GPRO - Earnings call transcript Q4 2019

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Operator

Good day. And welcome to the GoPro’s Fourth Quarter 2019 Earnings Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Christopher Clark, please go ahead, sir.

Christopher Clark

operator. Thanks, everyone. afternoon, Good GoPro's Call. XXXX to XXXX Full Earnings Conference Fourth welcome and Quarter Year And today Nicholas me CFO With are and McGee, and COO. GoPro’s Brian Woodman, GoPro’s CEO

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

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

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

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

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

Nicholas Woodman

we’ll our strategic fiscal our quarter Thanks, times $XX In and was to XXXX million product bottom income. highlighted of and our million successful and return priorities than million. full touch more Adjusted walk and we three increased improvement and over revenue X% year-over-year XXXX and XXXX, also fourth net growth Brian ever XXXX line year line XXXX. This for on will which our $XX EBITDA and good outlook. review year-over-year then you Chris, through grew performance financial fourth Today, a earned quarter to $XX revenue afternoon. I’ll performance, by and strongest profitability. new up represents

much of proud and these results are sheet. our and important to it’s of balance while and growth our just slightly step fell We QX short achievements. recognize And expectations, how business strengthened XXXX back our we’ve

history, products our subscribers. proactive service, plus at as our of serving XXX,XXX more most our period. Mexico, sell sales direct saw versatility. Friday, subscription HEROX to that the And growth high-end Monday the ultra-creatives of to through camera exciting We both segments In in the entered than high we and vloggers for customer ASPs year material highlights continue Cyber lifting lineup, and to gross contributed phenomenal new XXXX January, margin. and our Black the production move our bound leading of like QX, both with industry performance key the the Guadalajara, end of drive which of and U.S. consumers of margin to with growth totaled Black during Some profitability, camera product where and importantly, our gopro.com paid increased of lineup consumer MAX

in our and returned in of second dynamics, most but million in Despite still profitable However, quarter in $XXX revenue prior generated largest profit, December, the ever. through the sell these $XXX slightly the to up third year, we from levels HEROX fourth line our expectations. quarter history our quarter below million, growth

to new positive plus U.S., dollar the grow impact continue up And the which momentum to of products, continue world, and of from share in GoPro's positive multi continues and And only in captured GoPro to and media U.S., mods, are category the cameras Importantly, on selling consumers began edge. dollar prior from captured NPD we light QX service with of best which revenue XX% XX% XX% to during dollar ASPs. received in-camera camera end featured year-over-year. respectively from And continue highest action our segments. NPD the XX% well selling MAX, up the both well. XXth, we captured HEROX our at according positive our camera QX XX% unit serving having of to as fusion with very MAX, According above is available Group. is market. on gain the share And band, XX% the of the unit came in legacy including Black XX% in combining gopro.com, and subscription camera, in share keep are have when camera our cutting share, business share spherical in reviews, on the price important with GoPro in and innovations stabilization gravitate A MAX year. Group, customer The introduction a and GoPro and any now And that trend XX% to the October which towards XXXX, MAX. $XXX XX% lens

January XX% year-over-year grew subscribers As I than XXst, to as mentioned XXX,XXX, paid the more earnings QX our XX% at since call, the top up of of call.

over on have expect subscribers $XX in high an the in continue of MAX which shoot important million to XXX,XXX XXXX. component a We the And targeting MAX to publishing, published XXX,XXX of for dollar HEROX annual more the XX to forward just looking and a highlight challenge. the floored than video, In week Black marketing, times each of since million $XX more between challenge which contributors are X was to between invited over users we MAX We of than now, year's to to we recurring the year video. we basis contribute Black the quality dollar volume week. where would Black and garnered of by margin from HEROX XX,XXX reel customer were last highlight revenue $XX,XXX into growth million paid of community first the million views launch last our and HEROX awarded who we video. an submitted increase received. selected strong XX% and fact, submissions were our year's We our and videos, last

generated helped million bolster can channels, X.X of Initiatives passion this the talent dollar YouTube. and new a organic the views, engagement X and year-over-year customers’ challenge, record which GoPro the XX% within given more Instagram during brand in million XX%. than increase XXXX, including community, creativity, You year, of views our totaled up followers year-over-year. attract like any XXX GoPro million incredible and On our on of day social organic million any content a in see showcase XXXX,

grew believe our new GoPro smartphone digital app imaging with but of significant editing we Turning positioned GoPro can believe QX, is the for XXXX. we itself, a solve. as to feature leader GoPro of users anyone that or for monthly has in not a GoPro hardware, of revenue to a a In to well. margin that We our and team, usage app come one automatic business. active high experience points made a expand in that to addresses pain XXXX, time while in app the strategy In software, only XXX%. progress XX% plan year-over-year widespread monetize establish significantly as GoPro grew source The uniquely that new app’s GoPro faces, software our growing

super core believe scale by by plus engaged on this, do XXX,XXX a maximize higher year-end; we products; our and TAM what profit app and to to to releasing rein opportunity. XXXX expanding of high-end to Our experience most be ASP address focus a new GoPro tight customers OpEx. XXX,XXX business intend profitability to with business significant our we is while the subscription And this; our serving paid hardware subscribers keeping

We our more margin improve further on sales to grew than XX% In profitability. focused direct-to-consumer gopro.com of scaling capabilities XXXX, are and also revenue. direct-to-consumer year-over-year and generated our through XX% gross

to aggressively on build are in determined momentum this XXXX. We

Chief over Chief work elaborate press has role. to and And new McGee, our am has that has Brian, segue at on our leader call addition GoPro expanded and in create with on March Officer Financial who saw XXXX, role since a in GoPro at Operating as Officer, Finally, served be ongoing as you to proven to appointed tremendously share himself Brian I as his CFO. GoPro's to pleased important Brian to business. will Brian XXXX understanding to all of profitability us for in who shareholders the beyond. excited release, are deep of plans expand with a GoPro to our turn to perfect That's his value a been

Brian McGee

over in to XXXX thank say continued the CFO. want to as the to we a role continuing note, you along established beyond. and value their several have personal business for my with in past the ongoing On driving on I'm and moment COO and you looking and a building compliments to years Thanks journey, in Nick. creation me the Board my appointment and I forward momentum the take

XXXX overview and performance discuss of Now outlook our share XXXX. I’ll for for our an then

revenue full $X.XXX year XXXX, billion. increased the to X% For

with income share share we improved to net non-GAAP goal of of discontinued per a were grew GAAP our million, revenue line loss but incurred in in to profitable a In $X.XX XXXX, full year achieve we on year-over-year. with $X.XX a net profitability. year million per Karma, Excluding $XX.X basis, GAAP EPS XXXX. $XX.X loss basis which On X% XXXX, to compared in our loss full

While share times million improved our of improvement to $X.XX from three compared represented non-GAAP XXXX. than per adjusted in net EBITDA EPS more $XX income $X.XX loss to XXXX. And net

the had continuous as bottom with to by performance pleased the improvement our our on line. financial initiatives are shown positive our operational We impact

XXXX we non-GAAP million. $XXX net to and XXXX, in $XX with million loss in net back million profitability of successive XXXX each of $XX in finally, had $XX million, income and non-GAAP respectively of net to improved a which Looking has XXXX year returning and a loss

both million delay, $XXX.X was production approximately respectively. $XX.X Black and impacted Looking basis Non-GAAP of net contributed with basis on were million margin negatively at HEROX gross quarter. which we freight of XX.X%, and GAAP and non-GAAP with on by EPS margin costs gross quarter associated on which XXXX, $X.XX and the impact profitable fourth to was tariffs impact the XXX our point in income

per share share, GAAP $XXX non-GAAP quarter share a million, for Our the improved respectively. the was increase and fourth per a $XX earnings for Adjusted XX% year to EBITDA $X.XX $X.XX ago. and fourth quarter per million from

sheet. receivable improvement. Accounts $XXX to cash $XXX ended with of the inventory and $XX and balance million, Turning the million. We $XXX sequential ending at million equivalents ended million an sequentially $XXX at period declined cash million

with in XX% discuss quarter totaled compared Cameras, than ASP demand and respectively. during the the and let's initiatives higher and for with the Camera in of fourth The and shipped to above periods performance our year, more respectively. move the market shift our full Now retail year X.X margins. cameras XXXX units million for and our prices unit price same both quarterly represented in revenue XX% to detail. business million $XXX, customer for and more to the cameras strategic X.X reflects XX% higher to XX% the quarter

increase with quarter based $XXX, approximately fourth units year-over-year X.X sell-through was revenue As fourth the in discussed. And guidance and channel with our divided ended and for on line increased by X.X street defined total quarter. units respectively. for the Street million million a as We estimate shipped. to and quarter quarter result, ASP is XXXX higher a reported camera ASP camera we Nick units the factors inventory the X% unit

which with for for on our of reaching an second I behind provide and need EBITDA our generated the model for we GAAP continuous on of We balancing the and guidance quarterly our year management. reached are pleased focused million innovation cost highest With $XXX adjusted exited XXXX revenue in will XXXX. profitability the basis quarter. products, operating million with for the highest quarter for the now us, new third $XXX and a history, revenue non-GAAP And quarter, demand

year-over-year In price product between X% XX% well year-over-year. of growth. expected revenue, lower sales to increase year-over-year, on higher due guidance exiting Camera sales are inventory subscription to terms and trends channel cameras, targeting XXXX, revenue given accessories impact into of XX% to approximately ASPs to X% as as of are unit which and to we levels revenue camera translates flat be

As I we than previously of levels QX with XXXX inventory anticipated. mentioned, exited higher channel

the our level We in approximately at products first to expect demand XXX,XXX historical sell-through. for of XXX,XXX of to quarter units be

However, of million from will of million quarter range QX. we of and be normal sequentially. sell-through historical exiting lighter reduce reduced revenue With and appropriate that is million, channel channel inventory a sales our loss sell-in net be perspective, following revenue expect The cash QX, to correction for percentage of revenue. and than to the $XXX QX the $XX million; QX essentially of sell-in of to $XX concept, combination be a expected in to $XXX resulting to flat will levels into

approximately gross share; to non-GAAP to earnings $XX quarters by for range year-over-year; expect increasing $XXX XX% $XX XX% income the expect More we profitability quarters $XX for increasing of the three and with our year. and XX%; expect To to million be million, our GAAP net XXXX, to increase to summarize, share; margin specifically, for penny We of million. at $X.XX margin improve to the at four $X.XX in earnings expanded in we $XXX profitable to midpoint outlook. $X.XX to a gross to EPS two, midpoint of per be with EBITDA the per to cash XXXX million of million continue between to year-over-year growth quarter

through the cost while focus to We are take With questions. to that operator, on year, effective our expect increase ready continuing margins we management.

Operator

Andrew Company. Instructions] first from Uerkwitz question and We'll [Operator Oppenheimer our with take

Andrew Uerkwitz

inventory question piece is, model the particular could higher is and Brian, than The first you another. on that

If what inventory that on you like? looks can little color give us a

Brian McGee

highest to compare been historically, I don't inventory discount in older I was our our and if mean, that inventories, to newest that had hand book our looked get in selling have years it to rid and what's We I Yes, we XXXX. what have where inventory and some issue channel, of we've as we to on ahead inventory past, the it.

sell great. levels. So It's that's also good. It’s which lineup, worth sort pointing out of is standard through

that's $XXX,XXX expect We $XXX,XXX QX. to a historical

quarter. to track hit on are We that for the

on based seeing through the So we're and sell like. the

about into sell by to good end So and through able the we and channel X get QX, good feel really season being inventory the aligned of X. going in QX, selling

Andrew Uerkwitz

Nick, broadly good, higher you’re in simplification better, lineup there still of just then it And that with strategy? I think be the speaking, XX% more or mentioned a done points. price Is revenues, can best the happy

Nicholas Woodman

of we return investment interested the and products that to are important good that believe for. It's on products have by each that customer we for get in a developing segments GoPro, can

segments on we're going that these three call creative stick better, a I’ve Again, customer SKU ultra is with shared designed with. that multi the best segments. addresses strategy good, that. So last lineup to We're customer moved that important the I having that think segments one a being creative, and good, customer better, for. We've is the represents MAX past best ultra now now that

important it's sell focused that us identifying think from automatically from. we're serve key return on and investment then new get customer to good as customer we identify So that what segments already that we want can on and well, segments most a very the we we

Andrew Uerkwitz

Do level? is growth maybe bit the some while thinking And think adjust you term, then growth sales the guys kind industry camera, kind the think share, camera we gain do will market. it you camera headwinds may could back sustainable get guys remain there? broader Or a a so Where are in be? share normalized the thinking difficult. our Should seems gaining you more to longer we'll level just And of you of revenue of still like of broader kind there? little its

Nicholas Woodman

currently of to new as add doing job what higher to the possibly even execution it's is the gross and higher with a combination what what problems primarily moving an can XXXX focused that serve serving, segments mentioned, think and good on customer identifying chain GoPro for higher food products, we're that we're customer really uniquely and I customer for exist our better But of of grow. I them performance segments segments, even that strong creating the we're customers ASP products that. margin, higher percentage proven we've up at

XX% the to believe As shared XXXX, innovation coming we're band yet. moved as revenue capable innovative tremendous of XXXX price still anytime in And we and to allowing and building We and a done we've from a in company customers above reputation every our job we're was that very products. got not soon. our year, in going of of XX% I highly done business future came a pretty and that we $XXX paced, that's fast good not stop

focus. It's that's to products an grow to hardware in as and capture and going evolution of us from app well profitability and see experience, strategy to via of is something and a company what to a pretty to uses see And think to of by So smartphone big that maximizing problems as significant our well, global in our opportunity the form an we that as on content, video the number we profitability GoPro everybody existing business new as our consumers shared photo building of software as larger customers strategy GoPro’s a ultimate address well. by of relevance to virtually XXXX. our strength TAM a capabilities you're leverage are expand suite a our

Andrew Uerkwitz

obviously, the and on shared it be couple the like will probably you been, then between XXXX? software equally the the there seems side? just is app experience years last lot shift the focus to a that in in of just innovation -- And that to Do if think a you to camera. could have on Or continue going XXXX, that, build more

Nicholas Woodman

can coming same out of performance I continue the without say innovation, our our you're type a of camera going see wow to to and overall team. hardware, doubt, development

heartbeat that really well. really it’s really, GoPro, is exciting. something It's roadmap do and Our we the of

that So excite. our cameras and in I'm continue accessories confident very to roadmap will multiyear

I bringing taking the because our my What investment our important, talking really that's to mentioned for time excited up So believe I'm adding that there world remarks a development that development. really leader really I whatsoever. are off energy it's do in and we've software there's hardware. do the as as hardware as and the XXXX. no effort, digital gas I software in something And to got is That's about the team additional pace GoPro recognized it, the into to I'm of think expertise foot prepared imaging and in be we for

Operator

from Coster Morgan. We'll take JP next Paul our now question

Paul Chung

Paul for my Thanks questions. It's Coster. Chung taking for

So XXXX. there, so just XXX,XXX GoPro you subs growth I of first mentioned nice up plus, the think by on end mean I

kind maybe contribution from you or you million put more base how you kind X%. revenue around new do on numbers, there? will existing dependent your like could close this install And to still on up around of $XX be get of Is in know or expand then, sub I If if more it these camera even sales?

entice base? there like added value are increasing you other of any or more kind your pull levers to pricing So options install providing can there

Nicholas Woodman

drive part we we're to a And of awareness have awareness, going just experience benefits opportunity is benefits then do got course, see additional rate, growth an to to there marketing service well marketing turn to which improved not better. quite of then still customers. drive the we and from continued lot done there globally, opportunity and efforts to doing to improve come is to we're customers. And any out improved even but our So and subscription availability attract of we've important rolling ongoing

number, in the I just they've the that team makes upon So we've for to of of we've business. think and been shout letters that's nominal for to give in we're had got number that really there's all just we're terms a of improve job, proud doing going lever want that difference continue we but a we made. XXX,XXX no one that the past responsible And to out to the XXX,XXX just plus and have as that to progress it getting

Brian McGee

definitely add Paul, then And to of on that. mentioned XX%. improved me let kind which Nick churn,

and we're X% is side, XX% the which that. while very operating XX% of seeing it's revenue our on after So great. retention profitable, XX better like going We're is margin plus profit. to And points

to to AAR as the grow as business, margins hardware better our it the our as level, an well the boosting overall line from So of matters bottom business we bottom line. this

Paul Chung

on congrats And your role. expanded

kind mean finally, going change year terms does So that to How are of and you your areas success direction, of for from in the which attention be then the your will focus company what on? how measured? to will the past strategy

Brian McGee

a I better it Well, hope price for employees stock gets That's number with measured GoPro. in one. and investors

the We're I think the laid margins. EPS. going to well on pretty and year-over-year. We’ve us we're while we the product window I still create holding to efficient and we’ll great about expand We’ll to talked continue profitable. want innovate software XXXX a it into lineup. to on be keeps invest almost grow And do, in a think how operate to be what side, Nick that on our room double to the EPS got things business. to We've in guided we we going continue able OpEx more out

Paul Chung

if And question free saw I cash guide. is last sure not flow I'm then

I've income you So some from us expect your operations, you help CapEx. given with could your cash if for positive net flow, cash but seen expectations free guide

look of XXXX? get cash? deploy to finally, want free flow Thank would then a sense magnitude you. you where cash extra Just that to for for kind And

Brian McGee

our real XXXX, my of cash remarks, $XX to million XXXX No so and CapEx. increase exit to very XXX expectation over million that's in cash in our is flow. prepared increases Again, big $XXX nice in

historical of stays it think kind levels. at I

make working driving it's the So really to improvement. that's capital, going cash and the profitability

buyback we other there, out we position have we much company better the to do when cash looking can that so put redo things figure and in get 'XX forward or 'XX. to And

Operator

Erik the Stanley. Morgan next now from Woodring We'll with take question

Erik Woodring

I So kind if and channel is of your reason Is I the for just we and as understand you the good that. I inventory flow to together performance, just want correct? piece just go I you expected? XQ make missed back sure to to expectations the the right. lineup that through want make in newer new as that model, so had that wasn't What's sure

Nicholas Woodman

ask Could more one you the question time?

Erik Woodring

said of So I to the want models. just piece It's higher channel inventory models. is legacy it's but together, all kind more you even not a across of result of kind

if just that your performance. essentially so as combine models So XQ maybe you of some combining kind Black well some I I’d comments. didn't HEROX that and those of as with Does newer mean color this love two or expected? your

Nicholas Woodman

Cyber the as than see we Black good and were up period was that levels But QX the wasn't of return that happy products. line And with then that were December, to sell-through prior, expecting. channel sell-through really post as a saw a had strong we launch bit we we growth we Monday still in in that inventory Friday so year-over-year we’d sell-through HEROX more from Friday, where growth year, with us what year were saw. Cyber expected, We very Black the to Monday resulted the expected our that much finishing wasn't in

Brian McGee

said rate of that level. me look we add Let because through as that QX, historical ahead sell kind seeing just we to into are

through the raises off we're our the in able the inventory going year. to to work QX way and be that rest So of to and

Nicholas Woodman

Historically, us again position through think this important QX, point QX QX. good XXX,XXX is channel exit and I seeing wise we the we inventory XXX,XXX that's recognize. we're and really that in a Yes, QX that see to for of for to puts sell as which people in key units enter

basically the really a the on Brian, QX, of that in phrased the up QX remarks, that and now. his of we then we lineup prepared So a and is recognize out profitable correction which QX, that's of the channel profitable inventory we've built it of but believe QX end important by get to sets it got us strength and right issue quarter as out product for

Erik Woodring

and balance sheet, on of have looks just little cash that is it came a $XXX And And just was to days if -- lower. payable the down guided equivalents -- you million, fairly like bit previously obviously, you guys it considerably.

and love comment? capital where the And just kind the some would guide working between the where up color is payable on delta was? of ended days So you

Brian McGee

Yes, was in QX. it accounts look of hit sale, if significantly. timing we make that'll so you the from cash at basically And we that's up receivable when balance the sheet, get just is a when

we capital around top be have $XXX flow So so line, so a through that's definitely that inventory, timing in and the more issue. going came in to help the and we cash believe million, could inventory. working becomes XXXX, at in relates that $XXX more would And of I we at And million. really difference

the two those are on cash. dynamics So the

Erik Woodring

you the they the just for of to meaning one, that anything if kind I could and launch like just from, last And in any what to I'd then sneak of kind customers vloggers would the a done cameras mods, reception love could now you got of I if after where share before? hear maybe looking that GoPro hadn't Thanks. you've consider heard GoPro, new it especially

Nicholas Woodman

for indication, are Well, of at mod mod light And since media been ever out, initial general the and reception got very the that has we’ve launch. been have the positive those and very mods the now through to any because sales excited gopro.com And positive, them, great the which meeting always is expectation, people sell exceeding really are see. brisk. about they’re is if or reviews

the customers that know, helping And the of going customer encouraging types like to resonating buyers with segments, our and continue get that's on that flagship up vast expanded we in and you of well think pursue, our ultra-creatives. make performance as investment. of consumers, a we're best we've versatility vloggers the because that's recognizing majority meaningful to that and that's development a trend return those reach So way I successfully new really us as our

be interested to aligned in. fortunately, roadmap what So seem is customers our with our

Operator

We'll Jim with now take Citi. final our Suva from question

Jim Suva

are in change? deceleration think be still around do actually Or You up December Friday the happens? it’d there but Monday. a but after year-over-year base? that mentioned sales promotions, strong, Whether why Black Thank you. selling do were they month accelerated is thoughts Any of changing then targeted initial very why our you in Cyber change

Nicholas Woodman

Well, really softness. was We period. had retailers results We across some over do retail saw there some some that retailers saw mixed well.

think there's certainly. issues going I So macro that on there some

So that of may it. explain part

of year-over-year. sell-through we did see of inline December of noted, you the period slight increase a As period the our products,

was good see. was to from HEROX So tough it here. And comp a that yes, the

So that. it the up we the We lineup across -- were board the at we've the better each shared And But to expectations. yes, products SKU. never did period. has as been during happy wasn't our have promotions terrific to our see

to So better we than we bit see expected did. performance a

little host it was nothing I But identified think explain why we that conclusive a that came of a short. would bit reasons. we've up there's honestly,

Operator

remarks. you. any the Thank And closing for additional conclude today's conference that back to I’d or does question-and-answer to like over session. turn management

Nicholas Woodman

of done grow EPS XXX to thank want in for in who EBITDA. a products, continued give profitability, serve revisit our you, subscription expense end and new the most to Thank we monetize thank commitment XXXX, app you, getting generating margin, to world our we've margin improvement GoPro to grow customers us and to you high allow full are experience, GoPro far I'd will management, I or the business our on XXXX we XXXX, plan to operator. shareholders. growth a employees And a launch plus high top-line around and engaged delivered both our and all how like behalf In with meaningful believe than year with come. And it customers. to returned meaningfully super more value

GoPro has and in work years, best the off. camera signing America is the it in XXXX. made for This team Your making past selling GoPro seven to looking North six forward I'm

Operator

all conference. your And disconnect. does Thank conclude for you. you That now may participation. Thank today's you

GoPro (GPRO) 6 Feb 202019 Q4 Earnings call transcript