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GoPro (GPRO) Q2 Loss Wider Than Expected, Revenues Down Y/Y

Zacks Equity Research
·5 mins read

GoPro, Inc. GPRO reported lackluster second-quarter 2020 results, with the bottom line and top line deteriorating on a year-over-year basis. However, higher customer demand and direct-to-consumer operating model alleviated quarterly performance to some extent amid the COVID-19 crisis.

Net Loss

On a GAAP basis, net loss in the June quarter came in at $51 million or a loss of 34 cents per share compared with a loss of $11.3 million or a loss of 8 cents per share in the year-ago quarter. The year-over-year deterioration was primarily caused by top-line contraction.

Quarterly non-GAAP net loss came in at $29.7 million or a loss of 20 cents per share against net income of $4.2 million or 3 cents per share in the year-ago quarter. The bottom line was wider than the Zacks Consensus Estimate of loss of 18 cents.

GoPro, Inc. Price, Consensus and EPS Surprise

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 $134.2 million, down 54.1% from $292.4 million in the year-ago quarter. The year-over-year decline in revenues was mainly caused by adversities stemming from the COVID-19 induced pandemic. Nevertheless, the company witnessed an upward sell-through trend of nearly 750,000 GoPro camera units amid this crucial hour. The top line surpassed the consensus estimate of $109 million.

Markedly, GoPro’s Plus subscription service ended the reported quarter with 372,000 paid subscribers, up 57% from the prior-year quarter’s figure. Further, the company also launched diversified products such as Lifestyle Gear and Zeus Mini in second-quarter 2020.

On the basis of geographies, revenues from Americas came in at $82.6 million (61.6% of total revenues), down 42% from $142.3 million in the year-ago quarter. Revenues from EMEA were $34.9 million (26%), down 57.9% from $82.9 million and APAC generated $16.7 million (12.4%), down 75.1% from $67.2 million.

On the basis of channels, revenues from Gopro.com were $59.5 million (44.3% of total revenues), up 125.4% from $26.4 million. Revenues from Retail channel came in at $74.7 million (55.7%), down 71.9% from $266 million year over year.

GoPro shipped 448,000 camera units during the reported quarter, down 58.6% year over year. The company had $142.2 million in inventory compared with $129.2 million in the year-ago quarter. Non-GAAP gross margin was 31.6% compared with 35.8% in the prior-year quarter. Impressively, cameras with prices above $300 contributed 95% to revenues in the reported quarter, reflecting higher demand for GoPro’s premium products.

Cash Flow & Liquidity

During the first six months of 2020, GoPro utilized $112 million of net cash for operating activities compared with $66 million of cash utilization in the year-ago quarter. As of Jun 30, the company had $79.7 million in cash and equivalents with $154.1 million of long-term debt.

Q3 Guidance

GoPro provided the guidance for third-quarter 2020. Revenues are estimated in the range of $220-$250 million, while adjusted gross margins are expected to be 35% +/- 50 basis points. Sell-through of GoPro camera units are expected to be 900,000. Meanwhile, adjusted earnings are anticipated in the band of 1-7 cents per share.

Moving Forward

Although the action video camera maker’s global distribution network has been severely impaired by the COVID-19 pandemic, the company is confident that any kind of operational changes will not impact its 2020 product roadmap, which includes new hardware, software and subscription products. Notably, GoPro 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 accretive to the average selling price of products and gross margin. This, in turn, will enable the company to position itself well when demand begins to normalize amid this hour of crisis.

Zacks Rank & Stocks to Consider

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

Some other better-ranked stocks in the broader industry are Sony Corporation SNE, LiveXLive Media, Inc. LIVX and Vista Outdoor Inc. VSTO. While Sony sports a Zacks Rank #1 (Strong Buy), LiveXLive Media and Vista Outdoor carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sony’s bottom line surpassed the Zacks Consensus Estimate twice in the last four quarters. The company has a trailing four-quarter earnings surprise of 84.7%, on average.

LiveXLive Media’s bottom line surpassed the Zacks Consensus Estimate twice in the last four quarters. The company has a trailing four-quarter earnings surprise of 0.5%, on average.

Vista Outdoor’s bottom line surpassed the Zacks Consensus Estimate thrice in the last four quarters. The company has a trailing four-quarter earnings surprise of 72.9%, on average.

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