8-K
GoPro, Inc. (GPRO)
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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): February 3, 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 February 3, 2022, GoPro, Inc. (the “Company”) issued a press release to report its financial results for its fourth quarter ended December 31, 2021.
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 February 3, 2022, the Company held a live audio webcast to discuss its financial results for its fourth quarter ended December 31, 2021.
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 8.01. Other Events.
On January 27, 2022, GoPro’s board of directors authorized the Company to repurchase up to $100 million of its Class A capital stock. Stock repurchases under the program may be made periodically through open market purchases, block trades or otherwise in compliance with all federal and state securities laws and state corporate law and in accordance with the single broker, timing, price and volume guidelines set forth in Rule 10b-18 under the Securities Exchange Act of 1934, as amended, as such guidelines may be modified by the SEC from time to time. GoPro expects to fund repurchases through cash generated from operations. This stock repurchase program has no time limit and may be modified, suspended or discontinued at any time.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
| Exhibit<br><br>Number | Description of Document |
|---|---|
| 99.1 | Press Release of GoPro, Inc. dated February 3, 2022 to report its financial results for its fourth quarter ended December 31, 2021. |
| 99.2 | Management's commentary from Nicholas Woodman, Chief Executive Officer, and Brian McGee, Chief Financial Officer and Chief Operating Officer, dated February 3, 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: | February 3, 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 Fourth Quarter and Full Year 2021 Results
2021 Revenue up 30% to $1.16 Billion
2021 Gross Margin Increased 580 bps to 41.1%
2021 GAAP EPS of $2.27 and non-GAAP EPS of $0.90
2021 Cash & Investments Grew 64% to $539 Million
Board Approves Stock Repurchase Program of up to $100 Million
SAN MATEO, Calif., February 3, 2022 - GoPro, Inc. (NASDAQ: GPRO) today announced financial results for its fourth quarter ended December 31, 2021 and posted management commentary on the investor relations section of its website at https://investor.gopro.com.
“In 2021 GoPro navigated a challenging business environment – and thrived,” said Nicholas Woodman, GoPro’s founder and CEO. “We successfully launched innovative new hardware, software and subscription offerings and leveraged the first full year of our more direct-to-consumer, subscription-centric strategy to grow revenue, margin and profitability while generating a record year-end cash balance of $539 million.”
“The strategic shift we made in mid-2020 is bearing fruit in the form of financial and operational improvements,” said Brian McGee, GoPro’s CFO and COO. “The result has been strong revenue growth with significant margin improvement, combined with controlled spending, and leading to growing profitability and record cash flow generation.”
Q4 Financial Highlights
•Revenue was $391 million, up 9% year-over-year from $358 million.
•GoPro.com revenue, including subscription revenue, increased 10% year-over-year to $128 million, or 33% of total revenue. GoPro and Quik subscription revenues totaled $16.8 million, up 118% year-over-year.
•GAAP and non-GAAP gross margin was 41.2% and 41.3% respectively, up from the prior year period at 38.0% and 38.3%, respectively.
•GAAP net income was $53 million, or $0.32 per share, up from $44 million or $0.28 per share in the prior year period. Non-GAAP net income was $66 million, or $0.41 per share, up from $61 million, or $0.39 per share in the prior year period.
•Adjusted EBITDA was $72 million, or 18% of revenue, compared to $68 million, or 19% of revenue in the prior year period.
•Cameras with retail prices at or above $300 represented 100% of Q4 2021 camera revenue, up from 91% in the prior year period.
•Q4 2021 Street ASP was $379, up 17% year-over-year.
•Cash increased $160 million, or 41% of revenue.
2021 Financial Highlights
•Revenue was $1.16 billion, up 30% year-over-year from $892 million in 2020.
•GoPro.com total revenue, including subscription revenue, increased 39% year-over-year to $392 million, or 34% of total revenue. GoPro and Quik subscription revenues totaled $52.9 million, up 131% year-over-year.
•GoPro subscriber count ended 2021 at approximately 1.6 million, up 107% year-over-year.
•Quik app subscriber count grew to 221,000 after launching in March 2021.
•GAAP and non-GAAP gross margin was 41.1% and 41.4% respectively, up from the prior year at 35.3% and 36.1%, respectively.
•2021 GAAP net income was $371 million, or $2.27 per share, up from a loss of $67 million, or $0.45 loss per share in the prior year. Non-GAAP net income was $146 million, or $0.90 per share, up from $13 million, or $0.08 per share in the prior year.
•2021 adjusted EBITDA was $168 million, or 14% of revenue, compared to $43 million, or 5% of revenue in the prior year.
•Cameras with retail prices at or above $300 represented 97% of camera revenue.
•2021 Street ASP was $369, up 17% year-over-year.
•Cash grew 64% to $539 million.
Other Recent Business Highlights
•Won a 2nd Emmy® Award for Technical & Engineering from the National Association of Television Arts & Sciences for GoPro’s innovation in in-camera sensor and software stabilization technology.
•Ranked No. 1 Large Employer in Outside Magazine’s “Best Places to Work,” recognizing U.S.-based companies leading in their commitment to employee engagement and wellness.
•Launched the new high-performance Enduro Battery, improving HERO10 and HERO9 cold temperature performance and extending recording times in all conditions.
•On January 27, 2022, GoPro’s board of directors authorized the Company to repurchase up to $100 million of its Class A common stock. Share repurchases may take place from time to time, subject to market conditions, using a variety of methods. GoPro expects to fund repurchases through cash generated from operations. This stock repurchase program has no time limit and may be modified, suspended or discontinued at any time.
Results Summary:
| Three months ended December 31, | Year ended December 31, | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ($ in thousands, except per share amounts) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||||||
| Revenue | $ | 391,149 | $ | 357,772 | 9.3 | % | $ | 1,161,084 | $ | 891,925 | 30.2 | % | ||||
| Gross margin | ||||||||||||||||
| GAAP | 41.2 | % | 38.0 | % | 320 bps | 41.1 | % | 35.3 | % | 580 bps | ||||||
| Non-GAAP | 41.3 | % | 38.3 | % | 300 bps | 41.4 | % | 36.1 | % | 530 bps | ||||||
| Operating income (loss) | ||||||||||||||||
| GAAP | $ | 58,625 | $ | 55,355 | 5.9 | % | $ | 113,216 | $ | (36,819) | 407.5 | % | ||||
| Non-GAAP | $ | 69,232 | $ | 64,184 | 7.9 | % | $ | 155,667 | $ | 24,313 | 540.3 | % | ||||
| Net income (loss) | ||||||||||||||||
| GAAP | $ | 52,626 | $ | 44,413 | 18.5 | % | $ | 371,171 | $ | (66,783) | 655.8 | % | ||||
| Non-GAAP | $ | 66,147 | $ | 61,064 | 8.3 | % | $ | 146,068 | $ | 12,779 | 1,043.0 | % | ||||
| Diluted net income (loss) per share | ||||||||||||||||
| GAAP | $ | 0.32 | $ | 0.28 | 14.3 | % | $ | 2.27 | $ | (0.45) | 604.4 | % | ||||
| Non-GAAP | $ | 0.41 | $ | 0.39 | 5.1 | % | $ | 0.90 | $ | 0.08 | 1,025.0 | % | ||||
| Adjusted EBITDA | $ | 71,571 | $ | 67,744 | 5.6 | % | $ | 167,798 | $ | 43,200 | 288.4 | % |
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 +1 800-289-0720 (US) or +1 323-701-0160 (International) and enter access code 3025961, 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 April 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 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 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; the impact of theCOVID-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; 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, 2020, which is on file with the Securities and Exchange Commission (SEC), and as updated in future filings with the SEC. 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 December 31, | Year ended December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| (in thousands, except per share data) | 2021 | 2020 | 2021 | 2020 | ||||
| Revenue | $ | 391,149 | $ | 357,772 | $ | 1,161,084 | $ | 891,925 |
| Cost of revenue | 230,075 | 221,689 | 683,979 | 577,411 | ||||
| Gross profit | 161,074 | 136,083 | 477,105 | 314,514 | ||||
| Operating expenses: | ||||||||
| Research and development | 34,806 | 27,515 | 141,494 | 131,589 | ||||
| Sales and marketing | 47,882 | 38,535 | 156,694 | 151,380 | ||||
| General and administrative | 19,761 | 14,678 | 65,701 | 68,364 | ||||
| Total operating expenses | 102,449 | 80,728 | 363,889 | 351,333 | ||||
| Operating income (loss) | 58,625 | 55,355 | 113,216 | (36,819) | ||||
| Other income (expense): | ||||||||
| Interest expense | (5,780) | (5,483) | (22,940) | (20,257) | ||||
| Other expense, net | (611) | (5,343) | (176) | (4,881) | ||||
| Total other expense, net | (6,391) | (10,826) | (23,116) | (25,138) | ||||
| Income (loss) before income taxes | 52,234 | 44,529 | 90,100 | (61,957) | ||||
| Income tax expense (benefit) | (392) | 116 | (281,071) | 4,826 | ||||
| Net income (loss) | $ | 52,626 | $ | 44,413 | $ | 371,171 | $ | (66,783) |
| Net income (loss) per share: | ||||||||
| Basic | $ | 0.34 | $ | 0.29 | $ | 2.41 | $ | (0.45) |
| Diluted | $ | 0.32 | $ | 0.28 | $ | 2.27 | $ | (0.45) |
| Shares used to compute net income (loss) per share: | ||||||||
| Basic | 156,221 | 150,663 | 154,274 | 149,037 | ||||
| Diluted | 162,742 | 156,464 | 163,178 | 149,037 |
GoPro, Inc.
Preliminary Condensed Consolidated Balance Sheets
(unaudited)
| (in thousands) | December 31,<br>2021 | December 31,<br>2020 | ||
|---|---|---|---|---|
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 401,087 | $ | 325,654 |
| Restricted cash | — | 2,000 | ||
| Marketable securities | 137,830 | — | ||
| Accounts receivable, net | 114,221 | 107,244 | ||
| Inventory | 86,409 | 97,914 | ||
| Prepaid expenses and other current assets | 42,311 | 23,872 | ||
| Total current assets | 781,858 | 556,684 | ||
| Property and equipment, net | 19,003 | 23,711 | ||
| Operating lease right-of-use assets | 27,320 | 31,560 | ||
| Intangible assets, net and goodwill | 146,521 | 147,673 | ||
| Other long-term assets | 285,177 | 11,771 | ||
| Total assets | $ | 1,259,879 | $ | 771,399 |
| Liabilities and Stockholders’ Equity | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 171,545 | $ | 111,399 |
| Accrued expenses and other current liabilities | 128,572 | 113,776 | ||
| Short-term operating lease liabilities | 9,819 | 9,369 | ||
| Deferred revenue | 42,505 | 28,149 | ||
| Short-term debt | 122,391 | — | ||
| Total current liabilities | 474,832 | 262,693 | ||
| Long-term debt | 111,289 | 218,172 | ||
| Long-term operating lease liabilities | 43,025 | 51,986 | ||
| Other long-term liabilities | 14,819 | 22,530 | ||
| Total liabilities | 643,965 | 555,381 | ||
| Stockholders’ equity: | ||||
| Common stock and additional paid-in capital | 1,008,872 | 980,147 | ||
| Treasury stock, at cost | (113,613) | (113,613) | ||
| Accumulated deficit | (279,345) | (650,516) | ||
| Total stockholders’ equity | 615,914 | 216,018 | ||
| Total liabilities and stockholders’ equity | $ | 1,259,879 | $ | 771,399 |
GoPro, Inc.
Preliminary Condensed Consolidated Statement of Cash Flows
(unaudited)
| Three months ended December 31, | Year ended December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2021 | 2020 | 2021 | 2020 | ||||
| Operating activities: | ||||||||
| Net income (loss) | $ | 52,626 | $ | 44,413 | $ | 371,171 | $ | (66,783) |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 2,363 | 3,570 | 10,962 | 19,065 | ||||
| Non-cash operating lease cost | 442 | 1,658 | 4,240 | 6,565 | ||||
| Stock-based compensation | 10,423 | 8,037 | 38,650 | 29,963 | ||||
| Deferred income taxes | (3,619) | 1 | (273,541) | (50) | ||||
| Non-cash restructuring charges | — | — | (99) | 5,242 | ||||
| Impairment of right-of-use assets | — | — | — | 12,460 | ||||
| Non-cash interest expense | 3,673 | 3,018 | 14,208 | 10,366 | ||||
| Loss on extinguishment of debt | — | 5,389 | — | 5,389 | ||||
| Other | 1,370 | 334 | 2,243 | 1,072 | ||||
| Net changes in operating assets and liabilities | 96,570 | 39,833 | 61,319 | 70,493 | ||||
| Net cash provided by operating activities | 163,848 | 106,253 | 229,153 | 93,782 | ||||
| Investing activities: | ||||||||
| Purchases of property and equipment, net | (705) | (321) | (5,545) | (4,881) | ||||
| Purchases of marketable securities | (64,245) | — | (146,515) | — | ||||
| Maturities of marketable securities | 8,341 | — | 8,341 | 14,830 | ||||
| Asset acquisition | — | — | — | (438) | ||||
| Net cash provided by (used in) investing activities | (56,609) | (321) | (143,719) | 9,511 | ||||
| Financing activities: | ||||||||
| Proceeds from issuance of common stock | 265 | 1,927 | 7,490 | 5,435 | ||||
| Taxes paid related to net share settlement of equity awards | (2,366) | (1,494) | (17,379) | (6,207) | ||||
| Proceeds from issuance of 2025 convertible senior notes | — | 143,750 | — | 143,750 | ||||
| Payment of debt issuance costs | (4,752) | — | (4,752) | |||||
| Purchase of capped calls related to 2025 convertible senior notes | — | (10,249) | — | (10,249) | ||||
| Payments for 2022 convertible senior notes partial repurchase | — | (56,000) | — | (56,000) | ||||
| Proceeds from borrowings | — | — | — | 30,000 | ||||
| Repayment of borrowings | — | — | — | (30,000) | ||||
| Net cash provided by (used in) financing activities | (2,101) | 73,182 | (9,889) | 71,977 | ||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (408) | 1,669 | (2,112) | 2,083 | ||||
| Net change in cash, cash equivalents and restricted cash | 104,730 | 180,783 | 73,433 | 177,353 | ||||
| Cash, cash equivalents and restricted cash at beginning of period | 296,357 | 146,871 | 327,654 | 150,301 | ||||
| Cash, cash equivalents and restricted cash at end of period | $ | 401,087 | $ | 327,654 | $ | 401,087 | $ | 327,654 |
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 announced in the fourth quarter of 2016, first quarter of 2017, first quarter of 2018 and second quarter of 2020, 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. In connection with the issuance of the Convertible Senior Notes in April 2017 and November 2020, we are required to recognize non-cash interest expense, such as the amortization of debt discounts, in accordance with the authoritative accounting guidance for convertible debt that may be settled in cash;
•non-GAAP net income (loss) includes income tax adjustments. 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 December 31, | Year ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands, except per share data) | 2021 | 2020 | 2021 | 2020 | ||||||||
| GAAP net income (loss) | $ | 52,626 | $ | 44,413 | $ | 371,171 | $ | (66,783) | ||||
| Stock-based compensation: | ||||||||||||
| Cost of revenue | 374 | 373 | 1,794 | 1,548 | ||||||||
| Research and development | 4,132 | 3,733 | 17,263 | 13,415 | ||||||||
| Sales and marketing | 2,077 | 1,672 | 8,045 | 5,779 | ||||||||
| General and administrative | 3,840 | 2,259 | 11,548 | 9,221 | ||||||||
| Total stock-based compensation | 10,423 | 8,037 | 38,650 | 29,963 | ||||||||
| Acquisition-related costs: | ||||||||||||
| Cost of revenue | 71 | 723 | 1,152 | 4,598 | ||||||||
| Total acquisition-related costs | 71 | 723 | 1,152 | 4,598 | ||||||||
| Restructuring and other costs: | ||||||||||||
| Cost of revenue | 7 | 11 | 157 | 1,281 | ||||||||
| Research and development | 53 | 159 | 1,343 | 8,542 | ||||||||
| Sales and marketing | 35 | (264) | 712 | 10,925 | ||||||||
| General and administrative | 18 | 163 | 437 | 5,823 | ||||||||
| Total restructuring and other costs | 113 | 69 | 2,649 | 26,571 | ||||||||
| Non-cash interest expense | 3,673 | 3,018 | 14,208 | 10,366 | ||||||||
| Loss on extinguishment of debt | — | 5,389 | — | 5,389 | ||||||||
| Income tax adjustments | (759) | (585) | (281,762) | 2,675 | ||||||||
| Non-GAAP net income | $ | 66,147 | $ | 61,064 | $ | 146,068 | $ | 12,779 | ||||
| GAAP shares for diluted net income (loss) per share | 162,742 | 156,464 | 163,178 | 149,037 | ||||||||
| Add: dilutive shares | — | — | — | 3,096 | ||||||||
| Non-GAAP shares for diluted net income per share | 162,742 | 156,464 | 163,178 | 152,133 | ||||||||
| GAAP diluted net income (loss) per share | $ | 0.32 | $ | 0.28 | $ | 2.27 | $ | (0.45) | ||||
| Non-GAAP diluted net income per share | $ | 0.41 | $ | 0.39 | $ | 0.90 | $ | 0.08 | ||||
| Three months ended December 31, | Year ended December 31, | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (dollars in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||
| GAAP gross profit as a % of revenue | 41.2 | % | 38.0 | % | 41.1 | % | 35.3 | % | ||||
| Stock-based compensation | 0.1 | 0.1 | 0.2 | 0.2 | ||||||||
| Acquisition-related costs | — | 0.2 | 0.1 | 0.5 | ||||||||
| Restructuring and other costs | — | — | — | 0.1 | ||||||||
| Non-GAAP gross profit as a % of revenue | 41.3 | % | 38.3 | % | 41.4 | % | 36.1 | % | ||||
| GAAP operating expenses | $ | 102,449 | $ | 80,728 | $ | 363,889 | $ | 351,333 | ||||
| Stock-based compensation | (10,049) | (7,664) | (36,856) | (28,415) | ||||||||
| Restructuring and other costs | (106) | (58) | (2,492) | (25,290) | ||||||||
| Non-GAAP operating expenses | $ | 92,294 | $ | 73,006 | $ | 324,541 | $ | 297,628 | ||||
| GAAP operating income (loss) | $ | 58,625 | $ | 55,355 | $ | 113,216 | $ | (36,819) | ||||
| Stock-based compensation | 10,423 | 8,037 | 38,650 | 29,963 | ||||||||
| Acquisition-related costs | 71 | 723 | 1,152 | 4,598 | ||||||||
| Restructuring and other costs | 113 | 69 | 2,649 | 26,571 | ||||||||
| Non-GAAP operating income | $ | 69,232 | $ | 64,184 | $ | 155,667 | $ | 24,313 | ||||
| Three months ended December 31, | Year ended December 31, | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||
| GAAP net income (loss) | $ | 52,626 | $ | 44,413 | $ | 371,171 | $ | (66,783) | ||||
| Income tax expense | (392) | 116 | (281,071) | 4,826 | ||||||||
| Interest expense, net | 5,701 | 5,442 | 22,678 | 19,993 | ||||||||
| Depreciation and amortization | 2,363 | 3,570 | 10,962 | 19,065 | ||||||||
| POP display amortization | 737 | 708 | 2,759 | 4,176 | ||||||||
| Stock-based compensation | 10,423 | 8,037 | 38,650 | 29,963 | ||||||||
| Loss on extinguishment of debt | — | 5,389 | — | 5,389 | ||||||||
| Restructuring and other costs | 113 | 69 | 2,649 | 26,571 | ||||||||
| Adjusted EBITDA | $ | 71,571 | $ | 67,744 | $ | 167,798 | $ | 43,200 |
# # #
Investor Contact
investor@gopro.com
Media Contact
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Document
EXHIBIT 99.2
February 3rd, 2022
GoPro, Inc. (NASDAQ: GPRO)
Management Commentary
Q4 and Full Year 2021 Earnings Call
Jalene Hoover
Vice President, Investor Relations, GoPro, Inc.
Enclosed is GoPro’s fourth quarter and 2021 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, 2020 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 fourth quarter and 2021. 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.
Thank you for reading GoPro’s Q4 and 2021 management commentary.
In 2021 GoPro navigated a challenging business environment – and thrived. We successfully launched innovative new hardware, software and subscription offerings and leveraged the first full year of our more direct-to-consumer (DTC), subscription-centric strategy to grow revenue, margins and profitability while generating a record year-end cash balance of $539 million.
2021 revenue was $1.16 billion, up 30% year-over-year. Margins grew to 41.1% on a GAAP basis, and to 41.4% non-GAAP. GAAP EPS increased to $2.27, with non-GAAP EPS increasing more than ten times over 2020 to $0.90.
2021 was our third consecutive profitable year on a non-GAAP basis, with Q4 bringing home the win with the successful launch of our new flagship camera, HERO10 Black. Effective supply chain management kept shelves stocked globally for the holidays. We grew Q4 revenue and earnings year-over-year with revenue up 9% to $391 million and net income up 8% to $66 million.
In addition to growth in revenue and profitability, 2021 was also a year of optimization across our business. We refined our product development approach to enable the launch of more products at a faster rate as we pursue a larger TAM – which I will elaborate on further below. We modernized our ecommerce infrastructure to more aggressively address what we see as a significant opportunity to grow direct-to-consumer revenues and subscription while expanding customer lifetime value. We will continue to advance our ecommerce capabilities and given the effectiveness of our strategy to date, we enter 2022, our 20th anniversary, excited about our prospects.
In 2021, we grew our direct-to-consumer revenue 39% year-over-year to a record $392 million, representing 34% of revenue, up from 32% in 2020. Q4 direct-to-consumer revenue was $128 million, or 33% of revenue, up 10% year-over-year.
Our direct-to-consumer efforts contributed to the addition of 815,000 new GoPro subscribers in 2021, bringing our GoPro subscriber total to approximately 1.6 million at year end, which represented very strong growth of 107% year-over-year.
In Q4 we acquired the majority of new GoPro subscribers through camera sales at GoPro.com with an attach rate percentage in the mid-90s. In addition, consumers who purchased their GoPro camera at retail became GoPro subscribers via the Quik mobile app at an attach rate of 25%, up nearly 3x in Q4 year-over-year. We see the conversion of retail customers into subscribers as a meaningful growth opportunity. And we’re happy to report that subscriber retention rates remained at the same favorable levels we mentioned on previous earnings calls, with several opportunities to further improve on this important metric.
Our Quik app subscription, aimed at mobile users who do not own a GoPro camera, continues to grow steadily as well. Launched in Spring of 2021, our Quik app subscription grew to approximately 221,000 subscribers by year end. And to clarify, these Quik subscribers are not included in our approximately 1.6 million GoPro subscriber count.
Looking at 2022 and beyond, we plan to grow our business and expand our TAM by:
•Enhancing our product ecosystem, leveraging automation to help our customers more conveniently achieve success.
•Creating derivative cameras to diversify our offerings, targeting TAM-expanding use-cases in a more specific manner than we do today.
•Expanding our cloud, mobile and upcoming desktop application capabilities to better serve GoPro customers while appealing to new customers who may or may not own a GoPro camera.
We believe offering a broader portfolio of hardware products and software solutions to address new customer use cases and needs will enable us to expand our TAM. Our product roadmap is accordingly robust – tailored for consumers and professionals whose digital imaging needs require the types of solutions GoPro is uniquely positioned to provide. In just the past week GoPro was honored by the National Academy of Television Arts & Sciences with our second Emmy® award, this time recognizing our
industry leading HyperSmooth video stabilization. Our two Emmy’s are a testament to GoPro’s thriving culture of innovation and incredibly talented people.
At the end of 2022, we plan to increase our hardware offering from the two product types we have today – HERO and MAX – to four distinct camera products. And we expect to expand that further by the end of 2023. This is in addition to the aggressive roadmap we have planned for software, including new cloud capabilities and an all-new subscription-based desktop application.
To the GoPro team around the world, congratulations and thank you for delivering such impressive results in 2021. You deftly navigated some of the most challenging business conditions the world has seen to deliver market defining products and equally impressive financial results. Your execution also combined with our passionately supportive work culture to land GoPro as the No. 1 large business in Outside Magazine’s review of the most desirable places to work. Congratulations and thank you, again!
We look forward to building on all this positive momentum in 2022 to deliver what we believe with be another stellar year.
With that, I’ll hand it over to our CFO and COO, Brian McGee.
Brian McGee
Executive Vice President, Chief Financial Officer and Chief Operating Officer, GoPro, Inc.
We are proud of our financial and operational performance in 2021 which was capped off by fourth quarter revenue of $391 million, gross margin of 41.3%, and non-GAAP EPS of $0.41. We grew both revenue and net income year-over-year by 9% and 8%, respectively. And topped all of that off by generating $160 million in cash in the fourth quarter, which represented 41% of Q4 revenue.
We exceeded 2021 expectations set at this time last year for revenue growth, gross margin percentage and cash. Prioritizing sales of our higher-end cameras, a strategic focus to grow direct-to-consumer sales and subscriptions, combined with effective supply chain management, resulted in exceptional financial performance throughout the year. We are pleased with the
collective efforts of our employees and our supply chain partners and extend a big “thank you” to all who enabled us to accomplish this strong outcome.
Notably, during 2021 GoPro grew:
•Revenue 30% to $1.16 billion
•DTC revenue 39% to $392 million
•Subscribers 107% to 1.6 million
•Gross margin 500 basis points to 41.4%
•Operating profit to 13.4% of revenue
•Net income more than 10x to $146.1 million
•GAAP EPS to $2.27
•Non-GAAP EPS more than 10x to $0.90
•Cash by a record $211 million, or 18% of revenue
The following tables detail actual Q4 and 2021 results compared to guidance for the same periods.
Quarterly Results and Prior Guidance
| Q4 2021 Results | Q4 2021 Guidance | |
|---|---|---|
| Revenue | 391 | $380M +/- $5M |
| Unit sell-through | ~1.0MU | ~1.1MU |
| Street ASP | 379 | $380 |
| Gross margin | 41.3 | 40.5% +/- 50bps |
| Non-GAAP net income per share | 0.41 | $0.35 +/- $0.03 |
| Cash & investments | 539 | $470M - $500M |
All values are in US Dollars.
Annual Results and Prior Guidance
| 2021 Results | 2021 Guidance | |
|---|---|---|
| Revenue | 1,161M | $1,150M +/- $5M |
| Unit sell-through | ~3.25MU | ~3.35MU |
| Street ASP | 369 | $370 |
| Gross margin | 41.4 | 41% +/- 20bps |
| Non-GAAP net income per share | 0.90 | $0.83 +/- $0.03 |
All values are in US Dollars.
Direct-to-consumer revenue from GoPro.com was $128 million in Q4, up 10% year-over-year, and $392 million for 2021, up 39%. As a reminder, direct-to-consumer revenue includes all revenue generated from GoPro.com including camera, accessories, subscription and service revenue . On a percentage basis, DTC revenue was 33% of Q4 revenue and 34% of 2021 revenue.
Our dual sales channel is a key component of our go-to-market strategy and is working well for us. We appreciate the strong support we receive from our retail partners around the world and look forward to continuing to work together to grow our business.
Subscriptions are integral to our strategy and represent our most profitable revenue stream, generating 70-80% gross margins. Fourth quarter and 2021 subscription revenue were $17 million and $53 million, respectively. For 2021, subscription revenue was approximately 5% of 2021 revenue, up 131% year-over-year.
GoPro.com subscribers grew to approximately 1.6 million in 2021, up 107% year-over-year, but lower than our target of more than 1.7 million subscribers due to strength in the retail channel. Importantly, subscription attach rates improved on GoPro.com as well as retail during the fourth quarter. In Q4, subscription attach rates increased into the mid-90s on GoPro.com, while mobile subscription attach rates from retail steadily improved throughout the year, nearly tripling in Q4 year-over-year to 25%.
Quik mobile app subscribers grew to approximately 221,000, up 32% sequentially. Recall that we launched our paid Quik mobile application in March of 2021.
Fourth quarter gross margin was better than expected at 41.3%, up 300 basis points year-over-year and reflecting continued demand for our higher-end cameras as well as growth in direct-to-consumer and subscription-based revenue. We managed through supply chain, component costs and freight costs during the quarter, with incremental freight costs less than expected.
Cameras with suggested retail prices above $300 represented 100% and 97% of fourth quarter and 2021 revenue, respectively. In 2021, cameras with suggested retail prices of $400 and above made up 85% of our camera revenue, up from 74% in 2020.
Street ASP is defined as total reported revenue divided by camera units shipped. Fourth quarter Street ASP was $379, representing a 17% increase year-over-year thanks to the continued shift in demand for our higher-end cameras, and growth in DTC, accessory and subscription revenue. For 2021, Street ASP increased 17% to $369, a 12% compound annual growth rate since 2018.
Revenue grew in all geographies in Q4 and in 2021. For 2021, year-over-year growth was 40% for EMEA, 31% for APAC and 26% for the Americas. Fourth quarter year-over-year revenue growth was 22% in EMEA, 8% in APAC and 4% in the Americas. EMEA’s strong performance for the fourth quarter was curbed a bit by the resurgence of COVID’s Omicron variant in December, which impacted both retail and direct-to-consumer channels.
Turning to the balance sheet, we ended the year with $539 million in cash, up 64% year-over-year which represents approximately forty percent of our market capitalization. Earnings, combined with effective balance sheet management, drove impressive cash growth, increasing $160 million sequentially, or 41% of Q4 revenue. For 2021, cash increased $211 million, which is a record for the company.
Days sales outstanding was 26, down from 28 in Q3 2021.
We sold just over 1.0 million and 3.1 million units during the fourth quarter and in 2021, respectively. We sold-through approximately 1.0 million and 3.25 million units, during the fourth quarter and in 2021, respectively. Channel inventory increased slightly during the fourth quarter, yet ending a bit lower than the prior year at just over 600,000 units, putting us into a good position as we head into 2022. Overall, fourth quarter sell-through was slightly below expectations, primarily due to the impact of COVID’s resurgence in Europe, as mentioned earlier, as well as retail execution on our entry price point product in North America.
Before providing commentary on our 2022 outlook, I am pleased to report that GoPro’s Board of Directors approved a stock repurchase program of up to $100 million of our class A common stock.
Effective January 1, 2022 we have adopted ASC 2020-06, which requires us to account for our convertible notes wholly as traditional debt on our balance sheet. With the effective elimination of the non-cash discount component related to the debt, GAAP expenses should be more aligned with non-GAAP. More importantly, our projected share count now comprehends an additional 26 million shares, as the new standard requires all underlying shares of the converts to be included in diluted shares outstanding. This has been contemplated in our 2022 guidance. Payment of our debt obligation due in April 2022 will reduce the share count by approximately 10 million shares for Q2, Q3 and Q4 to approximately 180 million shares. We expect the weighted average share count to be at 183 million shares for 2022.
Looking at the first quarter of 2022, we expect to deliver revenue between $210 million and $220 million. We expect Street ASPs to increase to the $400 range, and gross margins to be between 41.0% and 42.0%. We expect non-GAAP net income dollars to increase in a range of 120% to 150% from $5 million in Q1 2021.
Looking into 2022, we expect slight unit growth and increasing ASPs to drive revenue growth. We are holding our target gross margin range between 40% and 43%, reflecting a continued shift of our hardware ASPs up the price curve, and growth in direct-to-consumer and higher margin subscription revenue. We estimate that new TAM-expanding product introductions, targeted marketing to increase awareness and engagement, and continued conversion of our retail customers, will support growth of our GoPro subscribers by approximately 40% year-over-year to 2.2 million. As a reminder, 2.0 million subscribers would translate to annual recurring revenue of $100 million at gross margins of 70-80%.
We expect 2022 operating expenses to be in a range of $340 million to $350 million, with first quarter operating expenses of approximately $80 million. We will continue to invest in our direct-to-consumer business, product innovation and targeted marketing, while continuing to drive efficiencies in all areas of our business. We anticipate modest headcount growth for the year.
In 2020 and 2021, our non-GAAP tax expense was $2.2 million and $0.7 million, respectively. Similarly, we expect 2022 and 2023 non-GAAP tax expense to remain low at approximately $1.5 million and $3.5 million, respectively. Non-GAAP tax expense is primarily related to actual cash tax paid as we utilize our U.S. net operating losses (NOLs) and other tax attributes to offset tax expenses.
For GAAP taxes, recall that in Q3 2021 our GAAP results were positively impacted by the release of a U.S. valuation allowance that was recorded as a $263 million non-cash income tax benefit during the quarter. Our cumulative GAAP income over the past three years, along with our financial outlook, which anticipated sufficient future taxable income to be able to utilize existing U.S. NOLs and other tax attributes, positioned us well to record the release. 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 above $500 million, which contemplates the use of $125 million in cash to settle our convertible notes due in April 2022. This range does not yet reflect any share repurchases; however, we do plan to repurchase shares during the year.
The strategic shift we made in mid-2020 is bearing fruit in the form of financial and operational improvements. The result has been strong revenue growth with significant margin improvement, combined with controlled spending and leading to growing profitability and record cash flow generation. As Nick mentioned earlier, we’re excited to diversify our business with the introduction of new, derivative hardware, and software products, which we believe will expand our TAM and positively impact top and bottom-line growth, in 2022 and beyond.
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