GoPro Q4 2024 Earnings Call Transcript

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February 6, 2025
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Operator

I'd now like to pass the call over to Robin Stecker.

Operator

Please go ahead.

Robin Stoecker
Robin Stoecker
Director of Corporate Communications at GoPro

Thank you, Cole. Good afternoon, and welcome to GoPro's fourth quarter and full year twenty twenty four earnings conference call. With me today are GoPro's CEO, Nicholas Woodman and CFO and CFO, Brian McGee. Today's agenda will include brief commentary from Nick and Brian followed by Q and A. For detailed information about our fourth quarter and full year twenty twenty four performance as well as outlook, please read our Q4 and full year earnings press release and management commentary we've posted to the Investor Relations section of GoPro's website.

Robin Stoecker
Robin Stoecker
Director of Corporate Communications at GoPro

Before I pass the call to Nick, I'd like to remind everybody 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 ks for the year ended 12/31/2023, which is on file with the Securities and Exchange Commission and other reports that we may file from time to time with the SEC.

Robin Stoecker
Robin Stoecker
Director of Corporate Communications at GoPro

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
Nicholas Woodman
Chief Executive Officer and Chairman at GoPro

Thanks, Robin, and thanks everybody for joining us today. As Robin mentioned, Brian and I will share brief remarks before going into Q and A. And I want to encourage all on the call to read the detailed management commentary we posted on our Investor Relations website. I'd like to start the call by addressing recent U. S.

Nicholas Woodman
Nicholas Woodman
Chief Executive Officer and Chairman at GoPro

Tariff announcements on inbound 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.

Nicholas Woodman
Nicholas Woodman
Chief Executive Officer and Chairman at GoPro

GoPro's Q4 results landed largely in line or slightly better than our guidance. During the quarter, we took action to right size operating expenses. We're now focused on delivering our twenty twenty five and twenty twenty six 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.

Nicholas Woodman
Nicholas Woodman
Chief Executive Officer and Chairman at GoPro

And our annual retention rates continue to be consistent with what we previously reported, including positive numbers for fourth year renewals of nearly 90%. In 2024, in addition to our flagship HERO 13 Black, we introduced an entry level product, an exciting tiny four ks 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 four:three aspect ratio for video capture along with a SuperView digital lens setting in the app, which combined to enable an immersive, it feels like you're there, point of view perspective during any activity. The immersive capture our engineering teams have enabled in this tiny entry level GoPro is staggering.

Nicholas Woodman
Nicholas Woodman
Chief Executive Officer and Chairman at GoPro

We expect sales to grow over time as we continue to champion its capabilities with updates. And it goes without saying that we're excited to grow our presence in the three sixty degree camera market, a market we pioneered and led for several years with category defining IP and products. As we've shared, the three sixty degree camera market represents a robust growth segment in the broader digital imaging category. And it's an understatement to say that we're excited about the opportunity to grow our share in this important market. Recent and upcoming events related to the three sixty degree camera market include our recent release of a powerful, totally new and enhanced three sixty degree editing experience in the Quick App, complete with impressive subject tracking, intuitive keyframe based reframing and more.

Nicholas Woodman
Nicholas Woodman
Chief Executive Officer and Chairman at GoPro

And later this month, we'll begin selling a refreshed Max three sixty degree camera to serve as an entry level three sixty SKU ahead of the highly anticipated availability of our Max2 three sixty camera later this year. And of course, Max will be compatible with all the new aforementioned features in the updated Quick 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 three sixty camera market and position Max2 as the world's most impressive three sixty camera. Innovation can be hard and we're proud of our engineers who've stayed committed to making Max II into something truly special. We cannot wait to launch it later this year.

Nicholas Woodman
Nicholas Woodman
Chief Executive Officer and Chairman at GoPro

Further on the innovation front, I'm excited to share that 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 revenues to be lower than 2024, primarily driven by macroeconomic headwinds, competition and the previously mentioned delay of our new Max two three sixty camera that we intend to launch later this year 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.

Nicholas Woodman
Nicholas Woodman
Chief Executive Officer and Chairman at GoPro

We plan to do this through a broader, more diversified and innovative roadmap that we believe will expand our TAM and further establish GoPro as a market leading innovator, while restoring 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. With that, I'll turn the call over to Brian.

Brian McGee
Brian McGee
Executive VP, CFO & COO at GoPro

Thanks, Nick. In the fourth quarter of twenty twenty four, revenue was in line with guidance of $2.00 $1,000,000 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 nine percent year over year primarily from 8% ARPU growth as a result of continued improving aggregate retention rate 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 more than 170,000 camera unit decrease in channel inventory. Additional performance highlights for the fourth quarter include subscribers grew 1% year over year to 2,520,000 including 70,000 premium plus subscribers.

Brian McGee
Brian McGee
Executive VP, CFO & COO at GoPro

Subscription attach rate from cameras sold across all channels was 34% compared to 29% in Q4 twenty twenty three, a 16% improvement. And street ASP was $346 compared to $330 in Q4 twenty twenty three. Notable performance highlights for the year include subscription and service revenue grew 10% year over year to $107,000,000 primarily from again improving aggregate retention rates and subscription gross margin exceeded 70%. Retail revenue was 75% of total revenue at $6.00 $1,000,000 down 15% year over year. GoPro.com product revenue was 12% of total revenue at $94,000,000 down 54% year over year.

Brian McGee
Brian McGee
Executive VP, CFO & COO at GoPro

Street ASP was $330,000,000 compared to $337,000,000 in 2023. Operating loss was $80,000,000 compared to an operating loss of $34,000,000 in 2023. And finally sell through was 2,500,000 units down 13% year over year. As we look at the 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 U. S.

Brian McGee
Brian McGee
Executive VP, CFO & COO at GoPro

Dollar competition and the delay of our new three sixty 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 and 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 basis points in 2025 over 2024 and nearly 300 basis points improved over 2023. And finally, we are actively managing the balance sheet to further reduce inventory to be consistently well below $100,000,000 to preserve cash and operate more efficiently with our working capital.

Brian McGee
Brian McGee
Executive VP, CFO & COO at GoPro

For the first quarter of twenty twenty five, we expect to deliver revenue of $125,000,000 dollars plus and minus $10,000,000 down 20% year over year. We estimate three Day SP in the first quarter to be approximately $365 down year over year from $3.95 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. We expect gross margin in the first quarter to be 35% at the midpoint of guidance, up slightly versus the prior year quarter. We expect first quarter twenty twenty five operating expenses to be approximately $63,000,000 plus or minus 2,000,000 a 24% reduction from the prior year quarter due to lower spending on wages from lower headcount, reduced marketing and lower non recurring engineering expenses related to the completion of our new GP3 SoC. Non GAAP tax expense is expected to be $1,000,000 in the first quarter of twenty twenty five.

Brian McGee
Brian McGee
Executive VP, CFO & COO at GoPro

We expect non GAAP loss per share in the first quarter of $0.13 at the midpoint of guidance and expect shares outstanding to be approximately $155,000,000 Tuning to the balance sheet, we expect cash to be approximately $80,000,000 at the end of the first quarter. And now I'll provide commentary on full year some full year 2025. We expect gross margin improvement of more than 100 basis points in 2025 from 2024 based on the following factors. The introduction of our Max II three sixty camera, identified product cost, operating cost as well as further tariff savings due to continued supply chain diversification outside of China and subscription ARPU growth and subscription cost improvement. We expect our full year 2025 operating expenses to be in a range of $250,000,000 to $260,000,000 down $100,000,000 or nearly 30% year over year.

Brian McGee
Brian McGee
Executive VP, CFO & COO at GoPro

Non GAAP tax expense is expected to be $3,000,000 in 2025 and cash tax is expected to be 1,000,000 in 2025. With the anticipated decline in unit sales in 2025 from 2024, our subscriber count is expected to be approximately 2,400,000 at the end of twenty twenty five. We expect subscription and service revenue in 2025 to be approximately $105,000,000 The continued improvement in aggregate retention rate is driving improved ARPU which is softening the revenue decline due to the slight decrease in subscribers. Turning to the balance sheet, we expect cash at the end of the year to be approximately $50,000,000 which anticipates the repayment of our convertible debt. In addition, we have a $50,000,000 asset back line or ABL facility available.

Brian McGee
Brian McGee
Executive VP, CFO & COO at GoPro

We believe our cash position along with our ABL facility will be sufficient to fund our plan. In summary, in 2024, we undertook several initiatives to reduce operating expenses, improve gross margin, refine our product roadmap for improved diversification in 2025 and 2026 and implement efficiencies in our approach to product development. We are focused on launching new products while preserving cash to repay our debt in 2025 and launching a significant number of new products in 2026 to restore growth and profitability to our business. Finally, we look forward to seeing many of you at the upcoming Morgan Stanley Technology, Media and Telecom Conference on March 5. Operator, with that, we are now ready to take questions.

Operator

Questions. We have a question from Eric Woodring with Morgan Stanley. Your line is now open.

Erik Woodring
Erik Woodring
Managing Director - Equity Research at Morgan Stanley

Great. Thank you so much for taking my question, guys. I apologize, I'm hopping between calls. But maybe I guess it's for you, Brian. I think I heard you guide to subscribers in the next year of I think it's $2,400,000 which would be down year over year.

Erik Woodring
Erik Woodring
Managing Director - Equity Research at Morgan Stanley

I realize units will be down, but your commentary at least that I caught on renewal rates was sounded very bullish. And so can you just help us understand the moving pieces for how you get to subscriber declines in 2025, please? And then I have a quick follow-up.

Brian McGee
Brian McGee
Executive VP, CFO & COO at GoPro

Sure. Well, we said units would be down. And so our tax rate for the full year is about 42%. We're assuming 38 to 40% on that front. And we do continue to see aggregate retention improve.

Brian McGee
Brian McGee
Executive VP, CFO & COO at GoPro

And so that results in about an improvement in ARPU. So that's helping to counterbalance the reduction in units and therefore you get about $105,000,000 of revenue and about $2,400,000 less than or $2,400,000 so it's down about $120,000

Erik Woodring
Erik Woodring
Managing Director - Equity Research at Morgan Stanley

Okay, perfect. Thank you

Erik Woodring
Erik Woodring
Managing Director - Equity Research at Morgan Stanley

for that. And then Brian, maybe just a follow-up. You provide obviously a handful of details on 2025 gross margin, OpEx, taxes. I realize that 2025 revenue will decline. Is there any more kind of concrete guidance that you can provide us to for how we should be thinking about 2025, the revenue base you're considering for that base of OpEx?

Erik Woodring
Erik Woodring
Managing Director - Equity Research at Morgan Stanley

Just anything that can help us kind of maybe narrow down expectations into 2025? And that's it for me. Thanks so much.

Brian McGee
Brian McGee
Executive VP, CFO & COO at GoPro

Yes, sure. We're going to guide quarter to quarter, Eric. It's a long year to go. We feel good about products we have, the products that are coming out, but there's headwinds with consumer competition and FX, right, which has impacted us a lot. I mean FX from 2021 into twenty twenty two, three and four has impacted us about $50,000,000 on the top line margin and bottom line.

Brian McGee
Brian McGee
Executive VP, CFO & COO at GoPro

So now we got to worry about where the dollar is going as well. So it's but we said it would be down, not going to give a precise number. The good news is we think we've got good margin going here at 35% and some really good cost reduction. Clearly, the subscription and service is helping us from a margin perspective. We expect that to continue.

Brian McGee
Brian McGee
Executive VP, CFO & COO at GoPro

I mean, since 2023, it's probably about a 200 basis points to two fifty basis point improvement in margin right there along with another 100 and something basis points of other costs like freight, tariffs and warranty as we have much better product experience for our customers. So all those things combined to make 35%, but we're not going to guide the top line right now for 2025.

Erik Woodring
Erik Woodring
Managing Director - Equity Research at Morgan Stanley

Okay. Understood. Thank you so much. Sorry, Ron. Sorry.

Nicholas Woodman
Nicholas Woodman
Chief Executive Officer and Chairman at GoPro

I'd just like to add one more point on subscription. While we expect it to be down in 2024, we sorry, in 2025, We expect to grow subscription again in 2026 with the launch of a slew of exciting new products that are going to broaden our portfolio considerably. So that's a bright spot to look forward to in 2026.

Erik Woodring
Erik Woodring
Managing Director - Equity Research at Morgan Stanley

Thank you very much, Nick.

Nicholas Woodman
Nicholas Woodman
Chief Executive Officer and Chairman at GoPro

Thank you.

Operator

Our next question is from Martin Yang with Oppenheimer. Your line is now open.

Martin Yang
Senior Analyst at Oppenheimer & Co. Inc.

Hi. Thank you for taking my question. First question on Max. And curious to hear your decision to reintroduce the MAX one back into the market and any context you can provide on that decision and how whether that model will be margin accretive for you?

Nicholas Woodman
Nicholas Woodman
Chief Executive Officer and Chairman at GoPro

Thanks, Martin. Yes, we had cleared the channel of Max in anticipation of Max2. And as we shared the delay of Max2, caused some complications for the business. And so we determined that and we identified that there's a market for Max. It's a slightly refreshed product along with the significant software enhancements that we just launched recently as a free update to the GoPro Quick app, the overall three sixty experience is much enhanced.

Nicholas Woodman
Nicholas Woodman
Chief Executive Officer and Chairman at GoPro

So we're super excited to get Max back out into the marketplace here later this month. And then that's going to serve as a terrific entry level three sixty product paving the way for momentum towards the launch of Max too. So it was a pretty easy decision to go and essentially refresh the product and bring it back into the market as an entry level experience, again bolstered by the new and enhanced software experience that we just recently launched and that we'll be building on throughout the year. So I'm happy to let GoPro three sixty camera owners know that the software experience will continue to expand over the course of the year. So look forward to that.

Nicholas Woodman
Nicholas Woodman
Chief Executive Officer and Chairman at GoPro

And on the margin front, I'll hand it over to Brian.

Brian McGee
Brian McGee
Executive VP, CFO & COO at GoPro

Yes, Martin, it's absolutely margin accretive, more on dollars than necessarily percentage, but the percentage is built into our model of 35% for the year.

Martin Yang
Senior Analyst at Oppenheimer & Co. Inc.

Got it. Thank you. And then the second question is on new products this year. So we have Max2 coming up later. And then you referenced GP3 development updates.

Martin Yang
Senior Analyst at Oppenheimer & Co. Inc.

Do we expect GP3 to be or GP3 enabled camera to be out this year?

Nicholas Woodman
Nicholas Woodman
Chief Executive Officer and Chairman at GoPro

Yes. Martin, I wish that we could be more transparent with our roadmap, but just due to competition, we're going to have to be a bit more opaque than we have in the past as it relates to upcoming product releases. So we're not going to be able to provide any information on that. I apologize.

Martin Yang
Senior Analyst at Oppenheimer & Co. Inc.

Got it. No problem. Last question for me is on overall subscription trend. Is there any way when you look at overall long term growth or subscription, do you still view our sales as a primary driver of subscription revenue? Is there any other levers you can pull to boost subscription revenue growth or that return of growth?

Brian McGee
Brian McGee
Executive VP, CFO & COO at GoPro

Yes. Hi, Brian. You want to start?

Nicholas Woodman
Nicholas Woodman
Chief Executive Officer and Chairman at GoPro

Yes, Brian. Yes, I'll just start with one thing. It is tied to historically, it's been tied to hardware, But we are identifying opportunities to create new software experiences that we think will lead to not only added engagement within our existing subscriber community, but also help improve conversion rates amongst buyers. So we've identified a number of opportunities that we'll address over time to expand the functionality and relevance of our hardware products to serve more use cases, more customer groups and more ways through software that we think can have an accretive impact on subscription over time. In addition to selling more units which is the primary driver of subscription.

Nicholas Woodman
Nicholas Woodman
Chief Executive Officer and Chairman at GoPro

But we think we can improve on that and expand beyond just hardware sales through software as a service as a driver of subscription as well.

Brian McGee
Brian McGee
Executive VP, CFO & COO at GoPro

I think I have more to add on that. Well, I mean the other thing that I'll add Martin is we've continued to improve aggregate retention rates like year one is 60%, year 270%, then 80% and now nearly 90% in year 4%. So the longer subscribers stay in the program, the more likely they are to stay engaged and come back in. And that's what's helping to drive ARPU up year after year. So that's exciting.

Brian McGee
Brian McGee
Executive VP, CFO & COO at GoPro

And as we as Nick mentioned, we return to subscription growth, we believe in 2026. And so that has the additional benefit of keeping more people in longer, adding more service capability that enhances the value proposition for this, which will then fuel aggregate retention. So that both are important, right? That drives ultimately drives ARPU and revenue growth and margin.

Martin Yang
Senior Analyst at Oppenheimer & Co. Inc.

Got it. Thank you, Brian. That's it for me.

Operator

We have no further questions at this time. So I'll pass the call back to the management team for any final remarks.

Nicholas Woodman
Nicholas Woodman
Chief Executive Officer and Chairman at GoPro

Thank you, operator, and thank you, everyone, for joining today's call. We believe we're positioned to return to unit revenue growth along with improved profitability in 2026 as we plan to introduce a broader, more diversified and innovative roadmap that we believe will expand our TAM and further establish GoPro as a market leading innovator. Thanks, everyone. This is team GoPro signing off.

Operator

That concludes today's call. Thank you all for your participation. You may now disconnect your line.

Executives
    • Robin Stoecker
      Robin Stoecker
      Director of Corporate Communications
    • Nicholas Woodman
      Nicholas Woodman
      Chief Executive Officer and Chairman
    • Brian McGee
      Brian McGee
      Executive VP, CFO & COO
Analysts
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