GoPro, Inc. (NASDAQ:GPRO) Morgan Stanley Technology, Media and Telecom Conference March 2, 2021 5:00 PM ET Company Participants Christopher Clark - Vice President, Corporate Communications Nicholas Woodman - Chief Executive Officer Brian McGee - Chief Financial Officer and Chief Operating Officer Conference Call Participants Eric Woodring - Morgan Stanley Eric Woodring Good afternoon, everyone. My name is Eric Woodring. I am part of the IT hardware research team here at Morgan Stanley. Let me just read a qu ...

GoPro, Inc. (NASDAQ:GPRO) Conference Call Summary Company Overview - **Company**: GoPro, Inc. - **Date**: March 1, 2021 - **Participants**: Nick Woodman (CEO), Brian McGee (CFO, COO) Key Industry Insights - **Transition to Direct-to-Consumer (DTC)**: The company accelerated its shift to a DTC model due to COVID-19, which allowed for reduced operating expenses and a focus on subscription offerings [4][6] - **Subscription Growth**: GoPro ended 2020 with approximately 760,000 subscribers, marking a 145% year-over-year increase and a 52% sequential increase. The goal is to reach about 1 million subscribers by Q2 2021 and approach 2 million by the end of 2021 [4][5] - **Annual Recurring Revenue (ARR)**: With a target of 2 million subscribers, GoPro anticipates generating approximately $100 million in ARR, with gross profit margins above 70% and operating profit margins above 50% [5][6] Financial Performance and Projections - **Revenue Growth**: GoPro expects revenue to increase by 20% to 25% in 2021, driven by unit sales and an average selling price (ASP) growth of 5% to 10% [25][28] - **Unit Sales**: The company projects sell-through of approximately 3.6 million units in 2021, which is flat compared to 2020 [25][26] - **Operating Expenses**: Operating expenses are guided to be around $310 million for 2021, slightly up from $298 million in 2020, reflecting investments in innovation and direct-to-consumer strategies [30][34] - **Cash Position**: GoPro ended 2020 with about $328 million in cash and expects to generate free cash flow of $470 million to $500 million in 2021 [35] Strategic Initiatives - **Customer Engagement**: The subscription model enhances customer lifetime value and engagement, allowing for better communication and follow-on purchases [7][10] - **New App Launch**: GoPro is set to release a new app aimed at managing personal photos and videos, targeting users who do not own a GoPro camera. This app will offer a low-cost subscription service to help users organize their content [14][18] - **Market Expansion**: The new app is seen as a significant opportunity to expand the total addressable market (TAM) beyond traditional GoPro users [14][20] Additional Insights - **Content Management**: The new app aims to solve the content management problem for users, making it easier and more enjoyable to manage personal photos and videos [41][42] - **Branding Opportunities**: While there are discussions about potential branding opportunities in markets like automotive, the company remains focused on its core strengths and existing product lines [37][38] Conclusion - GoPro is strategically positioned for growth in 2021, with a strong focus on direct-to-consumer sales, subscription services, and innovative product offerings. The company is optimistic about its financial outlook and market opportunities, particularly with the upcoming app launch aimed at enhancing user engagement and expanding its customer base.

GoPro, Inc. (NASDAQ:GPRO) Q4 2020 Earnings Conference Call February 4, 2021 5:00 PM ET Company Participants Christopher Clark - Vice President, Corporate Communications Nicholas Woodman - Chief Executive Officer Brian McGee - Chief Financial Officer and Chief Operating Officer Conference Call Participants Paul Chung - JP Morgan Andrew Uerkwitz - Oppenheimer & Company Jim Suva - Citigroup Investment Research Nik Todorov - Longbow Research Erik Woodring - Morgan Stanley Operator Good day and welcome to the Go ...

Financial Data and Key Metrics Changes - GoPro generated non-GAAP EPS of $0.20 and $100 million of operating cash flow in Q3 2020, with expectations to be profitable for the full year 2020 [8][10] - Revenue growth of 109% sequentially, with record GoPro.com revenue of $81 million [10] - Estimated sell-through of approximately 955,000 cameras, exceeding expectations [10] Business Line Data and Key Metrics Changes - The launch of HERO9 Black and the GoPro subscription service contributed significantly to revenue and subscriber growth [9][10] - 85% of HERO9 Black purchases were made with a subscription, indicating a strong attach rate [21] - Higher average order values and accessory attach rates were observed among subscriber customers compared to non-subscribers [9][23] Market Data and Key Metrics Changes - The direct-to-consumer model is driving improved cash flow and margins, with expectations for continued growth in 2021 [10][25] - The company expects to exit 2020 with low channel inventory, positioning itself well for 2021 [10][56] Company Strategy and Development Direction - GoPro's strategy focuses on making the subscription service central to its business model, enhancing customer lifetime value and profitability [9][10] - The company aims to expand its direct-to-consumer approach, which is more profitable than retail channels [25][56] - Future product development will be informed by consumer research to address both existing user needs and attract new customers [46][48] Management's Comments on Operating Environment and Future Outlook - Management noted a shift in consumer behavior due to COVID-19, with increased local outdoor activities driving demand for GoPro products [15][16] - The company anticipates continued strong performance in Q4 and beyond, supported by a robust subscription model [10][42] - Management expressed confidence in the ability to grow the subscriber base significantly in 2021, with a target of nearly 2 million subscribers [22][42] Other Important Information - GoPro is focusing on enhancing the value of its subscription service to improve retention rates and reduce churn [50][52] - The company is developing a new app experience aimed at smartphone users, which could create additional subscription revenue opportunities [61][62] Q&A Session Summary Question: Change in business model and cash management - Management highlighted improvements in working capital, with DSOs improving to 35 days and expected to decrease further [12] Question: Changing demographics and market penetration - Management noted a shift in consumer behavior towards local activities, which has increased the relevance of GoPro products [15][16] Question: Subscriber attach rates through different channels - Higher attach rates were observed for subscriptions purchased through GoPro.com compared to retail [21] Question: Future cash flow modeling - Management indicated that cash flow seasonality has improved due to the direct-to-consumer model [34] Question: Operating expenses guidance for 2021 - Management expects operating expenses to be in the range of $290 million for 2021, with flexibility to adjust if necessary [39] Question: Subscriber growth expectations - Management anticipates exceeding 700,000 subscribers by year-end, with a potential to reach nearly 2 million by the end of 2021 [42] Question: New app experience for smartphone users - Management discussed plans for a new app that addresses widespread problems for both GoPro and smartphone users, aiming to expand the brand's reach [61][62]

Revenue Performance - Revenue for Q3 2020 was $280.5 million, a 114% increase compared to $131.2 million in Q3 2019[76] - Revenue for Q3 2020 was $280.5 million, a 114% increase from $131.2 million in Q3 2019, driven by the launch of HERO9 Black and increased demand for HERO8 Black[84] - Revenue from GoPro.com was $81.3 million in Q3 2020, representing 29% of total revenue, up from 17.8% in Q3 2019[84] - Total revenue for the first nine months of 2020 was $534.2 million, a 20% decrease from $666.3 million in the same period in 2019[82] Profitability and Income - Net income for Q3 2020 was $3.3 million, or $0.02 per share, compared to a net loss of $74.8 million, or $0.51 per share, in Q3 2019[79] - Operating income for Q3 2020 was $8.9 million, compared to an operating loss of $71.2 million in Q3 2019[82] - Adjusted EBITDA for Q3 2020 was $39.2 million, compared to a negative $52.7 million in Q3 2019[79] - GoPro reported a net income of $3.3 million for the three months ended September 30, 2020, compared to a net loss of $50.975 million for the previous quarter and a loss of $74.81 million for the same quarter last year[110] - Adjusted EBITDA for the quarter was $39.179 million, a significant improvement from an adjusted EBITDA loss of $22.367 million in the previous quarter and a loss of $52.715 million in the same quarter last year[109] Sales and Shipments - Camera units shipped in Q3 2020 totaled 923 thousand, a 93% increase from 479 thousand units in Q3 2019[77] - 83% of camera revenue in Q3 2020 came from products priced at $300 or more, compared to 77% in Q3 2019[79] - Average selling price of cameras in Q3 2020 was $304, reflecting a 10.9% year-over-year increase[79] - Average selling price in Q3 2020 was $304, an 11% increase compared to $274 in Q3 2019[84] Cost Management - Operating expenses decreased by $9.2 million, or 9.2%, year-over-year, due to cost management efforts[79] - Total operating expenses in Q3 2020 were $90.5 million, which is 32% of revenue, down from 76% in Q3 2019[82] - Sales and marketing expenses decreased by 30% to $34.4 million in Q3 2020 from $48.8 million in Q3 2019[88] - General and administrative expenses rose by 19% to $18.8 million in Q3 2020 compared to $15.8 million in Q3 2019[90] Research and Development - Research and development expenses for Q3 2020 were $37.2 million, accounting for 13% of revenue[82] - Research and development expenses totaled $37.2 million in Q3 2020, a 7% increase from $34.9 million in Q3 2019[87] - Total research and development expenses for the first nine months of 2020 were $104.1 million, a 6% decrease from $111.2 million in the same period of 2019[87] Cash Flow and Liquidity - Cash provided by operations in Q3 2020 was $99.6 million, a significant improvement from a cash used of $46.7 million in Q3 2019[77] - The company reported a net loss of $111.2 million for the nine months ended September 30, 2020, with cash used in operating activities amounting to $12.5 million[100] - As of September 30, 2020, GoPro's cash, cash equivalents, and marketable securities totaled $146.9 million, a decrease from $165.1 million on December 31, 2019[96] - The company anticipates that its current liquidity will be sufficient for at least one year from the issuance of the financial statements[99] Strategic Initiatives - The company plans to focus on direct-to-consumer sales to improve profitability and reduce operating expenses[81] - The shift to direct-to-consumer sales is expected to help achieve profitability despite a potential decrease in total addressable market[84] - GoPro's actions to shift to a direct-to-consumer sales model are expected to accelerate profitability and reduce operating expenses[99] - The company expects to increase sales from GoPro.com, which historically has a higher gross margin compared to retail sales[99] Restructuring and Costs - The company recorded restructuring costs of $26.6 million in Q2 2020, including $12.5 million related to asset impairment and $7.8 million for severance[92] - The company incurred $15.215 million in restructuring and other costs during the quarter, up from $11.351 million in the previous quarter[110] Market and Risk Factors - GoPro's foreign currency risk is currently considered immaterial, as the majority of product sales and inventory purchases are denominated in U.S. dollars[112] - Interest rate risk is primarily related to cash and cash equivalents, with the company holding investments in money market funds and U.S. treasury securities[112] - The fair value of GoPro's Senior Convertible Notes is subject to interest rate and market risks, but these do not impact the company's financial position or cash flows[112]

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Revenue Performance - Revenue for Q1 2020 was $119.4 million, a 50.8% decrease year-over-year from $242.7 million in Q1 2019[82]. - Revenue for Q1 2020 was $119.4 million, a 50.8% decrease year-over-year from $242.7 million in Q1 2019, primarily due to the COVID-19 pandemic[89]. Camera Shipments - Camera units shipped in Q1 2020 were 341 thousand, down 60% from 842 thousand in Q1 2019[81]. - Camera units shipped in Q1 2020 were 341 thousand, down 60% from 842 thousand in Q1 2019[89]. Financial Losses - Net loss for Q1 2020 was $63.5 million, or $0.43 per share, compared to a net loss of $24.4 million, or $0.17 per share, in Q1 2019[82]. - For the three months ended March 31, 2020, GoPro reported a net loss of $63.528 million, compared to a net loss of $24.365 million in the same period of 2019[116]. - Adjusted EBITDA for Q1 2020 was negative $41.4 million, compared to negative $1.0 million in Q1 2019[82]. - Adjusted EBITDA for the same period was $(41.356) million, significantly worse than $(1.035) million in the prior year[116]. - Non-GAAP net loss for Q1 2020 was $(49.613) million, compared to $(10.171) million in Q1 2019, indicating a deterioration in operational performance[117]. Operating Expenses - Operating expenses in Q1 2020 were $94.5 million, a decrease of $6.1 million year-over-year[82]. - Total operating expenses for Q1 2020 were $94.5 million, representing 79% of revenue, compared to $100.6 million or 41% of revenue in Q1 2019[87]. - Research and development expenses decreased by 14% year-over-year to $32.3 million in Q1 2020, accounting for 27% of revenue[92]. - Sales and marketing expenses decreased by 8% year-over-year to $43.5 million in Q1 2020, representing 36.4% of revenue[93]. - Total general and administrative expenses increased by $2.9 million, or 18%, in Q1 2020 compared to Q1 2019, reaching $18.8 million[94]. Market Impact - The COVID-19 pandemic negatively impacted revenue and inventory levels in Q1 2020[82]. - The company anticipates continued uncertainty regarding the impact of COVID-19 on financial performance[78]. Pricing and Sales Strategy - Average selling price in Q1 2020 increased to $351, a 21.7% increase year-over-year[82]. - Average selling price increased by 21.7% year-over-year to $351 in Q1 2020, driven by a higher proportion of cameras sold at or above $300[89]. - Nearly 90% of camera revenue in Q1 2020 came from cameras sold at or above $300[82]. - The direct sales channel accounted for 54.3% of revenue in Q1 2020, up from 45.7% in Q1 2019, reflecting a strategic shift towards direct-to-consumer sales[89]. - The company expects to increase sales from gopro.com relative to total revenue, as direct-to-consumer sales historically have a higher gross margin[103]. Cash Flow and Financing - Cash, cash equivalents, and marketable securities totaled $124.9 million as of March 31, 2020, down from $165.1 million at the end of 2019[99]. - Cash used in operating activities was $68.3 million in Q1 2020, primarily due to a net loss of $63.5 million and changes in working capital[106]. - Cash provided by investing activities was $6.1 million, mainly from maturities of marketable securities totaling $7.3 million[107]. - Cash provided by financing activities was $29.9 million, resulting from a $30.0 million draw on the Credit Facility[108]. Restructuring and Workforce - The company plans to reduce its global workforce by approximately 20% as part of a restructuring plan announced in April 2020[103]. - GoPro's restructuring actions have significantly reduced operating expenses, particularly in marketing and sales, in response to the COVID-19 pandemic[86]. - The company recorded restructuring charges of $23.1 million under a restructuring plan approved in March 2017, which included a workforce reduction of approximately 17%[95]. Tax and Other Expenses - Income tax expense for Q1 2020 was $2.4 million, a 535% increase from $378,000 in Q1 2019, resulting in a negative effective tax rate of 3.9%[98]. - Total other expense, net, increased by $1.3 million in Q1 2020 compared to Q1 2019, primarily due to a $0.8 million increase in net foreign exchange rate-based transaction losses[97]. - Stock-based compensation expenses amounted to $7.637 million in Q1 2020, down from $9.785 million in Q1 2019[117]. - Acquisition-related costs for Q1 2020 were $1.887 million, slightly lower than $2.082 million in the same quarter of 2019[117]. Market Risk - The fair value of GoPro's Senior Convertible Notes is influenced by interest rate risk and market risk, particularly due to the convertible feature[119]. - There were no material changes to market risk during the three months ended March 31, 2020, aside from risks associated with the COVID-19 pandemic[119]. - GoPro utilizes a cash-based non-GAAP tax expense approach for evaluating operating performance, which may differ from other companies' calculations[115]. - The company emphasizes that non-GAAP financial measures provide meaningful supplemental information regarding operational performance[115].

Financial Performance - The company experienced its highest revenue levels in the fourth quarter, particularly during the holiday shopping season, with direct sales accounting for 46% of total revenue in 2019[18][23]. - As of January 31, 2020, the company had over 334,000 paying subscribers for its GoPro Plus subscription service, although revenue from this service was not material to overall results[17]. - The company expects to maintain operating expenses at a similar level in 2020 as in 2019, focusing on operational excellence and predictability[13]. Market Presence - The company operates in over 100 countries and sells through more than 30,000 retail outlets, with gopro.com contributing more than 10% of total revenue in 2019[23][24]. - The company has approximately 29,000 point-of-purchase displays in retail outlets worldwide as of December 31, 2019[27]. - GoPro gained 4.3 million new followers on social media in 2019, reaching a total of 42.8 million followers across platforms[28]. Product Development - The company has a user experience-driven approach to product development, with a focus on innovative features and performance enhancements[21]. - The company competes against established brands like Canon and Nikon, emphasizing its durable product design and professional-grade features at attractive price points[29]. - The company moved most of its U.S.-bound camera production from China to Mexico in 2019 due to tariff-related concerns[22]. Corporate Structure and Workforce - GoPro had 926 employees as of December 31, 2019, with no employees covered by collective bargaining agreements and no work stoppages reported[33]. - The company has experienced no work stoppages and maintains a stable workforce without collective bargaining agreements[33]. - The company has implemented three company-wide restructurings since Q4 2016, resulting in a reduction of global workforce and the elimination of high-cost initiatives[13]. Intellectual Property and Financial Management - As of December 31, 2019, GoPro held approximately 682 issued patents and 441 pending patent applications in the United States, along with 314 issued patents and 193 pending applications in foreign countries[32]. - GoPro's trademarks, including "GOPRO" and "HERO," are critical components of its business value, with ongoing efforts to protect intellectual property against unauthorized use[32]. - GoPro's cash equivalents and marketable securities primarily consist of money market funds, commercial paper, U.S. treasury securities, and corporate debt securities, with a focus on preserving principal and providing liquidity[180]. Currency and Market Risks - The company has not entered into any material foreign currency exchange contracts, and believes that a 10% shift in exchange rates would not materially affect its results of operations[180]. - GoPro's operations outside the U.S. hold foreign denominated cash balances and incur expenses in various foreign currencies, but the exposure to foreign currency fluctuations is currently considered immaterial[180]. - The fair value of GoPro's Senior Convertible Notes is influenced by interest rate risk and market risk, but changes do not impact the company's financial position or cash flows due to the fixed nature of the debt obligation[180]. Company Background - The company was incorporated in California in 2004 and completed its initial public offering in July 2014, with its Class A common stock listed on The Nasdaq Global Select Market under the symbol "GPRO"[34]. - GoPro's principal executive offices are located in San Mateo, California, and the company provides access to its filings with the SEC through its website[36].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ Commission file number: 001-36514 GOPRO, INC. (Exact name of registrant as specified in its charter) Delaware 77-0629474 (State o ...

Financial Performance - Revenue for Q2 2019 was $292.4 million, a 3.4% increase year-over-year from $282.7 million in Q2 2018[89] - Net loss for Q2 2019 was $11.3 million, or $0.08 per share, an improvement of $26.0 million compared to Q2 2018[89] - Adjusted EBITDA for Q2 2019 was $13.6 million, an improvement of $22.3 million from negative $8.7 million in Q2 2018[89] - Operating loss for Q2 2019 was $(6,947) thousand, compared to $(30,836) thousand in Q2 2018[93] - Net loss for Q2 2019 was $(11,287) thousand, or (4)% of revenue, compared to $(37,269) thousand, or (13)% in Q2 2018[93] - The company reported a net loss of $11.3 million for the three months ended June 30, 2019, compared to a net loss of $24.4 million for the previous quarter[121] - Adjusted EBITDA for the three months ended June 30, 2019, was $13.6 million, compared to an adjusted EBITDA of $(1.0) million for the previous quarter[120] - Non-GAAP net income for the three months ended June 30, 2019, was $4.2 million, with a non-GAAP income per share of $0.03[121] Revenue and Sales - Total revenue for Q2 2019 was $292,429 thousand, a 3% increase from $282,677 thousand in Q2 2018[94] - The HERO7 Black camera accounted for over 85% of camera revenue in Q2 2019[89] - Average selling price in Q2 2019 increased to $270, a 2% increase year-over-year[89] - Direct channel revenue decreased by 7% to $135,351 thousand in Q2 2019, while distribution channel revenue increased by 14% to $157,078 thousand[94] - Average selling price of cameras increased by 7% to $270 in Q2 2019 compared to the same period in 2018[94] Cost and Expenses - Gross margin in Q2 2019 was 34.9%, up from 29.5% in Q2 2018, representing a 540 bps improvement[89] - Total cost of revenue for Q2 2019 was $190,244 thousand, a 5% decrease from $199,308 thousand in Q2 2018[95] - Operating expenses in Q2 2019 were $109.1 million, a decrease of $5.1 million year-over-year[89] - Total operating expenses for Q2 2019 were $109,132 thousand, a decrease from $114,205 thousand in Q2 2018[93] - Total sales and marketing expenses decreased by $8.1 million, or 13%, in Q2 2019 compared to Q2 2018, primarily due to a $7.6 million decrease in advertising expenses[98] - General and administrative expenses increased by $2.5 million, or 16%, in Q2 2019 compared to Q2 2018, driven by a $1.1 million increase in allocated facilities and other overhead expenses[100] Research and Development - Research and development expenses for Q2 2019 were $38,811 thousand, representing 13.3% of revenue, a slight increase from 13.5% in Q2 2018[97] - The company plans to continue investing in research and development to enhance customer experience and product offerings[90] Market and Growth Opportunities - International markets are viewed as a significant growth opportunity despite the overall decline in the digital camera market[90] Cash and Liquidity - Total cash, cash equivalents, and marketable securities decreased by $67.4 million, or 34.1%, from $197.5 million as of December 31, 2018, to $130.1 million as of June 30, 2019[107] - The percentage of total assets represented by cash, cash equivalents, and marketable securities decreased from 28% as of December 31, 2018, to 19% as of June 30, 2019[105] - The company expects its cash, cash equivalents, and marketable securities, along with amounts available under its credit facility, to be sufficient for at least the next 12 months[109] - Operating activities resulted in a cash outflow of $66.0 million for the six months ended June 30, 2019, primarily due to an adjusted net loss of $7.8 million and a net cash outflow of $73.9 million from changes in operating assets and liabilities[112] - Cash provided by investing activities was $5.0 million in the first half of 2019, resulting from maturities of marketable securities of $37.2 million, partially offset by purchases of marketable securities of $30.2 million[113] - Cash used in financing activities was $0.1 million in the first half of 2019, primarily due to $4.0 million in tax payments for net RSU settlements[114] Debt and Financing - The company issued $175.0 million in Convertible Senior Notes with a 3.50% interest rate, maturing on April 15, 2022[108] - The company has a secured revolving credit facility of up to $250.0 million, which terminates in March 2021, with no borrowings made to date[109] Other Financial Information - The company recorded an income tax benefit of $0.6 million for Q2 2019 on a pre-tax net loss of $11.9 million, resulting in an effective tax rate of 5.1%[104] - Total other expense, net, decreased by $0.8 million in Q2 2019 compared to Q2 2018, attributed to a decrease in unrealized losses from foreign exchange rates[103] - The company incurred restructuring costs of $563,000 in Q2 2019, a 43% increase compared to Q2 2018[100] - Total general and administrative expenses for the first half of 2019 decreased by $1.2 million, or 3%, compared to the first half of 2018[100] - There have been no material changes to the company's market risk during the six months ended June 30, 2019[123]