GoPro(GPRO) - 2023 Q4 - Annual Report

Product Launch and Features - GoPro's HERO12 Black camera launched in September 2023, features 5.3K video at 60 FPS, 27-megapixel photo resolution, and improved HyperSmooth 6.0 stabilization[17] - The HERO11 Black camera features 5.3K video at 60 FPS and cloud connectivity for automatic uploads, enhancing user experience[22] - The HERO12 Black includes advanced features such as 10-bit color video, 27-megapixel photo resolution, and improved battery performance with the Enduro Battery[96] Subscription and Revenue Growth - GoPro had 2.5 million subscribers as of December 31, 2023, representing a 12% year-over-year growth[22] - The Premium+ subscription launched in February 2024, offering 500 GB of cloud storage and enhanced editing features[19] - Subscription and service revenue grew by 18.4% year-over-year to $97.5 million, with 2.5 million GoPro subscribers as of December 31, 2023, an 11.5% increase year-over-year[105] Revenue and Sales Performance - GoPro.com revenue accounted for 30% of net revenue in 2023, down from 38% in 2022, while retail sales accounted for 70% in 2023, up from 62% in 2022[27] - Annual revenue decreased from $1.09 billion in 2022 to $1.01 billion in 2023, with a net loss of $53.2 million in 2023 compared to a net income of $28.8 million in 2022[42] - Total revenue for 2023 was $1.005 billion, an 8.1% decrease from 2022, primarily due to a reduction in MSRP across the camera lineup and a shift to lower price tiers[114] Market Strategy and Competition - GoPro's strategy focuses on expanding its total addressable market through new camera types, accessories, and subscription offerings[20] - The company competes with major brands like Canon, Nikon, Samsung, and Sony, emphasizing its durable and versatile product design[33] - GoPro's marketing strategy includes leveraging user-generated content, which has reached over 26 billion views on TikTok tagged with GoPro[32] Financial Challenges and Losses - The company experienced a decline in camera sales and attach rates, which could adversely affect subscriber growth and overall profitability[43] - The company incurred an operating loss in 2023, with an accumulated deficit of $249.3 million as of December 31, 2023, emphasizing the need for effective expense management[53] - Net loss for the full year 2023 was $53.2 million, compared to net income of $28.8 million in 2022, and Q4 2023 net loss was $2.4 million compared to net income of $3.1 million in Q4 2022[105] Research and Development - Research and development expenses were $165.7 million in 2023, up from $139.9 million in 2022 and $141.5 million in 2021, with expectations for continued substantial expenses in 2024[44] - GoPro's investments in new camera features and software offerings are expected to drive revenue growth and expand its total addressable market[97] Operational and Supply Chain Risks - The company relies on third-party suppliers for components, with risks of supply shortages and long lead times affecting production capabilities[45] - The company expects to continue facing challenges related to supply chain disruptions, including equipment breakdowns and labor shortages, which could adversely affect sales and financial performance[46] - Economic downturns and inflationary pressures may adversely affect consumer spending and demand for the company's products, impacting financial performance[43] Stock and Financing - The company has a stock repurchase program authorized for up to $140 million, with $70,382 remaining available for repurchase as of December 31, 2023[92] - The company has $93.8 million in aggregate principal amount of convertible senior notes due in 2025 after repurchasing $50.0 million of the notes for $46.3 million in cash[75] - The company’s credit facility imposes restrictions that may limit its ability to operate and pursue business opportunities, including acquisitions[76] Environmental, Social, and Governance (ESG) Initiatives - The company published its 2023 Sustainability Snapshot, highlighting ongoing efforts to reduce carbon footprint and improve corporate social responsibility (CSR) initiatives[58] - There is increasing scrutiny regarding the company's Environmental, Social, and Governance (ESG) practices, which could lead to additional costs and reputational risks[58] Inventory and Cash Management - Inventory balances decreased from $127.1 million in 2022 to $106.3 million in 2023, reflecting a decrease of $20.8 million[149] - Cash and cash equivalents as of December 31, 2023, were $222,708,000, a slight decrease from $223,735,000 in 2022[129] - The company expects operating expenses and inventory purchases to be a significant use of cash balances moving forward[137]