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GoPro (GPRO) Q3 Earnings Top Estimates, Revenues Surge Y/Y

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GoPro, Inc. (GPRO - Free Report) reported impressive third-quarter 2020 results, with the bottom line and top line surpassing the respective Zacks Consensus Estimate. Solid sales of HERO8 and HERO9 Black cameras across various geographies and accretive subscriber base, coupled with a direct-to-consumer strategy, buoyed GoPro’s quarterly performance despite the pandemic.

Bottom Line

On a GAAP basis, net income in the September quarter came in at $3.3 million or 2 cents per share against net loss of $74.8 million or loss of 51 cents per share in the year-ago quarter. The year-over-year improvement was primarily driven by a more than two-fold rise in the top line.

Quarterly non-GAAP net income came in at $31 million or 20 cents per share against net loss of $61.3 million or loss of 42 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 14 cents.

GoPro, Inc. Price, Consensus and EPS Surprise

GoPro, Inc. Price, Consensus and EPS Surprise

Revenues

GoPro generated revenues of $280.5 million, up a whopping 113.9% from $131.2 million in the year-ago quarter. The surge in revenues was mainly driven by robust sales across all geographies and channels coupled with an accretive subscriber base despite adversities stemming from the COVID-19 pandemic. Further, the company witnessed an upward sell-through trend of more than 950,000 GoPro camera units in the reported quarter. The top line surpassed the consensus estimate of $233 million.

Markedly, GoPro ended the reported quarter with 501,000 subscribers, up 65% from the prior-year quarter’s figure. It expects to surpass 700,000 subscribers by the year-end. The company launched HERO9 Black in third-quarter 2020, which was further bolstered by solid traction in GoPro subscription service.

Region wise, revenues from the Americas came in at $157.7 million (56.2% of total revenues), up 161.1% from $60.4 million in the year-ago quarter. Revenues from Europe, Middle East and Africa (EMEA) were $64.6 million (23%), up 30.8% from $49.4 million, and Asia and Pacific (APAC) generated $58.2 million (20.8%), up 172% from $21.4 million.

On the basis of channels, revenues from Gopro.com were $81.3 million (29% of total revenues), up 247.4% from $23.4 million. The year-over-year increase in GoPro.com was primarily driven by continued investments to enhance the e-commerce experience, which ultimately led the healthy momentum in website engagement and conversion. Solid demand for HERO8 Black and HERO9 Black cameras was also a contributing factor. Revenues from Retail channel came in at $199.2 million (71%), up 84.8% from $107.8 million year over year.

GoPro shipped 923,000 camera units during the reported quarter, up 92.7% year over year. The company had $132.8 million in inventory compared with $250 million in the year-ago quarter. The year-over-year inventory reductions were mainly driven by an upward sell-through trend across all geographies, particularly in EMEA and APAC.

Non-GAAP gross margin was 36.2% compared with 23.4% in the prior-year quarter. Impressively, cameras with prices above $300 contributed 83% to revenues in the reported quarter, reflecting burgeoning demand for GoPro’s premium products.

Cash Flow & Liquidity

During the first nine months of 2020, GoPro utilized $12.5 million of net cash for operating activities compared with $112.7 million of cash utilization in the year-ago period. As of Sep 30, the company had $146.9 million in cash and cash equivalents with $156.8 million of long-term debt.

Q4 and Full-Year 2020 Guidance

GoPro provided the guidance for both fourth-quarter and full-year 2020. For fourth quarter, revenues are estimated to be $365 million +/- $10 million, while adjusted gross margins are expected to be 38% +/- 50 basis points. Sell-through of GoPro camera units is expected to be 1.3 million. Meanwhile, adjusted earnings are anticipated to be 37 cents +/- 5 cents per share.

For full-year 2020, revenues are expected to be $900 million +/- $10 million, while adjusted gross margins are estimated to be 36%. Sell-through of GoPro camera units is expected to be 3.7 million. Adjusted earnings are anticipated to be 6 cents +/- 5 cents per share.

Moving Forward

Despite the uncertainties stemming from the pandemic, GoPro has delivered an impressive performance on the back of a resilient business model. Although the action video camera maker’s upcoming results might get affected by the COVID-19 pandemic, GoPro is confident that any kind of operational changes will not hurt its 2020 product roadmap, which includes new hardware, software and subscription products.

Notably, in the third quarter, GoPro’s direct-to-consumer and subscription-centric strategy not only expanded margins but also increased subscriber base with lowered channel inventories and efficient working capital management. It believes that a more direct-to-consumer-centric approach with a lower operating expense model is better aligned with the present business climate as well as is accretive to the average selling price of products and gross margin. This, in turn, will enable the company to tap potential opportunities, which bodes well for long-term growth.

Zacks Rank & Stocks to Consider

GoPro currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader industry are Fox Corporation (FOXA - Free Report) , TEGNA Inc. (TGNA - Free Report) and Grupo Televisa, S.A.B. (TV - Free Report) . While Fox Corporation and TEGNA sport a Zacks Rank #1 (Strong Buy), Grupo Televisa carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fox Corporation delivered a trailing four-quarter positive earnings surprise of 106.6%, on average.

TEGNA delivered a trailing four-quarter positive earnings surprise of 20.2%, on average.

Grupo Televisa delivered a trailing four-quarter positive earnings surprise of 30.8%, on average.

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