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Fitbit (FIT) Q2 Loss Narrower Than Estimated, Revenues Beat

Zacks Equity Research

Fitbit, Inc. FIT reported second-quarter 2019 adjusted loss of 22 cents per share, narrower than the Zacks Consensus Estimate of a loss of 25 cents.

The company’s total revenues came in at $313.6 million, up 4.7% year over year and 15.3% on a sequential basis.

The top line was within management’s guided range of $305-$320 million and surpassed the consensus mark of $312 million.

Strong sales gain from its trackers aided growth in the second quarter. Tracker devices sold increased 56% year over year, while smartwatch devices sold decreased 7% year over year.

During the quarter, Fitbit sold 3.5 million devices, up 31% year over year. New products launched over the past 12 months — namely Fitbit Charge 3, Fitbit Inspire, Fitbit Inspire HR, Fitbit Ace 2 and Fitbit Versa Lite Edition — contributed 68% to the company’s revenues.

The average selling price decreased 19% from the prior-year level to $86 per device in the second quarter.

Let’s check out the numbers in detail.

Fitbit, Inc. Price, Consensus and EPS Surprise

 

Fitbit, Inc. Price, Consensus and EPS Surprise

Fitbit, Inc. price-consensus-eps-surprise-chart | Fitbit, Inc. Quote

Top-Line Details

Tracker revenues accounted for 59% of total revenues and were up 51% year over year.

Smartwatch revenues, which contributed 38% to revenues, decreased 27% year over year. The decrease was due to weaker-than-expected sales of Fitbit Versa Lite. Accessory and non-device revenues represented 3% of revenues.

Geographically, revenues from the United States accounted for 58% of second-quarter revenues, EMEA brought in 28%, Americas excluding the United States contributed 6% and the remaining 8% came from Asia Pacific.

On a sequential basis, all the regions depicted an increase, except Asia Pacific. On a year-over-year basis, revenues from the United States and Asia Pacific decreased, while the same from all other regions marked an increase.

Margins and Net Income

Non-GAAP gross margin was 35.6%, down 530 basis points year over year. Gross margins were negatively impacted by lower warranty benefit and the reduction in average selling price, partially offset by an improvement in yield loss and efficiencies.

Non-GAAP operating expenses were 160 million, down 18% from the year-ago quarter.

Pro-forma net loss was $35.8 million or loss per share was 14 cents versus net loss of $54.2 million or loss per share of 22 cents in the year-ago period.

Balance Sheet and Cash Flow

Cash and cash equivalents & Marketable securities were $564.9 million compared with $644.2 million in the first quarter.

Accounts receivables were $258.6 million compared with $250.6 million in first-quarter 2018.

Cash flow from operations was ($76.4) million and free cash flow totaled ($81.2) million in the second quarter.

Guidance

For third-quarter 2019, Fitbit expects revenues in the range of $335-$355 million, indicating a decrease of 15-10% on a year-over-year basis. The Zacks Consensus Estimate for the same is pegged at $398.2 million.

Non-GAAP basic net loss per share is expected in the range of ($0.11) to ($0.09). The Zacks Consensus Estimate for loss per share is pegged at 2 cents.

For full-year 2019, the company lowered revenue forecast to the range of $1.43-$1.48 billion from previous guidance of $1.52-$1.58 billion. The Zacks Consensus Estimate for revenues is pegged at $1.56 billion.

Zacks Rank and Stocks to Consider

Currently, Fitbit has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Alibaba Group Holding Limited BABA, Teradyne, Inc. TER and eBay Inc. EBAY, 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 Alibaba, Teradyne and eBay is currently projected at 26.8%, 11.4% and 9.4%, respectively.

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