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Fitbit (FIT) Q4 Loss Wider Than Estimated, Revenues Lag

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Fitbit, Inc. FIT reported fourth-quarter 2019 adjusted loss of 12 cents per share, wider than the Zacks Consensus Estimate of a loss of 4 cents.

The company’s total revenues came in at $502.1 million, down 12.1% year over year but up 44% on a sequential basis. The figure also missed the consensus estimate by 5.99%.

Following the weaker-than-expected fourth-quarter results, the share price fell 1.4% in after-hours trading.

On Nov 1, 2019, Fitbit entered into a definitive agreement to be acquired by Google for a total amount of approximately $2.1 billion. Fitbit stockholders have approved the transaction in January. The deal is expected to close in 2020, subject to other customary closing conditions. This move will likely help the company to accelerate innovation in the wearables category.

Let’s check out the numbers in detail.

Fitbit, Inc. Price, Consensus and EPS Surprise

 

Top-Line Details

During the fourth quarter, Fitbit sold 6 million wearable devices, up 8% year over year.

The average selling price decreased 19% from the prior-year level to $81 per device in the fourth quarter.

Geographically, revenues from the United States accounted for 55% of fourth-quarter revenues and decreased 16% year over year.

On a year-over-year basis, international revenues declined 7% to $226 million. Americas, excluding the United States, declined 2% to $44 million and APAC was down 40% from the prior-year quarter to $29 million. However, EMEA was up 2% year over year to $153 million.

Operating Results

Non-GAAP gross margin was 26.3%, down 1,240 basis points year over year. Gross margins were negatively impacted by an unfavorable product mix, lower warranty benefits and a reduction in average selling price.

Per the press release, operating expenses were 237.1 million, up 15.1% from the year-ago quarter. As a percentage of sales, research & development, sales & marketing, and general & administrative expenses increased from the year-ago quarter.

Balance Sheet and Cash Flow

Cash and cash equivalents & marketable securities were $518.5 million compared with $502.2 million in the third quarter.

Accounts receivables were $435.3 million compared with $345.6 million in third-quarter 2019.

Cash flow from operations was $28.3 million and free cash flow totaled $18 million in the fourth quarter.

Guidance

The company did not provide any guidance for the first quarter due to the pending acquisition by Google.

Zacks Rank and Stocks to Consider

Currently, Fitbit has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Itron, Inc. TER, Splunk Inc. (SPLK - Free Report) and Agilent Technologies A, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth for Itron, Splunk, and Agilent is currently projected at 25%, 31.2% and 12.5%, respectively.

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