GoPro Sales Double After Price Cut, Karma Game Over

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GoPro Announces Preliminary Fourth Quarter 2017 Results

SAN MATEO, Calif., Jan. 8, 2018 /PRNewswire/ – GoPro, Inc. (NASDAQ: GPRO) today reported certain preliminary financial results for the fourth quarter ended December 31, 2017. GoProexpects revenue to be approximately $340 million for the fourth quarter of 2017. Fourth quarter revenue includes a negative impact of approximately $80 million for price protection on HERO6 Black, HERO5 Black and HERO5 Session cameras, as well as the Karma drone.

GoPro expects GAAP gross margin for the fourth quarter of 2017 to be between 24% and 26%. Non-GAAP gross margin for the fourth quarter of 2017 is expected to be between 25% and 27%. Non-GAAP gross margin for the same period, excluding the price protection impact of $80 million and other charges of between $19 million and $21 million, is expected to be between 44% and 46%. GoPro expects GAAP operating expenses to be between $136 million and $140 million for the fourth quarter of 2017 and non-GAAP operating expenses to be between $118 million and $122 million for the same period.

GoPro ended the fourth quarter with cash and cash equivalents of $247 million, up $50 million over the third quarter of 2017.

“As we noted in our November earnings call, at the start of the holiday quarter we saw soft demand for our HERO5 Black camera,” said GoPro founder and CEO Nicholas Woodman. “Despite significant marketing support, we found consumers were reluctant to purchase HERO5 Black at the same price it launched at one year earlier. Our December 10 holiday price reduction provided a sharp increase in sell-through.”

Globally, HERO5 Black sell-through more than doubled in the two weeks following the December 10 price reduction, while HERO5 Session sell-through roughly tripled.

Sales of the newly introduced flagship HERO6 Black camera performed as expected during the fourth quarter. On January 7, GoPro lowered the price of its premium model, HERO6 Black from US$499 to US$399 to align with its good, better, best product strategy.

Initial uptake of GoPro’s newly launched spherical camera, Fusion, was better than expected during the quarter.

“GoPro is committed to turning our business around in 2018,” said Nicholas Woodman. “We entered the new year with strong sell-through and are excited with our hardware and software roadmap. We expect that going forward, our roadmap coupled with a lower operating expense model will enable GoPro to return to profitability and growth in the second half of 2018.”

2018 Products and Operating Expenses

In 2018, GoPro will continue to innovate with several new products aimed at new and existing customers. GoPro’s sharper focus will enable an US$80 million reduction in operating expenses compared to 2017 levels, resulting in a target operating expense level of below US$400 million for 2018 on a non-GAAP basis.

The lower non-GAAP operating expense target will be achieved through a variety of strategies, including:

  • GoPro is reducing its global workforce from 1,254 employees as of September 30, 2017 to fewer than 1,000 employees worldwide.
  • GoPro founder and CEO Nicholas Woodman will reduce his 2018 cash compensation to $1.
  • Although Karma reached the #2 market position in its price band in 2017, the product faces margin challenges in an extremely competitive aerial market. Furthermore, a hostile regulatory environment in Europe and the United States will likely reduce the total addressable market in the years ahead. These factors make the aerial market untenable and GoPro will exit the market after selling its remaining Karma inventory. GoPro will continue to provide service and support to Karma customers.

A restructuring of GoPro’s business will result in an estimated aggregate charge of $23 million to $33 million, including approximately $13 million to $18 million of cash expenditures as a result of a reduction in force, substantially all of which are severance and related costs, as well as approximately $10 million to $15 million of other charges, consisting primarily of non-cash items. GoPro expects to recognize most of the restructuring charges in the first quarter of 2018. GoPro will provide more detail on its 2017 results and 2018 outlook in its fourth quarter earnings report which will take place in early February.

Report: GoPro has laid off 200-300 more staff from its drone division

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Californian action camera manufacturer GoPro has laid off between 200 and 300 staff, according to a report by TechCrunch. The report claims the redundancies have been made in the division of the company that builds it aerial offering—the Karma drone—and that GoPro cited a need to “better align our resources with business requirements” as the reason for the layoffs.

GoPro has suffered in recent times, with its share price taking a hammering and profits showing in negative figures. One of the main reasons for this was the much-anticipated Karma drone, which had to be recalled after it was discovered the battery could shake itself loose, causing the device to lose power mid-flight and plummet back to Earth.

The company claims that, since returning to stores, Karma has been the number 2 best-selling drone priced above $1,000 in the US for a period of six months up to September 2017. Even so, it would have faced (and still does) stiff competition from former partner DJI.

GoPro’s November report to shareholders announced increased revenue of $300 million, up 37% on the same quarter last year, and a gross margin of 40%. The company was in profit too, making $15 million against a loss of $104 million in the third quarter of 2016. However, the share price has remained low, with current trading at $7.51 against a high of $90 in October 2014.

After 370 job cuts in 2016 and early 2017 the company stated that it employed 1,327 people, but that number is now set to drop to close to 1,000, according to the TechCrunch report.

GoPro, which has been operating under the name since 2004, hasn’t commented on the claims, but the job losses have come between the end of the financial year (December 31st) and the company’s annual report, which would seem the logical time to do it.