8-K
GoPro, Inc. (GPRO)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 5, 2022
GOPRO, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-36514 | 77-0629474 |
|---|---|---|
| (State or Other Jurisdiction<br><br>of Incorporation) | (Commission File No.) | (I.R.S. Employer<br><br>Identification No.) |
3025 Clearview Way, San Mateo, CA 94402
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (650) 332-7600
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Class A common stock | GPRO | NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
On May 5, 2022, GoPro, Inc. (the “Company”) issued a press release to report its financial results for its first quarter ended March 31, 2022.
A copy of the press release is furnished as Exhibit 99.1 to this report.
The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liabilities of that section. The information in Item 2.02 of this Current Report on Form 8-K shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended (“Securities Act”), except as may be expressly set forth by specific reference in such filing or document.
Item 7.01. Regulation FD Disclosure.
On May 5, 2022, the Company held a live audio webcast to discuss its financial results for its first quarter ended March 31, 2022.
A copy of management's commentary from Nicholas Woodman, our Chief Executive Officer, and Brian McGee, our Chief Financial Officer and Chief Operating Officer, is furnished as Exhibit 99.2 to this report, and is incorporated by reference into this Current Report on Form 8-K.
The information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.2, shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section. The information in Item 7.01 of this Current Report on Form 8-K shall not be incorporated by reference into any filing or other document pursuant to the Securities Act, except as may be expressly set forth by specific reference in such filing or document.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
| Exhibit<br><br>Number | Description of Document |
|---|---|
| 99.1 | Press Release of GoPro, Inc. dated May 5, 2022 to report its financial results for its first quarter ended March 31, 2022. |
| 99.2 | Management's commentary from Nicholas Woodman, Chief Executive Officer, and Brian McGee, Chief Financial Officer and Chief Operating Officer, dated May 5, 2022 (furnished pursuant to Item 7.01). |
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| GoPro, Inc. | ||
|---|---|---|
| (Registrant) | ||
| Dated: | May 5, 2022 | By: /s/ Brian McGee |
| Brian McGee<br><br>Chief Financial Officer and Chief Operating Officer<br><br>(Principal Financial Officer) |
Document
EXHIBIT 99.1
GoPro Announces First Quarter 2022 Results
Revenue up 6% year-over-year to $217 million
GAAP EPS of $0.04 and non-GAAP EPS of $0.09
GoPro Subscribers up 85% year-over-year to 1.74 million
Cash & Investments Increased 52% year-over-year to $450 million
SAN MATEO, Calif., May 5, 2022 - GoPro, Inc. (NASDAQ: GPRO) today announced financial results for its first quarter ended March 31, 2022 and posted management commentary on the investor relations section of its website at https://investor.gopro.com.
“We hit the ground running in 2022, successfully growing year-over-year revenue and profitability while launching exciting new products,” said Nicholas Woodman, GoPro’s founder and CEO. “With several additional products slated for launch later this year, we expect to continue this TAM-expanding trend.”
“The first quarter of 2022 represents another quarter of GAAP profitability, coinciding with GoPro’s strategic shift to becoming a more direct-to-consumer, subscription centric business back in the second quarter of 2020,” said Brian McGee, GoPro’s CFO and COO. “Over that period, we’ve steadily grown revenue, gross margin and, importantly, GAAP profitability as well as cash.”
Q1 2022 Financial Results
•Revenue was $217 million, up 6% year-over-year from $204 million.
•GoPro.com revenue, including subscription revenue, increased 8% year-over-year to $89 million, or 41% of total revenue. Subscription and service revenues totaled $19 million, up 73% year-over-year.
•GAAP and non-GAAP gross margin was 41.8% and 42.0% respectively, up from the prior year period at 38.6% and 39.2%, respectively.
•GAAP net income was $6 million, or $0.04 per share, up from a net loss of $10 million or $0.07 per share in the prior year period. Non-GAAP net income was $15 million, or $0.09 per share, up 214% from $5 million, or $0.03 per share in the prior year period.
•Adjusted EBITDA was $21 million, or 10% of revenue, compared to $11 million, or 5% of revenue in the prior year period.
•Cameras with retail prices at or above $400 represented 92% of Q1 2022 camera revenue, up from 79% in Q1 2021.
•Q1 2022 Street ASP was $414, up 13% year-over-year.
Recent Business Highlights
•Launched Volta, a standalone premium battery and remote-control grip that delivers more than four hours of recording at 4K 30 frames per second.
•Launched Creator Edition, an all-in-one content capturing powerhouse that makes vlogging, filmmaking and live streaming easier than ever by combing the power of HERO10 Black with GoPro Mods and GoPro’s new premium accessory, Volta.
•Launched GoPro Player + ReelSteady desktop app, a powerful, yet easy-to-use desktop app with professional-level stabilization and 360 content tools for creators.
•Launched HERO 10 Black Bones, the ultimate no-compromise FPV (First Person View) drone camera.
•Won a 2nd Technical & Engineering Emmy® Award from the National Association of Television Arts & Sciences for GoPro’s innovation in in-camera sensor and software stabilization technology.
•Expanded remote work options to two of GoPro’s international innovation hubs, Bucharest and Paris, as part of GoPro’s strategy to attract and retain top talent.
Results Summary:
| Three months ended March 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| ($ in thousands, except per share amounts) | 2022 | 2021 | % Change | |||||
| Revenue | $ | 216,705 | $ | 203,680 | 6.4 | % | ||
| Gross margin | ||||||||
| GAAP | 41.8 | % | 38.6 | % | 320 bps | |||
| Non-GAAP | 42.0 | % | 39.2 | % | 280 bps | |||
| Operating income (loss) | ||||||||
| GAAP | $ | 8,162 | $ | (3,512) | (332.4) | % | ||
| Non-GAAP | $ | 18,124 | $ | 6,913 | 162.2 | % | ||
| Net income (loss) | ||||||||
| GAAP | $ | 5,685 | $ | (10,168) | (155.9) | % | ||
| Non-GAAP | $ | 15,196 | $ | 4,835 | 214.3 | % | ||
| Diluted net income (loss) per share | ||||||||
| GAAP | $ | 0.04 | $ | (0.07) | (157.1) | % | ||
| Non-GAAP | $ | 0.09 | $ | 0.03 | 200.0 | % | ||
| Adjusted EBITDA | $ | 20,649 | $ | 10,720 | 92.6 | % |
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 call +1 844-200-6205 (US) or +1 929-526-1599 (International) and enter access code 571477, 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, from approximately two hours after the call through July 28, 2022.
About GoPro, Inc. (NASDAQ: GPRO)
Celebrating its 20th anniversary in 2022, GoPro helps the world to capture and share itself in immersive and exciting ways.
For more information, visit GoPro.com. Open roles can be found on our careers page. Members of the press can access official logos and imagery on our press portal. GoPro customers can submit their photos and videos to GoPro Awards for an opportunity to be featured on GoPro's social channels and receive gear and cash awards. Connect with GoPro on Facebook, Instagram, LinkedIn, TikTok, Twitter, YouTube, and GoPro's blog The Current.
GoPro, HERO and their respective logos are trademarks or registered trademarks of GoPro, Inc. in the United States and other countries.
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 Facebook, Instagram, LinkedIn, TikTok, Twitter, YouTube, GoPro’s investor relations website and blog The Current.
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 our direct-to-consumer and subscription-centric strategy to grow revenue; our share repurchase plan; and overall consumer demand. 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 include our cumulative GAAP income from the past three years may not be sustainable in future periods, we may not be able to achieve our forecast, sustain revenue growth or profitability, and our operating results may fluctuate unpredictably; our ability to effectively grow our direct-to-consumer and subscription business; our ability to maintain the value and reputation of our brand and protect our intellectual property and proprietary rights, the continuing impact of the COVID-19 outbreak on the United States and global economies could have a
material adverse impact on our business in particular; the risk that our sales fall below our forecasts, especially during the holiday season; the risk we fail to manage our operating expenses effectively, and may result in our financial performance suffering the fact that our plan to profitability depends in part on further penetrating our total addressable market, and we may not be successful in doing so; the fact that sales of our cameras, mounts and accessories for substantially all of our revenue, and any decrease in the sales or change in sales mix of these products could harm our business; the risk that growing our direct-to-consumer and subscription business while reducing our reliance on our other sales channels could impact profitability; any inability to successfully manage product introductions, product transitions, product pricing and marketing; 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; our transition away from some distributors and retailers; our reliance on third party suppliers, some of which are sole source suppliers, to provide services and components for our products which may be impacted due to supply shortages, long lead times for components, and supply changes, any of which could disrupt our supply chain and may increase our costs such as increased freight rates or shipping delays; the fact that an economic downturn or economic uncertainty in our key U.S. and international markets, as well as fluctuations in interest rates or currency exchange rates, may adversely affect consumer discretionary spending; our ability to attract, engage and retain qualified personnel; any changes to trade agreements, trade policies, tariffs, and import/export regulations; the effects of the highly competitive market in which we operate, including new market entrants; the fact that we may experience fluctuating revenue, expenses and profitability in the future; risks related to inventory, purchase commitments and long-lived assets; difficulty in attracting and retaining qualified personnel; the importance of maintaining the value and reputation of our brand; 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, 2021, 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, 2022. 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 Statements of Operations
(unaudited)
| Three months ended March 31, | ||||
|---|---|---|---|---|
| (in thousands, except per share data) | 2022 | 2021 | ||
| Revenue | $ | 216,705 | $ | 203,680 |
| Cost of revenue | 126,229 | 124,984 | ||
| Gross profit | 90,476 | 78,696 | ||
| Operating expenses: | ||||
| Research and development | 31,598 | 32,430 | ||
| Sales and marketing | 35,373 | 35,790 | ||
| General and administrative | 15,343 | 13,988 | ||
| Total operating expenses | 82,314 | 82,208 | ||
| Operating income (loss) | 8,162 | (3,512) | ||
| Other income (expense): | ||||
| Interest expense | (2,209) | (5,880) | ||
| Other expense, net | (319) | 443 | ||
| Total other expense, net | (2,528) | (5,437) | ||
| Income (loss) before income taxes | 5,634 | (8,949) | ||
| Income tax expense (benefit) | (51) | 1,219 | ||
| Net income (loss) | $ | 5,685 | $ | (10,168) |
| Net income (loss) per share: | ||||
| Basic | $ | 0.04 | $ | (0.07) |
| Diluted | $ | 0.04 | $ | (0.07) |
| Shares used to compute net income (loss) per share: | ||||
| Basic | 156,864 | 152,181 | ||
| Diluted | 188,737 | 152,181 |
GoPro, Inc.
Preliminary Condensed Consolidated Balance Sheets
(unaudited)
| (in thousands) | March 31,<br>2022 | December 31,<br>2021 | ||
|---|---|---|---|---|
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 305,319 | $ | 401,087 |
| Marketable securities | 144,616 | 137,830 | ||
| Accounts receivable, net | 70,574 | 114,221 | ||
| Inventory | 119,396 | 86,409 | ||
| Prepaid expenses and other current assets | 26,869 | 42,311 | ||
| Total current assets | 666,774 | 781,858 | ||
| Property and equipment, net | 17,294 | 19,003 | ||
| Operating lease right-of-use assets | 25,642 | 27,320 | ||
| Goodwill | 146,459 | 146,459 | ||
| Other long-term assets | 289,772 | 285,239 | ||
| Total assets | $ | 1,145,941 | $ | 1,259,879 |
| Liabilities and Stockholders’ Equity | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 82,925 | $ | 171,545 |
| Accrued expenses and other current liabilities | 96,591 | 128,572 | ||
| Short-term operating lease liabilities | 9,859 | 9,819 | ||
| Deferred revenue | 43,914 | 42,505 | ||
| Short-term debt | 124,963 | 122,391 | ||
| Total current liabilities | 358,252 | 474,832 | ||
| Long-term debt | 140,304 | 111,289 | ||
| Long-term operating lease liabilities | 40,203 | 43,025 | ||
| Other long-term liabilities | 14,396 | 14,819 | ||
| Total liabilities | 553,155 | 643,965 | ||
| Stockholders’ equity: | ||||
| Common stock and additional paid-in capital | 935,674 | 1,008,872 | ||
| Treasury stock, at cost | (123,613) | (113,613) | ||
| Accumulated deficit | (219,275) | (279,345) | ||
| Total stockholders’ equity | 592,786 | 615,914 | ||
| Total liabilities and stockholders’ equity | $ | 1,145,941 | $ | 1,259,879 |
GoPro, Inc.
Preliminary Condensed Consolidated Statements of Cash Flows
(unaudited)
| Three months ended March 31, | ||||
|---|---|---|---|---|
| (in thousands) | 2022 | 2021 | ||
| Operating activities: | ||||
| Net income (loss) | $ | 5,685 | $ | (10,168) |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||
| Depreciation and amortization | 2,302 | 3,534 | ||
| Non-cash operating lease cost | 1,678 | 920 | ||
| Stock-based compensation | 9,836 | 8,869 | ||
| Deferred income taxes | 2,931 | (2) | ||
| Non-cash restructuring charges | — | (99) | ||
| Non-cash interest expense | — | 3,433 | ||
| Other | 1,004 | 112 | ||
| Net changes in operating assets and liabilities | (96,843) | (32,091) | ||
| Net cash used in operating activities | (73,407) | (25,492) | ||
| Investing activities: | ||||
| Purchases of property and equipment, net | (520) | (1,068) | ||
| Purchases of marketable securities | (23,111) | — | ||
| Maturities of marketable securities | 15,900 | — | ||
| Net cash used in investing activities | (7,731) | (1,068) | ||
| Financing activities: | ||||
| Proceeds from issuance of common stock | 2,599 | 2,998 | ||
| Taxes paid related to net share settlement of equity awards | (7,175) | (6,246) | ||
| Repurchase of outstanding common stock | (10,000) | — | ||
| Net cash used in financing activities | (14,576) | (3,248) | ||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (54) | (1,092) | ||
| Net change in cash, cash equivalents and restricted cash | (95,768) | (30,900) | ||
| Cash, cash equivalents and restricted cash at beginning of period | 401,087 | 327,654 | ||
| Cash, cash equivalents and restricted cash at end of period | $ | 305,319 | $ | 296,754 |
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 restructuring and other related costs which primarily include severance-related costs, stock-based compensation expenses, facilities consolidation charges recorded in connection with restructuring actions, including right-of-use asset impairment charges, 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;
•adjusted EBITDA and non-GAAP net income (loss) exclude the loss on extinguishment of debt because it is not reflective of ongoing operating results in the period, and such losses vary in the frequency and amount;
•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 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. Prior to the adoption of ASU 2020-06 in fiscal year 2022, we were required to recognize non-cash interest expense related to the amortization of a debt discount associated with our 2022 Notes and 2025 Notes in accordance with the prior authoritative accounting guidance for convertible debt that may be settled in cash. From fiscal year 2022 and onwards, this debt discount accounting requirement was removed, and as a result non-cash interest expense will no longer be a reconciling item between GAAP and non-GAAP net income (loss);
•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) | 2022 | 2021 | ||||
| GAAP net income (loss) | $ | 5,685 | $ | (10,168) | ||
| Stock-based compensation: | ||||||
| Cost of revenue | 447 | 429 | ||||
| Research and development | 4,158 | 4,136 | ||||
| Sales and marketing | 2,123 | 1,865 | ||||
| General and administrative | 3,108 | 2,439 | ||||
| Total stock-based compensation | 9,836 | 8,869 | ||||
| Acquisition-related costs: | ||||||
| Cost of revenue | 47 | 723 | ||||
| Total acquisition-related costs | 47 | 723 | ||||
| Restructuring and other costs: | ||||||
| Cost of revenue | 5 | 50 | ||||
| Research and development | 39 | 441 | ||||
| Sales and marketing | 22 | 199 | ||||
| General and administrative | 13 | 143 | ||||
| Total restructuring and other costs | 79 | 833 | ||||
| Non-cash interest expense | — | 3,433 | ||||
| Income tax adjustments | (451) | 1,145 | ||||
| Non-GAAP net income | $ | 15,196 | $ | 4,835 | ||
| GAAP shares for diluted net income (loss) per share | 188,737 | 152,181 | ||||
| Add: Non-GAAP only dilutive securities | — | 7,671 | ||||
| Non-GAAP shares for diluted net income per share | 188,737 | 159,852 | ||||
| GAAP diluted net income (loss) per share | $ | 0.04 | $ | (0.07) | ||
| Non-GAAP diluted net income per share | $ | 0.09 | $ | 0.03 | ||
| Three months ended March 31, | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| (dollars in thousands) | 2022 | 2021 | ||||
| GAAP gross profit as a % of revenue | 41.8 | % | 38.6 | % | ||
| Stock-based compensation | 0.2 | 0.2 | ||||
| Acquisition-related costs | — | 0.4 | ||||
| Non-GAAP gross profit as a % of revenue | 42.0 | % | 39.2 | % | ||
| GAAP operating expenses | $ | 82,314 | $ | 82,208 | ||
| Stock-based compensation | (9,389) | (8,440) | ||||
| Restructuring and other costs | (74) | (783) | ||||
| Non-GAAP operating expenses | $ | 72,851 | $ | 72,985 | ||
| GAAP operating income (loss) | $ | 8,162 | $ | (3,512) | ||
| Stock-based compensation | 9,836 | 8,869 | ||||
| Acquisition-related costs | 47 | 723 | ||||
| Restructuring and other costs | 79 | 833 | ||||
| Non-GAAP operating income | $ | 18,124 | $ | 6,913 | ||
| Three months ended March 31, | ||||||
| --- | --- | --- | --- | --- | ||
| (in thousands) | 2022 | 2021 | ||||
| GAAP net income (loss) | $ | 5,685 | $ | (10,168) | ||
| Income tax expense | (51) | 1,219 | ||||
| Interest expense, net | 2,111 | 5,796 | ||||
| Depreciation and amortization | 2,302 | 3,534 | ||||
| POP display amortization | 687 | 637 | ||||
| Stock-based compensation | 9,836 | 8,869 | ||||
| Restructuring and other costs | 79 | 833 | ||||
| Adjusted EBITDA | $ | 20,649 | $ | 10,720 |
# # #
Investor Contact
investor@gopro.com
Media Contact
pr@gopro.com
Document
EXHIBIT 99.2
May 5th, 2022
GoPro, Inc. (NASDAQ: GPRO)
Management Commentary
Q1 2022 Earnings Call
Jalene Hoover
Vice President, Investor Relations, GoPro, Inc.
Enclosed is GoPro’s first quarter 2022 earnings report. Following this brief introduction is management commentary from GoPro’s CEO, Nicholas Woodman, and CFO and COO, Brian McGee. This commentary may include forward-looking statements. Forward-looking statements and all other statements that are not historical facts are not guarantees of future performance and are subject to a number of risks and uncertainties which may cause actual results to differ materially. Additionally, any forward-looking statements made today are based on assumptions as of today, including but not limited to uncertainty related to the duration and impact of the COVID-19 pandemic. This means that results could change at any time. Our commentary about our business results and outlook is based on the information available as of today’s date, and we do not undertake any obligation to update these statements as a result of new information or future events. Information concerning our risk factors is available in our most recent annual report on Form 10-K for the year ended December 31, 2021, which is on file with the Securities and Exchange Commission (“SEC”) and in other reports that we may file from time to time with the SEC.
In the management commentary, we may discuss gross margin, operating expense, net profit and loss, EBITDA as well as basic and diluted net profit and loss per share in accordance with GAAP and, additionally, on a non-GAAP basis. We believe that non-GAAP information is useful because it can enhance the understanding of our ongoing economic performance. We use non-GAAP reporting internally to evaluate and manage our operations, and we choose to provide this information to enable investors to perform comparisons of operating results in a manner similar to how we analyze our own operating results. A reconciliation of GAAP to non-GAAP operating expenses can be found in the press release that was issued this afternoon, which is posted on the investor relations section of our website.
In addition to the earnings press release, we have posted slides containing detailed financial data and metrics for the first quarter, 2022. These slides, as well as a link to today’s live webcast and a replay of this conference call are posted on the investor relations section of GoPro’s
website for your reference. Unless otherwise noted, all income statement-related numbers that are discussed in the management commentary, other than revenue, are non-GAAP.
Nicholas Woodman
Founder, Chief Executive Officer and Chairman, GoPro, Inc.
We hit the ground running in 2022, launching new camera SKUs derived from our industry-leading HERO10 Black camera, a premium high-margin, high-ASP accessory, and new desktop software that furthers our position as the world leader in software-based video stabilization. It’s exciting to be making significant progress on our strategy to further diversify our portfolio to address specific use cases and expand our TAM. We also delivered solid first quarter performance that reflected growth across key financial metrics, including revenue, gross margin operating profit and net income.
In late March, we introduced HERO10 Black Creator Edition, a new camera SKU aimed at vloggers, travelers and professional content creators. HERO10 Black Creator Edition is bundled with our high-end Media Mod and Light Mod accessories, providing advanced audio and lighting performance, and Volta, our new powered control grip. Volta provides more than four hours of additional battery life, on-grip controls and also functions as a tripod – providing content creators with enormous versatility and value. Combined with the included Mods and HERO10 Black’s Emmy® award winning capabilities, HERO10 Black Creator Edition is a “Hollywood in Your Hand” solution for anyone looking for a compact, pro-level vlogging, filmmaking or livestreaming solution.
And in early April, we launched the first of two new derivative cameras planned for 2022, HERO10 Black Bones – the ultimate FPV (first person view) camera for drone-based cinematography. The FPV community is demanding in its pursuit of innovative perspectives, and we believe we’re ideally positioned to serve their needs with HERO10 Black Bones, a stripped-down, lightweight variant of HERO10 Black that is designed specifically for mounting on small, agile drones. Bones ships with an updated version of our award-winning ReelSteady desktop stabilization software, super-serving this important core GoPro customer group in a way no other company can.
Expect to see more from our derivative and diversification strategy in both hardware and software later this year and expanding further in 2023. We’re confident we can grow our TAM by serving differentiated, often very specific needs of our consumer and professional customers.
We’re also creating significant value for our customers through our GoPro Subscription offering. GoPro Subscription continues to grow at an impressive rate, ending Q1 with 1.74 million subscribers, up 85% year-over-year. GoPro Subscription also plays a key role in driving direct-to-consumer (DTC) revenue, which increased 8% year-over-year to $89 million during the quarter, or 41% of revenue.
And we continue to improve our conversion of retail customers into GoPro subscribers via the GoPro app, more than doubling our retail-to-subscriber attach rate to 39% in Q1'22 from 18% in Q1'21.
As a sign of GoPro subscribers taking advantage of their subscription benefits, at the end of Q1, 72% of subscribers were storing content in their cloud accounts with average storage per user increasing nearly 40% year-over-year. While encouraging on its own, we believe this represents a significant opportunity to drive further engagement as we make our expanding suite of editing tools a more convenient, cloud-based experience. We see a long-term opportunity to establish GoPro as a powerful, subscription-based content management and editing experience for GoPro-owners and non-owners alike and this recent data supports that thesis.
As a part of this effort, we recently launched our new GoPro Player + ReelSteady desktop app. A powerful, yet easy-to-use app with industry-leading video stabilization and 360-reframing tools, GoPro Player + ReelSteady serves as a technical foundation for an exciting next-generation desktop editing app we plan to launch in 2023.
We’re also pleased to report that in the U.S., based on NPD’s Retail Tracking Service data, GoPro is the No. 1-selling brand in the camcorder battery and other imaging accessories
categories for the 12 months ending March 2022. The breadth and depth of our accessory catalog, which includes the recent launches of Volta and our high-performance upgrade battery, Enduro, is integral to GoPro’s versatility and will continue to play a key role as we look for ways to add more value for our customers, increase total order value, ASP and ultimately our TAM.
We are excited about how 2022 is taking shape. I am personally grateful for our passionate global team and their world class experience, commitment and focus. Thanks to their execution and the pace of our business, we’ve much to be thankful for today as we look ahead to the rest of the year.
Brian McGee
Executive Vice President, Chief Financial Officer and Chief Operating Officer, GoPro, Inc.
In Q1’22, we delivered revenue of $217 million, gross margins of 42.0% and GAAP and non-GAAP EPS of $0.04 and $0.09, respectively. The first quarter of 2022 represents GoPro's seventh consecutive quarter of profitability on a non-GAAP basis, a trend we expect to continue throughout 2022. We have generated $253 million of non-GAAP net income over the last seven quarters on revenue of $2.0 billion, or 13% of revenue.
First quarter 2022 performance was solid and reflected growth across key financial metrics on a year-over-year basis, including revenue, which increased by 6%, operating profit by 162%, and net income by 214%. We also bolstered our cash balance, ending the quarter with $450 million. In addition to this strong financial performance, we are also executing on our hardware and software portfolio expansion, with several launches announced in 2022 to-date.
Notable Q1'22 year-over-year highlights:
•Revenue grew 6% to $217 million
•Direct-to-consumer (DTC) revenue grew 8% to $89 million, or 41% of revenue
•Subscribers grew 85% to 1.74 million
•Subscription and service revenue grew 73% to $19 million
•Gross margin increased 280 basis points to 42.0%
•Operating profit increased 500 basis points to 8.4% of revenue
•Net income grew 214% to $15 million
•GAAP EPS was $0.04, up from a prior year loss per share of $0.07
•Non-GAAP EPS grew 200% to $0.09
•Cash grew $153 million, ending at $450 million
The following table details actual Q1'22 results compared to guidance for the same period.
First Quarter 2022 Results and Prior Guidance
| Q1 2022 Results | Q1 2022 Guidance | |
|---|---|---|
| Revenue | 217 | $215M +/- $5M |
| Street ASP | 414 | ~$400 |
| Gross margin | 42.0 | 41.5% +/- 50bps |
| Non-GAAP net income | 15.2M | $11M - $12M |
All values are in US Dollars.
In Q1'22, both retail and DTC channels delivered year-over-year revenue growth. Having dual sales channels is a key component of our go-to-market strategy and is working well for us. First quarter revenue from retail and DTC was $128 million and $89 million respectively, representing growth of 5% and 8% respectively, year-over-year. Sell-through was approximately 600,000 camera units in the first quarter, in-line with expectations.
On a percentage basis, first quarter 2022 DTC revenue was 41% of revenue up from 33% in Q4’21 and up slightly from 40% in Q1’21. As a reminder, direct-to-consumer revenue includes all revenue generated from GoPro.com including camera, accessories, subscription and service revenue.
Subscription and services are integral to our strategy and represent our most profitable revenue stream, generating 70-80% gross margin. First quarter 2022 subscriptions and service revenue was $19 million, or 9% of revenue, up 73% year-over-year, driving growth in Q1'22 DTC revenue. GoPro subscriber count increased 85% year-over-year to 1.74 million with web attach rates holding in the mid-90’s. Retail attach increased to 39%, up from 25% in Q4’21, and more than doubling from 18% in the year ago quarter, benefitting from seasonally strong fourth quarter
retail sales combined with efforts to improve conversion. Looking into Q2, we expect to see the retail attach rate reduce seasonally to the low to mid 30% range.
The power of our subscription model is reflected in gross margin improvements to 42.0% in Q1’22, at the high-end of expectations, and up 280 bps year-over-year. Growth in subscription accounted for the majority of the margin improvement along with the continued shift in camera mix to the high-end.
Improving our value proposition to consumers and driving ease of use and engagement, while also increasing the stickiness of our subscriptions, is a strategic priority. Enhancements to our subscription offering, including updates to editing tools, filters, music and themes combined with improvements to auto upload and camera connect, are driving positive results.
As we’ve mentioned previously, each year approximately 85% of our camera sales are to customers who are new to GoPro. This presents us with a large and ongoing opportunity to attract new subscribers. And we estimate that nearly 60% of our 1.74 million subscribers own either HERO10, HERO9 or Max cameras, with the balance owning HERO8 and older. The breadth of the offering is supporting the appeal of these enhancements to customers, leading them to subscribe or resubscribe. A few examples of year-over-year stats indicative of increasing subscription stickiness in our ecosystem include:
•Subscribers with content in the cloud continued to increase, with 72% of subscribers using their subscription to store content in our cloud
•Average amount of cloud storage per user has increased nearly 40%
Additionally, we remain pleased with the continued migration of GoPro subscription plans from monthly to annual, which improves our retention rates.
Looking at revenue by geography, first quarter revenue increased year-over-year with growth in Europe and Asia Pacific, while down slightly in the Americas. Europe and Asia Pacific grew 24% and 11% respectively, while the Americas declined 4%.
First quarter Street ASP was $414, representing a 13% increase year-over-year. Street ASP is defined as total reported revenue divided by camera units shipped. The growth in Street ASPs is attributable to growth in subscription revenue and the continued shift in demand to our higher-end cameras. The compound annual growth rate in Street ASP is 12% since 2018. In Q1’22, cameras with suggested retail prices of $400 and above made up 92% of our camera revenue, up from 79% in Q1’21.
First quarter operating expenses were flat year-over-year at $73 million. The launch of derivative cameras, bundles, accessories and software earlier this year, including HERO10 Black Bones, the Creator Edition, Volta and GoPro Player + ReelSteady, is a testament to our ability to expand our portfolio with modest investment.
Our strategy shift is generating positive earnings power. Combined with a continued focus on expense management, Q1'22 non-GAAP EPS increased 3x year-over-year to $0.09, with top line revenue growth and margin improvement flowing to the bottom line. GAAP EPS also improved, from a $0.07 loss in Q1’21 to $0.04 earnings per share in Q1’22.
Turning to the balance sheet, we ended the quarter with $450 million in cash, up 52% year-over-year. Cash decreased $89 million sequentially, primarily from reductions in net working capital of $95 million, and $10 million in GoPro share repurchases, partially offset by positive EBITDA of $21 million. The $153 million in cash we generated over the last twelve months was used to pay back the $125 million in convertible notes in April 2022, deleveraging our balance sheet.
Days sales outstanding was 29, down slightly from 30 days in Q1'21.
Looking ahead to the second quarter and full year 2022, our expectations are for greater revenue growth in the second half due to the timing of product launches, with additional commentary below.
The following table shows our guidance for the second quarter of 2022.
Second Quarter 2022 Guidance
| Q2 2022 Guidance | |
|---|---|
| Revenue | $240M +/- $5M |
| Unit sell-through | 675k +/- 25k |
| Street ASP | ~$400 |
| Gross margin | 40.5% +/- 50bps |
| Non-GAAP net income per share | $0.06 +/- $0.02 |
Looking at the second quarter of 2022, we expect to deliver revenue of approximately $240 million, down 4% year-over-year based on the midpoint of guidance. We expect an approximate 16% year-over-year reduction in unit sales, which will be largely offset by 14% year-over-year ASP increases. Historically, we have experienced sequential unit volume lifts in the second quarter between 10% to 20%. Our second quarter outlook assumes a 17% sequential lift in unit sales from Q1’22. In addition, we expect DTC to be in the upper 30’s as a percentage of second quarter revenue. And we expect second quarter Street ASP to be approximately $400 as we continue to shift camera mix to the high-end and grow subscription revenue.
We expect gross margin to be between 40.0% and 41.0%, in-line with the prior year quarter, but down sequentially. The sequential decline in gross margin percentage is primarily related to a strengthening U.S. dollar along with component price increases.
On April 15, 2022, we cash-settled the remaining $125 million of our 3.5% convertible notes. Combined with anticipated share repurchases, we expect to end the second quarter with approximately $330 million in cash.
Moving on to full year 2022, we continue to expect to drive revenue growth through modest increases in unit sales as well as growth in ASPs. As a reminder, our business is seasonal with the lowest revenue occurring in the first quarter and the highest revenue in the fourth quarter.
The fourth quarter in particular, has experienced historical sequential sell-through growth in a range of 30% to over 50%. We expect our derivative and flagship product launches in the second half to result in 4Q’22 sell-through lifts towards the higher-end of our typical sell-through range as we have more new products available for sale. We anticipate the 2022 retail and DTC revenue mix to hold relatively consistent with 2021, at 65% and 35%, respectively.
We expect sell-in and sell-through will be up in 2022 on a year-over-year basis, with channel inventory largely balanced at around 650,000 units, which we believe is in the right range. Channel inventory reduced in Q1’22 and we expect a slight reduction in Q2’22 before increasing to the 650,000 range in the second half of the year to support new product launches. We continue to effectively manage the supply chain, with second quarter inventory secured and the second half of the 2022 pipeline well-developed.
We are seeing positive impacts from our recent product launches on customer engagement as well as our subscription, and believe we remain on-track to achieve annual growth of GoPro subscribers of 40%, to 2.2 million, which translates into more than $80 million in subscription and service revenue in 2022. As a reminder, an exit rate of 2.2 million subscribers translates into annual recurring revenue of more than $100 million at gross margin of 70-80%.
We expect target gross margin to be in a range of 40.0% to 43.0% for full year 2022, reflecting continued camera mix to the high-end, and growth in direct-to-consumer led by higher margin subscription revenue. In addition, as we expand our TAM and grow units along with subscription and service revenue, we believe we have the opportunity to further expand gross margin into the mid 40%’s as we look out over the next couple of years.
We expect to narrow our 2022 operating expense range to between $340 million and $345 million. We will continue to invest in product innovation in hardware, software and the cloud experience, as well as in targeted marketing, while continuing to drive efficiencies in all areas of our business. We anticipate modest headcount growth for the year.
We expect 2022 and 2023 non-GAAP tax expense to remain low at approximately $1.9 million and $3.6 million, respectively. Non-GAAP tax expense is primarily related to actual cash tax paid
as we utilize our U.S. net operating losses and other tax attributes to offset tax expenses. We expect our GAAP effective tax rate in 2022 and 2023 to be approximately 24%.
We have established a track record of delivering higher second half cash flows for the past three years and anticipate this trend to continue in 2022. We expect to exit 2022 with cash between $450 million and $480 million, which contemplates additional share repurchases. We have $90 million remaining in our Board approved share repurchase plan.
GoPro is the leading provider of solutions for people wanting to capture and share their life experiences in immersive and exciting ways — and we continue to meaningfully enhance the experience and value proposition for our customers. Our shift to a more direct-to-consumer, subscription-centric model has had a powerful impact on our business, our financials and our company as a whole. We are excited by our multi-year roadmap that leverages our award-winning technology to expand our hardware, software, and subscription service offerings which we expect will yield positive financial results, top line growth, increased profitability and cash generation.
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