Yahoo Finance GoPro, Inc. (NASDAQ:GPRO) Q1 2024 Earnings Call Transcript
GoPro, Inc. (NASDAQ:GPRO) Q1 2024 Earnings Call Transcript May 7, 2024
GoPro, Inc. misses on earnings expectations. Reported EPS is $-2.24426 EPS, expectations were $-0.24. GoPro, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Hello and welcome to the GoPro First Quarter 2024 Earnings Call. My name is Lauren, and I'll be coordinating your call today. There will be opportunity to questions at the end of the presentation. [Operator Instructions] I would now hand you over our host, Chris Clark, VP, Corporate Communications to begin. Please go ahead.
Chris Clark: Thank you, Lauren. Good afternoon and welcome to GoPro's first quarter 2024 earnings conference call. With me today are GoPro's CEO, Nicholas Woodman, and CFO and COO, Brian McGee. Today's agenda will include a brief commentary from Nick followed by Q&A. For detailed information about our first quarter 2024 performance as well as outlook, please read our Q1 2024 earnings press release and the management commentary we've posted to the Investor Relations' section of GoPro's website. Before I pass the call to Nick, I'd like to remind everyone that our remarks today may include forward-looking statements. Forward-looking statements and all other statements that are not historical facts are not guarantees of future performance and are subject to a number of risks and uncertainties, which may cause actual results to differ materially.
Additionally, any forward-looking statements made today are based on assumptions as of today. This means that results could change at any time and we do not undertake any obligation to update these statements as a result of new information or future events. To better understand the risks and uncertainties that could cause actual results to differ from our commentary, we refer you to our most recent annual report on Form 10-K for the year ended December 31st, 2023, which is on file with the Securities and Exchange Commission, and is updated in filings with SEC including the quarterly report on Form 10-Q for the quarter ended March 31st, 2024. Today, we may discuss gross margin, operating expense, net profit and loss, adjusted EBITDA, as well as basic and diluted net profit and loss per share in accordance with GAAP and on a non-GAAP basis.
A reconciliation of GAAP to non-GAAP operating expenses can be found in the press release that was issued this afternoon, which is posted on the Investor Relations' section of our website. Unless otherwise noted, all income statement related numbers that are discussed in the management commentary and remarks made today, other than revenue, are non-GAAP. Now, I'll turn the call over to GoPro's Founder and CEO, Nicholas Woodman.
Nicholas Woodman: Thanks Chris and thanks everybody for joining us today. GoPro exceeded guidance in Q1, delivering revenue of $155.5 million, non-GAAP gross margin of 34.4%, and non-GAAP EPS loss of $0.21. We ended Q1 with 2.5 million subscribers, a 6% year-over-year increase. Today's earnings call marks the one-year anniversary of the start to our multi-year transition to expand our TAM by restoring our brand presence at retail, scaling our marketing efforts in our core markets, and substantially broadening our product portfolio to serve more people who want to capture, create, and share content in ways that go beyond the phone. GoPro's brand resonates with a broad range of end users, from active consumers to professional athletes, influencers, and film and television professionals who rely on their GoPros to capture unique content that stands out.
We see an opportunity to be the world's most exciting brand focused on enabling differentiated, alternative forms of content creation across a broad range of markets and use cases. To-date, we've primarily served this wide range of users and use cases with the world's most versatile camera, the HERO camera. And while the HERO camera has done an amazing job in its role and will continue to be our flagship for some time, we believe we can expand our TAM and business by developing a broader range of products that more specifically meet the needs of our customers, while also targeting entirely new market segments. In 2026, we expect to have in market the broadest, most differentiated lineup in our history. We are developing a full spectrum of specialized, diversified products to serve consumers capture needs in more convenient and enjoyable ways than ever before, at price points ranging from entry level through professional.
Rather than compete in a digital imaging market with me too products, we intend to grow GoPro with fun and exciting alternative capture solutions that enable consumers and professionals in unique, value-added ways. We see a long runway of totally new, specialized products that can merge with our software solutions to establish GoPro as the world's leading alternative capture company. As an example of this TAM-expansion strategy through specialization and diversification, in February 2024, we completed the acquisition of Forcite Helmet Systems, an Australian maker of tech-enabled motorcycle helmets. As discussed in our Q4 earnings call, we believe tech-enabling motorcycle helmets and combining them with a value-added software experience, represents a meaningful opportunity for GoPro to extend its technical and marketing capabilities to create differentiated solutions within a $6 billion motorcycle helmet market, of which we believe we can target a SAM of approximately $3 billion.
We are excited to expand our brand into this new product category and expect to announce our first helmet products in the second half of 2025. We also intend to partner with leading helmet brands as an OEM supplier to help them tech-enable their own premium SKUs. We have enormous respect for leading brands and look forward to working with them to help drive innovation together. And that's just on the hardware front. We're also excited to build upon our sync'd mobile, desktop, and cloud software experience to make GoPro an even more powerful yet simple solution for anyone wanting to create engaging content, regardless of what camera they use. We see this as a long-term opportunity and we believe our 2.5 million subscribers and high retention rates are a testament to that opportunity and our ability to execute against it.
In February, we rolled out the initial release of our Quik desktop app for macOS and our new Premium+ subscription tier. The Quik desktop app, which is available at no additional charge to GoPro subscribers, brings the simplicity and convenience of automatic edits to desktop users, along with powerful yet convenient manual editing tools, sync'd editing between mobile and desktop apps, and the ability to import footage from any camera. We're planning to launch a Windows desktop app later this year. Our new Premium+ $99.99 subscription tier includes an advanced desktop-based HyperSmooth Pro video stabilization feature, plus increased cloud storage for footage captured with any camera. GoPro subscribers at both the original $49.99 Premium tier and new $99.99 Premium+ tier enjoy unlimited cloud storage of footage captured with their GoPro at original quality.
We've already added more than 20,000 Premium+ subscribers, with nearly 80% having upgraded from the $49.99 annual Premium tier, a solid start that we are excited about. In addition, our aggregate annual subscription retention rate increased to a new high of 69% in the first quarter, up 6% year-over-year. We also made significant progress expanding our global retail presence during Q1. We added approximately 1,000 new retail doors and importantly, deepened relationships with key partners to improve in-store merchandising and brand exposure to excite customers and drive sell-through. Since Q2 2023, we've added more than 4,200 doors and believe we're on track to add an additional 3,000 to 6,000 new doors by the end of 2025, enhancing our go-to-market capabilities for our expanding product roadmap.
As mentioned previously, the bulk of our door count increase over the past year has been in EMEA, where in Q1 we saw a greater than 50% lift in retail channel sell-through, year-over-year. This is a clear and positive sign that our strategy to grow retail channel sales is working. In addition to growing door count, we are refreshing our point-of-purchase merchandisers, expanding our in-store brand presence, and enhancing account management throughout the retail channel. For example, in North America, we're in the process of updating our endcap displays with Best Buy. This started with installing our larger eight-foot endcap displays in all Best Buy premium experience doors that feature a camera experience shop, which we completed in mid-April.
And by mid-July, we expect to have completely refreshed all of our merchandising displays in all Best Buy stores. Additionally, we're working closely with Best Buy to train select Blueshirt employees on GoPro products to help them maximize GoPro sales in their top stores. Having a passionate and knowledgeable in-store salesperson can have a significant impact on our joint business and we're very excited to be a part of this exclusive sales program with Best Buy, one of the world's largest consumer electronics retailers. We believe growing our brand presence in thousands of new doors over the coming years will help maximize awareness of our brand and present our expanding product portfolio in the best possible way. As we previously highlighted in our Q4 2023 earnings commentary, we've been reinvigorating our efforts to drive awareness of our brand in all the major verticals we serve.
In Q1, our brand was prominently displayed in snow-focused events like the X Games and Freeride World Tour; in mountain biking with the Red Bull Hardline and Darkfest events; and in two-wheel motorsports events including Supercross and MotoGP. We are also leveraging select events as platforms to host retail Super Clinics to grow engagement and product knowledge amongst key retailers that serve these important markets. There are many exciting initiatives underway at GoPro as we work to expand our TAM by growing our brand, strengthening our presence at retail, and developing a significantly broader offering of specialized products. Given consumers' growing appetite for content creation, we believe we are well-positioned to leverage our unique hardware and software ecosystem to serve consumers in exciting ways and grow our business over the long-term, firmly establishing GoPro as the world's leading alternative capture company, offering content capturing and creation solution that go well beyond the phone.
This transformation will take time, however. We expect that it won't be until 2025, as we enter the third year of our growth strategy, that we will show improved revenue and profit growth. We believe 2025 will be the first full year that we benefit from our investments and efforts, with an expected door count of 26,000 to 29,000 retailers and well on our way to having the broadest, most differentiated product portfolio in our history in 2026. Due to the development process taking longer than expected, the launch of our new entry-level camera will push from Q2 to Q3 in 2024, and our new 360 camera will push to late Q4. This is expected to negatively impact revenue in a range of $65 million to $85 million in 2024. Importantly, our exciting new flagship HERO camera, and all of its innovation and performance enhancements, remains on-track for a scheduled launch later this year.
While 2024 will be challenging from a revenue and profitability perspective, we believe we have the right long-term strategy to expand GoPro into new markets in order to drive growth and profitability. We recognize this will require patience, but we believe that patience will be rewarded over the long-term. Operator, we're now ready to take questions.
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