GoPro, Inc.’s (NASDAQ:GPRO) reported first-quarter 2018 adjusted loss of 34 cents per share, narrower than the Zacks Consensus Estimate of a loss of 40 cents per share.
On a GAAP basis, the company reported a loss of 55 cents for the quarter, compared with a loss of 78 cents in the year-ago period.
The company posted better-than-expected revenue numbers for the quarter and also reduced its operating expenses significantly on a year-over-year basis.
Inside the Headlines
Total revenues in the quarter came in at $202.3 million, down 7.8% on a year-over-year basis. However, the figure trumped the Zacks Consensus Estimate of $175.4 million.
Notably, the year-over-year decline in revenues was partially offset by robust sales of the company’s HERO5 Black and HERO6 Black products along with the launch of its latest entry-level HERO camera.
Notably, GoPro was the best-selling camera in the overall digital imaging category in North America for seventeenth consecutive quarter. The company remains optimistic about its prospects in end markets mainly on account of enhanced marketing programs, expense control measures, improving channel management as well as upcoming product launches.
For the quarter, R&D expenses were down 23% year over year. Additionally, sales and marketing expenses declined 27.5% year over year. First-quarter total operating expenses came in at $119.7 million, down 23.7% year over year.
Non-GAAP gross margins contracted 800 bps year over year to 24.3%. Non-GAAP operating loss came in at $44.5 million, down 26.2% from $60.3 million incurred last year.
Restructuring Measures
GoPro has been aggressively cutting costs in recent times through layoffs. Last year, the company conducted two rounds of layoffs, retrenching 7% and 15% of its workforce in January and November, respectively. GoPro also shuttered its entertainment and media business as part of the restructuring last year.
For 2018, the company has a target to limit operating expenses to below $400 million compared with $476 million incurred in 2017. A large part of the reduction can be attributed to the company’s decision of exiting its drone business and reducing employee headcount.
Notable Developments
Last month, the company rolled out an entry-level HERO camera that is designed to capture impressive videos and pictures. The new camera will enable users to share experiences that are difficult to get through a phone. Featuring a 2-inch touch display, the camera is waterproof up to 30 feet. This makes it extremely durable and ideal for kids, adventurers, social sharers and travellers alike.
In March, the company announced a global, equipment license and multi-year technology agreement with Jabil Inc. The collaboration will make innovative, GoPro enabled products and services available from some of the well-known hardware and software companies. The collaboration will encompass a range of products and services offered by each company including certain digital imaging as well as consumer products.
Liquidity
Exiting the quarter, the company had cash and cash equivalents of about $105 million, up significantly from $74.9 million as on Mar 31, 2017.
Our Take
GoPro has been aiming toward transforming itself from the ‘camera maker’ to ‘content maker’ and has taken significant steps to diversify into higher-margin businesses including video editing and virtual reality. The company is developing various types of software solutions and hardware to curtail the complexity of managing, editing and sharing contents on different media platforms.
After some difficult quarters of booking charges related to inventory write downs, the company has now eliminated entry-level products, and has a clean distribution channel. The company announced measures to turn its business around in 2018, including intense restructuring and streamlining its supply chain. GoPro is committed to recapture growth, with a slimmer camera portfolio and interesting product launches.
GoPro currently carries a Zacks Rank #2 (Buy).
Other Stocks to Consider
Some other top-ranked stocks worth considering in the same space include Rocky Brands, Inc. (NASDAQ:RCKY) , Amaya Inc. (NASDAQ:TSG) and Pool Corporation (NASDAQ:POOL) . While Rocky Brands sports a Zacks Rank #1 (Strong Buy), Amaya and Pool Corporation carry Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Rocky Brands has an impressive earnings surprise history, surpassing estimates in the trailing four quarters with an average beat of 264.6%.
Amaya has a decent earnings surprise history, exceeding estimates thrice in the trailing four quarters with an average beat of 12.6%.
Pool Corporation has a modest earnings surprise history, exceeding estimates thrice in the trailing four quarters with an average beat of 7.8%.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
Pool Corporation (POOL): Free Stock Analysis Report
GoPro, Inc. (GPRO): Free Stock Analysis Report
Rocky Brands, Inc. (RCKY): Free Stock Analysis Report
Amaya Inc. (TSG): Free Stock Analysis Report
Original post