GoPro, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Amounts are in U.S. dollars; financial statement amounts below are in millions unless otherwise noted. GoPro sells cameras, mounts and accessories, and subscription and services through GoPro.com and retail and wholesale partners.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $216.7 | $203.7 | Up 6% |
| Gross profit / gross margin | $90.5 / 41.8% | $78.7 / 38.6% | Margin up 320 bps |
| Operating income (loss) | $8.2 | $(3.5) | Improved |
| Net income (loss) | $5.7 | $(10.2) | Turned profitable |
| Diluted GAAP EPS | $0.04 | $(0.07) | Improved |
| Adjusted EBITDA | $20.6 | $10.7 | Up 93% |
| Operating cash flow | $(73.4) | $(25.5) | Greater cash use |
Gross margin improved mainly on higher camera selling prices and subscription and service growth, partly offset by foreign exchange effects. Operating expenses were $82.3 million, broadly flat year over year. Interest expense fell to $2.2 million from $5.9 million, primarily because adoption of ASU 2020-06 eliminated non-cash debt-discount amortization.
Camera shipments were 523,000, down 6%, while average selling price was $414, up 13%. Subscription and service revenue rose 73% to $18.6 million; subscribers reached approximately 1.74 million, up 85%. GoPro.com revenue was $88.6 million, or 40.9% of sales; retail revenue was $128.1 million. EMEA revenue grew 24% and APAC 11%, while Americas revenue declined 4% year over year.
At March 31, cash and cash equivalents were $305.3 million and marketable securities were $144.6 million, totaling $449.9 million, down from $538.9 million at year-end. Current assets were $666.8 million and current liabilities $358.3 million. Total debt carrying value was $265.3 million: $125.0 million of 2022 Notes classified as short-term and $140.3 million of 2025 Notes classified as long-term. GoPro repaid the 2022 Notes at maturity on April 15, 2022, paying $125.0 million principal plus $2.2 million accrued interest.
Operating cash outflow primarily reflected working-capital outflows, including a $33.0 million inventory increase and a $123.2 million decrease in accounts payable and other liabilities, partly offset by collections of receivables. Financing cash use included $10.0 million of share repurchases and $7.2 million of taxes on net share settlements. The company had not borrowed under its $50 million revolving facility and was in compliance with its financial covenants.
Material changes and unusual items
- Adoption of ASU 2020-06 on January 1, 2022 changed convertible-note accounting and diluted EPS to the if-converted method; prior periods were not restated. It increased reported debt and reduced opening additional paid-in capital, with a net adjustment to opening equity. The change also reduced reported interest expense and increased diluted weighted-average shares in Q1 2022.
- The company repurchased 1.12 million shares for $10.0 million at an average $8.93 per share under a newly authorized $100 million program. $90 million remained available at quarter-end.
- Q1 2022 GAAP diluted EPS included 31.9 million dilutive shares, primarily reflecting convertible-note accounting. The company’s non-GAAP measures exclude selected items and should be considered alongside, not instead of, GAAP results.
- GoPro received a favorable summary judgment in a patent case; the opposing party appealed on April 13, 2022. The company said it intended to defend itself and could not determine a loss range for the legal matters described.
Outlook, commentary and risks
No quantified revenue, earnings or margin guidance is provided in the supplied filing text. Management said cash, cash equivalents, marketable securities and available credit were expected to cover working capital, capital expenditures, commitments and other liquidity needs for at least one year from issuance of the financial statements. Management emphasized that profitability depends on continued direct-to-consumer and subscription growth, new product execution, and cost management. It also noted the customary seasonal pattern of stronger fourth-quarter revenue.
Key uncertainties include COVID-19 and broader economic conditions, inflation and currency movements, supply-chain disruption and reliance on third-party and some sole-source suppliers, competition and discretionary consumer demand, product launch and inventory forecasting, customer concentration, and the ability to sustain direct sales and subscription growth. The company reported $348.5 million of undiscounted future obligations under multi-year agreements with terms longer than one year. It also said U.S. tax rules requiring capitalization and amortization of research and development expenses could materially affect cash flows beginning in 2024 if the law does not change.
Important facts for investors to verify
- Whether subscriber growth, subscription revenue and direct-to-consumer sales continue to offset lower camera unit shipments.
- Cash generation and working-capital trends, particularly inventory levels and payment timing to suppliers.
- Post-April repayment liquidity and the remaining debt profile, including the $143.8 million principal amount of 2025 Notes.
- Whether gross-margin gains persist amid component costs, foreign exchange, pricing and supply-chain pressures.
- Developments in the patent appeal, uncertain tax positions, and the projected cash-flow effect of R&D tax capitalization.