filings, press releases, public conference calls and webcasts. GoPro may also use social media channels to communicate about the Company, its brand and other matters; these communications could be deemed material information. Investors and others are encouraged to review posts on GoPro's pages on Facebook, Instagram, LinkedIn, Pinterest, Twitter, YouTube, GoPro's investor relations website and The Inside Line.
Note Regarding Use of Non-GAAP Financial Measures
GoPro reports gross profit, gross margin, operating expenses, operating income (loss), net income (loss) and diluted net income (loss) per share in accordance with U.S. generally accepted accounting principles (GAAP) and on a non-GAAP basis. Additionally, GoPro reports non-GAAP adjusted EBITDA. Non-GAAP items exclude, where applicable, the effects of stock-based compensation, acquisition-related costs, restructuring costs, non-cash interest expense and the tax impact of these items. When planning, forecasting and analyzing gross margin, operating expenses and tax expense for future periods, GoPro does so primarily on a non-GAAP basis without preparing a GAAP analysis as that would require estimates for reconciling items which are inherently difficult to predict with reasonable accuracy.
Note on Forward-looking Statements
This press release may contain projections or other forward-looking statements within the meaning Section 27A of the Private Securities Litigation Reform Act. Words such as "anticipate," "believe," "estimate," "expect," "intend," "should," "will" and variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements. Forward-looking statements in this presentation may include, but are not limited to, expectations regarding our business outlook for 2018 and our ability to address the industry-wide shortage in supply of passive components. These statements involve risks and uncertainties, and actual events or results may differ materially. Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are the risk that our reduction in operating expenses may impact our ability to meet our business objectives and achieve our revenue targets and may not result in the expected improvement in our profitability; the fact that our future growth depends in part on further penetrating our addressable market and growing internationally, and we may not be successful in doing so; any inability to successfully manage frequent product introductions (including roadmap for new hardware and software products) and transitions, including managing our sales channel and inventory and accurately forecasting future sales; our reliance on third party suppliers, some of which are sole source suppliers, to provide components for our products; the effects of the industry-wide shortage of passive components; our dependence on sales of our cameras, mounts and accessories for substantially all of our revenue (and the effects of changes in the sales mix or decrease in demand for these products) and; the effects of a decrease in sales during the holiday season; the fact that an economic downturn or economic uncertainty in our key U.S. and international markets may adversely affect consumer discretionary spending; the effects of the highly competitive market in which we operate; the fact that we may not be able to achieve revenue growth or profitability in the future; risks related to inventory, purchase commitments and long-lived assets; difficulty in accurately predicting our future customer demand; the importance of maintaining the value and reputation of our brand; and other factors detailed in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2017 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, and as updated in future filings with the SEC including the Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, each of which are on file with the Securities and Exchange Commission. These forward-looking statements speak only as of the date hereof or as of the date otherwise stated herein. GoPro disclaims any obligation to update these forward-looking statements.
GoPro, Inc.
Preliminary Condensed Consolidated Statement of Operations
(unaudited)
Three months ended June 30, Six months ended June 30,
(in thousands, except
per share data) 2018 2017 2018 2017
---- ---- ---- ----
Revenue $282,677 $296,526 $485,023 $515,140
Cost of revenue 199,308 190,894 356,738 340,942
------- ------- ------- -------
Gross profit 83,369 105,632 128,285 174,198
Operating expenses:
Research and
development 38,225 55,497 89,204 121,663
Sales and marketing 60,256 56,678 109,426 124,534
General and
administrative 15,724 18,440 35,230 41,199
------
Total operating
expenses 114,205 130,615 233,860 287,396
------- ------- ------- -------
Operating loss (30,836) (24,983) (105,575) (113,198)
Other income (expense):
Interest expense (4,621) (3,784) (9,188) (4,598)
Other income, net (1,106) 222 (929) 383
------ --- ---- ---
Total other expense,
net (5,727) (3,562) (10,117) (4,215)
------ ------ ------- ------
Loss before income
taxes (36,563) (28,545) (115,692) (117,413)
Income tax (benefit)
expense 706 1,991 (2,076) 24,273
--- ----- ------ ------
Net loss $(37,269) $(30,536) $(113,616) $(141,686)
======== ======== ========= =========
Net loss per share:
Basic $(0.27) $(0.22) $(0.82) $(1.02)
====== ====== ====== ======
Diluted $(0.27) $(0.22) $(0.82) $(1.02)
====== ====== ====== ======
Weighted-average shares used to compute
net loss per share:
Basic 139,166 136,288 138,515 139,575
Diluted 139,166 136,288 138,515 139,575
GoPro, Inc.
Preliminary Condensed Consolidated Balance Sheets
(unaudited)
(in
thousands) June 30, December 31,
2018 2017
---- ----
Assets
Current assets:
Cash
and
cash
equivalents $114,843 $202,504
Marketable
securities 24,951 44,886
Accounts
receivable,
net 116,573 112,935
Inventory 86,095 150,551
Prepaid
expenses
and
other
current
assets 37,657 62,811
------ ------
Total
current
assets 380,119 573,687
Property
and
equipment,
net 56,566 68,587
Intangible
assets,
net
and
goodwill 164,970 170,958
Other
long-
term
assets 23,900 37,014
------ ------
Total
assets $625,555 $850,246
======== ========
Liabilities and
Stockholders' Equity
Current liabilities:
Accounts
payable $110,415 $138,257
Accrued
liabilities 129,854 213,030
Deferred
revenue 15,279 19,244
Total
current
liabilities 255,548 370,531
Long-
term
debt 134,416 130,048
Other
long-
term
liabilities 47,876 50,962
------ ------
Total
liabilities 437,840 551,541
Stockholders' equity:
Common
stock
and
additional
paid-
in
capital 874,939 854,452
Treasury
stock,
at
cost (113,613) (113,613)
Accumulated
deficit (573,611) (442,134)
-------- --------
Total
stockholders'
equity 187,715 298,705
------- -------
Total
liabilities
and
stockholders'
equity $625,555 $850,246
======== ========
GoPro, Inc.
Preliminary Condensed Consolidated Statement of Cash Flows
(unaudited)
Three months ended June 30, Six months ended June 30,
(in thousands) 2018 2017 2018 2017
---- ---- ---- ----
Operating activities:
Net loss $(37,269) $(30,536) $(113,616) $(141,686)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and
amortization 9,173 11,467 18,080 23,160
Stock-based
compensation 10,011 11,235 20,834 24,360
Deferred income taxes (32) 156 (625) (1,894)
Non-cash restructuring
charges 323 1,834 3,256 2,800
Non-cash interest
expense 2,018 1,530 3,952 1,530
Other (839) 2,133 (567) 3,763
Net changes in
operating assets and
liabilities 15,567 (9,247) (29,474) (61,399)
Net cash used in
operating activities (1,048) (11,428) (98,160) (149,366)
Investing activities:
Purchases of property
and equipment, net (96) (4,946) (6,878) (10,112)
Purchases of marketable
securities - - (14,896) -
Maturities of
marketable securities 15,000 - 35,000 14,160
Sale of marketable
securities - - - 11,623
Net cash provided by
(used in) investing
activities 14,904 (4,946) 13,226 15,671
Financing activities:
Proceeds from issuance
of common stock 215 591 3,425 6,629
Taxes paid related to
net share settlement
of equity awards (1,350) (1,927) (3,752) (8,210)
Proceeds from issuance
of convertible senior
notes - 175,000 - 175,000
Prepayment of forward
stock repurchase
transaction - (78,000) - (78,000)
Payment of deferred
acquisition-related
consideration (2,450) - (2,450) (75)
Payment of credit
facility issuance
costs - (5,250) - (5,250)
Net cash provided by
(used in) financing
activities (3,585) 90,414 (2,777) 90,094
Effect of exchange rate
changes on cash and
cash equivalents (415) 838 50 1,242
Net change in cash and
cash equivalents 9,856 74,878 (87,661) (42,359)
Cash and cash
equivalents at
beginning of period 104,987 74,877 202,504 192,114
------- ------ ------- -------
Cash and cash
equivalents at end of
period $114,843 $149,755 $114,843 $149,755
======== ======== ======== ========
GoPro, Inc.
Reconciliation of Preliminary GAAP to Non-GAAP Financial Measures
To supplement our unaudited selected financial data presented on a basis consistent with GAAP, we disclose certain non-GAAP financial measures, including non-GAAP gross profit, gross margin, operating expenses, operating income (loss), net income (loss), diluted net income (loss) per share and adjusted EBITDA. We also provide forecasts of non-GAAP gross margin, non-GAAP operating expenses, non-GAAP net income (loss) and non-GAAP diluted net income (loss) per share. We use these non-GAAP financial measures to help us understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short-term and long-term operational plans. Our management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing our operating results. These non-GAAP financial measures should not be considered in isolation from, or as an alternative to, the measures prepared in accordance with GAAP, and are not based on any comprehensive set of accounting rules or principles. We believe that these non-GAAP measures, when read in conjunction with our GAAP financials, provide useful information to investors by facilitating:
-- the comparability of our on-going operating results over the periods
presented;
-- the ability to identify trends in our underlying business; and
-- the comparison of our operating results against analyst financial models
and operating results of other public companies that supplement their
GAAP results with non-GAAP financial measures.
These non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP. Some of these limitations are:
-- adjusted EBITDA does not reflect tax payments that reduce cash available
to us;
-- adjusted EBITDA excludes depreciation and amortization and, although
these are non-cash charges, the property and equipment being depreciated
and amortized often will have to be replaced in the future, and adjusted
EBITDA does not reflect any cash capital expenditure requirements for
such replacements;
-- adjusted EBITDA excludes the amortization of POP display assets because
it is a non-cash charge, and is treated similarly to depreciation of
property and equipment and amortization of acquired intangible assets;
-- adjusted EBITDA and non-GAAP net income (loss) exclude the impairment of
intangible assets because it is a non-cash charge that is inconsistent
in amount and frequency;
-- adjusted EBITDA and non-GAAP net income (loss) exclude restructuring
costs which primarily include severance-related costs, stock-based
compensation expenses and facilities consolidation charges recorded in
connection with restructuring actions announced in the first and fourth
quarters of 2016, first quarter of 2017 and first quarter of 2018. These
expenses were tied to unique circumstances related to organizational
restructuring, do not reflect expected future operating expenses and do
not contribute to a meaningful evaluation of current operating
performance or comparisons to the operating performance in other
periods;
-- adjusted EBITDA and non-GAAP net income (loss) exclude stock-based
compensation expense related to equity awards granted primarily to our
workforce. We exclude stock-based compensation expense because we
believe that the non-GAAP financial measures excluding this item provide
meaningful supplemental information regarding operational performance.
In particular, we note that companies calculate stock-based compensation
expense for the variety of award types that they employ using different
valuation methodologies and subjective assumptions. These non-cash
charges are not factored into our internal evaluation of net income
(loss) as we believe their inclusion would hinder our ability to assess
core operational performance;
-- non-GAAP net income (loss) excludes acquisition-related costs including
the amortization of acquired intangible assets (primarily consisting of
acquired technology), the impairment of acquired intangible assets (if
applicable), as well as third-party transaction costs incurred for legal
and other professional services. These costs are not factored into our
evaluation of potential acquisitions, or of our performance after
completion of the acquisitions, because these costs are not related to
our core operating performance or reflective of ongoing operating
results in the period, and the frequency and amount of such costs are
inconsistent and vary significantly based on the timing and magnitude of
our acquisition transactions and the maturities of the businesses being
acquired;
-- non-GAAP net income (loss) excludes non-cash interest expense. In
connection with the issuance of the Convertible Senior Notes in April
2017, we are required to recognize non-cash interest expense in
accordance with the authoritative accounting guidance for convertible
debt that may be settled in cash;
-- non-GAAP net income (loss) includes income tax adjustments. Beginning in
the first quarter of 2017, we implemented a cash-based non-GAAP tax
expense approach (based upon expected annual cash payments for income
taxes) for evaluating operating performance as well as for planning and
forecasting purposes. This non-GAAP tax approach eliminates the effects
of period specific items, which can vary in size and frequency and does
not necessarily reflect our long-term operations. Historically, we
computed a non-GAAP tax rate based on non-GAAP pre-tax income on a
quarterly basis, which considered the income tax effects of the
adjustments above; and
-- other companies may calculate these non-GAAP financial measures
differently than we do, limiting their usefulness as comparative
measures.
GoPro, Inc.
Reconciliation of Preliminary GAAP to Non-GAAP Financial Measures
(unaudited)
Reconciliations of non-GAAP financial measures are set forth below:
Three months ended June 30, Six months ended June 30,
(in thousands, except per
share data) 2018 2017 2018 2017
---- ---- ---- ----
GAAP net loss $(37,269) $(30,536) $(113,616) $(141,686)
Stock-based compensation:
Cost of revenue 490 415 872 910
Research and development 4,960 5,390 9,965 11,072
Sales and marketing 2,313 1,995 5,060 4,686
General and
administrative 2,248 3,435 4,937 7,692
----- ----- ----- -----
Total stock-based
compensation 10,011 11,235 20,834 24,360
Acquisition-related costs:
Cost of revenue 3,334 1,195 5,989 2,430
Research and development - 946 - 2,082
General and
administrative - 1 3 (22)
--- ---
Total acquisition-
related costs 3,334 2,142 5,992 4,490
Restructuring costs:
Cost of revenue 3 25 1,242 418
Research and development 145 1,702 9,744 7,381
Sales and marketing 229 361 3,847 5,603
General and
administrative 395 268 2,677 1,409
--- --- ----- -----
Total restructuring costs 772 2,356 17,510 14,811
Non-cash interest expense 2,018 1,530 3,952 1,530
Income tax adjustments 291 359 (2,879) 20,798
Non-GAAP net loss $(20,843) $(12,914) $(68,207) $(75,697)
======== ======== ======== ========
GAAP shares for diluted
net loss per share 139,166 136,288 138,515 139,575
Add: dilutive shares - - - -
Non-GAAP shares for
diluted net loss per
share 139,166 136,288 138,515 139,575
======= ======= ======= =======
Non-GAAP diluted net
loss per share $(0.15) $(0.09) $(0.49) $(0.54)
====== ====== ====== ======
Three months ended June 30, Six months ended June 30,
(dollars in thousands) 2018 2017 2018 2017
---- ---- ---- ----
GAAP gross profit $83,369 $105,632 $128,285 $174,198
Stock-based compensation 490 415 872 910
Acquisition-related costs 3,334 1,195 5,989 2,430
Restructuring costs 3 25 1,242 418
--- --- ----- ---
Non-GAAP gross profit $87,196 $107,267 $136,388 $177,956
======= ======== ======== ========
GAAP gross profit as a %
of revenue 29.5% 35.6% 26.4% 33.8%
Stock-based compensation 0.2 0.1 0.2 0.2
Acquisition-related costs 1.1 0.4 1.2 0.4
Restructuring costs - 0.1 0.3 0.1
--- --- --- ---
Non-GAAP gross profit as
a % of revenue 30.8% 36.2% 28.1% 34.5%
==== ==== ==== ====
GAAP operating expenses $114,205 $130,615 $233,860 $287,396
Stock-based compensation (9,521) (10,820) (19,962) (23,450)
Acquisition-related costs - (947) (3) (2,060)
Restructuring costs (769) (2,331) (16,268) (14,393)
---- ------ ------- -------
Non-GAAP operating
expenses $103,915 $116,517 $197,627 $247,493
======== ======== ======== ========
GAAP operating loss $(30,836) $(24,983) $(105,575) $(113,198)
Stock-based compensation 10,011 11,235 20,834 24,360
Acquisition-related costs 3,334 2,142 5,992 4,490
Restructuring costs 772 2,356 17,510 14,811
--- ----- ------ ------
Non-GAAP operating loss $(16,719) $(9,250) $(61,239) $(69,537)
======== ======= ======== ========
Three months ended June 30, Six months ended June 30,
(in thousands) 2018 2017 2018 2017
---- ---- ---- ----
GAAP net loss $(37,269) $(30,536) $(113,616) $(141,686)
Income tax (benefit)
expense 706 1,991 (2,076) 24,273
Interest expense, net 4,299 3,652 8,511 4,413
Depreciation and
amortization 9,173 11,467 18,080 23,160
POP display amortization 3,611 4,955 7,523 10,120
Stock-based compensation 10,011 11,235 20,834 24,360
Restructuring costs 772 2,356 17,510 14,811
--- ----- ------ ------
Adjusted EBITDA $(8,697) $5,120 $(43,234) $(40,549)
======= ====== ======== ========
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SOURCE GoPro, Inc.
