GoPro (GPRO) Q2 Earnings Top Estimates on Stellar Revenues

GoPro, Inc. GPRO reported solid second-quarter 2021 results, with both the bottom line and top line surpassing their respective Zacks Consensus Estimate. Despite the current volatile environment, the company maintained its better-than-expected momentum on the back of robust direct-to-consumer, subscription-centric strategy, higher subscription revenues, accretive customer base, increasing demand for its high-end cameras across all regions followed by diligent operational execution.

Bottom Line

On a GAAP basis, net income in the June quarter was $17 million or 10 cents per share against net loss of $51 million or loss of 34 cents per share in the prior-year quarter. The year-over-year improvement was mainly driven by solid top-line growth.

Quarterly non-GAAP net income came in at $19.9 million or 12 cents per share against net loss of $29.7 million or loss of 20 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 8 cents.

GoPro, Inc. Price, Consensus and EPS Surprise

GoPro, Inc. Price, Consensus and EPS Surprise

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

Revenues

GoPro generated revenues of $249.6 million, up 85.9% from $134.2 million in the year-ago quarter. The stellar revenues were mainly driven by robust sales of premium products across all regions and channels, along with an accretive subscriber base. This improved the company’s margins significantly. Also, strong retail partnerships and expanding direct-to-consumer and subscription businesses boosted substantial unit sell amid the pandemic. The top line surpassed the consensus estimate of $233 million.

Further, the company witnessed an upward sell-through trend of nearly 820,000 GoPro camera units in the reported quarter, up more than 10% year over year. Driven by higher subscription revenues, GoPro outdid the 1 million subscriber mark during the second quarter of 2021. It tapped 1,160,000 subscribers at the end of the reported quarter, up 211% year over year.

GoPro expects to surpass 1.7 million subscribers by the year end, thereby approaching the 2 million subscriber milestone. The company’s newly launched Quik App witnessed more than 100,000 paying Quik subscribers, contributing to revenues in the reported quarter.

Region wise, revenues from the Americas came in at $146.6 million (58.8% of total revenues), up 77.5% from $82.6 million in the year-ago quarter. Revenues from Europe, Middle East and Africa (EMEA) were $61.2 million (24.5%), up 75.4% from $34.9 million, and Asia and Pacific (APAC) generated $41.8 million (16.7%), up 150.3% from $16.7 million.

On the basis of channels, revenues from GoPro.com were $87.8 million (35.2% of total revenues), up 47.6% from $59.5 million. The year-over-year increase was primarily driven by higher direct-to-consumer and subscription revenues via GoPro.com. In the GoPro.com channel, hardware revenues totaled $76.2 million, up 39.1%, and subscriptions revenues came in at $11.6 million compared with $4.7 million in the year-ago quarter. Encouraged by a better-than-expected second quarter momentum, the company aims to bolster its margins with continued investments to enhance shopper experience on the back of robust website engagement and conversion. Revenues from Retail channel came in at $161.8 million (64.8%), up 116.6% from $74.7 million a year ago.

GoPro shipped 724,000 camera units during the reported quarter, up 61.6% year over year. The company had $106.8 million in inventory compared with $142.2 million in the year-ago quarter. The inventory reductions were mainly driven by an upward sell-through trend across all regions. The company unveiled Open GoPro, an open API initiative, in the second quarter, that enables third-party developers to integrate HERO9 Black into their own development efforts. This is likely to reinforce its market penetration globally.

Other Details

Gross profit was $99.3 million, up 144% year over year. Total operating expenses were $89.8 million, up from $85.6 million, primarily due to higher research and development expenses. Operating income came in at $9.5 million against operating loss of $44.9 million in the prior-year quarter.

GoPro is committed to strengthening its subscription-centric, consumer-direct business model to improve its earnings outlook, margins and revenues for the second half of 2021. Cameras with prices above $300 contributed 94% to revenues in the reported quarter, reflecting growing demand for GoPro’s premium products.

Cash Flow & Liquidity

During the first six months of 2021, GoPro utilized $2.3 million of net cash for operating activities compared with $112 million of cash utilization in the year-ago period. As of Jun 30, 2021, the company had $285.8 million in cash and cash equivalents with $107.7 million of long-term debt.

Q3 Guidance

GoPro provided guidance for third-quarter 2021. Revenues are estimated to be $290 million +/- $5 million, while adjusted gross margins are expected to be 40% +/- 50 basis points. Sell-through of GoPro camera units is expected to be in the range of 775,000 to 825,000. Adjusted earnings are anticipated to be 19 cents +/- 2 cents per share.

Moving Ahead

Despite the uncertainties arising from the global catastrophe, GoPro delivered an impressive performance on the back of a dynamic business model and robust operating momentum. The action video camera maker is confident that any kind of operational changes will not hurt its 2021 product roadmap.

GoPro’s direct-to-consumer and subscription-centric strategy continues to not only expand margins but also increase 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 #4 (Sell).

Some better-ranked stocks in the broader industry are Roku, Inc. ROKU, Sony Group Corporation SONY and Nexstar Media Group, Inc. NXST, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Roku delivered a trailing four-quarter earnings surprise of 506.1%, on average.

Sony delivered a trailing four-quarter earnings surprise of 170.9%, on average.

Nexstar delivered a trailing four-quarter earnings surprise of 37.6%, on average.

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