SAN MATEO, Calif., Jan. 8, 2018 /PRNewswire/ -- GoPro, Inc. (NASDAQ:
GPRO) today reported certain preliminary financial results for the
fourth quarter ended December 31,
2017. GoPro expects revenue to be approximately $340 million for the fourth quarter of 2017.
Fourth quarter revenue includes a negative impact of
approximately $80 million for price
protection on HERO6 Black, HERO5 Black and HERO5 Session cameras,
as well as the Karma drone.
GoPro expects GAAP gross margin for the fourth quarter of 2017
to be between 24% and 26%. Non-GAAP gross margin for the fourth
quarter of 2017 is expected to be between 25% and 27%.
Non-GAAP gross margin for the same period, excluding the price
protection impact of $80 million and
other charges of between $19 million
and $21 million, is expected to be
between 44% and 46%. GoPro expects GAAP operating expenses to be
between $136 million and $140 million for the fourth quarter of 2017 and
non-GAAP operating expenses to be between $118 million and $122
million for the same period.
GoPro ended the fourth quarter with cash and cash equivalents of
$247 million, up $50 million over the third quarter of 2017.
"As we noted in our November earnings call, at the start of the
holiday quarter we saw soft demand for our HERO5 Black camera,"
said GoPro founder and CEO Nicholas
Woodman. "Despite significant marketing support, we
found consumers were reluctant to purchase HERO5 Black at the same
price it launched at one year earlier. Our December 10 holiday price reduction provided a
sharp increase in sell-through."
Globally, HERO5 Black sell-through more than doubled in the two
weeks following the December 10 price
reduction, while HERO5 Session sell-through roughly
tripled.
Sales of the newly introduced flagship HERO6 Black camera
performed as expected during the fourth quarter. On January 7, GoPro lowered the price of its premium
model, HERO6 Black from $499 to
$399 to align with its good, better,
best product strategy.
Initial uptake of GoPro's newly launched spherical camera,
Fusion, was better than expected during the quarter.
"GoPro is committed to turning our business around in 2018,"
said Nicholas Woodman. "We
entered the new year with strong sell-through and are excited with
our hardware and software roadmap. We expect that going
forward, our roadmap coupled with a lower operating expense model
will enable GoPro to return to profitability and growth in the
second half of 2018."
2018 Products and Operating Expenses
In 2018, GoPro will continue to innovate with several new
products aimed at new and existing customers. GoPro's sharper
focus will enable an $80 million
reduction in operating expenses compared to 2017 levels, resulting
in a target operating expense level of below $400 million for 2018 on a non-GAAP basis.
The lower non-GAAP operating expense target will be achieved
through a variety of strategies, including:
- GoPro is reducing its global workforce from 1,254 employees as
of September 30, 2017 to fewer than
1,000 employees worldwide.
- GoPro founder and CEO Nicholas
Woodman will reduce his 2018 cash compensation to
$1.
- Although Karma reached the #2 market position in its price band
in 2017, the product faces margin challenges in an extremely
competitive aerial market. Furthermore, a hostile regulatory
environment in Europe and
the United States will likely
reduce the total addressable market in the years ahead. These
factors make the aerial market untenable and GoPro will exit the
market after selling its remaining Karma inventory. GoPro will
continue to provide service and support to Karma customers.
A restructuring of GoPro's business will result in an estimated
aggregate charge of $23 million to
$33 million, including approximately
$13 million to $18 million of cash expenditures as a result of a
reduction in force, substantially all of which are severance and
related costs, as well as approximately $10
million to $15 million of
other charges, consisting primarily of non-cash items. GoPro
expects to recognize most of the restructuring charges in the first
quarter of 2018. GoPro will provide more detail on its 2017
results and 2018 outlook in its fourth quarter earnings report
which will take place in early February.
About GoPro, Inc. (NASDAQ:
GPRO)
GoPro makes it easy for people to celebrate and
share experiences. We believe life is more meaningful when
shared. We build cameras, software and accessories that help
the world share itself in immersive and exciting ways.
GoPro, HERO, Karma, Quik, QuikStories and their respective
logos are trademarks or registered trademarks of GoPro,
Inc. in the United States and other
countries.
For more information,
visit www.gopro.com or connect
with GoPro on Facebook, Instagram,
LinkedIn, Pinterest,
Twitter, YouTube, and GoPro's The
Inside Line.
Note Regarding Use of Non-GAAP Financial
Measures
GoPro reports gross margin and operating expenses in
accordance with U.S. generally accepted accounting
principles (GAAP) and on a non-GAAP basis. Non-GAAP items
exclude, where applicable, the effects of stock-based compensation,
acquisition-related costs, restructuring costs and aerial-related
charges. A reconciliation of preliminary 2017 GAAP financial
measures to non-GAAP financial measures is presented below. A
reconciliation to 2018 target GAAP operating expense has not been
provided because doing so would require an unreasonable effort due
to the unavailability of information needed to calculate
reconciling items and due to the variability, complexity and
limited visibility of the adjusting items that would be excluded
from the non-GAAP financial measures in future periods. When
planning, forecasting and analyzing operating expenses 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 of the Private
Securities Litigation Reform Act. Forward-looking statements in
this press release include, but are not limited to, our
expectations regarding our revenue, including the impact of price
protection charges, gross margin and operating expenses for the
fourth quarter of 2017; our business outlook for 2018 regarding our
2018 operating plan and our return to profitability and growth in
the second half of 2018; our 2018 product roadmap, including new
hardware and services; anticipated reductions in operating expenses
for 2018 as compared to 2017; and aggregate charges for employee
termination and the timing to recognize these charges and other
costs associated with the restructuring, including the estimates of
related cash expenditures by GoPro in connection with the
restructuring. These statements involve risks and
uncertainties, and actual events or results may differ
materially. Among the important factors that could cause
actual results to differ materially from those in the
forward-looking statements are the risk that our reduction in
operating expenses may impact our ability to meet our business
objectives and achieve our revenue targets and may not result in
the expected improvement in our profitability, the fact that our
future growth depends in part on further penetrating our
addressable market and also growing internationally, and we may not
be successful in doing so; any inability to successfully manage
frequent product introductions (including our 2018 roadmap for new
hardware and software products) and transitions, including managing
our sales channel and inventory and accurately forecasting future
sales; our dependence on sales of our cameras, mounts and
accessories for substantially all of our revenue; the effect of a
decrease in the sales or change in sales mix of these products
would harm our business; the effect of a decrease in sales during
the holiday season; the fact that an economic downturn or economic
uncertainty in our key U.S. and international markets may adversely
affect consumer discretionary spending and demand for our products;
any inability to anticipate consumer preferences and successfully
develop and market desirable products; the risks associated with
the exiting from the consumer drone market; the effects of the
highly competitive market in which we operate; the fact that we may
not be able to achieve revenue growth or profitability in the
future; risks related to inventory, purchase commitments and
long-lived assets; difficulty in accurately predicting our future
customer demand; the importance of maintaining the value and
reputation of our brand; and other factors detailed in the Risk
Factors section of our Annual Report on Form 10-K for the year
ended December 31, 2016, which is on
file with the Securities and Exchange Commission and as
supplemented by Item 1A Risk Factors in our Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 2017. Additional information will
also be set forth in our Annual Report on Form 10-K for the year
ended December 31, 2017. 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.
Reconciliations of preliminary non-GAAP financial measures for
the three months ended December 31,
2017 are set forth below:
|
Three months
ended
|
(dollars in
thousands)
|
December 31,
2017
|
GAAP gross margin
as a % of revenue
|
24% - 26%
|
Stock-based
compensation
|
—
|
Acquisition-related
costs
|
1
|
Restructuring
costs
|
—
|
Non-GAAP gross
margin as a % of revenue
|
25% - 27%
|
Price protection
charges
|
15
|
Aerial-related
charges
|
4
|
Adjusted Non-GAAP
gross margin as a % of revenue
|
44% - 46%
|
|
|
GAAP operating
expenses
|
$136,000 -
$140,000
|
Stock-based
compensation
|
(14,500)
|
Restructuring
costs
|
(3,500)
|
Non-GAAP operating
expenses
|
$118,000 -
$122,000
|
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SOURCE GoPro, Inc.