GPRO - Earnings call transcript Q3 2019

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Operator

Good day, ladies and gentlemen and welcome to today's GoPro’s Third Quarter 2019 Results Conference Call. I'd like to remind everyone that this conference is being recorded and then at this time I would like to turn the floor over to Christopher Clark, Vice President of Communications.

Christopher Clark

Thanks, operator. Good afternoon, everyone, and welcome to GoPro's Third Quarter 2019 Earnings Conference Call. With me today are GoPro’s CEO, Nicholas Woodman; and CFO, Brian McGee.

are I'd include remind other to forward-looking are materially. historical started, remarks that statements a get future actual not may of results and today statements facts may number we of like are uncertainties, everyone to our that performance risks Before and guarantees which subject cause not and differ all to

other these of statements annual today risk recent that today. from file to statements on a Information any made most are ended with obligation based to assumptions we December events. time any forward-looking XX-K new update XXXX, time do SEC. We with report factors our in for of file the Exchange year as as not reports on Form result and in future information the undertake Additionally, on is may is which or available Securities our the concerning XX, and Commission

loss net performance. can discuss may use per accordance we Today, additionally it non-GAAP profit with non-GAAP and and basis. believe understanding information GAAP because to diluted our on share of that and gross internally as useful is loss in We operations. and the operating economic expense, basic evaluate and non-GAAP net a enhance profit ongoing as margin, reporting well We manage our

was analyze afternoon. to GAAP can we press to of of that issued our comparisons operating how expenses enable own operating A perform to a in choose be investors information in manner this this the non-GAAP We similar to provide operating release to results found reconciliation our results.

conference containing slides live are your metrics the the posted for the as link as press Investor third a this release, quarter GoPro on call today's slides detailed data financial and These website to for and of to In Relations well reference. a replay XXXX. webcast we have addition posted

otherwise than All GAAP revenue discussed income other call during today unless are noted. are statement that not the related numbers

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

Nicholas Woodman

update and the you XXXX and Chris, Thanks, XXXX. Brian for to of reception positive performance some going outlook new of third will lineup metrics. take GoPro’s the our on improved our performance rest and Then key and I'm good afternoon. you through quarter Today, product

put, HEROX and Since launch sentiment GoPro, new social has sales also up are XX% highest positive HEROX over Simply eclipsed a unquestionable previous at engagement MAX new and ago. all HEROX HEROX XX%. Black indicate year's Black GoPro gopro.com any last signs Black the Black year including hits. every unit HEROX of of by have flagship generated metrics Black

Considering the business success at standout a as factor HEROX and of our of its the sales gopro.com on Black to of contribute well. can month predecessor Fusion to have, Black how HEROX four. of proving to exciting be is to shattered debut unit the MAX went MAX performance October a Through it's consider by

is or MAX in one, a grade multiple vlogging a camera, cameras a users stabilized professional XXX it rich feature HERO be for addressing looking consumer segments, like camera, MAX camera. having three

play to our an important demand. raise business gross customers forward, delivering to shared, going increasingly helping while believe going innovation and wow we in we've margins is the role As MAX our ASPs

point value HEROX and strengthen our and price our Black to by going new at delivered. in promised performance MAX HEROX at $XXX and every and Black HEROX our we Joining were we've lineup, $XXX at we business Silver maximizing

EPS top line a this to and grow find won't weak in and lineup's offering confident quarter holiday our You of our XXXX fourth XXXX. both the spot and in we're ability in

serves We at camera camera believe sales and encouraging levels with as XX% record performance selling HEROX up indicator in aggregated in as channels. ramps have As unit and we mentioned retail all gopro.com fact, through gopro.com well of sell since an MAX launch are year-over-year. through Black models at gopro.coms demand through at sell sold

innovative and and to Our MAX our camera. what's to possible focused both led redefine incredible customers' roadmap. Black Thanks a input engineering has with consumer investment product research and a HEROX in teams, highly and GoPro’s

software along We're share products positive $XX confident are the take for beyond with greater we our billion imaging these long-term new new hardware expectations. help can aforementioned level roadmap of And our while metrics sentiment demand social digital our and market. the of this products, us more anticipated

Black posts, in positive the mentioned, and In I a GoPro a As a of product a videos, assets from million black month, related global up launch generated HEROX our engagements Black. up social And video on other launch viral XX% from setting for million history. reach launch the achieved record sentiment HEROX lift camera. first Black XX% in over new XX HEROX Black. generated We X% HEROX become channels, HEROX XXX the asset the of our has most launch social

as our for see such vloggers. in Reviewers give to This products. launch, new and widespread of versatility of traditional customer level press the the we've importantly we days off To GoPro and both performance, articles of entirely momentum as announcement. that the next product a and our acknowledged after by needs appeal sense the our were builds XX products coverage segments receives acclaim customers consumer as taken during addressing our published to well you reviews there the global X,XXX new continue nearly media

problems Germany, that taking cities of an world including greater out have billion are television and grow we digital the billboards includes believe excitement by extending States, major can quarter, Japan aggressive around we a of and from to market. marketing we theaters major GoPro’s set holiday returned the Australia, brand more imaging and in the TAM in United in HEROX advertisements film our the home To amplify consumers, campaign $XX that products Black Again, for MAX releases. out and broader rolling share during while further to for solve for

in million generated organic quarter. holiday marketing speaking QX platforms content XXXX. will the we XX% significant presence over of quarter maintain $XXX And up set in record And throughout GoPro of a with setting views of our record previous course digital QX on another

XX% Instagram and viewership channels new These top social and scale channels increased across followers to video on million huge surpass YouTube all XX platforms GoPro numbers large year-over-year. like continues on sequentially Organic already X.X gaining GoPro’s gains of to brand views and XX% on million. are

experience. area for the Another app last that app We excelling into simplified merged our where mobile GoPro the one is shared software. we editing on is earnings GoPro call app a quick

the our Within increase engagement This the jump bodes in well resulted This in first saw sessions. in editing automated and users active people fired X% the total our we XX% edit to monthly up for is subscription And doing. monetize release, number of about grow of month Plus apps tools. using XXX% in plans how XXXX. a service app a the we're

factors, X, a November accelerated Plus several result This of accessibility count availability, growth annual gopro.com. call. increased of As in-card newly was subscriber XXX,XXX, at our earnings improved introduced subscriptions is XX% international last up our including since and

With rest our puts and EPS via subscription high-margin across top defining this is confident all our we're to us targeting XXXX. GoPro of in Momentum, to XXX,XXX ability our XXXX XXX,XXX the plan mobile steadily our in momentum our we've XXXX position This for line business got service. in fronts. and on we're to cameras, grow a strong accelerating between market exit app advancing rapidly both or with advancing it entire paying our roadmap, and Plus subscribers.

to I'll with And that, hand Brian. it over

Brian McGee

above discussed were Thanks third October today those be will we results delay our X results outlined on brief call. comments Nick. expected My that And the QX and quarter production during call. as our our during

year found our we outlook Our results, I'll detailed XXXX. summary website. comparisons half quarterly XXXX that EPS After press third revenue for of and remain for in Thereby, why guidance and on reaffirming release provide increasing color our our and be QX second successful are we for on results a growth and track a can more profitability. quick QX quarter full

third revenue was $XX.X loss with quarter, of net non-GAAP million. the $XXX.X million For a

Third expenses reduction and and $XX.X of our operating marketing were operating GAAP level facility expenses quarterly respectively costs. XX% expenses $XX.X advertising, quarter million, X% decreases XXXX. GAAP and in related benefited and year-over-year were representing since from operating non-GAAP million lowest non-GAAP

Turning to inventory This increase with Cameras. to shipping Black HEROX ended sheet, short-term $XXX million the due in in period delay we the balance was the in inventory.

quarter accounts receivable. in In addition, inventory avoid We the to ended million in tariffs. HEROX million $XX cash $XX forward with some we pulled and equivalent cash and

Importantly, cash to and an of exit balance we and cash expect $XXX million million with between between XXXX inventory million. $XXX $XXX to of to $XXX equivalent million

Camera X.X season. sell-through more putting We shipped XXX,XXX good the detail. performance unit XXXX approximately camera of us the the believe totaled QX estimate the XXX,XXX inventory and Now position to declined a to was let's between third for channel during for our XX% HEROX between units. quarter quarter in holiday We quarterly XX%, in discuss million. business units

began represented over we MAX of MAX shipments on-shelf in XX% third revenue. our which available quarter camera and of late During HEROX became Black QX, October.

Third total ASP increase Street a by defined revenue $XXX, quarter street as year-over-year. reported was is units ASP camera X% shipped. divided

gross increase guidance, than from during driving what our factors for XXXX and expect be lower costs $X margin outlook previously are was call Black the one-time to year The we we improving to October. to are in main our Turning we half second this noted. provided full related HEROX early million

expect operating with Black Jabil. expenses. combined at lower Cameras ramps efforts a faster due of HEROX pace Production to we our And slightly

skewed remain expect the And to as we're between targeting camera XXXX We end. Plus the XXX,XXX to result, to increase or a year. our to than full And subscribers exit our expect as paying Plus cameras paying over for high above subscribers. XXXX noted, And XXX,XXX to to to ASPs Nick we of expect as growth XXX,XXX XX% to exit XXXX. more be $XXX per continue mix we with

of we $X.XX Therefore, or million of for GAAP continue up to less non-GAAP share; expenses than in million, $XXX per range be points, to the $XXX gross from $XXX XX to of XX.X%; margin second in plus half a revenue $X.XX of earnings $X.XX XX%, of $X.XX to of range share. basis operating XXXX, per a minus earnings to million; expect

per the minus in to share. to a of earnings XX plus points; a to range to million; $X.XX $XXX basis of $X For expenses per $X.XX gross or of expect be earnings of $X.XX non-GAAP quarter of million or million; GAAP revenue fourth minus margin $XXX XX%, in XXXX, $X.XX share; we $XXX plus of range million, operating

in EPS full revenue be $X.XX or be $X $X.XX slight delivering a plus EBITDA of million, share. billion per in range to to For X% growth GAAP to to loss X%. $X.XX a $XX we the a of year, of of of $X.XXX to a $X.XX and million. to range billion break-even minus of EPS expect range Non-GAAP in

costs income such year. Additionally, year, in and quarter. production of $X.X million expense QX, related to and HEROX in for costs million incurred million million Other third to we the $X.X expect the one-time be be fourth for $X.X tax the for of quarter million $X.X expense; we Black in be delay the $X.X XXX or for count QX the year; expense share in XXX to million to million

track To on recovered profitability growth production delay summarize, quickly to HEROX from the is return and year. to we GoPro the for and

expect our million EBITDA was to a XXXX. on continue X% million and XXXX as We line $XX our to X% reminder negative top $XXX in negative And progress, to of and in grow XXXX respectively. the financial

$XX to more turned positive Xx million than XXXX in positive and expect EBITDA a is year-over-year. in which $XX XXXX, increase we Our million

continue products and to the performance new dynamic financial improve our dramatically while market. We innovations bringing to

and to expect meaningful ASPs, As over leverage look we EBITDA we in XXXX, grow expand and XXXX units EPS gross in operating revenue and margins, levels. XXXX to increases both drive ahead

we operator, that are With take questions. ready to

Operator

from very first And [Operator Thank Good we much, Instructions] Citi, Jim morning. you Suva. have sir.

Jim Suva

initial get of you ahead at like on some greatly or I'll expectations It’s also some not, have themselves. if grow. don't Thank So mentioned position words much. to least you and all? brackets XXXX, follow-up. And then based Are guidance at very a you original for meaningful out too

Brian McGee

Hi this is Brian. Yes. Jim,

$XX as million. a in dramatically the growing EBITDA increasing revenue let's great with X% market in profitability XXXX, just that First, and of say, reminder to products along hit X% just about we have

is As to our in grow million, XXXX. this our target, a EBITDA XXXX midpoint guidance of this providing at earnings want at XXXX what and or $XX is of not per frame minimum we And meaningful We XX% for want we least and target. off grow for at least guidance XX% by share. is to our

that's both earnings for company. So cash flow and in meaningful increase pretty the

Jim Suva

about shopping my Thank there's behaviors like good to is And this very your market promotions or conscious be guys different you. different talking Thank or there from I'm or or That season is should Christmas if is perspective that appreciated. there. that talking greatly anything out of trends holiday you something. detail competitively or strong. and follow-up the And just anything you. the or or market product I'm keystone we marketplace a is, past? not caps about about I'm embraced placement product seen have wondering, compared

Nicholas Woodman

our better Well, And quarter. much into the fold Nick better get case here. advertising �� again that partners at their plan, last we retail so presence our advertising they stronger process, closely in year sort earlier that we're QX as of much stores Every bringing we our how retailers with do. shared all working we and in the year in of holiday we year, approach and them this combine the efforts the planning can market to have with more

this than did going I an than did is what did bit our a Last confidence it pretty a then. year to was show-me think there's terrific there brand the job darn last HEROX of even more showing a good last know, we was job in we of I'd of. that we and and Black year better perspective, retailer channel GoPro that year. Black job all So from and year world say as of do HEROX with a capable year we're

coming year, into of and coming our QX so QX with strong a we're XXXX, And off QX, retailers. this

with really it the I product we've then is really a into shelves their when $XXX got in also $XXX lineup about for that's quarter, coming is MAX. terms that it's $XXX evaporating and sell-through and HEROX at Black HEROX And with for MAX. strong hits. gaining entire we've mean, the of is support that the Black blockbuster that we're So HEROX confidence really Silver, lineup Black high helpful And $XXX HEROX from then feeling retail at just from and got. we're the which and gopro.com good seeing

retailers that our just well the really that in in every the turn do So hits further with holiday. unquestionable indication are in products the and is to gives products that and consumers confidence for brand

our we quarter. think a strong So expect we're and I retailers feeling good, to feeling are have should good

Brian McGee

to really of Yes. do relative up point particularly for one that MAX And really that high dollar to product to kind going Fusion. around drive follow doors in and kind more growth because about We're the product is. see world, be price which it on unit I and Jim, the We'll four of margin. times of and with and good the helps just growth

bring another that's again, the we've that So element now been table. to to able

Operator

All Erik right. And we hear from Stanley. moving on, Woodring with Morgan will

Erik Woodring

effects? up. month Hey, I good provide I that start is any issue then more with if mentioned are follow a could just production any color a on evening delays curious update any the if and you HEROX, guys. just delay ago, there any you there I'm lingering Just guess production have I out, on

Brian McGee

I the to Yes. say we're is Hi, it. just but details, moving we're can into this said like Yes, going not behind before, And forward. Brian. we get it's

Erik Woodring

then question the But just HEROX would of points on some data quarter second sales. XX% Okay, was roughly you gopro.com. the provided really sales be it I about guess you said last bullish of early the and perfect. And MAX

available color So I'm initially, your just I realized X MAX they be you broadly the any channels, provide were helpful. broadly can of the are only if you speak channels on about kind of distribution that kind would the distribution just wondering but just and selling? more how across all more more gopro.com could

Nicholas Woodman

for frankly, to that for setting is selling shared seeing so really is Well, needs of that's, we better that's the points. of different the terrific are at We've that's job products. the see. that a a done do line to sales that I record strong entire gopro.com think investors both something of entire really know great job to new strong, GoPro and realigning different price customers we line, as And the lineup meeting are important sales each the desires of strong

doing or job as the which more relates is And think better retail it retail getting we demand to than see to we're evaporating that our product have of gets to mirrored be And of product less then is through this then performance on-shelf I retailers sell-through think supply a stores as actually fully on ever to week, beginning we to to-date. channels. have it's terrific have soon that as can and on-shelf, capitalize seems sell-through, that more So before. year ahead next demand where than they gopro.com that been

track And matching launch. far, so indication we new consumer response important higher reception that seen the that think the year-to-year. from consumer positive And the positive But that have to sentiment it's consumer in the is new every past. the the for since products we're substantially social to seeing around I that sentiment, we for is note demand products sentiment, they've up products

consumer So of that's indicator interest. great, another great

Erik Woodring

That's Awesome. guys. helpful. very Thank you,

Nicholas Woodman

you. Thank

Operator

Uerkwitz Oppenheimer And next we have & Andrew Company. with

Andrew Uerkwitz

partners Appreciate thanks questions mentioned ability Should also expect Nick, others. and presence more cetera you vlogging on products you as in see going and first here. your area it's From it live the growth. traditional partners, Hey, just TV streamers question, et a streamers marketing of gentlemen. broadening media? or your of is we mentioned on YouTube, whether drive couple Twitch Thank my to an you. ask most to or to to the interest be on And as channels digital of going

Nicholas Woodman

word of products. with the their to help demonstrate Moving definitely work types relevant consumers use to get through has into to influencers be how authentic vlogging GoPro of the product our out to that our And allowed expand we us them. can about

and the a opportunity the to it new HEROX just work also capabilities, customer segment people to with MAX's addressing Black to brand. us more vlogging grow addition So in affords both with

to a from definitely be a sense something like I consumers see vlogger capability new effectively speculation a on I they're that of dots And that viability of And get the the to little is there bit previous a more and only on positive. reviews all there well seeing answered as us. GoPros reception and you'll to new received that new a to yes, was functionality and been to I our the the that for has said, really we're the of something models. connect search year's of are GoPro had questions lot And consumers It's front. think doubts with many lineup. we've this products how vlogging. used need the to YouTube do But, just we're, GoPro Mark with you those think the that being how on hitting So

Andrew Uerkwitz

Got it. Thank you.

great from My MAX is Black think the away a the next the any, fear opportunity. take might that I share it's on question MAX any X

Nicholas Woodman

fear it's upsell and a, more to more well, nice our No always from to products. customers capable profitable

So that's terrific.

supply I may consumers we're camera mean, a no, And about, expense at Black. specifically think wreck. MAX the of HEROX you that. has be, outstrip worried strong line does I may not such and brand, question to your demand right. These the hero of time for take things be a about

a done camera. as a great looking a really GoPro go-to for we've job that's any so And choice of consumer for establishing that the like

a would get going a MAX hero take MAX one. versus two comfortable with hoped well to for it dual And is aware of lens, exciting to as vlogging in XXX and the so it's is camera doing and camera consumers idea HERO it get of as as a time as all and some and become one, more we'd

think we from share MAX I going in that from be think and camera take the leading HERO sell. have time I the MAX that the camera that to camera's and do GoPro like the that category to future, potential it's over

affords the quickly enough. like happening. the again, some that that us a don't going a that But into being respond grow it take time and opportunity can't ability versus light switch we to see to that's We risk of to

Andrew Uerkwitz

up Got there like on overcome If the think before MAX certain are you editing catch to limitations software the auto hero? to have it. about of question And the AI then we versus side. something last the can the software? MAX,

Nicholas Woodman

I'm you surprised assuming with used the again, you're I as it's far experience and fan, on reviews used know how delighted the and you the work very you we're have just, with you're product going be come just frame of and it's a haven't we've MAX if it, at there. just getting and Fusion yourself. used it's progressively of And No, watch fan you YouTube that's, a key the to editing, some mobile if haven't

far you'll experience. we've it and in can this we’ve point from our really app And customers Kudos HERO the taken GoPro, continued for and mobile nailing camera our both on great experience to that expect see starting surprised editing for this with well. how MAX that the one for team advancement people from as

Andrew Uerkwitz

Got color. guys. it. Thanks Appreciate the

Nicholas Woodman

you. Thank

Operator

Todorov I move with Instructions] Research. [Operator Longbow will next Nik to

Nik Todorov

Hey XXXX. that afternoon. can the give XXXX into we about think you ASP we bit dynamic little good and us, Can wonder guys, Appreciate contribution? dig you how As deeper. a if I go on color should between units

Brian McGee

that the top marks. it do for expanding Brian. next shareholders on to is want the think did growth this of line, you more we'll call clearly With I company. on probably be, earnings XXXX could line to year But Nik, we bottom Hi which as details prepared details a some on and give appropriate. is respect I more see XXXX, provide I that's say important the

while just of least to for at So a about of say, XXXX. least growth XX be showing share And targets, over talking million not at of at above we're or to driving XX% EBITDA it's minimum earnings per growth the again, XX%, guidance midpoint XXXX. our

Nik Todorov

shipping the And right. you that does in All ASP can remind us and report, accessories shipments start mods? guys include that we once how should impact the think you you unit about Okay. as

Brian McGee

revenue Our camera. by ASPs are divided total

would only not are ship accessories The lift little revenue. ASPs help But XXXX. we bit cameras, included the in we the probably the accessories. the report a to So mods in

Nik Todorov

Okay.

you trade it Any direct provide color very to on up users way Amex are with there. comment, how can you program gopro.com. attractive much you having I for discounts. saw And in making your some traction additional? you can and channel go is think can Okay. like quantify the the They seems sales driving your know you're that good I some Any

Brian McGee

No, we portion that helping It’s that every don't does year, break don't of actually it. we it break but out out. and, clearly

Nik Todorov

bit me. Okay. on I was wondering last the if And reductions. XQ can and more channel little through one sell you for a comment

I mentioned Black think overall was comment XX%-ish. you that HEROX down inventory much was channel how sequentially? on channel you down Can

Brian McGee

were Yes, actually and cameras, my to around white comments XX% three HEROX down XX%. all silver we're black,

that's was Right. indicator So for X key how in channel. no the we clear There Black out the channel. the

So..

Nik Todorov

Okay. try you but way you can In what from not the to quantify do quarter? not through quantify expect forecast any fourth sell in and

Brian McGee

XXXX. We higher in expect quarter the fourth be it in than sell through was to

Nik Todorov

guys. Got Okay. it. Thanks luck. Good

Nicholas Woodman

Thank you.

Operator

right. Woodring Stanley. Erik it like from Morgan question a looks with be And final your will All follow-up

Erik Woodring

of of guys see Hey, the down do of, of that still do the MAX? you Okay. it's level? you prosumers gave consumer just users initial, commentary Are type kind through curious, wanted Just, what on the the to level, MAX, you just but going buying just vlogging for kind I or early around regular that I kind to given of the ask, what type that. these read see curious to realize

Nicholas Woodman

to first camera development with MAX. prosumer us was with level Fusion that version capable consumer professionals. we've we nailed a the that believe, a goal was which lens stone a that definitely camera of pro-focused our stepping of and is enough is camera get prosumer a to We that completely consumer we to than more a product, intended such MAX for shared be for dual our development

for the So and of that time response we're we're the on type that and is it's Instagram user. the the that consumer prime MAX exciting as that YouTube for a more MAX type seeing. buyer very than seeing does And is mainstream ready match like, well and is to the of

Erik Woodring

you Okay, great. guys. Thank

Nicholas Woodman

Thank you.

Brian McGee

Thank you.

Operator

the the gentlemen, for of additional like to turn I'd portion back or remarks. that Woodman Nicholas our today. call All floor any does ladies, right conclude closing to question-and-answer

Nicholas Woodman

very and joining of thanks as people and as its dedicate totally a the technology thanks like well strength you revamped XXX the to make thank close, app. today's who for their much brand GoPro’s, team magic happen. our thank GoPro innovation everyone apparent This special is now of this that's only Operator. and possible. Black and the products the around you, time MAX, year’s to GoPro’s well to both Huge in Thank and of possible energy and match making call so world HEROX To done. to for employees incredible GoPro I'd

our investors, at Investor will you London in be X, To with connect there. Brian December and of I on many we're to Conference excited and NASDAQ's

very off. everyone. GoPro signing This team thanks So is much

Operator

presentation gentlemen, conclude and you We once ladies does And again, that our for today. joining do us. thank for

may now disconnect. You

GoPro (GPRO) 7 Nov 192019 Q3 Earnings call transcript