Investor Relations

GoPro Announces First Quarter 2020 Results

Revenue of $119 Million In-Line with Preliminary Results Shared on April 15
GoPro.com Percentage of Revenue Increases; Direct-to-Consumer Transition is Underway

SAN MATEO, Calif., May 7, 2020 /PRNewswire/ -- GoPro, Inc. (NASDAQ: GPRO) today announced financial results for its first quarter ended March 31, 2020.

"We've taken decisive action to transition into a more efficient and profitable direct-to-consumer business," said GoPro founder and CEO, Nicholas Woodman. "This benefits GoPro with a substantially reduced operating expense model, improved gross margin and a significantly lower threshold to profitability."

GoPro Q1 2020 Financial Results

  • Revenue for Q1 2020 was $119 million, in-line with the preliminary results published on April 15, and down from $243 million for the same prior year period.
  • GAAP gross margin for Q1 2020 was 32.2%, slightly down from 33.1% year-over-year. Non-GAAP gross margin for Q1 2020 was 34.2%, flat from the prior year.
  • Q1 2020 GAAP net loss was $64 million, or $0.43 per share. Non-GAAP net loss was $50 million, or $0.34 per share.
  • Q1 2020 GAAP operating expenses of $95 million decreased 6% year-over-year. Q1 2020 non-GAAP operating expenses were $87 million, down 4% year-over-year. GAAP and non-GAAP operating expenses were at their lowest levels since 2014.
  • Adjusted EBITDA for the first quarter of 2020 was negative $41 million, compared to negative $1 million in the same period a year ago.
  • Cash and investments totaled $125 million at the end of Q1 2020.

Recent GoPro Highlights

  • GoPro.com represented a record percentage of revenue in Q1 2020 at 17%, up from 11% in Q1 2019.
  • Cameras with retail prices above $300 represented nearly 90% of Q1 2020 revenue, continuing a trend of consumers moving to our high-end cameras.
  • GoPro's Plus subscription service ended Q1 2020 with 355,000 paid subscribers, up 14% sequentially and up 69% year-over-year.
  • Social followers increased by more than 1.3 million across all channels in Q1 2020 to more than 44 million, driven primarily by increases on Instagram, TiKTok and YouTube.  
  • Organic viewership of GoPro content grew more than 40% both sequentially and year-over-year to a record quarterly high of 243 million organic, non-paid views in Q1 2020.
  • On April 15, GoPro announced Aimée Lapic, former Pandora and Banana Republic Chief Marketing Officer, as its Chief Digital Officer to lead direct-to-consumer growth initiatives.

"While our business slowed due to COVID-19, consumers have continued to purchase GoPro cameras at substantial levels during the pandemic, and since early April we've seen sell-through trend in a positive direction," said Brian McGee, GoPro CFO and COO. "Operationally we are performing well during a difficult period and we are extremely proud of our team's dedication. We expect our shift to a more consumer-direct model allows us to succeed both during the pandemic and in the long-term."

Results Summary:




Three months ended March 31,

($ in thousands, except per share amounts)


2020


2019


% Change

Revenue


$

119,400



$

242,708



(50.8)

%

Gross margin







GAAP


32.2

%


33.1

%


(90)

bps

Non-GAAP


34.2

%


34.2

%



Operating loss







GAAP


$

(56,114)



$

(20,288)



176.6

%

Non-GAAP


$

(46,654)



$

(8,118)



474.7

%

Net loss







GAAP


$

(63,528)



$

(24,365)



160.7

%

Non-GAAP


$

(49,613)



$

(10,171)



387.8

%

Diluted net loss per share







GAAP


$

(0.43)



$

(0.17)



152.9

%

Non-GAAP


$

(0.34)



$

(0.07)



385.7

%

Adjusted EBITDA


$

(41,356)



$

(1,035)



3,895.7

%

 

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.

Prior to the start of the call, the Company will post Management Commentary on the "Financials" section of its Investor Relations website at https://investor.gopro.com. Management will make brief opening comments before taking questions.    

To listen to the live conference call, please dial toll free (800) 458-4121 or (720) 543-0206, access code 3327779, approximately 15 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 https://investor.gopro.com. A recording of the webcast will be available on GoPro's website, https://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 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 FacebookInstagramLinkedInTikTokTwitterYouTube, 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, TikTok, 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), other income (expense), tax expense, 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 and other related costs, non-cash interest expense, gain on sale and license of intellectual property and the tax impact of these items. When planning, forecasting and analyzing gross margin, operating expenses, other income (expense), tax expense, net income (loss) and net income (loss) per share 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 planned growth and increased profitability in 2020 and beyond. 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 our ability to effectively manage late stage production delay, 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; our ability to continue to focus on expense management; the fact that our plan to profitability depends in part on further penetrating our addressable market, and we may not be successful in doing so; the risk that growing our direct to consumer business while reducing our reliance on our other sales channels could impact profitability; the impact of the COVID-19 pandemic and its effect on the United states and global economies and our business in particular; any inability to successfully manage frequent product introductions (including roadmap for new hardware, software and subscription products) and transitions, including managing our sales channel and inventory, and accurately forecasting future sales; the fact that a small number of retailers and distributors account for a substantial portion of our revenue and our level of business with them could be significantly reduced due to retail closures related to COVID-19;  the fact that we plan to transition from some distributors and retailers as we shift our sales strategy to focus on our direct-to-consumer channel, and that transition may result in reduced revenue and profitability; our reliance on third party suppliers, some of which are sole source suppliers, to provide components for our products and our reliance on third party logistics partners to deliver without interruption; our dependence on sales of our cameras, mounts and accessories, and subscription services for substantially all of our revenue (and the effects of changes in the sales mix or decrease in demand for these products); the fact that an economic downturn or economic uncertainty in our key U.S. and international markets, as well as fluctuations in currency exchange rates, may adversely affect consumer discretionary spending; any changes to trade agreements, trade policies, tariffs, and import/export regulations; the effects of transferring most U.S.-bound production out of China and our ability to manufacture in Mexico; the effects of the highly competitive market in which we operate, including new market entrants; 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; the risk that the e-commerce technology systems that give consumers the ability to shop online do not function effectively; the risk that we will encounter problems with our distribution system; the threat of a security breach or other disruption including cyberattacks; the concern that our intellectual property and proprietary rights may not adequately protect our products and services; and other factors detailed in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2019, which is on file with the Securities and Exchange Commission (SEC), and as updated in future filings with the SEC including the Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. 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 March 31,

(in thousands, except per share data)

2020


2019

Revenue

$

119,400



$

242,708


Cost of revenue

80,973



162,361


Gross profit

38,427



80,347






Operating expenses:




Research and development

32,281



37,464


Sales and marketing

43,502



47,290


General and administrative

18,758



15,881


Total operating expenses

94,541



100,635


Operating loss

(56,114)



(20,288)


Other income (expense):




Interest expense

(4,843)



(4,527)


Other income (expense), net

(172)



828


Total other expense, net

(5,015)



(3,699)


Loss before income taxes

(61,129)



(23,987)


Income tax expense

2,399



378


Net loss

$

(63,528)



$

(24,365)






Basic and diluted net loss per share

$

(0.43)



$

(0.17)






Weighted-average number of shares outstanding, basic and diluted

147,560



142,601


 

GoPro, Inc.
Preliminary Condensed Consolidated Balance Sheets
(unaudited)


(in thousands)

March 31,
 2020


December 31,
 2019

Assets




Current assets:




Cash and cash equivalents

$

117,435



$

150,301


Marketable securities

7,495



14,847


Accounts receivable, net

50,991



200,634


Inventory

172,022



144,236


Prepaid expenses and other current assets

24,942



25,958


Total current assets

372,885



535,976


Property and equipment, net

33,670



36,539


Operating lease right-of-use assets

51,086



53,121


Intangible assets, net and goodwill

150,384



151,706


Other long-term assets

15,013



15,461


Total assets

$

623,038



$

792,803






Liabilities and Stockholders' Equity




Current liabilities:




Accounts payable

$

63,776



$

160,695


Accrued expenses and other current liabilities

97,543



141,790


Short-term operating lease liabilities

8,871



9,099


Deferred revenue

14,421



15,467


Short-term debt

30,000




Total current liabilities

214,611



327,051


Long-term debt

151,392



148,810


Long-term operating lease liabilities

60,351



62,961


Other long-term liabilities

19,186



20,452


Total liabilities

445,540



559,274






Stockholders' equity:




Common stock and additional paid-in capital

938,372



930,875


Treasury stock, at cost

(113,613)



(113,613)


Accumulated deficit

(647,261)



(583,733)


Total stockholders' equity

177,498



233,529


Total liabilities and stockholders' equity

$

623,038



$

792,803


 

GoPro, Inc.
Preliminary Condensed Consolidated Statement of Cash Flows
(unaudited)




Three months ended March 31,

(in thousands)

2020


2019

Operating activities:




Net loss

$

(63,528)



$

(24,365)


Adjustments to reconcile net loss to net cash used in operating activities:




Depreciation and amortization

5,983



6,850


Non-cash operating lease cost

2,035



2,626


Stock-based compensation

7,637



9,785


Deferred income taxes

6



(38)


Non-cash restructuring charges



(201)


Non-cash interest expense

2,373



2,142


Other

672



(329)


Net changes in operating assets and liabilities

(23,462)



(61,454)


Net cash used in operating activities

(68,284)



(64,984)






Investing activities:




Purchases of property and equipment, net

(795)



(724)


Purchases of marketable securities



(6,948)


Maturities of marketable securities

7,330



4,400


Sale of marketable securities



1,889


Asset acquisition

(438)




Net cash provided by (used in) investing activities

6,097



(1,383)






Financing activities:




Proceeds from issuance of common stock

1,887



3,812


Taxes paid related to net share settlement of equity awards

(2,003)



(2,673)


Proceeds from borrowings

30,000




Net cash provided by financing activities

29,884



1,139


Effect of exchange rate changes on cash and cash equivalents

(563)



74


Net change in cash and cash equivalents

(32,866)



(65,154)


Cash and cash equivalents at beginning of period

150,301



152,095


Cash and cash equivalents at end of period

$

117,435



$

86,941



 

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), other income (expense), tax expense, 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 other income (expense), non-GAAP tax expense, 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 point of purchase (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 and other related costs which primarily include severance-related costs, stock-based compensation expenses, facilities consolidation charges recorded in connection with restructuring actions announced in the fourth quarter of 2016, first quarter of 2017 and first quarter of 2018, and the related ongoing operating lease cost of those facilities recorded under Accounting Standards Codification 842, Leases. These expenses 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. Although we exclude the amortization of acquired intangible assets from our non-GAAP net income (loss), management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation;
  • 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) excludes a gain on the sale and license of intellectual property. This gain is not related to our core operating performance or reflective of ongoing operating results in the period, and the frequency and amount of such gains are inconsistent;
  • non-GAAP net income (loss) includes income tax adjustments. We utilize 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 March 31,

(in thousands, except per share data)

2020


2019

GAAP net loss

$

(63,528)



$

(24,365)


Stock-based compensation:




Cost of revenue

503



513


Research and development

3,022



4,677


Sales and marketing

1,717



2,213


General and administrative

2,395



2,382


Total stock-based compensation

7,637



9,785






Acquisition-related costs:




Cost of revenue

1,887



2,082


Total acquisition-related costs

1,887



2,082






Restructuring and other costs:




Cost of revenue

(4)



16


Research and development

(24)



97


Sales and marketing

(19)



103


General and administrative

(17)



87


Total restructuring and other costs

(64)



303






Non-cash interest expense

2,373



2,142


Income tax adjustments

2,082



(118)


Non-GAAP net loss

$

(49,613)



$

(10,171)






GAAP and non-GAAP shares for diluted net loss per share

147,560



142,601






GAAP diluted net loss per share

$

(0.43)



$

(0.17)


Non-GAAP diluted net loss per share

$

(0.34)



$

(0.07)







Three months ended March 31,

(dollars in thousands)

2020


2019

GAAP gross profit as a % of revenue

32.2

%


33.1

%

Stock-based compensation

0.4



0.2


Acquisition-related costs

1.6



0.9


Non-GAAP gross profit as a % of revenue

34.2

%


34.2

%





GAAP operating expenses

$

94,541



$

100,635


Stock-based compensation

(7,134)



(9,272)


Restructuring and other costs

60



(287)


Non-GAAP operating expenses

$

87,467



$

91,076






GAAP operating loss

$

(56,114)



$

(20,288)


Stock-based compensation

7,637



9,785


Acquisition-related costs

1,887



2,082


Restructuring and other costs

(64)



303


Non-GAAP operating loss

$

(46,654)



$

(8,118)







Three months ended March 31,

(in thousands)

2020


2019

GAAP net loss

$

(63,528)



$

(24,365)


Income tax expense

2,399



378


Interest expense, net

4,681



4,083


Depreciation and amortization

5,982



6,850


POP display amortization

1,537



1,931


Stock-based compensation

7,637



9,785


Restructuring and other costs

(64)



303


Adjusted EBITDA

$

(41,356)



$

(1,035)


 

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SOURCE GoPro, Inc.