Q3 2023 GoPro Inc Earnings Call
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Hello, everybody and welcome to the third quarter 'twenty to 'twenty three earnings Conference call. My name is Sam and I'll be coordinating your call today.
everybody and welcome to the GoPro 3rd Quarters 2023 at Linge Conference call. My name is Sam and I'll be coordinating your call today.
If you'd like to ask a question during the presentation, you may do so by pressing star followed by one on your telephone.
Like to ask a question during the presentation you may do so by Christmas stuff like by one on your telephone keypad.
I will now hand you over to your host, Christopher Clark, VP or corporate communications to begin. So Christopher, please go ahead.
Now how do you over to your host Christopher Clark VP of corporate communications to begin so Christopher Please go ahead.
Thank you Sam good afternoon, everyone and welcome to <unk> third quarter 2023 earnings Conference call with me today are Gopro, CEO, Nicholas Woodman, and CFO and C O O Brian Mcgee.
and welcome to GoPro's third quarter 2023 earnings conference call. With me today, our GoPro's CEO , Nicholas Woodman, and CFO and COO Brian McGee.
Today's agenda will include commentary from Nick and Brian , followed by Q&A. For detailed information about our third quarter, 2023 performance and our outlook, please read our Q323 press earnings press release and the management commentary we've posted to the Investor Relations section of GoPro's website.
Today's agenda will include commentary from Nick and Brian followed by Q&A.
Detailed information about our third quarter 2023 performance and our outlook. Please read our Q3 23 press earnings press release, and the management commentary, we've posted to the Investor Relations section of <unk> 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 the actual results to different materials.
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.
Not guarantees of future performance and are subject to a number of risks and uncertainties, which may cause the actual results to differ materially.
Additionally, any forward looking statements made today are based on assumptions as of today.
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.
It 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 10K for the year and December 31st, 2022, which is on file with the Securities and Exchange Commission and other reports that we may file from time to time with the SEC.
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, 2022, which is on file with the Securities and Exchange Commission.
And other reports that we may file from time to time with the SEC.
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.
Today we may discuss growth margin, operating expense, net profit and loss adjusted evita, as well as basic and deluded net profit and loss per share and accordance with gap and on and on gap base.
A reconciliation of gap to non-gap operating expenses can be found in the press release that would issue this afternoon, which is posted on the Investor Relations section of our website.
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-guess.
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 Wood.
Now I'll turn the call over to Gopro is founder and CEO Nicholas Woodman.
Thanks Chris and thanks everybody for joining us today. I'm excited to share the positive progress we're making against the growth and TAM expansion strategy we initiated in May 2023.
Thanks, Chris and thanks, everybody for joining us today.
I'm excited to share the positive progress, we're making against the growth and Tam expansion strategy, we initiated in May 2023.
We believe we'll drive meaningful revenue subscriber and profit growth over the next two years
Our strategy, we believe will drive meaningful revenue subscriber and traffic growth over the next two years.
As a reminder, this strategy included and returned to lower pre pandemic pricing to drive unit sales.
As a reminder, this strategy included a return to lower pre-pandemic pricing to drive unit sales, the reintroduction of entry-level price GoPro cameras to reach new customers, increased marketing.
The reintroduction of entry level price gopro cameras to reach new customers increased.
Increased marketing to drive awareness.
Expanding GoPro's global retail channel presence to better serve consumers post pandemic shopping.
Expanding gopro global retail channel presence to better serve consumers post pandemic shopping behavior.
In Q3 2023.
in Q3 2023, both revenue and non-gap earnings per share exceeded the midpoint of our guide.
Both revenue and non-GAAP earnings per share exceeded the midpoint of our guidance.
Revenue was 294 million, and non-gap earnings per share was 4 cents. And we ended the quarter on target with 2.5 million subscribers.
Revenue was $294 million and non-GAAP earnings per share was four cents and we ended the quarter on target with $2 5 million subscribers.
In September , we launched our new $399 flagship camera, Hero 12 Black, loaded with powerful new features for both professional and casual users, and further establishing GoPro as the performance and value benchmark for our industry.
In September we launched our new $399 flagship camera hero 12, black loaded with powerful new features for both professional and casual users and further establishing gopro as the performance and value benchmark for our industry.
As I mentioned revenue for the quarter was ahead of guidance.
This was a result of Hero 12 Black and our entry-level price point cameras both exceeding our expectations.
This was a result of hero 12, black and our entry level price point cameras, both exceeding our expectations.
Our entry-level SKUs generated 19% of camera revenue, demonstrating their tam expanding potential without cannibalizing our high-end SKUs.
Our entry level Skus generated 19% of camera revenue demonstrating their tam expanding potential without cannibalizing our high end skus.
Third quarter 2023, retail channel revenue grew 12% year over year to $231 million.
Third quarter, 2023, VTail Channel revenue grew 12% year over year to 231 million, or 78%
Or 78% of total revenue.
Total camera unit sales grew 31% sequentially in 16% year over year.
Total camera unit sales grew 31% sequentially and 16% year over year.
Total camera units sold into retail grew 35% and retail sell through grew 29% respectively year over year aided by our <unk>.
Total camera units sold into retail grew 35% and retail sales grew 29% respectively year over year, aided by our renewed focus on growing our retail channel press.
<unk> focus on growing our retail channel presence.
Last quarter we shared a target of adding approximately 2,000 new retail doors globally by the end of 2023 and I'm happy to report that we're tracking ahead of that goal. Having already added 2,500 new retail doors as of today.
Last quarter, we shared a target of adding approximately 2000, new retail doors globally by the end of 2023 and I'm happy to report that we are tracking ahead of that goal, having already added 2500, new retail doors as of today.
Our work with these retailers includes refreshed point of purchase merchandisers improved in store brand presence and enhanced account management to enable premium representation in each retail location.
Our work with these retailers includes refreshed points of purchase merchandisers, improved in-store brand presence, and enhanced account management to enable premium representation in each retail location.
Our 2024 target is to open more than 3,000 additional retail doors globally, bringing our total to approximately 25,000 doors, which would be an increase of more than 30% from when we initiated this growth strategy in May of this year, 2023.
Our 2024 target is to open more than 3000 additional retail doors globally, bringing our total to approximately 25000 doors, which would be an increase of more than 30% from when we initiated this growth strategy in may of this year 2023.
To further leverage our growing retail network, we're going to expand our TAM. Over the next two years, we plan to introduce several new types of cameras, beginning in the second quarter of 2024. We believe each of these new camera skews will address distinct news cases and will be built at improved margin profiles, which we expect to contribute materially to revenue and earnings in 2024 and 2025.
To further leverage our growing retail network and expand our Tam over the next two years, we plan to introduce several new types of cameras beginning in the second quarter of 2024.
We believe each of these new camera Skus will address distinct use cases and will be built at improved margin profiles, which we expect to contribute materially to revenue and earnings in 2024 and 2025.
In addition to scaling our presence at retail, we continue to enhance the shopping experience at GoPro.com where we sell in more than 60 countries.
In addition to scaling our presence at retail we continue to enhance the shopping experience at Gopro Dot com.
We sell in more than 60 countries.
While GoPro.com is a significant direct to consumer sales channel, representing 22% of revenue in Q3, including our subscription revenue, it's also where consumers can learn about our complete end-to-end camera and software ecosystem, which includes our subscription.
While go product cost is a significant direct to consumer sales channel representing 22% of revenue in Q3, including our subscription revenue. It's also where consumers can learn about our complete end to end camera and software ecosystem, which includes our subscription service.
Our subscription service continues to perform as both a high value solution for subscribers and a high margin revenue stream for GoP.
Our subscription service continues to perform as both a high value solution for subscribers and a high margin revenue stream for Gopro.
We finished Q3 on target with 2.5 million subscribers, representing 20% growth year over year.
We finished Q3 on target with $2 5 million subscribers, representing 20% growth year over year.
Subscriber attach and retention rates remained strong and we expect to finish 2023 with between two five and $2 6 million subscribers with additional subscriber growth in 2024.
Subscriber attached and retention rates remain strong. And we expect to finish 2023 with between 2.5 and 2.6 million subscribers with additional subscriber growth in 2024.
As an added benefit for Gopro subscribers. Later this month, we're launching a desktop version of our Quik App for Mac OS at no additional charge.
As an added benefit for GoPro subscribers, later this month, we're launching a desktop version of our quick app for Mac OS at no additional charge.
Quik desktop App will bring the simplicity and convenience of automatic edits to desktop users along with manual editing and media management tools synced editing between mobile and desktop apps.
The ability to import footage from any camera.
We plan to launch a Windows version of the Quick Desktop app in the second quarter of 2024.
We plan to launch a windows version of the Quik desktop App in the second quarter of 2024.
As a part of the quick desktop app launch, we're introducing a new premium plus $99 subscription tier that includes an advanced desktop-based hyper smooth pro video stabilization.
As a part of the Quik desktop App launch, we're introducing a new premium plus $99 subscription tier that includes an advanced desktop based hyper smooth pro video stabilization feature plus.
plus increased cloud storage for footage captured with any cam.
Plus increased cloud storage for footage captured with any camera.
Go for some subscribers at both the original $49 premium tier and the new $99 premium plus tier will continue to enjoy unlimited cloud storage of footage captured with their GoPro at original quality.
Gopro subscribers at both the original $49 premium tier and the new $99 premium plus tier will continue to enjoy unlimited cloud storage of footage captured with their gopro at original quality.
We expect our new quick desktop App to further establish gopro as an exciting end to end content creation solutions for consumers, whether they are just getting started or they are in advanced created.
Our innovative auto editing experience represents a convenient starting point for new creators. And we believe the ongoing investments we're making in AI and computer vision will help maintain GoPro as an innovator in this space.
Our innovative auto editing experience represents a convenient starting point for new creators and we believe the ongoing investments, we're making in AI and computer vision will help maintain gopro as an innovator in this space.
To reinforce <unk> commitment to innovation and engineering excellence, we've recently welcomed Vince Nakayama as <unk>, New senior Vice President of engineering.
To reinforce GoPro's commitment to innovation and engineering excellence, we've recently welcomed Vince Nakayama as GoPro's new senior vice president of engineering.
Vince brings a unique blend of software, hardware, and UX experience to GoPro. Having delivered many unique product and content experiences while holding influential roles at HP, Silicon Graphics, NetApp, Apple, Sony, Amazon, Flex, and Microsoft.
Vince brings a unique blend of software hardware and UX experience to gopro, having delivered many unique product and content experiences while holding influential roles at HP Silicon graphics, net app, Apple, Sony Amazon Flex and Microsoft <unk>.
He's passionate about cameras and cutting edge technologies and we're excited for him to augment our efforts in AI to help our customers enrich their content and discover more utility in the use of their cameras and access.
As passionate about cameras and cutting edge technologies and we're excited for him to augment our efforts in AI to help our customers enrich their content and discover more utility in the use of their cameras and accessories.
On the marketing front, we're making solid progress in driving awareness and visibility for GoPro's brand through increased marketing collaboration with our retail channel partners, as well as expanded athlete and event sponsorships and activations that align with the markets we serve.
On the marketing front, we're making solid progress in driving awareness and visibility for <unk> brand through increased marketing collaboration with our retail channel partners as well as expanded athlete and events sponsorships and activations that align with the markets we serve.
An example of this is the recently expanded slate of Motorsport Series GoPro is now aligned with as the official action camera part.
An example of this is.
Is the recently expanded slate of Motorsport series Gopro is now aligned with as the official action camera partner Moto.
Moto GP FIA Carding World Champs.
Moto GP FIA Carding World Championships.
Hamzaoil Championship Off-Road, Pro-Motocross Championship, Monster Energy Supercross, MXGP, World Supercross, Formula Drift, and Nitro.
Soil Championship off road Pro Motocross Championship.
Energy Super trials, Amex, GP World Super trials Formula drift and Nitro crops.
These partnerships.
These partnerships, along with the many other sponsorships in other verticals we serve, benefit both GoPro and the series themselves through the incredible content we produce together. Content that authentically demonstrates the performance of our products and legitimizes our brand in the sport.
Along with the many other sponsorships and other verticals, we serve benefit both gopro and the series of themselves through the incredible content, we produce together content that authentically demonstrates the performance of our products and legitimate legitimizes our brand in the sport.
We're excited about our future, which would not be possible without our approximately 900 passionate employees. I want to thank them for their commitment.
We're excited about our future, which would not be possible without our approximately 900 passionate employees.
I want to thank them for their commitment to excellence.
We foster a workplace of culture of respect and accountability and approach that yields consistently high employee engagement rates and third party recognition.
We foster a workplace culture of respect and accountability and approach that yields consistently high employee engagement rates.
And third party recognition most.
Most recently, we were recognized by US News and World Report as one of the best places to work. Adding to outside magazines, recognition of GoPro, as one of the 50 best places to work for the past two years.
Most recently, we were recognized by U S News and World report as one of the best places to work, adding to outside magazines recognition of Gopro I was one of the 50 best places to work for the past two years.
We're excited for the upcoming holiday season. Demand is strong. We're making steady progress, expanding our retail network, and we're looking forward to launching new margin-acredip hardware in 2024, while continuing to enhance our software and subscription on.
We're excited for the upcoming holiday season demand is strong, we're making steady progress expanding our retail network and we're looking forward to launching new margin accretive hardware in 2024, while continuing to enhance our software and subscription offerings.
We believe our strategy positions us well for the rest of the year and will yield meaningful unit, revenue, subscriber, and profit growth in 2024 and 2025.
We believe our strategy positions us well for the rest of the year and will yield meaningful unit revenue subscriber and profit growth in 2024 and 2025.
Now I'll pass the call over to Brian to share some color on our Q4 output.
Now I'll pass the call over to Brian to share some color on our.
On our Q4 outlook.
Thanks, Matt.
The third quarter of 2023 represented the first full quarter operating under our growth and term expansion strategy that we implemented in May 2023.
The third quarter of 2023 represented the first full quarter operating under our AR growth and Tam expansion strategy.
So we implemented in May 2023.
I'd like to now frame at a high level, where we are as we evolve our business.
Based on the full year outlook provided today in our written commentary revenue and unit sales for 2023.
Good to be ahead of what we estimated on our Q2 23 earnings call.
We return to year over year unit growth and at the quarter 15%, and expect unit growth to be approximately up 15% year over year in the fourth quarter.
We returned to year over year unit growth in the third quarter at 16%.
And we expect unit growth to be approximately.
Up 15% year over year in the fourth quarter.
We increased door count by 13% since the second quarter. Through October , we are tracking to our estimated 1 million units of cameras from a cell through in the fourth quarter of 2023.
With increased store count by 13% since the second quarter.
Through October we are tracking to our estimated 1 million units.
Camera sell through in the fourth quarter of 2023.
We return to non-gap profitability in the third quarter and expect to be profitable on the non-gap basis in the fourth quarter. These are very positive early signs that are planned to return GoPro to growth and profitability. A work.
We returned to non-GAAP profitability in the third quarter and expect to be profitable on a non-GAAP basis in the fourth quarter.
Three positive early signs that our plan to return gopro to growth and profitability.
Okay.
Our success in selling more of our entry level product than initially projected have put pressure on near term margin.
Our success in selling more of our entry-level products than initially projected has put pressure on near-term markets.
Respect margin pressure to continue through Q1 2024 until the replacement of our current low margin entry level product.
We expect margin pressure to continue through Q1 2024 until the replacement of our current low margin entry level product.
are replaced with newly designed entry-level cameras at lower price points, lower cost, product costs that are expected to come in a second quarter of 2024.
Ah replace with newly designed entry level cameras at lower price point.
Lower cost.
Product costs are expected to come in the second quarter of 2024.
We continue to invest in innovation, notably in system entrepreneurship.
We continue to invest in innovation, notably in system on chip.
Pugware, Accessories, and Software. In addition, we are expanding marketing and sales capabilities to fuel growth while also driving efficiencies in other areas at the business.
Hardware accessories and software. In addition, we are expanding marketing and sales capabilities to fuel growth, while also driving efficiencies in other areas that the business we.
We have prudently tightened operating expenses for 2023, which we expect to be at 365 million, down from 370 million, estimated during our last earnings.
We have prudently tightened operating expenses for 2023.
We expect to be at $365 million down from $370 million estimated during our last earnings report.
We continue to tightly manage our balance sheet metrics, particularly inventory and DSO. We expect to reduce inventory, exiting the fourth quarter to be below $100 million, or approximately 40 days of inventory.
We continue to tightly manage our balance sheet metrics, particularly inventory and DSO, we expect to reduce inventory.
Exiting the fourth quarter to be below $100 million.
Or approximately 40 days of inventory.
And we expect to exit 2023, with cash of $300 million, including a minimum of $10 million of stock buybacks in the fourth quarter or $40 million in share repurchases for the year.
And we expect to exit 2023 with cash of 300 million, including a minimum of 10 million, a stop by back in the fourth quarter, or 40 million in share your purchases for the year.
Our guidance reflects our excitement for the fourth quarter and 2023 and me.
Our guidance reflects our excitement for the fourth quarter and 2020-3D, and even more so for the future.
Even more so for the future.
Looking ahead to 2024, we expect to grow units to a range of 3.5, 3.3 to 3.5 million, or more than 10% over 2023.
Looking ahead to 2024, we expect to grow our unit to a range of $3 five.
Sorry, three three to $3 5 million or more than 10% over 2023.
That would put revenue in a range of $1 one to $1 2 billion.
That would put Raviniw in a range of 1.1 to 1.2 billion.
We expect to end 2024 with approximately 25,000 dollars or growth of approximately 14% year over year.
We expect to end 2024, with approximately 25000 doors or growth of approximately 14% year over year.
We expect to improve gross margin of 32% in 2023 to 37% plus or minus 50 basis points in 2024. Driven by the following facts.
We expect to improve gross margin of 32% in 2023% to 37% plus or minus 50 basis points in 2024, driven by the following factors.
by approximately 230 basis points from the introduction of our lower cost entry level product in Q2, 2024. 150 basis points from price protection incurred in 2023 for the strategic price move.
By approximately 230 basis point from the introduction of our lower cost entry level product in Q2 2024.
150 basis points from price detection incurred in 2023, so the strategic price move.
Approximately 80 basis points from identify product component cost saving.
And approximately 70 basis points from subscription growth and other improvements.
and a possibly 70 basis point from subscription growth and other improvements.
Respect operating expenses to grow modestly from 365 million in 2023 to approximately 385 million in 2024.
We expect operating expenses to grow modestly from $365 million in 2023 to approximately $385 million in 2024.
And we expect non-GAAP tax expense to be approximately $1 5 million in 2024.
And we expect non-gap tax expense to be approximately 1.5 million in 2024.
Yeah.
Successfully executing against these assumptions would result in revenue growth, margin expansion and subscriber growth.
Successfully executing against these assumption.
<unk> and revenue growth margin expansion and subscriber growth.
In addition, expected earnings leverage is substantial in 2024, and we expect to generate...
In addition expected earnings lever just substantial in 2024, and we expect to generate.
And a range of 30 million to $50 million and non-GAAP net income a solid 60 million to $80 million improvement.
and a range of 30 million to 50 million in non-GAP net income has solid 50 million to 80 million dollar improvement over 2023.
2023.
This profitability improvement enables us to increase our capital allocation in 2024.
This profit-developing improvement enables us to increase our capital allocation in 2024.
In summary, we are pleased by the results of our first quarter.
In summary, we are pleased by the result of our first quarter.
for a full quarter of our growth and tan expansion plan. We look forward to exciting developments and suffer releases in the fourth quarter and believe we will enter 2024 for stronger men and men and that strategies will be a catalyst for expanding growth and profitability in 2024 and 2025. And now operator. Thank you.
For a full quarter of our growth and Tam expansion plan, we look forward to exciting developments and software releases in the fourth quarter and believe we will enter 2024 with strong momentum.
That strategy will be a catalyst for expanding growth and profitability in 2024 and 2025.
And now operator, we are ready to take questions.
Thank you if you'd like to ask a question. Please press star one on your telephone keypad now.
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And when preparing to ask your question, please ensure your line is unmeasied.
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Again to ask a question that staff on it by one on your telephone keypad now.
Again to ask a question, let's start followed by one on your telephone key.
Our first question comes from Erik Woodring from Morgan Stanley Eric <unk> line is now open. Please go ahead.
I'll first question cause I'm Eric Lutderoong from Morvans Damien. Eric Lutderoong is now open. Please go ahead.
Okay.
Thank you so much, and thank you guys for taking my questions. I have two. You know, maybe Nick or Brian , you know, forks yourself through guidance of a million units. Obviously, great to hear you're tracking there at this point. That's up about 10% year of year, I believe. You know, can you just give us a bit more detail on how you would characterize the demand environment? And specifically, you know, how you think about
Thank you so much and thank you guys for taking my questions I have two.
Maybe Nick or Brian <unk> sell through guidance of 1 million units, obviously, great to hear you're tracking there at this point that's up about 10% year over year. I believe can you just give us a bit more detail on how you would characterize the demand environment and specifically.
How you think about.
you know that growth being driven by the lower price point and go pro specific actions and products versus just kind of a better overall consumer health for the holiday period. If you could just kind of dissect that however best that would be really helpful and I'll follow up. Thank you.
That growth being driven by the lower price point than Gopro specific actions in products versus just kind of a better overall consumer health for the holiday period. If you could just kind of dissect that however, best that'd be really helpful. And then I have a F.
Follow up thank you.
Maybe I can start on a mix coming behind me.
Maybe I can start and then Nick can come in behind me.
Just kind of maybe frame that a little bit.
I guess this cannot maybe frame them a little bit. Q3 was off the charts good. I mean, we were up 31% quaint to leave.
Q3 was.
Off the charts. Good I mean, we were up 31% sequentially.
We moved our price point to where they've historically been. We saw terrific performance that adhered to our black and even more momentum, but frankly out of the entry level products and retail performed exceptionally well, up to 35%.
We moved our price point to where they've historically been.
Terrific.
Performance out of hero Black and even more momentum quite frankly out of the entry level products and retail performed exceptionally well up 35%.
and you know, sales end of unit year of a year and
Sales in units year over year and.
nearly 30% increase in filters. So the retail side of it is doing very well. We expect that to continue in the fourth quarter. Here.
Nearly 30% increase in sell through so the retail side of it.
Very well, we expect that to continue in the fourth quarter.
Hello, 12 will do well and we will have growth over what we did in parallel 11, just based on the performance we're seeing to date.
while we'll have growth over what we did in Herald Lab and this based on the performance we're seeing today and our expectation for the quarter area. I think the other thing we'll see that's helping to drive the businesses about 30% or so of our unit volume in the fourth quarter will be our entry level product.
And our expectation for the quarter.
Other thing, we'll see that's helping to drive the business is about 30% or so.
Of our unit volume in the fourth quarter will be our entry level product.
And I mean, that's up substantially from last year. We had some, but we continue to drive the entry level and that's driving units. And that's why I mentioned, yeah, we still get hit a little bit in margin, but we drive more subscribers as a result of that. And early, so to percent is bad.
And I mean, that's up substantially from last year, we had some.
But we continue to drive the entry level and Thats driving units and that's why.
And now we still get hit a little bit on margin, but we drive more subscribers as a result of that nearly 30% as cats.
and it reduces inventory and drives cash well. So from that perspective, it's positive and we expect to replace our entry level.
And it reduces inventory and drive.
Cash flow so from that perspective, it's positive and we expect to replace our entry level price point product that we're selling.
price point products that we're selling today with a new one that's got an appropriate cost profile in Q2 of 24 and that as I mentioned, Lifts margin next year.
Today with the new one that's got an appropriate cost profile in Q2 of 'twenty four and that as I mentioned lifts margin next year.
about 200 basis points. So kind of framing it that way. And I can say our cell through so far to date.
230 basis points, so kind of framing it that way and I can say our sell through.
So far to date.
between retail and gopher.com or tracking the where we need to be for the quarter. You know, we have to now get into the holiday season. We're coming into that, right? With Black Friday and Saturday Monday and the holiday and the likes, but so far, that's going well. We have great indications from our retail partners, too, who are also very excited. And I'll miss it if you have anything more to add.
Between retail and <unk> dot com are tracking to where we need to be for the quarter.
We have to now get into the holiday season, we're coming into that right with Black Friday, cyber Monday, and the holiday and the like but so far.
It's going well and we have great.
Occasions from our retail partners to who are also very excited.
Do you have anything more to that.
Yeah, I mean, I would add it was great to see here of 12 black come out of the gates, so strong and maintain that momentum.
Yeah, I mean, I'd add it was great to see Hero 12 Black come out of the gate.
So strong and maintain that momentum. Hero 12 Blacks proven to have a really good launch and follow on sales that compare really well with Hero 11 Blacks performance a year ago. So it's great to see that improvement.
<unk>.
Proven to be.
Haven't really good launch and follow on sales compare.
Well.
With here on 11 blacks performance a year ago, So it's great to see that improvement.
And we think that's not only due to it being a phenomenal product has been really well received.
And we think thats not only due to it being a phenomenal product that's been really well received.
by media and consumers alike. But this year we are
Hi.
And consumers alike.
But this.
This year, we also have to support.
our retail partners in a way that we haven't had since before the pandemic. So it's a great indicator that our strategy to focus more on our retail presence and work more closely.
Our retail partners in a way that we haven't had since before the pandemic. So it's a it's a great indicator that our strategy to focus more on our retail presence and work more closely with our retail partners is paying off that's great to see and then.
with our retail partners is paying off. That's great to see. And then as we know.
As we noted in my prepared remarks, the strength of our entry level products has really been exceeding our expectation.
But without cannibalizing, our higher end products, so our expectation that our entry level price products would expand the Tam and bring in new customers.
Without eroding the high and has proven to be true.
So it's a it's a great puts us in a great position going into the holiday season, because we have a much better lineup for.
Every buyer at every price point every type of gift giver.
This year compared with last year, So we're feeling really good.
Yes.
Okay. That's really helpful. Thank you for thank you both for all that color.
Maybe my second question is for you, Brian and you know your business is transactional and very kind of.
And very seasonal.
And we haven't yet passed the 2023 holiday period, but you've given us some fairly specific guidance for the entirety of 2024 can you maybe just help us understand what gives you confidence to kind of set some of these bogies for next year and kind of how you come to these conclusions.
So far in advance just give us some confidence in the in the baseline that you're that you're setting for next year would be really helpful and that's it for me. Thanks.
Yeah, well I'd say I think we're going to see continued growth on the entry level to more units than we are.
We're doing this year, because we'll have a full year of selling them out. So that's several hundred thousand units alone going into 'twenty, four and we're seeing that demand. So that's going to continue we really started to kind of mid call. It man.
This year, so that's just kind of putting a full year.
To kind of increase in demand, we're seeing strong demand in.
Hello, 12, we expect that to continue and we have some other new products come in that.
We're going to.
So we would expect that theyre going to do really well next year. So.
Three new products next year coming as well as what we've got today.
Going into 'twenty four so from that perspective is good we'll continue to add doors expand that reached another 14% next year, we've got the full year.
Pricing at a lower price point and below versus 49, 9% below that alone is lifting unit volume and we're seeing that demand happen as we meet the consumer where they are.
So that's another aspect of of where we go and adding more doors and we're driving.
A lot more engagement with subscription will drive subscription up.
Spectrum in there so.
We're seeing positive momentum on where we're going so far.
With Q3 now behind US Q4 ahead of us with <unk>.
Really strong retail.
<unk> and consumer demand. So I think we can look ahead and go yeah.
The moves we've made mid year of 'twenty three we expect to continue to be.
Laying out in 2024.
And then that's on the top line and then I talked about how do we improve margin.
I'm getting to about 37% and that's really key for US next year as we drive that margin.
Opex goes up a little bit to support innovation and that goes right to the bottom line for pretty substantial profit improvement as we've laid it out.
As a reminder, if you would like to ask a question. Please press star followed by one now and our next question comes from Martin Young from Oppenheimer. Martin. Your line is now open. Please go ahead.
Yeah.
Okay.
For taking my question.
First question is about the retention rate really appreciate our surety of per share secondary retention.
Can you maybe comment on how those retention rate changed versus.
A year or two years ago.
Yes, Martin this is Brian retention rates have generally been increasing.
And they've gone from the 50 is now up to in the first year too.
60% to 65%.
In year, one and year two is holding it.
75%. So we're very pleased with that we have even within that improvement in retention rates.
<unk>.
Those who have signed up on the web.
And that's improved.
About 10%.
5%, so that's that's been encouraging.
<unk> trend and who work more and more stores as well and as we get into next year, because it will be kind of three years into this when we can start reporting on the third year.
Tension, but so far the retention rates have continued to improve as.
As well as the tax rates.
Are up year over year.
So you know things have continued to move in the right direction on subscription as well.
Got it.
The lower cost models have.
Lower cash rate for service what are your plan to raise that attach rate or do you feel that 30% attach rate for subscription is where you want it to be.
Okay.
On the attach rate currently 40% right for.
Actually and combined between retail and corporate Dot com.
And who comes in and buys we think adding the premium subscription service.
Add to that retention rate, we've done a lot of.
Work on consumer insights, that's why we're so people who subscribe to gopro.
Have access to.
Desktop app.
And a very positive.
Response rate from consumer in fact perspective.
So hopefully that drives not only attacks, but increased retention great overtime, so and.
And we will add other kind of services and applications too.
Service.
This enhances it overtime.
It's really about continuing to drive attach and and retain subscribers we have.
Got it. Thank you last question from me is on.
With the upcoming new cameras for 24 can you maybe generally talk about exploration for new designs.
Are they coming from available products on the market customer feedback or any other source that would drive you to come up with New York.
Maybe a more niche specific designs.
Hey, I'll take that thanks.
Yes, it's a little bit of everything.
We're doing more and more consumer research to understand what consumers want to see from us.
Maybe.
Our current products are missing that would.
Compel them to purchase.
And as well just through our experience in.
So many categories for so many years we've been identifying.
New form factors, new new capabilities that would better tailor at gopro for a specific use case.
That we're getting.
More a better understanding that it's not just price points that we have to hit to attract consumers, but it's also.
Unique.
Usability and product functionality for different.
Use cases that we think that if we nail it and we know that at the right price point, we can expand our Tam.
And that goes both in both directions.
Shared that we're working on a new entry level product, that's going to be at the appropriate margin.
Level for Gopro that we're going to launch in Q2 next year really excited about that not only is that going to be.
Phenomenal price point, but we also think the user experience is going to be nominal for that entry level user really helping them be successful with their gopro, which we believe is going to lead to increased engagement.
And the potential to up sell them to other products over time and then at the high end, we have new products coming that we think are going to really excite consumers and helped drive.
Further growth. So it's it's it's across the spectrum that we're targeting new products.
And.
Next year is going to be a really exciting time.
Thank you Nick.
And then final question, so I'd like to hand, the call back to the management team for any closing remarks.
Thank you operator, and thank you everyone for joining today's call as I said earlier, we're excited about the upcoming holiday season demand is strong, we're making steady progress expanding our retail network and we're looking forward to launching new margin accretive hardware in 2024, while continuing to enhance our software and subscription offerings.
And to those of you still trying to figure out the perfect gift to give this holiday season that will make you look like a hero.
Simple Gulf.
<unk>.
Thanks again for joining today's call everyone. This is team gopro signing off.
This concludes today's conference call. Thank you everyone for joining you may now disconnect.
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Yeah.
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