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  Title	GoPro : Q4 2024 Management Commentary
  ID	6655292
  External ID	7530070105
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  Published Date	Feb. 6, 2025, 3:21 p.m.
  Summary	February 06, 2025 at 04:18 pm EST February 6 th GoPro, Inc. (NASDAQ: GPRO) Management Commentary Q4 & Full Year 2024 Earnings Call Robin Stoecker Director, Corporate Communications, GoPro, Inc.
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  Content	February 06, 2025 at 04:18 pm EST February 6 th GoPro, Inc. (NASDAQ: GPRO) Management Commentary Q4 & Full Year 2024 Earnings Call Robin Stoecker Director, Corporate Communications, GoPro, Inc. Enclosed is GoPro's fourth quarter and full year 2024 earnings report. Following this brief introduction is management commentary from GoPro's CEO, Nicholas Woodman, and CFO and COO, Brian McGee. This commentary 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 31, 2023, which is on file with the Securities and Exchange Commission ("SEC") and other reports that we may file from time to time with the SEC. In the management commentary, 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, other than revenue, are non-GAAP. Nicholas Woodman Founder, Chief Executive Officer and Chairman, GoPro, Inc. Thank you for reading GoPro's Q4 and full year 2024 management commentary. I'd like to start by addressing recent U.S. tariff announcements on in-bound goods to be sold in the U.S., which we do not expect to materially impact our U.S. consumer pricing or gross margin due to our proactive supply chain management. This is thanks to the terrific job our teams have done to diversify our manufacturing and sourcing over the years. Now, I'll shift to our Q4 and full year 2024 commentary. GoPro's Q4 results landed largely in-line or slightly better than our guidance: Q4 revenue of $201 million and subscription and service revenue of $27 million Sell-through of approximately 775,000 units Subscribers up slightly year-over-year at 2.52 million Average revenue per user (ARPU) for subscription up 8% and aggregate retention increased to a record 69%, up 2% year-over-year Non-GAAP net loss per share of $(0.09) During the quarter, we took action to right-size operating expenses. We're now focused on delivering our 2025 and 2026 products in an efficient manner, which includes a broadening of our portfolio that we believe will yield profitable returns for GoPro and our shareholders over time. The GoPro subscription is the most profitable product we sell, and our retention numbers demonstrate the strength in the value we offer subscribers, as illustrated by ARPU improving 8% year-over-year. Aggregate subscription retention in Q4 was 69%, up from 67% both sequentially and year-over-year, and our annual retention rates continue to be consistent with what we've previously reported, including positive numbers for fourth-year renewals, on which Brian will share more detail in his section. Street ASP was $346 in the quarter, an increase both sequentially and year-over-year. This improvement was primarily due to products with MSRP of $399 and above representing a higher percentage of overall revenue as well as increasing subscription and service revenue. GoPro continues to be the gold standard for professionals and consumers alike when it comes to ultra-compact, reliable, durable "go anywhere, capture anything" professional quality cameras. We shared over the summer how our cameras played a key role in the production of the blockbuster Hollywood film, Twisters More recently, the production team for MrBeast, who has used GoPro cameras heavily for years on the main MrBeast YouTube channel, recently leveraged 1,000 HERO12 Black cameras to help capture their record-breaking Amazon Prime series, Beast Games which generated 50 million views in 25 days, according to a recent report. GoPro cameras continue to be a product of choice for professionals due to the quality, durability, advanced feature set and ease of use, and shows like Beast Games and the MrBeast YouTube channel, with more than 350 million subscribers, are helping to put our products and brand in-front of a broader and younger audience. In 2024, in addition to our flagship HERO13 Black, we introduced an entry-level product - an exciting, tiny 4K camera we call HERO. This ultra-small, 86-gram featherweight camera has enormous potential that we're excited to continue to tap into. Just last week via firmware update, we added a wider, more immersive in-camera 4:3 aspect ratio for video capture along with a SuperView Digital Lens setting in the app, which combine to enable an immersive "it feels like you're there" POV perspective during any activity. The immersive capture our engineering teams have enabled in this entry-level GoPro is staggering - we expect sales to grow over time as we and our end-users continue to champion its capabilities. And it goes without saying that we're excited to grow our presence in the 360-camera market - a market we pioneered and led for several years with category-defining IP and products. As we've shared, the 360-camera market represents a robust growth-segment in the broader digital imaging category, and it's an understatement to say we're excited about the opportunity to grow our share in this important market. Recent and upcoming events related to the 360-camera market include our recent release of a powerful, totally new and enhanced 360 editing experience in the Quik app, complete with impressive subject tracking, intuitive keyframe-based reframing and more. And later this month we'll begin selling a refreshed MAX 360-camera to serve as an entry-level 360 SKU ahead of the highly anticipated availability of our MAX2 360-camera later this year. And of course, MAX will be compatible with all the new aforementioned features in the updated Quik app. And speaking of MAX2, we're excited about the progress we've made on what we believe are innovative capabilities that will redefine the 360-camera market and position MAX2 as the world's most impressive 360-camera. Innovation can be hard, and we're proud of our engineers who've stayed committed to making MAX2 into something truly special - we cannot wait to launch it later this year. Further on the innovation front, I'm excited to share we've completed the validation of our next- generation SoC, GP3. Everything we know about the competitive landscape for market- available SoCs leads us to believe GP3 will once again set new performance standards - not only in our categories of cameras but for the digital imaging industry as a whole. As we noted on our last earnings call, in 2025 we expect units and revenue to be lower than 2024, primarily driven by macroeconomic headwinds, competition and the delay of our new MAX2 360-camera, which, as mentioned, we expect to launch later in 2025. We've substantially reduced operating expenses for 2025 and believe this lower level of spending enables us to continue to innovate and will lead us to an exciting year of new releases in 2026 and beyond. To be clear - we are focused on returning GoPro to unit and revenue growth, along with improved profitability. We plan to do this through a broader, more diversified and innovative roadmap that we believe will expand our TAM, further establish GoPro as a market-leading innovator, and restore unit and revenue growth in 2026. It can be challenging to simultaneously be an innovator and a leader, yet we maintain an unwavering commitment to realizing the long-term rewards that perseverance, innovation and super-serving our end-users can yield. Brian McGee Executive Vice President, Chief Financial Officer and Chief Operating Officer, GoPro, Inc. In the fourth quarter of 2024, revenue was in line with guidance at $201 million. GAAP net loss per share was $(0.24), while non-GAAP net loss per share of $(0.09) exceeded guidance. Subscription and service revenue grew 9% year-over-year, primarily from 8% ARPU growth as a result of continued improving aggregate retention rates, which reached a record 69%. Sell- through in the fourth quarter of approximately 775,000 camera units was in-line with expectations and resulted in a more than 170,000 unit decrease in channel inventory. Notable fourth quarter performance highlights: Subscription and service revenue grew 9% year-over-year to $27.2 million, primarily from 8% ARPU growth as a result of improving aggregate retention rates, which were up 2% year-over-year to a record 69% Subscribers grew 1% year-over-year to 2.52 million, including 70,000 Premium+ subscribers Subscription attach rate from cameras sold across all channels was 34%, compared to 29% in Q4 2023 Street ASP was $346, compared to $330 in Q4 2023 GAAP and non-GAAP loss per share was $(0.24) and $(0.09), respectively Sell-through was approximately 775,000 units, down 16% year-over-year Notable full year performance highlights: Subscription and service revenue grew 10% year-over-year to $107 million, primarily from improving aggregate retention rates, and subscription gross margin exceeded 70% Retail revenue was 75% of total revenue at $601 million, down 15% year-over-year GoPro.com product revenue was 12% of total revenue at $94 million, down 54% year- over-year Street ASP was $330, compared to $337 in 2023 Operating loss was $80 million, compared to an operating loss of $34 million in 2023 Sell-through was 2.5 million units, down 13% year-over-year Actual Q4'24 and full year 2024 results compared to guidance for the same period follows: Fourth Quarter Results and Prior Guidance *Compared to guidance, foreign exchange impacted Q4 2024 gross margin by 80 bps and loss per share by $0.01 due to a stronger USD. Annual Results and Prior Guidance *Compared to guidance, foreign exchange impacted 2024 gross margin by approximately 20 bps due to a stronger USD. **Non-GAAP loss per share was impacted by $1.93 per share due to the establishment of a $295 million valuation allowance on our U.S. deferred tax assets that was recorded in 2024. Turning to more detail on our financial performance, fourth quarter revenue of $201 million was down 32% year-over-year, while revenue for the full year of 2024 was $801 million, down 20% year-over-year. The year-over-year decreases in revenue were primarily driven by lower camera unit sales of 581,000 in the fourth quarter of 2024 compared to 895,000 in the prior year period, and 2.4 million in 2024 compared to 3.0 million in 2023, both driven by consumer-related macroeconomic issues resulting in a softer global consumer market, as well as an increasingly global competitive landscape. In addition, revenue in 2024 was impacted by approximately $80 million due to the delay of MAX2, our new 360-camera, which is expected to launch in 2025. Fourth quarter 2024 Street ASP was $346 compared to prior year Street ASP of $330. The year-over-year increase in Street ASP was primarily due to a camera revenue mix shift with 84% of camera revenue from suggested retail prices of $400 and above compared to 74% in the fourth quarter of 2023, and an increase in subscription and service revenue as a percentage of total revenue, partially offset by an increase in promotional activity. For full year 2024, Street ASP decreased to $330 compared to $337 in 2023 primarily due to camera mix with the introduction of our $199 HERO entry level product as well as an increase in promotional activity during the year. In 2024, 76% of our camera revenue mix was from suggested retail prices of $400 and above, down slightly from 77% in 2023. Street ASP is defined as total reported revenue divided by camera units shipped. Fourth quarter demand as measured via sell-through was approximately 775,000 units, down 16% year-over-year. Year-over-year, changes in fourth quarter unit sell-through by geography were: Asia-Pacific decreased 28%, EMEA decreased 17% and Americas decreased 10%. The year-over-year sell-through decreases in all regions were primarily driven by consumer-related macroeconomic issues and competition. Looking at fourth quarter revenue by geography year-over-year, Asia-Pacific decreased by 48%, EMEA decreased by 39% and Americas decreased by 18%. On an annual basis, revenue from Asia-Pacific decreased by 33%, Americas decreased by 19% and EMEA decreased by 11%. Gross margin of 35.1% in the fourth quarter of 2024 was impacted by a stronger U.S. dollar by 80-bps, which would have translated to 35.9% had the U.S. dollar not strengthened during the quarter. This compares to 34.4% in the prior year quarter. For full year 2024, gross margin was 34.1% compared to 32.4% in the prior year, a 170-bps improvement. The annual improvement in gross margin was primarily due to an increase in high margin subscription and service revenue and improvement in operating cost efficiencies, partially offset by an increase in promotional activity. In Q4, we grew our subscriber base 1% year-over-year to 2.52 million. Importantly, we continued to drive our subscriber base across all camera price points. Our overall fourth quarter subscription attach rate improved 16% from cameras sold across all channels to 34%, up from 29% in the prior year quarter, with notable overperformance on GoPro.com. Additionally, the subscription attach rate on GoPro.com for our entry-level cameras remained consistent at 25%. Our overall subscription attach rate is calculated from cameras purchased through both GoPro.com and at retail and represents the number of new GoPro subscribers in the period over the corresponding number of estimated camera units sold through both GoPro.com and retail channels. As a reminder, we focus on driving annual versus monthly subscriptions and are pleased that our annual subscribers account for 91% of our total, slightly up from 90% in the prior year quarter. Our aggregate retention rate for annual subscribers was a record 69%, up from 67% a year ago, a 2% improvement. Our annual subscriber retention rates for the first, second and third-year renewals continue to be approximately 60%, 70% and 80%, respectively. And our annual subscriber retention rate for fourth-year renewals is nearly 90%. Our aggregate retention rate for annual subscribers represents the percent of annual subscribers that renewed their subscription in the period, over the total corresponding renewal events. Turning to expenses, fourth quarter operating expenses decreased 13% year-over-year to $86 million. For the full year 2024, operating expenses decreased 2% to $354 million. The decreases were primarily due to restructuring actions resulting in reduced employee related costs, partially offset by investments in research and development to support our hardware, software and subscription roadmap. GAAP and non-GAAP tax benefit was $2.4 million and $3.2 million, respectively, in the fourth quarter and GAAP and non-GAAP tax expense was $299 million and $290 million, respectively, for the year. Fourth quarter GAAP net loss per share was $(0.24) and $(0.09) on a non-GAAP basis. 2024 GAAP net loss per share was $(2.82) and $(2.42) on a non-GAAP basis. GAAP and non-GAAP net loss per share for 2024 were impacted by the establishment of a $295 million valuation allowance on our U.S. deferred tax assets that was recorded in the first quarter of 2024. Adjusted EBITDA was negative $14 million in the quarter and negative $72 million for the year. Turning to the balance sheet, we ended the quarter with $103 million in cash, cash equivalents and marketable securities, which was down $27 million sequentially primarily due to adjusted EBITDA of negative $14 million, restructuring expenses of $17 million, and working capital changes of $3 million. Fourth quarter cash net of debt was $9 million. For the full year 2024, cash decreased $144 million primarily due to adjusted EBITDA of negative $72 million, working capital changes of $30 million, restructuring expenses of $23 million, the acquisition of Forcite Helmet Systems for $12 million and other operating and investing activities of $6 million. We ended the fourth quarter with inventory of $121 million, down 22% sequentially, and inventory days were 83, up from 49 days a year ago. Accounts receivable decreased $47 million sequentially or 35%. Our days' sales outstanding was 39 days, up from 28 days a year ago. Headcount ended at 696 full-time employees, down 25% from the prior year of 930. Outlook As we previously noted, we continue to expect units and revenue in 2025 to be lower than 2024, primarily driven by macroeconomic headwinds, Fx due to a stronger US dollar, competition and the delay of our new 360-camera. That said, we have undertaken several initiatives in 2024 to put us back on a path to long-term success. Notably, this includes our plan to reduce operating expenses nearly 30% from 2024 and honing our roadmap to drive not only faster time-to-market but also more efficiency in how we design our products. Additionally, our focus on operational efficiencies to drive down costs and expand our supply chain outside of China is expected to improve gross margin by more than 100-bps in 2025 over 2024 and nearly 300-bps over 2023. And finally, we are actively managing the balance sheet to further reduce inventory to be consistently well below $100 million to preserve cash and operate more efficiently with working capital. First Quarter 2025 Guidance For the first quarter of 2025, we expect to deliver revenue of $125 million +/- $10 million, down 20% year-over-year. We estimate Street ASP in the first quarter to be approximately $365, down year-over-year from $395. We expect unit sell-through to be down 20% year-over-year to approximately 430,000 units and channel inventory to reduce by approximately 60,000 units, sequentially. 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