PR Newswire | Aug 6, 2020 04:06PM EDT

08/06 15:05 CDT

GoPro Announces Second Quarter 2020 ResultsRevenue of $134 Million up 12% SequentiallyGoPro.com Percentage of Revenue Grows to 44%Camera Sell-through of nearly 750,000 UnitsChannel Inventory Reduction of 25% Sequentially SAN MATEO, Calif., Aug. 6, 2020

SAN MATEO, Calif., Aug. 6, 2020 /PRNewswire/ -- GoPro, Inc. (NASDAQ: GPRO) today announced financial results for its second quarter ended June 30, 2020.

"Our strategic shift to a more direct-to-consumer business with lower operating costs is working. Camera sell-through during Q2 demonstrates resilient consumer demand for GoPro and an increasing shift to online shopping. We believe GoPro has proven to be a part of global consumers' 'new normal' during the pandemic and we feel well positioned for the remainder of the year," said GoPro founder and CEO, Nicholas Woodman.

GoPro Q2 2020 Financial Results

* Revenue for Q2 2020 was $134 million, a 12% sequential improvement from $119 million in Q1 2020. * GAAP gross margin for Q2 2020 was 30.3%, down from 34.9% year-over-year. Non-GAAP gross margin for Q2 2020 was 31.6%, down from 35.8% year-over-year. * Q2 2020 GAAP net loss was $51 million, or $0.34 per share. Non-GAAP net loss was $30 million, or $0.20 per share. * Q2 2020 GAAP operating expenses of $86 million decreased 22% year-over-year. Q2 2020 non-GAAP operating expenses were $69 million, down 29% year-over-year. GAAP and non-GAAP operating expenses were at their lowest levels since Q1 2014 and Q3 2013, respectively. * Adjusted EBITDA for Q2 2020 was negative $22 million, compared to $14 million in the same period a year ago. * Cash and investments totaled $80 million at the end of Q2 2020.

Recent GoPro Highlights

* Camera sell-through of nearly 750,000 in Q2 2020. * Channel inventory reduction of 25% sequentially and 45% since Q4 2019. * GoPro.com represented a record percentage of revenue in Q2 2020 at 44%, up from slightly below 10% of revenue in Q2 2019. * GoPro's Plus subscription service ended Q2 2020 with 372,000 paid subscribers, up 5% sequentially and up 57% year-over-year. * Cameras with retail prices above $300 represented 95% of Q2 2020 revenue, reflecting consumer preference for GoPro's premium products. * Street ASPs increased 11% year-over-year to $300. * GoPro ended Q2 2020 with 741 employees, the lowest headcount since 2014. * Launched diversified products including Zeus Mini, The World's Most Versatile Light, and Lifestyle Gear including bags, apparel and accessories. * HERO8 Black updated to work as a webcam.

"In Q2 2020, we saw steadily increasing demand and better-than-expected sell-through across all geographies," said Brian McGee, GoPro CFO and COO. "Our direct-to-consumer model is gaining momentum and we're seeing a faster-than-expected rebound at retail. These factors, along with our strong hardware, software and subscription roadmap give us confidence going into the second half of the year."

Results Summary:

Three months ended June 30,

($ in thousands, except per share 2020 2019 % Change amounts)

Revenue $134,246 $292,429 (54.1) %

Gross margin

GAAP 30.3 %34.9 %(460) bps

Non-GAAP 31.6 %35.8 %(420) bps

Operating income (loss)

GAAP $(44,914) $(6,947) 546.5 %

Non-GAAP $(26,663) $7,532 (454.0)%

Net income (loss)

GAAP $(50,975) $(11,287) 351.6 %

Non-GAAP $(29,721) $4,193 (808.8)%

Diluted net income (loss) per share

GAAP $(0.34) $(0.08) 325.0 %

Non-GAAP $(0.20) $0.03 (766.7)%

Adjusted EBITDA $(22,367) $13,616 (264.3)%

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 "Events & Presentations" 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) 353-6461 or (334) 323-0501, access code 2952876, 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 Facebook, Instagram, LinkedIn, TikTok, 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, 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 the second half of 2020 and beyond, and consumer demand and the impact of the COVID-19 pandemic on our business. 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 further 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; 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 June 30, 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 June Six months ended June 30, 30,

(in thousands, except per2020 2019 2020 2019 share data)

Revenue $134,246 $292,429 $253,646 $535,137

Cost of revenue 93,554 190,244 174,527 352,605

Gross profit 40,692 102,185 79,119 182,532



Operating expenses:

Research and development 34,558 38,811 66,839 76,275

Sales and marketing 34,965 52,135 78,467 99,425

General and 16,083 18,186 34,841 34,067 administrative

Total operating expenses 85,606 109,132 180,147 209,767

Operating loss (44,914) (6,947) (101,028) (27,235)

Other income (expense):

Interest expense (4,671) (4,882) (9,514) (9,409)

Other income (expense), (321) (63) (493) 765 net

Total other expense, net (4,992) (4,945) (10,007) (8,644)

Loss before income taxes (49,906) (11,892) (111,035) (35,879)

Income tax expense 1,069 (605) 3,468 (227) (benefit)

Net loss $(50,975)$(11,287)$(114,503)$(35,652)



Basic and diluted net $(0.34) $(0.08) $(0.77) $(0.25) loss per share



Weighted-average number of shares outstanding, 148,497 144,668 148,028 143,640 basic and diluted

GoPro, Inc.

Preliminary Condensed Consolidated Balance Sheets

(unaudited)



(in thousands) June 30, December 31, 2020 2019

Assets

Current assets:

Cash and cash equivalents $79,679 $150,301

Marketable securities - 14,847

Accounts receivable, net 68,498 200,634

Inventory 142,151 144,236

Prepaid expenses and other current assets 23,773 25,958

Total current assets 314,101 535,976

Property and equipment, net 29,180 36,539

Operating lease right-of-use assets 48,963 53,121

Intangible assets, net and goodwill 149,360 151,706

Other long-term assets 13,564 15,461

Total assets $555,168$792,803



Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable $48,959 $160,695

Accrued expenses and other current liabilities88,605 141,790

Short-term operating lease liabilities 8,936 9,099

Deferred revenue 13,627 15,467

Short-term debt 30,000 -

Total current liabilities 190,127 327,051

Long-term debt 154,063 148,810

Long-term operating lease liabilities 57,916 62,961

Other long-term liabilities 20,984 20,452

Total liabilities 423,090 559,274



Stockholders' equity:

Common stock and additional paid-in capital 943,927 930,875

Treasury stock, at cost (113,613)(113,613)

Accumulated deficit (698,236)(583,733)

Total stockholders' equity 132,078 233,529

Total liabilities and stockholders' equity $555,168$792,803

GoPro, Inc.

Preliminary Condensed Consolidated Statement of Cash Flows

(unaudited)



Three months ended June Six months ended June 30, 30,

(in thousands) 2020 2019 2020 2019

Operating activities:

Net loss $(50,975)$(11,287)$(114,503)$(35,652)

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

Depreciation and 4,710 6,552 10,693 13,402 amortization

Non-cash operating lease 2,123 2,763 4,158 5,389 cost

Stock-based compensation 5,876 10,606 13,513 20,391

Deferred income taxes 47 (59) 53 (97)

Non-cash restructuring 3,299 2 3,299 (199) charges

Non-cash interest expense2,477 2,236 4,850 4,378

Other 527 558 1,199 229

Net changes in operating (11,828) (12,407) (35,290) (73,861) assets and liabilities

Net cash used in (43,744) (1,036) (112,028) (66,020) operating activities



Investing activities:

Purchases of property and(1,368) (1,275) (2,163) (1,999) equipment, net

Purchases of marketable - (23,219) - (30,167) securities

Maturities of marketable 7,500 30,878 14,830 35,278 securities

Sale of marketable - - - 1,889 securities

Asset acquisition - - (438) -

Net cash provided by 6,132 6,384 12,229 5,001 investing activities



Financing activities:

Proceeds from issuance of22 65 1,909 3,877 common stock

Taxes paid related to net share settlement of (351) (1,324) (2,354) (3,997) equity awards

Proceeds from borrowings - - 30,000 -

Net cash provided by (used in) financing (329) (1,259) 29,555 (120) activities

Effect of exchange rate changes on cash and cash 185 220 (378) 294 equivalents

Net change in cash and (37,756) 4,309 (70,622) (60,845) cash equivalents

Cash and cash equivalents117,435 86,941 150,301 152,095 at beginning of period

Cash and cash equivalents$79,679 $91,250 $79,679 $91,250 at end of period

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, first quarter of 2018 and second quarter of 2020, 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 June Six months ended June 30, 30,

(in thousands, except2020 2019 2020 2019 per share data)

GAAP net loss $(50,975) $(11,287) $(114,503) $(35,652)

Stock-based compensation:

Cost of revenue 332 522 835 1,035

Research and 3,063 4,884 6,085 9,561 development

Sales and marketing 789 2,221 2,506 4,434

General and 1,692 2,979 4,087 5,361 administrative

Total stock-based 5,876 10,606 13,513 20,391 compensation



Acquisition-related costs:

Cost of revenue 1,024 2,009 2,911 4,091

Total acquisition-related 1,024 2,009 2,911 4,091 costs



Restructuring and other costs:

Cost of revenue 336 71 332 87

Research and 2,524 784 2,500 881 development

Sales and marketing 7,234 395 7,215 498

General and 1,257 614 1,240 701 administrative

Total restructuring 11,351 1,864 11,287 2,167 and other costs



Non-cash interest 2,477 2,236 4,850 4,378 expense

Income tax 526 (1,235) 2,608 (1,353) adjustments

Non-GAAP net income $(29,721) $4,193 $(79,334) $(5,978) (loss)



GAAP shares for diluted net loss per 148,497 144,668 148,028 143,640 share

Non-GAAP shares for diluted net income 148,497 146,290 148,028 143,640 (loss) per share



GAAP diluted net loss$(0.34) $(0.08) $(0.77) $(0.25) per share

Non-GAAP diluted net income (loss) per $(0.20) $0.03 $(0.54) $(0.04) share





Three months ended June Six months ended June 30, 30,

(dollars in 2020 2019 2020 2019 thousands)

GAAP gross profit as 30.3 %34.9 %31.2 %34.1 %a % of revenue

Stock-based 0.2 0.2 0.3 0.2 compensation

Acquisition-related 0.8 0.7 1.2 0.8 costs

Restructuring and 0.3 - 0.1 - other costs

Non-GAAP gross profit31.6 %35.8 %32.8 %35.1 %as a % of revenue



GAAP operating $85,606 $109,132 $180,147 $209,767 expenses

Stock-based (5,544) (10,084) (12,678) (19,356) compensation

Restructuring and (11,015) (1,793) (10,955) (2,080) other costs

Non-GAAP operating $69,047 $97,255 $156,514 $188,331 expenses



GAAP operating loss $(44,914) $(6,947) $(101,028) $(27,235)

Stock-based 5,876 10,606 13,513 20,391 compensation

Acquisition-related 1,024 2,009 2,911 4,091 costs

Restructuring and 11,351 1,864 11,287 2,167 other costs

Non-GAAP operating $(26,663) $7,532 $(73,317) $(586) income (loss)





Three months ended June Six months ended June 30, 30,

(in thousands) 2020 2019 2020 2019

GAAP net loss $(50,975) $(11,287) $(114,503) $(35,652)

Income tax expense 1,069 (605) 3,468 (227) (benefit)

Interest expense, net4,629 4,479 9,310 8,562

Depreciation and 4,711 6,552 10,693 13,402 amortization

POP display 972 2,007 2,509 3,938 amortization

Stock-based 5,876 10,606 13,513 20,391 compensation

Restructuring and 11,351 1,864 11,287 2,167 other costs

Adjusted EBITDA $(22,367) $13,616 $(63,723) $12,581

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SOURCE GoPro, Inc.