GPRO - Earnings call transcript Q2 2020

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Operator

Good day and welcome to the GoPro Second Quarter 2020 Earnings Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Christopher Clark, Vice President of Corporate Communications. Please go ahead, sir.

Christopher Clark

Thanks, operator. welcome second and conference XXXX everyone call. afternoon to quarter GoPro's earnings Good are Woodman, CEO, COO, me GoPro's With today Nicholas Brian and McGee. and CFO

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

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

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

to addition and numbers earnings conference a call the are to call, quarter during on data as reference. commentary Investor link have replay discussed the for and today financial noted. containing metrics and XXXX. otherwise are your GoPro unless commentary posted slides well second detailed as management the The than for this other the webcast press related we today's In management release, of slides live Relations non-GAAP, that posted and All income website are statement revenue, a

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

Nicholas Woodman

good everyone. Chris afternoon Thanks, and

post overview As GoPro our we quarter on read commentary. XXXX did the Q&A. go I commentary the will for we've into and website, including second chosen to management QX XXXX earnings page brief report, during and Brian's we'll our then directly financial to remarks now encourage Relations Investor we of the to give all

GoPro's shared direct-to-consumer lower costs to operating working. more we management with business the is commentary, in As shift a

learning GoPro faster-than-expected areas XXXX, half consumers the track throughout includes consistently all with for inventory on globally, pandemic quarter to society at remain of improve operating expenses. both significantly able the has been to and our continues and we've we've second our offerings. our and product reducing of impact including COVID-XX the challenges, software, While channel and adapted seen which subscription business hardware, second efficiency launches obvious and we cameras Despite in improved to output too. in with slated negatively pandemic believe are GoPro for to a retail. sell-through the Demand the live rebound We

XXXX. and continued these resulting positive rest expansion in in new momentum results of in launches for our the to expect product XXXX We earnings contribute to growth

of many on now have that move our Q&A. call you commentary, written on read the to we'll Assuming

Operator

have Instructions] do And our we question. first [Operator

Stanley. first Woodring Morgan with Erik from question comes Our

Erik Woodring

there. Congrats get on the I to on the throughout just in your mentioned want quarter quarter take demand. the - improvement you

you region. if seeing Thanks. break Are then of kind regions follow-up could improvement after where have others. you're down certain by that there an versus I a curious more Just And that. of

Brian McGee

Eric, store well it's America our actually in Asia, business very snapped improvement improved, as Brian. did course, back back, came we every retail web of Yes, saw well. region. North EMEA and as

and the terms quarter point of were the end to demand. the the we week-over-week So very and sell-through we matching we against were we quite June, were - up comping prior the of by as right to see pleased to in everything where, moved in frankly, year

yes, up. So every region was

that pleased which sell-through in very QX, we've seen August, do we're guidance the we're we July where to gives continue we of basis XXX,XXX and quite is for think and frankly, gave into X% units going year-over-year. the up us So which

QX head but as week-over-week, QX. So we demand we're in just see also into to continuing not

with pleased in demand $XXX from profile our in but very XX% we're of it third mentioned million that's a base on and XX% gopro.com, quarter. revenue And for higher QX expect So we be QX, guidance of of in to revenue globally GoPro. much our came $XXX million to course, where given to the revenue we gopro.com the of XX%

from increase in QX. QX that on approximately would a of XX% revenue gopro.com So represent growth

Erik Woodring

or there And other some way that I to mentioned of that, then above any type. mean, of obviously, models? between could camera large you've were demand was any quick in the a from the is $XXX and demand there HEROX majority just improving follow-up you break Thanks. sales, improvement but as the difference and seen models you down for

Brian McGee

back a the which demand did represents That which expecting above Black we've Black, in well, in were of trend great. we of in XX% Yes, XX% HEROX ran and 'XX, $XXX and we the greater shifted and And the XXXX about to 'XX, expect talked on about and we've XX% were in Sure, was increase were anywhere seen business a at HEROX and over we MSRP was than that HEROX to was XXXX, our XXXX. We that. into also and in and from and $XXX of was outpaced the think XX% XXXX bulk MSRP is maybe no last several $XXX were XX% actually we problem. definitely that probably year, - quarters but at we above. we even QX. I quarter, strategy

helps So also for we're demand That the it's the definitely at which good. but is seeing drive growth, high-end, revenue the margin more best profile where company. is to

factor So for good consumer. good the for is that and us it's

the value are consumers good it's the at proposition buying higher-end. and So

Nicholas Woodman

that we're also planning for - also progressively is improving, I the we've SKUs Yes, levels as for inventory has been it and that, would been this other also trend we're add because with well. our a happy

where were planning from inventory with the standpoint. line in is an everything on business we taking So

Erik Woodring

if is the margins Like gopro.com math you excuse to that if margin, the Awesome. higher you've devices, higher That's if could your in points ask or direction. shift extrapolate, to which of say which margin roughly rest gross kind you mentioned implies opposite going helpful. the profile if And but to than I are the been has mentioned XX gross that shift is margin, is right. me XQ is XX% in my DTC of XQ business one higher-end were the you just gross margin just around points X you've last higher know, gopro.com

So to seeing me impacts Thanks. margin that the can on just gross that you help gap the bridge understand line? me other help you're

Brian McGee

overhead it for Yes, was under-absorbs no quarter two so Eric, quarter The that had issue revenue we the low basis and XXX is by problem. one points. amount of about

we margins plus in So think we're that's minus to quite driver margins bps XX% rebound and XX QX. have XX% were at in going minus be XX bps, QX and major or the frankly, plus down, to or why we

see along subscription. volume comes continues our and margins bags to high-end accessories products come with accessories like have mini improve so we new with we'll growth So, in the expecting and our up up this as – well mix lifestyle and new as we're to as

as kind as help improvement. comes to it revenue drive together of growth ASPs, So all well margin

Erik Woodring

you, that's helpful. Thank Okay, guys.

Brian McGee

way. gopro.com, by XX better And than gopro.com the points

said so to down better you and not is it's it had retail. than where So XX% it X%

Operator

Uerkwitz Thank you. question with We'll & our from Andrew Oppenheimer take next Company.

Andrew Uerkwitz

little Could the it been is has guys has from a forward your changed my change direct-to-consumer that if sell-through, then guys. you. all Thank at confidence you unit around about ongoing Hey, you forecast talk on questions for how thank taking how how affecting you forecasting bit and basis?

Brian McGee

Actually, and quite along with demand ended that it's Andrew, We HeroX bit hi sell-through a said we'll of Brian on profile gopro.com in We as XX%. and our quarter $XXX, has – on demand XX% our gopro.com. We and Yes, be hit was we commentary and commentary Yes, region that again. up first put expected my at up. both in on ASPs forecasting up. it bit least we in I think so at expectation little mix our improved all mostly with talked we it lined about matched did just Black. the better a

starting well said well in Max do actually is Although to like I did HeroX very quite retail. and

look demand re-trend about lot from site weekly of information use estimate do on what data get on to the able So that we're and basis we're and a we're to trend what credited really is. the basically that. to seeing we plus where on to line We a own retailers that our mining really profile

the data of the in management focused off. and it's I company been on that's paying So area side real lot we a a think

Andrew Uerkwitz

Got it. Thank you.

Nicholas Woodman

our best data as would we I we focus also more well. get on that performing our from business them retailers, add as better of

And get sales dotcom So our very we forecasting that then direct from helps the as our channel well. of sharpen feedback is course, accurate.

Andrew Uerkwitz

yes us you in has for development? are think much little question sense. new where being Nick map and on how development. on you the time with at didn't on a any And make product new Got COVID product about had no, COVID's it's too give on impact impact a the your color it, mention comfortable I that had you road comments Could then that you, and

Nicholas Woodman

some have need on all is this development that missed consumers and work we're vast continue serving majority so of now being that end-to-end GoPro of small the robust, high. going employees to this well but that of remotely really we're our the we really think and via been It's it GoPro excited challenges It's remotely from be with hardware that We're it best with and even expand period. experience conferencing, to can of number great that outsize There's spanning operating new though hardware long feels offices it we've difficult I done about when course, whether more year haven't we've shift subscription we've sense in product time end-to-end make been we've to solution manufacturing different have fruition products, be to with doing it's a consumers had value office the excited the at in access to streamlined to coming, otherwise your been is to succeeding feels hardware a got, that expanding fortunate. to a delivering, communicating of or be And later ways of coming software terms during is launches. going of efficiently our remotely. home, good it a holiday forward. – beat. in I are it giving and are there that effectively team at product job solution, that as or roadmap and they We've we're really working sure. video our them Yes, labs our on content it's best. been more but software And for pretty ways, for launches subscriptions for as of season. new in cloud. I'm come Everybody an is going this is and and time a of is at vision effective. at and specific culture company for very work, think least really and excite continue morale aspects this other times their GoPro the serving teams just that performed consumers it's our exceptionally it's ways partners A family we're your the to lot but going has consumers that but really got entire phenomenal internal for the The

Andrew Uerkwitz

and question around I And metric color. I of I And lifestyle One, be clearly question. for like a How material from how going the you're a think, you. gear. ASP Angela for some products should it it, going that forward? that question for Thank take to big is over think has brand think then GoPro a we will two-part with been mean while Got a looks we you, time. be that be about me last of lifestyle Brian, the part appreciate that and really and forward, or should Street calculation could that or will trying

Nicholas Woodman

days I'll its part first with take the our products. early new

us are and do new good marketing I say our we a learn exceptionally year, we're took cameras, that expecting the to to we're accelerate. then and really new that and how products, seeing it's a a properly learn, to with with at today a off want growth introduce it took market It got it to – us We app enjoying when and we're we it. year half that subscription offering and learn that Plus really but to muscle took and our we've

our and value terrific. products bags our Zeus muscles our relates new new performance better – and line but and with of we it's learned we've quality it lighting including different bag better no and first the new product and as at of this category I so getting then And types is it mean so and where bag Mini products is these forth, to introducing line. learn lifestyle to we're need fantastic that

and You our in with cases product grow design which to then to value and we're And world. driving in it say for active as convenient durability to differentiation at time. to is where awareness makes make at authentic get GoPro, get do the get where there to just we only it we done as fits and so use that categories. of you'd to bags GoPro consumer what really right why better with. we what's excited a I'd better direct-to-consumer is in to for type product effective. categories believe I'm these at then and would relevant we've is that, attractive that offer exciting make just in to but all our our the many for but going consumers able Plus products consumers product that need learn add new authentic expanded and really on brand know already the entering also margin And we be time really brand yet so and strategy, don't sense GoPro be how sales be new that, with prices more it expect new from But categories make to And that super obviously it focused a offer favorable their over covering we that lifestyle, people can new product. through we're and in that this GoPro. we'll to we very to product out has value from results lightweight

going But discounts are to it's relates us GoPro, it. be road more categories to markets, become as but I we materiality the consider our it ahead it from then, it can And value product how grow at know, this we they time and to everybody. as to it's because for expect buy time win-win material, it's Plus the new tuned. expansion of being, it's so to a as new over wouldn't exciting – So gopro.com. introductions get point, consumers further new the learning to into to that you expand and And business, product for from relates just brand stay when to subscribers direct they an

So color Brian, that? want you add if to to

Brian McGee

lighting to Zeus thanks, Mini and Andrew ASP. selling Street just just more and lifestyle Yes Yes, in products adds bags Nick. in

more people with adding adding want, at more higher ASP. of on It that So subscription. Street more so to the cameras all accumulates our that it it's trend will accessories along on selling high-end, and be positive

Andrew Uerkwitz

thank it, guys you that. I Got appreciated

Nicholas Woodman

you. Thank

Operator

Instructions] next with [Operator We'll JPMorgan. take Paul our question Chung from

Paul Chung

thanks questions. guys, for taking Hey my

strong expect more function for some So And then benefits earnings cash a initial would you you, just guidance. maybe the than use you was on cap, XQ second And selling bit puts get was for kind as on about kind of year? there going we or in free then flagship half, lower of cash, and of is breakeven takes is it of this or more Brian, hit a then we on this working kind of previous What of can the pretty the forecasted. initially also the XQ refreshed. seasonal even had some think we of will a

Brian McGee

timing we Thanks, Paul. cash. at is of in of deals In QX, in have basically May back have where It good about to and quarter, $XXX did the call question. and would would the we all a just we be second sales. estimated in we difference that we bit million sales, Yes, have we little when accounts in between thought XX, receivable. the particular ended And happened

So moved that bit. a around little

is through getting above a actual up positive cash that's even in collected that So were and that's we where July, today actually June actually in trend. so

As we think and is and paying off we $XX expectations guidance, end put the expectation for million of will backed our cash asset million because to end We $XXX given revenue of include we higher about at demand. bought line. the in have then sell-through cash QX on our

flow that's go million yes from perspective. and higher $XX would QX of be you operations off guidance gave kind from revenue QX a we if it cash that in of So

close between maybe and got could profitable. be basically and QX slightly profitable per $X.XX year $X.XX million share, that's we're the think, given call. I QX, to on their drive $XXX think expectation, to consistent of and cash that on to And be and non-GAAP earnings our last what even we've in said fact with a it's the basis breakeven, going to about we and we what

a being So, think we yes, of shot profitable. we have

way the of year. remainder for demand in will a profile it we the the continue So think

Paul Chung

of How what rate as direct-to-consumer? as direct-to-consumer. to GoPro's when to rate the or just Thanks, your different your buy plans it Brian. ramp you consumers attach kind on And is this different you've increase kind gopro.com up of then of then moved is kind of subs, Plus do Nick are kind and attach on that

Nicholas Woodman

of in attach much when they're do GoPro that time and and we of Plus they a about is they're engaged because best earlier the all you buying have. significantly and benefit significantly Yes, we're to purchase. most value And the plus their in be about that And something they're that's imagine experience thinking want as subscriber ways they improves a going driving value of the better job to year. can the that GoPro they're their the purchase thinking of the that ownership expands becoming the later their expanding customers the

as appealing as major been, GoPro Plus a get while. boost to has short in a it's going So

So that the we total directly And we're benefit. benefit the have increasing dotcom. have through customers then serving of of that we number

So can through attach the the we then expand business. number the an to, improved we can attach because customers of offering. subscription rate expand that expanded direct of plus And

to upon our on contributes we've XXXX just Plus to we to we grow subscription as build the And that feel that. and XXX,XXX good value about So more with really with that in we that And our to course, expect direct to further expectation load year then further Plus over time, XXX,XXX something build the up opportunity that's further. still more that subscribers. then finish of got. to continue We offering business between

Paul Chung

that. Okay, for thanks

Brian McGee

we've me the attach so that We've Andrew on Nick add subscriptions, on of high even top of you AB very data. other the with and add some would test Plus that done testing I about model. top and but Nick, let done because this a found and site thing kind of asked Yes, on on right,

can the and to So XXX,XXX we That why Nick data to mentioned of it think XXX,XXX analytics. good we - as by drive end year. is subscribers comes the the with some

Nicholas Woodman

doing thing promoting is right, keep one on. a we're happy lot value that and is We're the the we're having something there and are But is with Brian's building to impact a impacts Yes of obviously things where our is to rate term well. on having annual to with big positive retention shift subscriptions, small that that program. going as more more even with really

Paul Chung

then And question. great. Okay, last

adding you kind getting sales Thank as expand that from there your a feedback now is feature, well? If kind functionality a on view webcam what of could as been the bump result see you you. added, why are and you feature? for this do of of consumers, has And this and in feature

Nicholas Woodman

more think make people They're are do Black Well, clear differentiated the possible our prior far now now were were and what we customers prior just Black HeroX use And far using with for COVID. conferencing ever, want to COVID, web more quite to with an a it we more firmware update, video is, they to that with why other GoPro’s that angle than than recognized lens specifically I than webcams functionality. and that they feature as could webcam, live we cameras. that is to wide their that important a really from important them its it's HeroX enable streaming

camera where And very more to video they they're instruction angle wider and camera. a perspective, activities where give a versatility they than where are same versatile sort be in it's computer whether having the fit live giving or you just need them get can't and so web people the and in, web from the as as their flexibility more of from traditional lens they need know, scene some computer streaming it's decoupled just conferencing some helpful is location they with or far for who could the

same wide performance that and angle that GAAP GoPro and the as camera quality as So make activity I a as made is mean, it helping successful web it's camera image so successful well. we're versatility interesting. a filling has

live streaming the pain other So the that's platforms. offer, great then with enhancing streaming of year that addressing we're that on live experience later of some that points to further currently And exists see. we the with expanding this some

performance, I the and for your anything bonus well. the So and love been that. product that'll don't as it, more give consumers money charge capability feedbacks for you, anytime them customers somebody our their more value great, enhance an added for be of And mean you

we And been look that it's positive we've forward something received really and upon going forward. it's building to so,

Paul Chung

Great, thanks so much.

Nicholas Woodman

you. Thank

Operator

our And Citigroup. we'll Suva Jim take from with now question next

Mike Cadiz

one Good afternoon Citi. Jim question, gentlemen, commentary remarks. prepared at appreciate OpEx have I the this is I in Mike the Cadiz for

I'm selling think marketing XXXX sales direct variable is the expected any to as going proper curious continue in or costs model the However, if the we of second half moderation the should the guidance there and you in forward? optimize as level

Brian McGee

Mike $XXX Yes Hi, our the call, wanted OpEx a said then million bit is the to in XXXX, - higher Brian. last we level about this little in to we get but we're also seeing demand.

to to I optimize between little XX goes think to X it's to some do Not investments long attribution going continue but a we'll bit site. million a gopro.com. to XX be way to to plus that drive lot, the a

but lift. also So, nice see a we'll

on second And bit So costs, our marketing a our gopro.com improve marketing, for and little again, we're even actually the a variable in bit the on phone. half. to then, up continued of digital little site enhancements that's selling some on

Operator

our next Thank take you. Longbow Todorov from we'll question Nik And with Research.

Nikolay Todorov

Nick, afternoon. thinking in inventory of XXXX? inventory direct Good the expect model Brian that we down XXX,XXX in exiting that year target inventory the you guys be general should amount to I position right or thanks. going forward the guess further guys, that Hey is about as you channel to and for that XXX,XXX go to

Brian McGee

that's think I No Brian. is this Nik, right level. the about Hey

more at million range. half end I that think at of lower on the end the XXXX a of

inventory in own of to also XXX,XXX our at down. XXXX. end somewhere the We'll of to end going bring the I the midpoint think we're XXX,XXX

it's to XX% working from XXX,XXX seeing going than mean it sell-through. happy demand capital position no, did And our improve. into continues estimate talked frankly we're that we XXX,XXX. so QX year is helping We we're units next actually year So drive What's our will with and that. about. think more I demand, of about This and in up quite that

So demand that leads - trajectory. should nicely continue us profiles into XXXX that on

Nikolay Todorov

third Okay. sell-through in sell-through an your traditionally year million to you're easier And quarter and at talking you look growing I was year-over-year. has X.X comp But been units. X.X in about million sell-through anywhere seeing last that's the if why from understand,

that down XX% but for then going fourth that quarter should you're XX% sell-through gap? than driving seen traditional versus that So So units fourth the that anything be the Is sell-through million quarter bridge essentially than of to there more the down that implied that's quarter? I that's is implies level, roughly that or guess. X.X versus how about implying for seasonal, why like you're delta, it the fourth weaker level else

Brian McGee

hi Nik look Yes XX% we second in question. Yes, would basis. good on at than little actually units if half, I a year-over-year a more you down think guided be bit how

about QX be think up, we'd QX, teaser but over XX% so XXXX lift so And above we're I in up higher. said of And we be of QX ASP XX% XXXX. will

than that. our second $XXX So something X% half guidance on about the think did and on a revenue. we less revenue I basis, half about million of Last implies second year,

on actually going to and more margin basis, profitability. we're drive better basis and a revenue So we're

Nikolay Todorov

a sorry. think, - Nick, have guys no, and more no something collecting started how I you - on helpful What do I'm lot you sorry Great, data I'm yes?

Nicholas Woodman

drive making driving we're pricing and decisions, add on what business. we're I Nik, that, on business used Brian not more distribution decisions, to and We're products we're decisions, earnings would decisions, fixated on unit a to fixated growth. profitable sell-through, more be to said just profitability, like focused efficient we

Nikolay Todorov

know, about mean competitive you fourth Yes, years fourth think I environment. being talked a very always has quarter ago, last, quarter been a you the couple the I

be do the guys terms from promotions, where draw would even you money? are and discounting the attention to to that what are their you you of economic going planning situation And more in? I challenging do we're situation? and guess given assume to go How customers get guys? a So not read fourth now you in that it's view current about but I quarter how environment

Nicholas Woodman

know. while the of that a direct-to-consumer be consumers especially as is consumer when fourth provide one benefits GoPro. retail for is still competition lot that you quarter, for at we Well, And a over generating - of any healthy margin going of there value the can can more challenging wallet,

is consumers that delivering And so do is simultaneously convert shift so into in generating about our us expanded important another them result It's a this job to it while value better to to margins direct-to-consumer value. allows customers, is us paying a help reason of that all profitable GoPro. to

a do products, that direct attract than question see with with And are a allow way them to you to result brand got business going value. to XXXX. got of terrific generating and to business laden there's in relates - to got your important is you to plan and allow our XXXX. and And to Retail you so going experience way with value them business really generate that we to going do is to us, fourth more healthy for I to so GoPros allow learning them efficient serve we're well retail in you a much a your start as you're and to about capable you do more the performance, that with load more balancing is operate retail into business the product got what see our it think and we've profits. forward your our them profitable still line going And to And and believe. consumers and that, allow as reliant being customers a how is we’re but and quarter, profitable, believe and strategically between so any trick this got margin to we on

Nikolay Todorov

uptake? there me, have from GoPro I is your How some that the for be more on customer question What use think new data as customers guys guess last is end? update? camera. year to used a and how Last collecting announced cameras that on application you guys a it. I got going or abilities you feedback for features example any and started data an blogging you you Okay, is do lot

Nicholas Woodman

and HeroX Yes, punctuated audiences. help but successful been Instagram GoPro can very regularly you, are as launch for we've HeroX, see communicate demonstrated that blogger, with clearly of Influencers what GoPro to really Maximum. that YouTube, and the staple any for a very before at establishing their HeroX, and have And where yourself, via serious TikTok, using you by was or with

that got cameras and excited new And that the well so on how a we're as products tap far we that further. work as blogging those solution even take

serving consumer experience growing another one seeing important where we're fact streaming expanding year. this we And And for I mentioned, be consumers we're in the and this due capabilities going we as are customers in in pandemic. to that this live streaming live an So, succeeding as see case later our our is use to way.

versatile so constantly make versatile our the ways even valuable And looking camera the for and world's we're board, to customers. across most more at

Nikolay Todorov

Thanks, Okay, guys got luck. it. good

Nicholas Woodman

Thank you.

Operator

further questions no would like you. or we back for this time. Thank management at turn the now additional have I remarks. call to to And closing

Nicholas Woodman

employees Thank the you, operator. call I'd Well, close world. my today by the GoPro like for around gratitude sharing to

and will terrific Thank you call amazing of for this millions joining. signing products all to be are Stay them. rest to of excelling challenging on later behalf thank much for the customers, to because of fun This all work. haven't are and so, the You appear all of executing a year. truly going our year. you we team is it the going safe. extremely as It's our to during you GoPro on else beat everybody when They're a be And all though times off. you missed new launch and amazed so

Operator

this call. participation. gentlemen, and today's thank Ladies you We your concludes for

disconnect. may now You

GoPro (GPRO) 6 Aug 202020 Q2 Earnings call transcript