Q2 2021 GoPro Inc Earnings Call
Any detailed financial data and metrics for the second quarter of 2021.
The management commentary implies as well as the link for today's live webcast and a replay of this conference call are posted on the Gopro Investor Relations website for your reference.
All income statement related numbers that are discussed today during the call.
Other than revenue are non-GAAP, unless otherwise noted.
Now I'll turn the call over to Gopro is founder and CEO Nicholas Woodman.
Thanks, Chris and good afternoon, everyone Gopro.
Gopro had a very strong Q2, our fourth consecutive profitable quarter on a non-GAAP basis, we grew revenue improved margins and increased cash thanks to our expanding direct to consumer subscription businesses.
Q2 also benefited from our strong retail relationships, which drove substantial unit sell through as the world continues to find its way through the pandemic.
Revenue in the second quarter increased 86% year over year to $250 million.
Direct to consumer revenue from Gopro Dot com totaled $88 million.
Up 48% year over year and up 7% sequentially.
And Gopro was profitable on both the GAAP and non-GAAP basis in the second quarter generating EPS of 10, and 12, respectively with margins increasing to 40% and operating profit improving by $47 million year over year.
Our subscription businesses continued to impress with gopro subscribers growing 211% year over year, and 23% sequentially to $1.1.6 million subscribers and subscriber revenue grew 143% year over year.
And while it's still early days, we're excited to share that as of this report the quik App has exceeded 100000 paying subscribers.
Millstone reached nearly half the time it took us to achieve the same number of gopro subscribers.
Our Q2 results reflect not only the strength of our strategy, but also the strength of our people.
By embracing a flexible work culture, the champions of our employees desire to live and work from wherever they feel most productive we've been able to thrive over the last year and a half.
We're excited to continue supporting our employees and their pursuit of the ultimate life work balance.
And the approach we've seen consistently yield strong business results.
As a result of our better than expected Q2 momentum.
We are raising our revenue margin and earnings outlook for the second half and.
In 2021.
As outlined in our management commentary.
Please be sure to visit our Investor Relations page of Gopro Dot com and give it a read.
Brian and I will now take questions.
Thank you and everyone to ask a question. Please press Star then 1 on your telephone keypad. Please note the Carolina speaker phone to pick up your handset or de press your mute function until all of that day and they want to reach our system.
Again that is star 1 to ask a question and we'll go first to of Paul <unk> of J P. Morgan.
Yeah.
Hi, Thanks for taking my questions and great quarter. So.
Just Brian on your on your cash guide for <unk>.
Yeah, we'll have obviously plenty of cash to do that and then we can also look at.
The other option for shareholder return.
That's true.
And then on revenues you know you're nearly at 2019 levels.
With maybe 1 million fewer cameras, so nice mix to kind of higher ASP.
Products is working out pretty great and also of that shifting the pro dot com.
So and I mean, maybe you can argue that you're still feeling the kind of paint on the impact on sales.
So.
Question really is do you think you can get back to that 4 million plus units per year for this kind of the.
The new normal just on here your thoughts there.
No I don't think it's the new normal and I know, you're comparing to 2019, but even comparing the 2015 for ships.
A lot of units and has much more of about 30% more kind of revenue than.
What's on our guidance.
Our operating profit is much higher sort.
We've been able to move the market to the high end of.
Of a product line, that's where we make more money.
We're driving more to direct to consumer and clearly for subscription.
We look ahead would be about $90 million.
Plus of annual recurring revenue of 70 to 80 points of margin.
That's what's driving the business, it's not always about tonnage now for what we're spending on a commentary on just given what's happened with.
Supply and particularly on semiconductors and shortages.
The relevance of of Gopro camera to more people and the the I E. P. I effort enables third party companies to more easily and seamlessly integrate uhm gopro into their own product offering their own service on.
Offering and the using our products as of the important utility. That's just you know strategically sound because the more of that we are are used as our products are used as tools by other companies, reaching other customers. Obviously, there's a wonderful network effect that comes from that.
In terms of what it can represent from the Gulf growth perspective, I think that's the wait and see I think it at a minimum it fortifies better for defies our position as the market leader and gives us the potential for you know some breakout growth opportunities.
And it's always nice to to be included in and other businesses marketing efforts and product development efforts because it just helps scale of the reach of our brand and and the perceived utility of our products. So it's a great thing, but in terms of you know how it's going to contribute.
I think that that's a wait and see but but even if it's only you know contributing in the ways that I mentioned, that's still terrific for the business.
Alright, thank you.
And now we will move to my Yang from the Oppenheimer.
Hi, Brian and neck. Thank.
Thank you for taking the question. The first question on the guidance hugging accounts for any potential risk for I extend the shutdown globally you know of.
<unk> in other words do you assume of major re opening later in the mid your.
Ah recently day guidance.
Yeah, I have Martin that's Brian no. We've we've been consistent on that worse.
So compelling and utility.
Is the part of that and being more versatile for the the the needs of today's consumer is streaming more has a greater need for webcam usage. In addition to.
All of the traditional ways that people use of Gopro interactive lifestyle. So I'd say more of the the the the the same but building upon that proven strategy that has has been going quite well for us over the past few years as it relates to new product launches and yes, I can confirm there will be new products from go for this year.
<unk> on the left crushing his around 2 of <unk>, we talk to the real close the subscriber base so coming into this holiday season, nothing there will be maybe a larger cohorts.
For my face the choice of whether to the new the subscription can we can talk about your plan to retain the subscribers how do you plan to present to them.
In the plan to treat for you and what whether or not you can't you have additional features the added to the gopro subscription.
I'll take the first part of that and then like of you want to take it right [laughter].
Okay, well I was I was gonna say that where we have a.
Robust roadmap of of adding value to go for a subscription.
With the goal of continually reducing churn and and frankly engaging more consumers by hitting on value proposition for that matter for them.
Kudos to our team for doing a terrific job of engaging with our subscriber base doing ongoing research to understand what are they getting out of it and where are their hiccups and what where are their new opportunities to add more value to continue to sweeten the pot while.
At the same time building Ah Ah Ah a very attractive margin for Gopro and I'm I'm really excited about the future of gopro subscription offering because of the roadmap is is Claire is weighted with very easy to comprehend value that I think is going to just continue.
I need to build upon the the very positive momentum that we're seeing and that's momentum. That's the date, resulting in very impressive annual Ah retention and renewal rates amongst the annual subscribers that we do have and for that.
<unk> cohort is it's showing very promising.
The results for the go for the subscription on going and that cohort is behaving very similarly, if not the same and in most respects relative to the the new cohort that Ah, new or or I should say at this point debt.
Became of subscribe of it the purchase of the hero 9 camera. So we're expecting those cohorts to behave quite similarly going forward and Brian at the you want to add anything to that.
Actually I think the difficult to.
I haven't covered the I've just since 1 thing Martin than our of mind here and everyone of you know our subscription business of growing very strongly and we'd rather the kind of thousand subscribers. You know every year, our guidance with imply read out of about a million subscribers and.
The 2021 of of 2020 those are terrific the results and as a reminder of of making 70.80 points of you know margin on that and that's actually 1 of the primary reasons, we were able to improve our margin outlook on our guide so as we look at the second half of the.
2021, and then going into the 20th 22.
So it works out of it about how we're doing how the <unk> going on and ethnic had mentioned.
And the fact that are you know cohorts for annual subscribe of renewal right continue to be very strong.
Well. Thank you for the very detailed the answer and it will send me a couple of write us on how high degree who knew of weight late song.
No we're not gonna get into the number of but we can't say, they're they're very strong they're very good.
Oh.
Great. Thank you so much.
And our next question will come from and make it kind of of his lungs on research.
Hey, guys congrats on the homespun results [noise].
And can you update us on how you see unit sales through for 2021, and the follow up to gag. The streaming you will not facing supply chain component of kind of strange for the kinky unit sales through would've been in the third quarter [laughter].
[noise].
Well actually I don't think we've got we've got some concerns Jack because you should definitely shifted to the high end ethics bent the kind of mid term and loved here, where we just don't make as much money.
For the years fell through is going to be M of $2 for a million.
A million range, maybe 3 of my 5 tickets and that kind of ballpark. So we will continue you know he is to reduce the channel inventory from now to below 500000 units, which is the really important.
Metric because that that's been you know.
The real headwind for the company since the beginning of 2020 of them when we had nearly 1.4 million.
The unit.
In the channel now it's less than 500000, so that becomes more of a towel on for US. So we don't have to drive channel inventory found.
That could be more balance so that's the the approach of we've taken in and it's proving out I think on the business I understand that reflected on margin.
And now we will go to a gym it seems that a secret.
Thank you for making Brian first I Wanna say really congratulations on making such a pivot point in the company and then turning it for subscriptions and reoccurring subscribers and such is truly remarkable and I sincerely mean that.
It's kind of funny here, we sit in August and I'm going to ask a question about Christmas with the supply constraints and things and I'm, just wondering how you're feeling kind of of about the Christmas season cause it seems like the component shortages are percolating everywhere on the economy of artwork going with and I think Brian even mentioned it in his prepared comments, which are read ahead of the.
This you know a lot of times designs need to be tested in beta type before you can put in mass mass orders for production. So any thoughts you can give us around kind of the newer variables that that's coming into the supply chain now in your thoughts around Christmas in queue for which is important for the company.
Yeah, Hi, Janice, Brian let me check that.
As I sit on prepared remarks, you're right part of it.
<unk> of continuous had been a challenge not just for us with the industrial problem. You know we've got on this about a year ago and it's been a very good job of forecasting where are we gonna be what product we needed.
And got in front of the suppliers on that so that's really helped us tremendously we have that visibility more probably earlier and that's really helped helped us from our forecast and supply chain perspective.
That is still you know toxic tertiary the out there, but we also Gregory Scott supply.
We need to make the number can you just have outlined on the call and then on management commentary for the year. So we feel very good about Q3, as well as queue for and the holiday season.
Okay, and then of follow up as you mentioned in your prepared comments that I read that you're shifting any allocations to more higher end products, which is constantly the the right thing to do and I believe your average selling price guidance is about $5 higher for the Q3 outlook compared to the queue.
2 results if I'm right on that and I'm, just kind of wondering if you're shifting more of a higher and is it possible, we could see a bigger increase than $5 quarter over quarter or there's some variables that I just need to be reminded up.
For your users on the quick App or move the old click users on to the new quick App and keep them engaged and then I have a follow up.
[noise]. Thanks.
Cross the board.
And in terms of what they are using the.
The editing side of the App is very strong in terms of engagement.
Which is great to see because that's definitely an area, where we can continue to innovate and differentiate.
Going forward.
And an exciting aspect about where we're at now with the quick App is that.
You know we were in development of it for quite some time and for sure. We're doing consumer research and gauging what consumers are going to gravitate towards an running usability tests and so forth, but you don't really get a true sense.
Of how people are gonna use the app until.
When you get it out into the wild and now that the quick App is in the wild with such a significant number of users we're getting tremendous feedback as to areas, where we can improve.
The features that users want to see more than others, which is helping the prioritize and with the you know of ballpark every 2 to 3 weeks cadence of release for for for new updates of the App or the able to continue with all of the.
<unk> in a way that uhm can meaningfully impact a subscriber conversion and retention rates. So that'd be it's gonna be fun to see over the course of the the rest of the year how much the app is going to evolve and any changes you see you can be sure are coming directly.
Lee from user feedback, which we think is going to have a very material impact on our subscriber growth rate in a positive way.
Okay. That's really helpful. Thank you I guess, maybe my my follow up question would just be about around D. T. C. Mixing so first half of the year of your training at around 37, and a half per cent of of revenue coming D. T. C. You know you're so diving to 40 to 45 per cent. So maybe what gives you confidence that you are.
Going to increase in direct to consumer mix in the second half of the year and then you know maybe the the the add on to that would just be do you plan to change any of your go to the market strategies in the second half of their views of the perhaps not selling the flagship camera at your channel partners just true.
Thank you so much.
Yeah higher Brian.
Check the first part of moving that can I add on to the second and I've prepared remarks, we did sort of that we we expect do the.
<unk> to be well within the 4 day to 45 per cent for the year, a little bit less than 40 per cent and Q3, that's largely due to just putting you.
You know of products into the channel internationally right.
But the.
The little bit of a mix of.
And then being more towards the higher end of the afforded of 45 per cent range and keep for and the.
Minder of the.
You know of seasonality queue for is obviously substantially bigger than a Q3 and Q2, so that mix shifting up into the higher and you know there's an X factor that comes on top of it which kind of get the sense of that but range if that helps.
Yeah, and then in terms of you know any modification of go to market strategy distribution strategy for the way I characterize it is.
That we're building upon a.
Proven strategy, so there'll be little puts and takes here that are opportunistic and we think will Nina materially contributed to our success on the fourth quarter.
But whereas last year was an enormous amount of change.
With the associated risks on.
And it it it all went to the positive that was terrific. This year is you know no no big [laughter] no big moves that would introduce any risks of the business Ah and then any changes that you see are are often opportunistic so the benefit of being.
1 year into the strategy learning, where there's opportunities to improve and excel and we'll be taking advantage of those.
Awesome. Thank you and then maybe if I could just make it of last 1 you know the language slightly changed for your subscribers at year end from approaching 2 million 2 exceeding 1.7 I'm just curious how many thoughts there of by the change of the language, but love to get your thoughts, but otherwise congrats on the corner again. Thanks.
Yeah, I think they're kind of you know, we surpassed 1 million for subscribers in queue to an added 800000 subscribers.
You too of Alaska, So massive gross 211 per cent, which is great.
The halfway through the year and half maybe better the line of sight and we expect to succeed.
She wanted to exceed 1.7 million subscribers by the end of the year on you know a person of the 2 million a milestone that we've been talking about so I think it's an important milestone that means we would expect to have in a recurring revenue subscription revenue at the start of 22.
In about 90 million I'm very high margin. So you know I found out about that and then maybe a little bit more kind of definitive too and where we think we are for the year and looking ahead and the 2022, which.
Continues to be strong and and are out of luck. Even on margin continues at the strong partly on the strength of subscription but also in the mix of both what we're selling and the channels of selling them for that.
Awesome, that's really helpful. Thank you guys.
And with that that does come for today's question and answer session and we'd like to turn the call back on <unk> for closing remarks.
Oh, sorry about that I was.
Muted.
Well, thank you everybody.
You know Q2 was outstanding.
Are people products and strategy are coming together on a powerful way and we're excited to see our strategy delivering on its potential and what it can mean for gopro going forward the.
Big things.
So thank you everyone for joining today's call. This is team gopro signing off.
[noise] panic on everyone that asks them for today's caller. Thank the thank you again for your participation you may now disconnect.
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