GoPro (GPRO) Q4 Earnings Miss Estimates, Revenues Up Y/Y

GoPro, Inc. (NASDAQ:GPRO) reported tepid fourth-quarter 2019 results, wherein both the top and bottom lines missed the Zacks Consensus Estimate. The company’s share price declined 9.2% post earnings release in yesterday’s trading session to close at $3.96.

Net Income

On a GAAP basis, net income for the December quarter was $95.8 million or 65 cents per share compared with $31.7 million or 22 cents per share in the year-ago quarter. The three-fold increase in GAAP earnings was primarily attributable to higher revenues and income tax benefit in the reported quarter. For full-year 2019, net loss was $14.7 million or loss of 10 cents per share compared with net loss of $109 million or loss of 78 cents per share in 2018.

Quarterly non-GAAP net income came in at $102.5 million or 70 cents per share compared with $42.4 million or 30 cents per share in the year-ago quarter. The bottom line missed the Zacks Consensus Estimate by 9 cents.

Non-GAAP net earnings in 2019 were $35.3 million or 24 cents per share against net loss of $31.9 million or loss of 23 cents per share a year ago. The drastic improvement was mainly driven by top-line growth.

GoPro, Inc. Price, Consensus and EPS Surprise

Revenues

GoPro generated revenues of $528.3 million, up 40% from $377.4 million a year ago. The increase was primarily driven by robust portfolio line-up, app monetization strategy and high-volume sales of HERO8 Black and MAX with Plus subscription service strategy, which further drove its subscriber base. The top line, however, lagged the consensus estimate of $571 million. Full year-revenues jumped 4% to $1,194.7 million from $1,148.3 million.

Revenues from Americas came in at $212.2 million (40.2% of total revenues), up 34.6% from $157.7 million in the year-ago quarter. Revenues from EMEA were $156 million (29.5%), up 34% from $116.4 million and APAC generated $160.1 million (30.3%), up 55% from $103.3 million.

Revenues from Direct channel were $230.3 million (43.6% of total revenues), up 33.6% from $172.4 million. Revenues from Distribution channel came in at $298 million (56.4%), up 45.4% from $205 million year over year.

GoPro shipped 1.9 million camera units during the reported quarter, up 31.4% year over year. The company had $144.2 million in inventory compared with $116.5 million in the year-ago quarter. Non-GAAP gross margin came in at 38.6%, up 20 basis points (bps) from 38.4%. However, it was negatively impacted by tariffs related to production delays of HERO8 Black cameras as a result of shift in production facilities from China to Mexico. Impressively, cameras with prices above $300 represented 90% of revenues in the quarter and for the full year compared with the respective tallies of 74% and 62% a year ago.

Cash Flow & Liquidity

In 2019, GoPro utilized $24.4 million of net cash from operating activities compared with $42.4 million of cash utilization in 2018. As of Dec 31, 2019, the company had $150.3 million in cash and cash equivalents with $148.8 million of long-term debt compared with respective tallies of $152.1 million and $139 million a year ago.

Q1 and 2020 Guidance

GoPro has provided outlook for first-quarter and full-year 2020. For the quarter, management expects revenues of $140-$260 million with net loss of $40-$60 million.

For the full year, non-GAAP earnings are expected to be in the range of 40-50 cents per share and GAAP earnings of 1 cent to 11 cents per share. Cash flow is anticipated in the band of $80-$100 million with gross margin of 38-39%. EBITDA is likely to be in the range of $95-$110 million. Markedly, the company expects to improve its margins with effective cost-control measures.

Zacks Rank & Other Stocks to Consider

GoPro currently has a Zacks Rank #2 (Buy).

A few top-ranked stocks in the broader industry are Cimpress plc (NASDAQ:CMPR) , Johnson Outdoors Inc. (NASDAQ:JOUT) and YETI Holdings, Inc. (NYSE:YETI) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cimpress surpassed earnings estimates thrice in the trailing four quarters, the positive surprise being 41.4%, on average.

Johnson Outdoors surpassed earnings estimates twice in the trailing four quarters, the positive surprise being 15%, on average.

YETI surpassed earnings estimates in each of the trailing four quarters, the positive surprise being 51.8%, on average.

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