Business context and reporting period
GoPro, Inc. designs and sells cameras, mounts and accessories, and offers software and subscription services. This unaudited Form 10-Q covers the three months ended March 31, 2021; comparisons are with Q1 2020 unless noted. GoPro continued its shift toward direct-to-consumer sales and cited the HERO9 Black launch, refreshed Quik app and subscription growth as strategic priorities.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $203.7 million | $119.4 million |
| Gross profit / margin | $78.7 million / 38.6% | $38.4 million / 32.2% |
| Operating loss | $3.5 million | $56.1 million |
| Net loss | $10.2 million; $0.07 per share | $63.5 million; $0.43 per share |
| Adjusted EBITDA (non-GAAP) | $10.7 million | $(41.4) million |
| Non-GAAP net income (loss) | $4.8 million | $(49.6) million |
| Operating cash flow | $(25.5) million | $(68.3) million |
Gross margin improved 640 basis points. Cash and cash equivalents were $296.8 million at quarter-end, down from $325.7 million at December 31, 2020. Current assets were $506.1 million and current liabilities $211.5 million. Inventory was $111.8 million, up from $97.9 million at year-end.
Long-term debt had a $221.9 million carrying value. Outstanding principal comprised $125.0 million of 3.50% convertible notes due April 2022 and $143.8 million of 1.25% convertible notes due November 2025. GoPro had an undrawn $50 million revolving credit facility and reported compliance with its financial covenant. The company said cash, cash equivalents and available facility resources should cover liquidity requirements for at least one year from issuance of the statements.
Changes versus the prior comparable period
- Revenue increased 71%; camera shipments rose 63% to 556,000 units, and average selling price increased 4% to $366.
- GoPro.com revenue grew 224% to $82.1 million, representing 40.3% of revenue versus 21.2% a year earlier. Retail and distribution revenue increased 29% but fell to 59.7% of the mix from 78.8%.
- Management attributed revenue growth to the direct-sales strategy and lower retail-channel inventory entering the quarter compared with the prior year. The filing does not isolate the effects of pandemic-related demand or other market factors.
- Operating expenses declined 13% to $82.2 million, primarily reflecting cost controls and savings from 2020 restructuring. Sales and marketing fell 18%, while research and development was essentially flat.
- Cash used in operations improved by $42.8 million year over year, but remained negative, mainly because of working-capital outflows, including lower accounts payable and other liabilities and higher inventory.
Outlook, commentary, risks and unusual items
No specific quarterly or full-year revenue or earnings guidance is provided in the supplied filing text. Management said it expects to focus on growing direct-to-consumer sales and subscriptions, developing products and software, and controlling costs. GoPro reported surpassing one million subscribers in April 2021. It also noted customary fourth-quarter seasonality and that timely product launches and forecasting are important.
- Key risks include continued COVID-19 effects, supply constraints and reliance on some sole-source suppliers, competition and pricing pressure, demand and inventory forecasting, dependence on seasonal sales, and execution of the direct-to-consumer and subscription strategies.
- Convertible notes create a significant repayment and liquidity consideration, particularly the $125 million principal due in April 2022. Note conversion, refinancing, covenant restrictions and potential dilution are additional risks.
- Cash flow was pressured by working capital despite improved earnings. Accounts payable and other liabilities declined by $56.1 million, inventory increased by $13.9 million, and accounts receivable declined by $38.0 million during the quarter.
- Unrecognized tax benefits were $27.6 million; the company said up to $13.0 million could be released within 12 months, though the net effect could not be quantified. A full valuation allowance applies to U.S. net deferred tax assets.
- Future undiscounted obligations under specified multi-year agreements were $307.5 million at quarter-end. The filing does not provide a clear breakdown of that total in the supplied text.
- A shareholder derivative settlement remained subject to final court approval and was not expected to materially affect the financial statements. GoPro disputed patent claims by Contour IP Holdings; the cases were set for trial in April 2022. The company said it could not determine a loss or range of loss for the legal matters described.
- Management reported effective disclosure controls as of March 31, 2021, with no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether direct-to-consumer growth and subscriber expansion can be sustained, and how they affect margins and sales through retail partners.
- How GoPro plans to fund or repay the $125 million of convertible-note principal due in April 2022, and whether liquidity and credit-facility conditions remain adequate.
- Whether operating cash flow turns positive as inventory and other working-capital needs change.
- Whether product demand, supply availability, seasonal sales and COVID-19 conditions align with management’s assumptions; the filing gives no specific numerical guidance.
- Developments in the patent litigation, derivative settlement, tax positions and material contractual commitments.
- The assumptions and exclusions behind non-GAAP profitability measures; Q1 GAAP results remained a net loss.