GPRO - Earnings call transcript Q1 2019

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Operator

Please standby. Good day, everyone. And welcome to GoPro’s First Quarter 2019 Earnings Results Conference Call. Today’s call is being recorded. And at this time, it’s my pleasure to turn the conference over to Christopher Clark, Head of Corporate Communications.

Christopher Clark

Operator. Thanks, everyone. afternoon, Good GoPro’s XXXX to conference first welcome earnings quarter call. And Nicholas today CFO, are me Woodman; GoPro’s With CEO, and Brian McGee.

Before remind everyone include I’d like remarks started, may forward-looking we today statements. that get our to

not of all to and differ actual are are facts performance, statements Forward-looking uncertainties, guarantees a which statements future number other of to results and not materially. that historical are risks subject cause and may

Securities and are obligation that profit Commission other Additionally, to do enhance the net may from this our economic GAAP information net non-GAAP based update non-GAAP that statements any to today of on internally We to gross the in year comparisons operating a file perform any reconciliation made performance. of our was well is in release use manage that to Information concerning provide Exchange can non-GAAP of as we in operations. information accordance not investors December as it statements results. to loss, is analyze we reports expense, We our afternoon. operating loss found undertake basic for how similar expenses new risk additionally discuss enable of on diluted our with profit a to and issued in recent a we which most results may choose manner on this ended or to and annual our per own press Today, and basis. because the useful events. We GAAP as be the A assumptions operating is reporting operating non-GAAP information these margin, the believe and understanding can share Form with SEC. We ongoing today. time-to-time XXXX, evaluate and of factors and XX-K forward-looking with result XX, on file in as report available future

as release, we conference are today’s detailed webcast other have of metrics link first press data and Investor reference. the the to that unless during addition as for and GoPro financial is slides, containing to posted Relations earnings the In well slides discussed a numbers This replay All posted XXXX. website revenue, your today a statement otherwise live income the are not related call this for than noted. GAAP, call on quarter

Now over call I’d to Founder turn Woodman. like the CEO, and GoPro’s Nicholas to

Nicholas Woodman

and our management Strong great collaboration line. and through revenue increase ASPs Thanks $XXX execution are growth Brian XXXX will retailers Brian I the Thanks sell-through Revenue quarter detail XXXX performance. , guidance. demand flagship first for earnings quarter. X% of raising year-over-year. to we HEROX led mix is results. Strong Black line, representing HEROX to and and Inventory shifted million, towards the improved good a in global you markets. each appropriate the demand GoPro’s Chris, and and our afternoon. levels In to year-over-year our quarter in at consistent in $XXX. And as an was and effective HEROX channel for Today, take our consumer a we sequential drove continued had will our XX% short, with

the from our and collaboration channel improved distributors retail around benefited QX marketing Our with partners world.

our To spend support momentum, partners we of channel take their year-over-year the Our we drive we our capitalize making markets. in for line. marketing a their to thank results to of We it as channel and contributed GoPro would like our It’s will doubled HEROX benefiting QX are impact are and partners awareness together are QX motivated impact. our team effort strength and opportunity the well. and this to Black, and believe to HEROX an from positively This QX. in sell-through on

conversion XX% drove shopping sales improved and unique lineup made regions, during and visits is campaigns strength quarter, of the web year-over-year. and up traffic record experience results. to with New and site have in improvements product year-over-year positive and approximately our Revenue we at GoPro.com creative the to up store achieved all rates improving GoPro.com. Thanks XXX% conversions the

regions. in According region captured and U.S., XX% Black share of China, Korea, by on top dollar HEROX a grew band, imaging each selling grew are growing of as YouTube. just in unit in HyperSmooth category in two camera by NPD XX% price Thailand the GfK, Black’s our Shorty sales We also selling media respectively, According We XX%, for and and In primarily the one achieved last And our committed on YouTube this opportunity to an Also share for the surpassing the XX% QX we Presence GoPro.com Japan, our the respectively, category, week it up dollar HEROX by Awards, unit X improved and within and channel XX% in Group, year-over-year. Stabilization and channel April, basis contributing and for lifetime sell-through according APAC X.X XX XX% digital first recognition XX%, internationally time. QX. increases year-over-year. from to one share growth driven its Overall aggregate share, believe improve the received margin $XXX views. GoPro Best market to HEROX the and direct us in one to million, GoPro our to industry-leading represents unit and over our to up Instagram in the for Video social our hit video that volume. cameras above all-time Best high, social line In of million channels. U.S., the and to GfK year-over-year. quality increased approximately winning following dollar XX% significant views, grew during positive Europe was impact performance an quarter number all All three content Instagram. a to billion GoPro in a of enables is on social viewership is quarterly represented and milestone, XXX announced on GoPro it Content our having Organic in GoPro gained QX. also million from in User-Generated GoPro

Our subscription to our over the mid-April, Plus subscribers, call up benefits out on Plus last year-over-year. two since up we service and rolled of paying grown international In full XXX,XXX reported we XX% has markets. additional XX%

the profit, strong margin our driving in Plus accordingly. our channel and we We and quarter, enhancing expect summarize first markets with to we our our subscription partners. proactively our are investing operating service of to our marketing To are around increased are world sales continued an opportunity through each business expansion, accelerate channels. Plus and important We as distribution grow international new and offering, see

which We we to below to our XXXX stated are a operating target million. expense approach are maintaining disciplined target $XXX $XXX management million, expense approximately our previously is of and lowering

given all continue business around And We at XXXX over expand including growth, I to to Plus multiyear an are that, exciting with have all innovative our points launching happy the and our am success we share core customers, and Brian. our result year seen we our world. planning call that to next and continued I spherical in will wow of offering, turn every that new with camera will regions we subscription while the growing generation products GoPro an profitability camera momentum, our lineup refreshed in roadmap for the in And to in believe beyond. QX, now price

Brian McGee

Gross our see to a from than year ago loss quarter, of improved an flagship for million Net loss XXXX, HEROX improvement increase in was on in year-over-year. year-over-year, begin $XX strong demand $X.XX $X.XX which $XXX nearly expenses XX.X%, by $X.XX, quarter per non-GAAP was year XX% million share to loss million, year-over-year. year GAAP were Black the In $XXX.X $XX in share quarter XX%, revised a Non-GAAP expenses resulted will we revenue X% and Adjusted for breakeven. million was quarter. and operating million, compared operating continued XX.X% the I of loss with Nick. for for up quarter year earnings from EBITDA non-GAAP margin of the decrease a the the quarter. the a the XXXX. the net Thanks, decrease $XX.X a per share XX% then performance improved camera, and overview upwardly some of a XX% was quarter GAAP ago ago. quarter and respectively. revenue to our first for guidance first thoughts ago

As XXst, XXX. our of March was headcount

Turning receivable sequentially. to Accounts million as down the balance sheet. of XXst $XX March were

Our DSOs on days. accounts receivable were XX

of XX% activity. quarter to level management from decrease the the $XXX of seasonal since execute continue the a We ending the at in million decreased ending $XXX million QX on quarter first XXXX the timing capital XXXX. at first to Cash quarter to lowest working or and our due quarter inventory

approximately to quarter We balances expect the second to in increase million. cash $XXX

totaled let’s of Now HEROX due performance for XX% which of in units in year-over-year, our XX% Black our over flagship camera quarter. the over XXX,XXX, accounted detail. increase of our quarterly and discuss Camera the unit XX% an to more principally revenue camera, business camera demand shipped of shipped

Revenue as grew units grew X% by our all year-over-year. $XXX, year-over-year. grew camera revenue XX% First XX%, from an region reported ASP reported increase was America and Europe XX%. Asia-Pac by grew is ASP street sequentially revenue the total quarter Street from while regions defined in shipped. divided and Revenue

HEROX particular, In either that substantially, tracked by XXX,XXX unit the more estimate GfK. channel has addition, than XX% White of that first the on declined for cameras is our revenue accounted increasing quarter was for we sequentially. over with of basis. inventories of XX% Silver business quarter We We aggregate GoPro.com unit percentage expectations. estimate inventory in growing XX% our line believe decreased year-over-year. HEROX for NPD representing or an XXXX In of GoPro.com sequential camera increasing a that sell-through channel and not by

on noted, improve Nick sales it over an as As to margin increasingly are we GoPro.com channel opportunity focused represents direct time. our

beginning on QX. camera to to continued in U.S.-bound We Mexico in second production the to ramping support be sales quarter begin in our Guadalajara, track

in We expect of cameras production will the XXXX. U.S.-bound half of be in Mexico our most in second

production well provide goal continue supports and to efficiencies. grow sell-through guidance most against As of to saving stated expect we decision for XXXX, our XXXX. Framing as some as recognized to and possible to previously, will insulate us our cost unit unit to Mexico year-over-year. our sell-in now I U.S.-bound move both tariffs,

per as to be mix as camera and the to grow accelerate operating expect $XXX due camera subscription result expect APS our remain a profit. expect we for we year. as meaningful to a Plus above Nick the end it’s of to And opportunity to said, and We margin our service high

revenue Our is guide XXXX to X% X% to overall for between previous our XX%, of expectation up from to X%. grow

We XX.X% minus be expect XXXX XX plus or basis margins to points.

$X expense in approximately be non-GAAP to to expect expense and income $X.X million tax $X other be approximately and to We million million expense.

for shares XXXX. We are diluted second of approximately fully count half share million million and shares a for $XXX the $XXX using QX,

per We expect of to outlook GAAP share. XX expenses revenue revenue earning our EPS expect $X.XX We or be with to second our the enables million, range full the and the believe More our in year operating $X.XX minus marketing $XXX the combination we service. share of realize of product operating share specifically, operating be increase $X.XX profitability the quarter plus also for breakeven investing non-GAAP the growth, as to points, $XXX XX.X% a to efficiencies approximately we to million million in gross $XX approximately while to margin range basis be expenses $XXX us non-GAAP to breakeven. million, to more and range in expenses reduced in XXXX, per in EPS in million $XX of and of per business, XXXX, improvement margin roadmap, of subscription

million, performance million be basis grow in half unit are the the we up EBITDA execution, revenue the XXXX, $XXX million deliver slightly expect of and in XX%, range With we the in $XX margin XXXX for first $XXX of the of the to Operator, positive second profitable range grow summarize, and quarter of With ready to For range to expect and OpEx momentum X% that, of minus over revenue XXXX. questions. pleased to plus flat are cash $XXX XX above to we X% or To higher with the year. Gross increase in year we to versus this the of continued ASPs to full in million. take our XX.X% the X%, $XXX of XXXX. million to second half points.

Operator

And Instructions] to Paul first [Operator will Morgan. you. go J.P. at Thank Coster we

Paul Coster

one one explain? at you wasn’t Thanks roadmap. for about latter can questions. Hello. whether talked clear Yes. taking perhaps Nick, on multiyear my one, your or is articulate if point intent to you two the it’s I have

Nicholas Woodman

sharing of build just grow that, No, a Well, and multiyear profitability. have definitely I believe we will but we us understanding got line better that only and strong customers. GoPro help maintain, our on this roadmap. very top roadmap not have multiyear got momentum was a much We we

it’s calls, consumer and they we more our an are that research we about our the investing towards to why models, exactly higher to Black, our As an understand and you and much in the higher products, end, have will drives shared on been some buying our understand we what have getting previous them gravitated of our going customers, our that be even doing XXX I’d over that, each of products at roadmap percentage develop a factoring entire indication think to how have of more rising, point better that is known is ASP important there’s customers much of opportunity excited see price higher product GoPro, add that now note are our is that if much job appeal to our we how well HEROX forward. as of about. customers sell-through and done, better performance, performance into information higher also better business history it’s to And customers it’s

this say, because grow we want one consumers, clearly very that the areas So, better to to the see appeal they GoPro. are opportunity us I telling of is would from best they an and

Paul Coster

it. Got

one improvement It kind flattish this it’s -- to ASP, question the just the kind of passing XQ that have a or anticipate interpretation? So implemented. they like a it’s one-shot creates have channel you applied for guidance with retail are do effects is year, revenue to ask being here. you. the me apparently, in Is a And unit I it is, then do that other volume the XQ constant Thank sounds innovations wise is the and looks you and that deal of in instant like somewhat that so increase that process? but mainly

Brian McGee

Brian. is This Paul. Hi,

take of question. that me Let the first part

On growth, the driven. it largely is ASP revenue

we Although, second talking go then and of bit and ASPs remarks million in remarks, but year, the it’s at really about, TAM X profitability kind have my half. good we we gravitating on adding are million And million up in $XX expansion. $XXX the kind units, said to prepared that around should be for enables half, us a to end in higher X.X QX as in ASP, were in up solid XX% XXXX revenue this to more consumers up the a second in in million the and up said to about business, Nick And higher a in year what we if EBITDA high per growing for million of QX be will to in as I and X% about solid end, units $XX from selling ‘XX prepared and the the company, in

Nicholas Woodman

improve I mean retailers our to globally to relates as about, And at with presentation absolutely. it is your more there to question do retail.

allows of retail. we to now of a operate to in where invest opportunity and position return strength at and definitely growth strong that a true from position get profitability us are returning and We that’s see

to are expand globally we GoPro regions. to part how our and to presence. our we grew an brand we channels our since We many where different But while and improve in have a -- There’s in presence. is have it’s how grew through opportunity of been strong present we refreshed retail presence consumers sell-through

stated continue We go-to of a in. Again, that’s that our store their all strategy and store to within market improve of invest about closely frankly, their something of target spoken our of And improve of to lot more have brand customer. understanding our OpEx in localization and we to our and opportunity there’s with leverage presence, retailers a work positioning. store But lot expertise more $XXX. our

haven’t before. on working and grow so ways we us It’s really -- to grateful our channel together. plans, So are a to partners the localize we customers team I effort, business for plans that speak mentioned respective retailers, that call, together that our on for marketing that in closely directly with joint we specific we as working joint to really are GoPro business

Paul Coster

Thank it. Got you.

Operator

to will Morgan go we Woodring next Eric at Stanley. And

Eric Woodring

Thanks for taking guys. Hey, my call.

you on Just wondering for was inventory channel comment you a I had XX%. channel inventory and -- am White just if Black a question, and mentioned the quick HEROX I have down can Silver Black follow-up.

Brian McGee

appropriate of increasing Yeah. we Black it be say the and that in and goes that bit And to revenue, quite across the that a channel, well. level was way, the good. basically quarter-over-quarter to flat QX to expect the inventory of at which needed as needed are with all be to as ahead on is all look would Black and level, be products our because I channel we in

Eric Woodring

Okay. Perfect. And then…

Nicholas Woodman

We…

Eric Woodring

just -- ahead. go my sorry, -- just … follow as

Nicholas Woodman

that add important we that, lineup to just spot coming inventory to and a well-positioned that, like transition in just important to the are that us for -- as we We to It’s transition really wise. we to feel in shares are note feel we future incredibly great really fall. is a it’s we refreshed

Eric Woodring

Okay. you. And then Perfect. just follow-up. as Thank my

Just out increased regions. for you to cloud curious and it terms heard since on rolled customer added what new unlimited you the reaction have Plus storage of accessories and subscription discounts in the

you from has Just how great? you been internationally, any on customers, be what have could that heard would color curious pickup share just Thanks.

Nicholas Woodman

Sure.

is am the having on that with added happy having our sequential subscribers. the sorry, growth. for of international to a making XXX,XXX available are obviously Plus suite we full time yeah, the benefits impact, the no course, that are There’s impact. are benefits the and of bringing I positive unit positive XX% We first question a customers

the the at and make the Buy us were stores Right it’s bit like, insurance able subscription economically and their only it grow if very We pitch that attach don’t to the subscribers. numbers that. the have note are in order selling been of one you most our new purchase very weeks at subscriber the the to to Plus have consumer or and help be about now flat-screen significantly we the Plus would don’t improve thereafter of consumer opportunities it time TVs. promising proof to to we to is not but coming took accelerate rates also acquire a Plus, helpful dealing do it the Plus subscription. that Best of we the how that purchase, That’s their pudding. shortly they paramount that’s home if to can retailers compared a The be be to to camera difficult offer have growth. sell very to sort the to beneficial to actually that that subscriber for have had on think, in that subscription learned and XXX,XXX able weeks online at Best retailer ability a offer I with insurance yet we the short going it’s that for been subscription grow terms proof of the Imagine to Plus of talking we would have camera three say Buy ability in is the in So, hanging we we and currently in how conversion what TV after two purchase have to GoPro.com. to is time on if wall subscription I’d hard that’s a

offer through we camera Buy at add we tremendous it’s at of impact and retail Best insurance the can a able to being to TV the channel. to purchase, our make of its Plus like purchase time So, when at GoPro.com going believe both time sale

we in on to So significant the our have going that’s subscriber impact a a future. change very market that is our in strategy go-to base think important

Brian McGee

million Eric, $X high I chime I that’s paid XXX,XXX in, And subscribers of a which think, revenue would quarter, very more created a than is margin.

accretive very it’s and bottomline. the margin to So

Eric Woodring

Thanks, guys. All right.

Nicholas Woodman

Thank you.

Operator

Research. next And to Todorov [Operator Longbow Instructions] Nikolay go at will we

Nikolay Todorov

and on a increased sell-ins the you afternoon. both on details for guys. mentioned if sell-through quarter Brian, Good guidance. Congrats correctly, expect you Hello, heard for and XXXX. thanks great I all that,

in that far as units. As call sell-through that year last X.X was remember, the I last you mentioned million

to million say, million, million we same you time, shipped million. X.X units So to But XXXX. puts growth X.X X.X should that of and at allow last guiding in the are year, you X% X% you X.X so kind around guys

delta. please kind bridge So gap? and of me, me that explain Can try you that’s kind of XXX,XXX units of help

Brian McGee

Yeah.

sell-through X.X manage think, from our is million we inventory expectation in in That about I unit trying XXXX. to and our is channel are X.X so or million XXXX. so up

million inventory maybe expect to to it. And proves out And drop or would to QX, XXX,XXX we this down QX, so X down. if in up channel how flat about in and QX, about would units so we be down we from guide were QX be slightly

Nikolay Todorov

the mentioned I Nick, me wrong, four there? the heard Is if the or mentioned you new change year launch think, camera of Okay. nothing fourth but you refreshes a changed correct I timing there And and in quarter. this

Nicholas Woodman

Well, I more specific into any than I go what shared. can’t

to I some consumers on so expect. sell-through excited paying really are see to It’s think historically an for what our engagement. and research product their we increased you HEROX terrific resulting really to indication positively the in to off GoPro’s an reacting could see line. look team and But launches new to for

the year, resulting socially, because We driving is believe something a have can are deliver viral going stabilization. in or large to fantastic It Black that quality brand than stronger it’s we If of watch. darn HEROX strong on and exciting, look really and is that’s our and what new got awareness appreciation to of the up part of make us that strength That’s driving gorgeous the incredible this sure everybody’s is you of due we teeing off at we content its that’s famously refresh we we believe expectation are coming line at video brand we ever the for viewership, later and our HyperSmooth be tap. that it’s products of been. to in you social have with

Nikolay Todorov

have you you of the subscription benefits? guys availability, you have on around because give And your timeline monthly kind long-term launch I any concurrently, users, service get could where current any think we there? can, regarding to do that active if updates the And us data expect helpful. of lot you globally, understand then, obviously, a a can That’s you have trajectory Okay.

Nicholas Woodman

It’s not the to purchase. overemphasize of Well, I more benefits Sure. countries are relates the camera as Plus subscriber than to are more purchase. as of And year at their best GoPro, internationally interested the of of engaged additional the the countries to can’t working additional And full sell on a the out distribution working never they time when growing opportunity. the to to I rolled in importantly, literally at we them. the at as it we value then base, camera mentioned, XX and subscription we are being are will like opportunity we April, channels Plus than we the a consumer shared benefits. in convert well, that most time is be have we and on stores Plus our educate continuing importance able at with to-date time the because to as in goes and consumers and also on to the had that Plus exploring service a retailers and GoPro.com offer to we checkout of them as time buying distribution is -- add service

initiative. our its and lever as Plus ability in we on retail bringing improve longer something allowing order and is to margin have the because customer, that our But through to significant selling that to a that we are far as a to is short time. it really are subscription we online importance focused going over keenly attach got term business be of recognize Plus we at it So, GoPro.com

So we are investing accordingly.

Nikolay Todorov

Okay. active And the any currently? you monthly then users have do around number

Nicholas Woodman

on we of all as of reporting are sharing XXX,XXX -- that yesterday. we got today paid subscribers Well, that have active is and as

Nikolay Todorov

Okay.

good and Sounds luck. Thanks guys. good

Nicholas Woodman

very much. you Thank

Operator

will our Citi. from We Jim Suva today question take at final

Jim Suva

your about The track you versus couple or a upgrades now sell-through talk that up what and up quarters very you systems, are new rate new and percents it full around know take they bit have quarter Thank of much. product? I their like so and you a of subscribers additions But of any Can that. had to you take little emails over holiday far? of newest is can the using thoughts them through versus things

Nicholas Woodman

are we great both split question. I to can’t indication. customers. and about That’s anecdotally not we ever a engagement prepared before we new with great any upgrades share share than are a existing between have That’s new the socially versus information really customers higher But with customers. that, levels seeing had

helping their you we helping how that’s believe when our new being of engagement App-Connect customer more We HEROX this new terrific. helping combine is acquisition. drive GoPro previous them of out are via that quality we seen each app shows getting so have than seeing are with customers and in that seeing that drive higher is than engagement frequently it with content generation using more the much typical And of purchase, the and and social customer from awareness, convenient Black with upgrade are making to which we the GoPro’s, shared. camera, great, We are them more more higher drive

Black we feeling Board are regions the that good our all globally. across the about So having grow to impact HEROX ability in on

Jim Suva

so the it. appreciate for details. you Thank Okay. I much

Nicholas Woodman

you. Thank

Operator

turn And over to at time, or program for back with the no like any this I’d remarks. additional management questions concluding additional to

Nicholas Woodman

GoPro, of channel course, for a to like thanking at of Thank support continued around GoPro again big and close you, once employees partners Operator. global all I’d their you by our thank to the world.

making the the York. helping itself in forward world on exciting We the to be ways signing Conference the and we that, team This June all force celebrate joining look for positivity in in am GoPro to on are as seeing investors with New and call Conference We And everyone. happen. Boston grateful a this at team know Baird May of JPMorgan with the XXth on I at is Xth thanks you off.

Operator

joining for today’s again, that I’d gentlemen, does today. like everyone and ladies thank us conclude And Again, conference. once to

GoPro (GPRO) 9 May 192019 Q1 Earnings call transcript