Q4 2023 GoPro Inc Earnings Call
Cole: Good afternoon. Thank you for attending today's GoPro fourth quarter 2023 earnings call. My name is Cole, and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end.
Good afternoon. Thank you for attending today's Gopro fourth quarter 2023 earnings call. My name is cole and I'll be the moderator for todays call all lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.
Operator: If you'd like to ask a question, please press star one on your telephone keypad. I would now like to pass the conference over to our host, Chris Clark, VP of Corporate Communications. Please go ahead.
If you'd like to ask a question. Please press star one on your telephone keypad.
I'd now like to pass the conference over to our host cliffs, Chris Clark VP of corporate Communications. Please go ahead.
Christopher Clark: Thank you, Cole. Good afternoon, and welcome to GoPro's fourth quarter and full year 2023 earnings conference call. With me today are GoPro CEO Nicholas Woodman and CFO and COO Brian. Today's agenda will include a brief commentary from Nick, followed by Q&A. For detailed information about our fourth quarter and full year 2023 performance, as well as outlook, please read our Q4 and 2023 earnings press release and the management commentary we've posted to the investor relations section of GoPro's website. Before I pass the call to Nick, I'd like to remind everyone that our remarks today may include forward-looking statements. Forward-looking statements and all other statements that are not historical facts are not guarantees of future performance and are subject to a number of risks and uncertainties, which may cause actual results to differ materially. Additionally, any forward-looking statements made today are based on assumptions as of today, which could change results at any time, and we do not undertake any obligation to update these statements as a result of new information or future events.
Christopher Clark: Thank you Nicole good afternoon, and welcome to Gopro as fourth quarter and full year 2023 earnings conference call.
Christopher Clark: With me today are Gopro, CEO, Nicholas Woodman, and CFO and COO, Brian Mcgee.
Nicholas Woodman: Today's agenda will include a brief commentary from Nick followed by Q&A for.
Nicholas Woodman: For detailed information about our fourth quarter and full year 2023 performance as well as outlook. Please read our Q4 and 2023 earnings press release and the management commentary, we've posted to the Investor Relations section of <unk> website.
Speaker Change: Before I pass the call to Nick I'd like to remind everyone that our remarks today may include forward looking statements.
Speaker Change: 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.
Speaker Change: Additionally, any forward looking statements made today are based on assumptions as of today.
Speaker Change: 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.
Christopher Clark: To better understand the risks and uncertainties that could cause actual results to differ from our commentary, we refer you to our most recent annual report on Form 10-K for the year ended December 31st, 2022, which is on file with the Securities and Exchange Commission and other reports that we might 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. The reconciliation of GAAP to non-GAAP operating expenses can be found in the press release that was issued this afternoon, which is posted in 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-GET. Now, I'll turn the call over to GoPro's founder and CEO, Nicholas Woodman. Thanks, Chris.
Speaker Change: 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 might file from time to time with the SEC.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Now I'll turn the call over to <unk>, founder and CEO Nicholas Woodman.
Speaker Change: Yeah.
Nicholas Woodman: Thanks, Chris and thanks, everybody for joining us today.
Nicholas Woodman: And thanks, everybody, for joining us today. 2023 marks the beginning of our multi-year TAM expanding strategy, targeting long-term revenue, subscriber, and profit. Beginning in May 2023, we initiated the first stage of our growth initiatives, including a return to lower pre-pandemic pricing to drive unit sales. The reintroduction of entry-level price GoPro cameras to drive volume and reach new customers, increase marketing to drive awareness, and expand GoPro's retail channel presence globally. These actions contributed to year-over-year retail channel unit sell-through growth of 25% in the period from our shift in May to the end of the year. Across all channels, retail combined with direct to consumer through gopro.com, 2023 units sell through growth since our strategy shift was 3% from May was up 3% from the period May 9 through the end of 2023, measured against the prior year period. However, our retail channel growth was largely offset by our gopro.com direct-to-consumer channel, where we underestimated the impact of our strategic shift. In Q4, GoPro.com revenue excluding subscriptions and services was 14% of revenue, down from 33% in the prior year period, due primarily to our strategic decision to eliminate subscription-related camera discounts at the time of purchase on GoPro.com.
Nicholas Woodman: 2023 marks the beginning of our multi year Tam expanding strategy.
Getting long term revenue subscriber and profit growth.
Nicholas Woodman: Beginning in May 2023, we initiated the first stage of our growth initiatives, including.
A return to lower pre pandemic pricing to drive unit sales the.
Nicholas Woodman: The reintroduction of entry level price Gopro cameras to drive volume and reach new customers.
Nicholas Woodman: Increased marketing to drive awareness.
Nicholas Woodman: And expanding gopro retail channel presence globally.
Nicholas Woodman: These actions contributed to year over year retail channel unit sell through growth of 25% in the period from our shift in may to the end of the year.
Nicholas Woodman: Across all channels retail combined with direct to consumer through Gopro Dot com.
Nicholas Woodman: 2023 unit sell through growth since our strategy shift was 3%.
Nicholas Woodman: From the May was up 3%.
Nicholas Woodman: Period may nine through the end of 2023.
Nicholas Woodman: Measured against the prior year period.
Nicholas Woodman: Our retail channel growth was largely offset by our gopro dot com direct to consumer channel, where we underestimated the impact of our strategic shift.
Nicholas Woodman: In Q4, <unk> Dot com revenue, excluding subscription and services was 14% of revenue down from 33% the prior year period.
Nicholas Woodman: Due primarily to our strategic decision to eliminate subscription related camera discounts at the time of purchase on Gopro Dot com.
Nicholas Woodman: We believe our sell-through growth in retail gives us and importantly gives our retailers and distributors confidence to lean in as we look to launch a number of new products, as I'll touch on shortly. This, combined with our aggressive efforts to open more doors and expand our brand presence in all of our doors, is creating a groundswell of opportunity at retail for GoPro. Fourth quarter entry-level camera sell-through priced at $199 and $249 represented 28% of our product mix, up from zero in the prior year when we had no products offered in this price range. However, in analyzing our 2023 holiday season performance, we believe consumers were looking for discounts irrespective of already low price points, which was an outlier from the behavior we've seen in prior years.
Nicholas Woodman: We believe our sell through growth in retail gives us and importantly gives our retailers and distributors confidence to lean in as we look to launch a number of new products as I'll touch on shortly.
This combined with our aggressive efforts to open more doors and expand our brand presence in all of our doors is creating a groundswell of opportunity at retail for Gopro.
Nicholas Woodman: Fourth quarter entry level camera sell through priced at $199 and $249 represented 28% of our product mix up from zero in the prior year. When we had no products offered in this price band.
Nicholas Woodman: However in analyzing our 2023 holiday season performance, we believe consumers were looking for discounts irrespective of already low price points, which was an outlier from the behavior, we've seen in prior years.
Nicholas Woodman: This resulted in lower than expected sell through of our $249 hero 10, Black product, which we did not discount during Q4 on.
Nicholas Woodman: This resulted in lower than expected sell-through of our $249 Hero 10 black product, which we did not discount during Q4. On the positive side, this resulted in a better than expected margin in the fourth quarter. In 2023, we reinvigorated our marketing strategy to reestablish GoPro's larger than life brand presence across all of the major verticals we serve. 2024 is when we'll see GoPro's brand more loud and proud than we've seen in years, beginning with events like January's X Games, where fans tuned in to watch the world's best skiers and snowboarders pushing the limits of their sport, with many athletes wearing GoPro cameras in competition, capturing footage that was integrated into the broadcast to share a first-person perspective. To help translate our expanded awareness efforts into sales, we've Since May of 2023, we have added more than 3,200 new retail doors, which was ahead of our target for the year.
Nicholas Woodman: On the positive side this resulted in better than expected margin in the fourth quarter.
Nicholas Woodman: In 2023, we reinvigorated our marketing strategy to reestablish gopro is larger than life brand presence across all of the major verticals we serve.
Nicholas Woodman: 2024 is when we will see Gopro brand more loud and proud than we've seen in years beginning with events like January is X games, where fans tuned into watch the world's best skiers and snowboarders pushing the limits of their sport with many athletes wearing gopro cameras and competition capturing footage that was integrated into the broadcast.
Nicholas Woodman: To share first person perspectives.
Nicholas Woodman: Help translate our expanded awareness efforts into sales we've been aggressively expanding the number of retail doors, where we sell our products.
Nicholas Woodman: Since may of 2023, we added more than 3200, new retail doors, which was ahead of our target for the year we.
Nicholas Woodman: We intend to continue to drive door growth with a target of 7,000 additional new doors over the next two years, bolstered by new products. In addition to growing the door count, we plan to refresh our point of purchase merchandisers, expand the in-store brand presence, and enhance account management throughout the retail channel. Our stage one growth initiatives outlined above delivered a profitable fourth quarter and second half in 2023 on a non-gap basis. However, fourth quarter revenue was $295 million below our guidance of $325 million.
Nicholas Woodman: We intend to continue to drive door growth with a target of 7000 additional new doors over the next two years bolstered by new products.
Nicholas Woodman: In addition to growing door count we plan to refresh our point of purchase merchandisers expand in store brand presence and enhanced account management throughout the retail channel.
Nicholas Woodman: Our stage one growth initiatives outlined above delivered a profitable fourth quarter and second half in 2023 on a non-GAAP basis.
Nicholas Woodman: Fourth quarter revenue was $295 million below our guidance of $325 million.
Nicholas Woodman: Q4 revenue was short of guidance due to lower-than-expected demand trends in North America, particularly in December, driven in part by competition for share of wallet, as well as lower-than-anticipated sales of Hero 10 Black due to our decision not to discount this entry-level-priced camera. The upside is that we retained margin on the Hero 10 black units we sold, and this combined with our high-margin subscription and service revenue to yield gross margin that outperformed the midpoint of guidance by 140 basis points. The improvement in gross margin plus savings and operating expenses during the quarter resulted in non-GAAP earnings per share of two cents for the fourth quarter.
Nicholas Woodman: Q4 revenue was short guidance due to lower than expected demand trends in North America, particularly in December driven in part by competition for share of wallet as well as lower than anticipated sales of hero 10, black due to our decision to not discount this entry level price camera.
Nicholas Woodman: The upside is that we retain margin on the hero 10 Black units, we sold and this combined with our high margin subscription and service revenue to yield gross margin that outperformed the midpoint of guidance by 140 basis points.
Nicholas Woodman: The improvement in gross margin plus savings in operating expenses during the quarter resulted in non-GAAP earnings per share of <unk> <unk> for the fourth quarter.
Nicholas Woodman: In 2024, we expect gross margin to be 32, 5% in the first quarter and improved throughout the year to 35% in the second and third quarters and to between 37%, 38% in the fourth quarter.
Nicholas Woodman: In 2024, we expect gross margin to be 32.5% in the first quarter and to improve throughout the year to 35% in the second and third quarters and to between 37 and 38% in the fourth quarter. This weighs out to a gross margin percentage in 2024 in a range of 35.5% plus minus 50 basis points, up from 32% in 2023. As we begin 2024 and look to the greater long-term opportunity for GoPro, we believe it's essential that we significantly scale the number of products we sell to serve more consumers in more categories and markets. Our research identifies several growth opportunities where GoPro can extend its market leadership. As we enter stage two of our TAM expanding strategy, we plan to expand our product roadmap over the next two years, and in 2024, we plan to launch four new models, giving us a lineup of cutting-edge, industry-leading cameras ranging in price from a volume-driving $199 up to $599 with more plans.
Nicholas Woodman: This weighs out to a gross margin percentage in 2024, and a range of 35, 5% plus or minus 50 basis points up from 32% in 2023.
Nicholas Woodman: As we begin 2024 and look to the greater long term opportunity for Gopro, we believe its essential that we significantly scale. The number of products, we sell to serve more consumers in more categories and markets.
Nicholas Woodman: Our research identifies several growth opportunities, where gopro can extend our market leadership.
Nicholas Woodman: As we enter stage two of our Tam expanding strategy, we plan to expand our product product roadmap over the next two years and in 2024, we plan to launch four new camera skus, giving us a lineup of cutting edge industry, leading cameras ranging in price from a volume driving 199.
Nicholas Woodman: Up to $599 with more planned for 2025.
Nicholas Woodman: 2025. In January, we announced plans to acquire Foresight Helmet Systems, an Australian maker of tech-enabled motorcycle helmets. We believe tech-enabling motorcycle helmets represents a meaningful opportunity for GoPro to extend its technical and marketing capabilities to create differentiated solutions within a $6 billion motorcycle helmet market, of which we believe we can service approximately $3 billion, with an eye towards entering additional helmet markets over time. There are a number of technologies used today by motorcycle enthusiasts, including communications, digital imaging, navigation, safety alerts, and more that we believe can be integrated into helmets for enhanced performance, convenience, value, and safety.
Nicholas Woodman: In January we announced plans to acquire fore sight helmet systems and Australian maker of Tech enabled motorcycle helmets.
Nicholas Woodman: We believe tech, enabling motorcycle helmets represents a meaningful opportunity for gopro to extend its technical and marketing capabilities to create differentiated solutions within a $6 billion motorcycle helmet market.
Nicholas Woodman: We believe we can service approximately $3 billion.
Nicholas Woodman: With an eye towards entering additional helmet markets over time.
Nicholas Woodman: There are a number of technologies used today by motorcycle enthusiasts, including communications digital imaging navigation safety alerts and more that we believe can be integrated into helmets for enhanced performance convenience value and safety.
Nicholas Woodman: We are on track to close this acquisition this quarter and will share specifics about our product vision as we get closer to the expected launch of our first helmet in 2025. To add more color, motorsports has been core to GoPro's business for the last 15 years. We've developed a strong brand across all disciplines of professional and enthusiast categories of motorsports with a very strong following among motorbike enthusiasts. We are a major sponsor across a broad range of racing series, events, and athletes, including the world's premier motorcycle racing series, MotoGP.
Nicholas Woodman: We are on track to close this acquisition this quarter and will share specifics about our product vision as we get closer to the expected launch of our first helmet in 2025.
Nicholas Woodman: To add more color Motorsports has been core to <unk> business for the last 15 years.
Nicholas Woodman: We've developed a strong brand across all disciplines of professional enthusiast categories with motor sports with a very strong following among motorcyclists.
Nicholas Woodman: We are a major sponsor across a broad range of racing series events and athletes, including the world's Premier motorcycle racing series Moto GP.
Nicholas Woodman: In addition to leveraging our existing Motorsports marketing and brand we intend to leverage the Motorsports retail channel. We are currently building to support sales of our current camera outline to also sell our helmets beginning in 2025.
Nicholas Woodman: In addition to leveraging our existing motorsports marketing and brand, we intend to leverage the motorsports retail channel we are currently building to support sales of our current camera line to also sell our helmets beginning in 2025. We also intend to partner with leading helmet brands as an OEM supplier to help them tech-enable their own premium skis. We have enormous respect for leading brands and look forward to working with them to help drive innovation together. We are encouraged by the early interest shown by some leading brands. Furthermore, we expect that success in the motorcycle helmet market can contribute to subscriber growth, as we intend to support GoPro TechEnabled helmet owners with meaningful subscriber benefits and features. Looking at our current subscriber base, we closed 2023 with more than two and a half million subscribers, representing 12% year over year growth. In previous quarters, retention for annual subscribers who represent 90% of total subscribers was between 60% and 65% for the first year and between 70% and 7 Our new third-year cohort is renewing at greater than 80 percent.
Nicholas Woodman: We also intend to partner with leading helmet brands as an OEM supplier to help them tech enabled their own premium skus, we have enormous respect for leading brands and look forward to working with them to help drive innovation together.
Nicholas Woodman: We are encouraged by early interest shown by some leading brands.
Nicholas Woodman: Furthermore, we expect that success in the motorcycle helmet market can contribute to subscriber growth as we intend to support Gopro Tech enabled helmet owners with meaningful subscriber benefits and features.
Nicholas Woodman: Looking at our current subscriber base, we closed 2023 with more than $2 5 million subscribers, representing 12% year over year growth.
Nicholas Woodman: Consistent with previous quarters retention for annual subscribers, who represent 90% of total subscribers was between 60% and 65% from the first year renewals and between 70% and 75% for second year renewables.
Nicholas Woodman: Our new third year cohort is renewing at greater than 80%.
Nicholas Woodman: Importantly, we now have a larger pool of subscribers who are up for renewal in their second or third year than we do for the first, which we believe will be a tailwind for subscriber retention going forward. Another positive for our subscription offerings is the initial release of our Quick Desktop app for Mac OS and our new Premium Plus subscription tier, both of which launched yesterday. The Quick Desktop app, which is available at no additional charge to GoPro subscribers, brings the simplicity and convenience of automatic edits to desktop users along with powerful, yet convenient manual editing tools, synced editing between mobile and desktop apps, and the ability to import footage from any camera.
Nicholas Woodman: Importantly, we now have a larger pool of subscribers, who are up for renewal in their second or third year. Then we do for the first year, which we believe will be a tailwind for subscriber retention going forward.
Nicholas Woodman: Another positive for our subscription offerings as the initial release of our Quik desktop App for Mac OS and our new premium plus subscription tier both of which launched yesterday.
Nicholas Woodman: The quik desktop App, which is available at no additional charge to gopro subscribers brings the simplicity and convenience of automatic edits to desktop users along with powerful yet convenient manual editing tools synced editing between mobile and desktop apps and the ability to import footage from any camera with.
Nicholas Woodman: We plan to launch a Windows version of the Quick Desktop app later this year. We expect to grow our subscriber base in 2024, adding to the substantial ARR we are already generating. We expect subscribers to be between two and a half million and 2.6 million by the end of 2024, or 4% growth year over year at the high end of the range. To summarize, the retail expansion strategy we kicked off in May of last year is successfully growing our business at retail.
Nicholas Woodman: We plan to launch a windows version of the Quik desktop App later this year.
Nicholas Woodman: We expect to grow subscribers in 2020 for adding to the substantial <unk> you're already generating.
Nicholas Woodman: We expect subscribers to be between $2 5 million and $2 6 million by the end of 2024 or 4% growth year over year at the high end of the range.
Nicholas Woodman: To summarize the retail expansion strategy, even kicked off in May of last year is successfully growing our business at retail.
Nicholas Woodman: We're excited about our expanding product line, the significant number of retail doors we're adding at a steady rate, and a significantly larger number of marketing activations we have planned throughout the year to drive awareness and demand, all of which we believe will contribute to growth. Our acquisition of Foresight reflects our belief that the GoPro brand can scale across multiple verticals globally. We have a number of exciting opportunities in front of us, and as we move through 2024, we are focused on execution and creating value for our shareholders. It's good to be on the board.
Nicholas Woodman: We're excited about our expanding product line a significant number of retail doors were adding at a steady rate.
Nicholas Woodman: A significant larger number of marketing Activations, we have planned throughout the year to drive awareness and demand all of which we believe will contribute to growth.
Our acquisition of foresight reflects our belief that the gopro brand can scale across multiple verticals globally.
Nicholas Woodman: We have a number of exciting opportunities in front of us and as we move through 2024, we're focused on execution and creating value for our shareholders.
It's good to be on the build again.
Speaker Change: Operator, we are now ready to take questions.
Operator: Operator, we are now ready to take questions. Great. If you'd like to queue for a question, please press star followed by one on your telephone keypad. If, for any reason, you'd like to remove a question, please press star followed by two.
Speaker Change: Great if you'd like to queue for a question. Please press star followed by one on your telephone keypad if for any reason you'd like to remove that question. Please press star followed by two.
Operator: Again, to join the queue for a question, please press star one. We'll pause here briefly as questions are registered. Our first question is from Erik Woodring with Morgan Stanley. Your line is now open.
Speaker Change: Again to join the queue for a question. Please press star one we'll pause here briefly as questions are registered.
Speaker Change: Okay.
Speaker Change: Our first question is from Erik Woodring with Morgan Stanley. Your line is now open.
Erik W. Woodring: Hey guys, good evening. I just had two questions, and I was wondering if you could give me a fairly clear vision for 2024, you know, guiding to, I think it was 1.1 to 1.2 billion of revenue, plus 10% unit growth. I think it was 40 million dollars in net income. You removed some of that language from the prepared remarks this quarter. So, you know, how should we think about maybe the full year just beyond one Q? And then I have a call. Yeah, maybe I'll start and see if Nick wants to chime in.
Erik W. Woodring: Hey, guys good evening.
Erik W. Woodring: I just had two questions quickly.
Erik W. Woodring: And I wasn't sure if the first one is for Nick or Brian, but last quarter, you laid out a fairly clear vision for 2024 guide.
Erik W. Woodring: Guiding to I think it was one 1% to $1 2 billion of revenue, 10% unit growth plus.
Erik W. Woodring: I think it was $40 million of net income you remove some of that language from the prepared remarks. This quarter. So just how should we think about maybe the full year just beyond 'twenty two just be on <unk> and then Oh. Thank you.
Speaker Change: Yeah, maybe I'll start Nick want.
Speaker Change: [noise] chime in I think first of all we just guided for the first quarter. Obviously, you saw that in our prepared remarks.
Brian Mcgee: I think, first of all, we just guided for the first quarter. Obviously, you saw that in our prepared remarks. I'll comment there, though, that has nothing to do with sell-through. That's actually going pretty well.
Speaker Change: Comment there though.
Speaker Change: That has nothing to do with sell through that's actually going pretty well, we should be $550 million plus or minus 50000 units, which is in line with where we've been in the first quarter in the last two years that the sell through sell in will be a little bit last we expect channel inventory down.
Brian Mcgee: We should be 550 million units, plus or minus 50,000 units, which is in line with where we've been in the first quarter of the last two years. That's on sell-through. Sell-in will be a little bit less. We expect to take channel inventory down about 17% to about 700,000 units. So that's why Q1 revenue is off a bit if you compare that on a year-to-year basis. We're still selling products, but not in large volumes as we deplete older inventory in favor of higher margin products that begin shipping in Q2 and Q3. In addition, Nick talked about the investment we're making in product that's under review to expand a roadmap, and we're evaluating those investments or the level of those investments for 2025 and 2026. That would obviously impact OPEX, and all those decisions aren't done yet.
Speaker Change: About 17% to about 700000 in it so.
Speaker Change: That's why Q1 revenue was off a bit if you compare it on a year to year basis, we're still selling product, but not not in.
Speaker Change: As we deplete older inventory in spite of a higher margin product that.
Speaker Change: It began shipping in Q2.
Speaker Change: Q3.
Speaker Change: In addition, Nick talked about.
Speaker Change: The investment.
Speaker Change: We are making in product and their review.
Speaker Change: To expand our roadmap and we're evaluating those investments.
Speaker Change: The level of those investments for 'twenty, five and 'twenty six.
Speaker Change: And that would obviously impact opex.
All of those decisions aren't done yet and so we will give an update on that on our next call.
Brian Mcgee: We'll give an update on that on the next call. All right, maybe, Brian, just one point of clarification, in the prepared remarks, in the table that shows first quarter guidance, there's a line that says units sold through, and it says 400,000 units to 550,000 units. If you could just give us some clarification on which one, for the. I think that would sell in with $400.
Speaker Change: Alright, maybe Brian just one point of clarification.
Speaker Change: In the in the prepared remarks.
Speaker Change: The table that shows first quarter guidance.
Brian Mcgee: Alignment so as unit sell through and it says 400000 units you just alluded to 550000 units. Just if you could just give us some clarification on which one we should be looking for that would be super helpful.
Speaker Change: I think that would fill in.
Speaker Change: 400.
Speaker Change: Sell through.
Erik W. Woodring: Transcribed by https://otter.ai Okay, all right. And then, maybe just as a follow-up on the acquisition of foresight, you guys alluded to being able to service a 3 billion TAM motorcycle helmet market TAM. Is that, is that should we think of that as being incremental to your current TAM? Because I think of, you know, helmet-mounted GoPros as one of your primary products today. And so how do we think about what's incremental and new and what technology you'd kind of be bringing to GoPro that you have? Yet, versus what is I don't I don't want to use the term cannibalistic or but part of a market that you're already addressing?
Speaker Change: 400.
Speaker Change: Okay, Alright, and then and then maybe just as a follow up on.
Speaker Change: On the.
Speaker Change: On the acquisition of Foresight, you guys alluded to being able to service a 3 billion Tam motorcycle helmet market Tam.
Speaker Change: Is that should we think of that as being incremental to your current Tam because I think of how the amount of Gopro is as one of your primary use cases today and so how do we think about what's incremental and new and what technology, you would kind of be bringing to gopro that you haven't been able to yet versus what is I don't want to use the.
Speaker Change: Cannibalistic or part of a market that you're already addressing today and that's it for me. Thanks, so much.
Nicholas Woodman: And that's it for me, thanks. Yeah, actually, before you go through that, Erickson, you're right, in a... Oh, and our prepared remarks, we actually sent 550 to, plus or minus 50, and it should have been units fell in in the table, Eric, so big cat. Okay, perfect. Thank you. Thanks for your question, Erik. Yes, there will be some cannibalization, because you're right, there are many motorcyclists who buy a GoPro to attach it to their helmet, but as we look to the future, there's so many gains to be had from integration, and as well, we think it can help expand the TAN by making the value proposition of having technology integrated into the helmet, not attached to the outside of the helmet, it can be TAN expanding and its ability to be more appealing to more motorcyclists that otherwise wouldn't want to necessarily have these attachments, so it's a little bit of both, but as I mentioned, we've got a really strong reputation across all of motorsports, and given Foresight's expertise with the motorcycle market, it's also the biggest market, it aligns really well for that to be our start with tech-enabled helmets, but we see the opportunity over time being bigger than just motorcycles, but we're going to learn first in the motorcycle market, capitalize on Foresight's experience, capitalize on our existing brand strength, and as I mentioned, the growing retail network that we're establishing to sell our existing line of cameras will also benefit us at the time of launch of our first helmets in 2025. Awesome. Thank you very much, Nik. That was great.
Speaker Change: Yeah actually before.
Speaker Change: Right.
Speaker Change: <unk>.
Speaker Change: In our prepared remarks, we actually sent by 50, though.
Speaker Change: Plus or minus 50 than it should've been unit sell in and the table Eric Katz.
Speaker Change: Okay perfect. Thank you.
Speaker Change: Okay.
Speaker Change: Thanks for your question Erik Yes, there will be some cannibalization because you're right there are.
Eric Katz: Many motorcyclists you buy a gopro to attach it to their helmet, but as we look to the future.
Speaker Change: Theres, so many gains to be had from integration.
Speaker Change: And as well, we think it can help expand the Tam by making.
Speaker Change: The value proposition of having technology integrated into the helmet not attached to the outside of the helmet.
Speaker Change: Can be Tam expanding in its ability to be more appealing.
Speaker Change: Two two more motorcyclists, they otherwise wouldn't want to necessarily happens attachments.
Speaker Change: So it's a little bit of both but.
Speaker Change: As I mentioned, we've got a really strong reputation in across all of Motorsports.
Speaker Change: And given foresight expertise with the motorcycle market. It's also the biggest market.
Speaker Change: It aligns really well for that to be.
Speaker Change: Our start with tech enabled helmets, but we see the opportunity over time being bigger than just motorcycles.
Speaker Change: But we're going to learn first in the motorcycle market capitalize on four sites experienced capitalize on our existing brand strength and as I mentioned, the growing retail network that we're establishing to sell our existing line of cameras.
Speaker Change: Will also benefit us at the time of launch of our first helmets and in 2025.
Speaker Change: Awesome. Thank you very much and if that was awesome content.
Speaker Change: Thank you.
Operator: Our next question is from Martin Yang with Oppenheimer. Your line is now open. Hi, good afternoon.
Our next question is from Martin Yang with Oppenheimer. Your line is now open.
Speaker Change: Right.
Martin Yang: Hi, Good afternoon. Thank you for taking my question. My first question is our subscribers.
Martin Yang: Thank you for taking my question. My first question is on subscribers. How do you see your long-term growth for the subscriber base as you have more multi-year renewed users in the subscriber base? Do you expect the long-term rate to go maybe above a single digit?
Martin Yang: Do you see long term growth stronger base as you have more multiyear renewals.
Martin Yang: We're seeing the subscribers base do you expect a long term way to go.
Martin Yang: At above mid single digits and also how should we think about.
Brian Mcgee: And also, how should we think about beyond subscriber user growth but ARR for our subscription revenues? Do they have a different growth rate relative to the subscriber base? Hi Martin. It's Brian.
Martin Yang: Beyond subscriber user growth, but AAR for our subscription revenues.
Martin Yang: They have a different growth rate relative to subscriber base.
Martin Yang: Hi, Martin this is Brian.
Brian Mcgee: Let me hit ARPU first. We're seeing ARPU improvements of about 5%. So, that's great. We are also seeing that the total number of subscribers in years two, three, and four will now be larger than in year one. And so, that helps drive the ARPU. And as you see, we're continuing, each successive year, to retain more and more subscribers, which is great. I don't, you know, growth is largely going to be tied to unit growth over time, right? So, that's a key kind of metric, I think, for the subscription business. We gave a range of two and a half to 2.6 million subscribers this year. You know, if we continue with ARPU and growth, it could actually go beyond 2.6.
Brian Mcgee: <unk> and <unk>.
Brian Mcgee: <unk> improvements of about 5%.
Brian Mcgee: So.
That's great. We are also seeing the.
Brian Mcgee: The total subscribers in years, two three and four now.
Brian Mcgee: Will be larger than year, one and so that helps drive the ARPA.
Brian Mcgee: And as you see we're.
Brian Mcgee: I'm hearing on each successive year, the retained more and more subscribers.
Brian Mcgee: Subscribers, which is great.
Brian Mcgee: The growth is largely going to be tied into unit growth.
Brian Mcgee: Overtime right. So that's a key metric.
Brian Mcgee: A metric I think for the subscription business, we gave a range of two and a half to $2 6 million subs.
Brian Mcgee: This year.
Brian Mcgee: Okay.
Brian Mcgee: If we continue with <unk> and growth or could that go beyond 2.6, you could see more growth.
Nicholas Woodman: So, you could see more growth. We've kind of held it back a little bit, maybe, to be conservative there. So, hopefully, that helps answer your question. Got it. Thank you. And then a quick follow-up on Nick's comment on the 2025 product for a helmet. Can you clarify if that's a helmet branded by GoPro, made still entirely by Foresight, or it's a different product with GoPro's own hardware in it?
Speaker Change: We've kind of held it back.
Speaker Change: Maybe to be conservative there.
Speaker Change: So hopefully that helps answer your question.
Speaker Change: Got it thank you.
Speaker Change: And then a quick following up.
Speaker Change: Mixed comment on the 2025 product helmet can you clarify if that's a helmet branded.
Speaker Change: By Gopro.
Speaker Change: <unk> entirely by fore sight are with.
Speaker Change: It's a different product with Gulf coast all hardware.
Nicholas Woodman: As we shared, we're going to be launching our own line of GoPro-branded helmets, and after the acquisition, Foresight will be a part of GoPro. So it will be GoPro-designed and manufactured helmets. And then we also intend to support other leading helmet brands who wish to tech-enable their helmets as well, serving as a technical OEM supplier to them. You know, brand counts for a lot in every industry, and we're looking to leverage our brand to help establish a new bar for performance, convenience, value, safety, and tech-enabled helmets and then use that to help drive the industry forward with the support of other leading brands that want to do the same.
Speaker Change: As we shared we're going to be launching our own line of Gopro branded helmets.
Speaker Change: And after the acquisition for site will be a.
Speaker Change: Part of Gopro, so it will be gopro designed.
And manufactured.
Speaker Change: Yeah.
Speaker Change: Helmets.
Speaker Change: And then we also are intending to support other leading helmet brands, who wish to tech enable their helmets as well.
Speaker Change: Serving as a technical OEM supplier to them.
Speaker Change: Brand counts for a lot in every industry and we're looking to leverage our brand to help establish a new bar for performance.
Speaker Change: Performance convenience value safety and tech enabled elements and then use that to then help.
Speaker Change: Driving industry for with the support of other leading brands that want to do the same.
Martin Yang: Got it. Thanks for the clarification. My last question is on gross margin outlook for 2024. Last quarter, we provided a breakdown of different components and sources of improvement for Margin Expansion 24. Do you still believe those key components are the same as you guided before? If there's any changes, what are they? They're the same.
Speaker Change: Got it thanks for the clarification. My last question is on gross margin outlook for 'twenty four last quarter, we provided a breakdown of optical components and source of improvement for.
Speaker Change: Margin expansion in 2004.
Speaker Change: Do you still believe those key components.
Speaker Change: Are the same as <unk> guided before if theres any changes what are they.
Brian Mcgee: Martin, we have the introduction of our new low, lower product cost entry level product in Q2, which is in our management commentary. We have reduced price protection year over year by about $30 million. We do have identified product cost and tariff savings. The tariff savings might be new.
Speaker Change: The same Martin we have the introduction of our new low.
Speaker Change: Lower product costs entry level product in Q2, which is in a management commentary.
Speaker Change: We have reduced price protection year over year about $37 million.
Speaker Change: We do have.
Speaker Change: Identified product cost and tariffs moving.
Speaker Change: The tariff savings might be new.
Brian Mcgee: In that, we didn't have that last time. The team has done a good job with that. Subscription growth and other improvements. There is a potential offset in there that we factored in, which is that we're seeing potential increases in memory pricing later this year. That can be something that could impact us that we've tried to reflect in our numbers, if that helps.
Speaker Change: And there we didn't have that last time.
Speaker Change: Good job with that subscription growth another improvement there is a potential.
Speaker Change: Potential off offset in that we've factored in which is we are seeing.
Speaker Change: Increases in memory pricing.
Later this year so.
Speaker Change: It can be something that could.
Speaker Change: Impact.
Speaker Change: We've tried to reflect in our <unk>.
Speaker Change: Members.
That helps.
Brian Mcgee: Got it. Thank you, Brian. That's all.
Speaker Change: Got it. Thank you Brian that's all for me.
Speaker Change: We have no additional questions. So I'll pass the conference back to the management team for any closing remarks.
Nicholas Woodman: We have no additional questions, so I will pass the conference back to the management team for any closing remarks. Thank you, operator. And thank you, everybody, for joining today's call. As we mentioned, we're excited to be growing in retail in an effort to expand our TAM. And we believe we can drive long-term revenue, profit, and margin growth with our expanded product line and increased marketing activities planned for the rest of the year, combined with our steady addition of more retail doors, targeting 7000 additional doors over the next two years.
Speaker Change: Thank you operator, and thank you everybody for joining today's call as we mentioned we're excited to be growing in retail in an effort to expand our Tam and we believe we can drive long term revenue profit and margin growth with our expanded product line and increased marketing activities planned for the rest of the year combined with our <unk>.
Speaker Change: Eddie addition of more retail doors targeting 7000 additional doors over the next two years lots to be excited about and as I mentioned, it's good to be on the build again at gopro. Thank.
Operator: Lots to be excited about. And as I mentioned, it's good to be on the build again at GoPro. Thank you, everyone. This is Team GoPro signing off. That concludes today's call. Thank you all for your participation. You may now disconnect your line.
Speaker Change: Thank you everyone. This is team gopro signing off.
Speaker Change: Yes.
Speaker Change: That concludes today's call. Thank you all for your participation you may now disconnect your lines.