GPRO Earnings Preview

GoPro (GPRO) is set to report Q4 results tonight after the close with a conference call to follow at 5pm ET. GPRO reported Q3 results at 4:04pm and then provided it's Q4 guidance in a presentation released shortly before its conference call. Current Capital IQ consensus stands at EPS of $0.03 on Revenues of $448 mln.

Shares of GPRO have remained mired in the $10 level. The stock was hammered when it preannounced a disappointing Q4 on January 13. This was on the heels of a poor Q3 report (that included disappointing Q4 guidance at the time). GPRO has been hampered by its launch of its HERO4 Session which has seen it cut prices in order to spur demand. This has led to fears that the company's original innovation has run its course. Worries about low barriers of entry also remain.

GPRO still holds its content but that has hardly been enough to placate investor fears. Investors will want to see how sales have been progressing over the past three weeks and will be paying particular attention to inventory levels.

January Preannouncement

  • GPRO preannounced results on January 13, cut its work force by 7% and announcement management/board changes
  • GPRO lowered Q4 rev to $435 mln from $500-550 mln vs. then-$507.8 mln consensus.
    • Q4 revenue reflected lower than anticipated sales of its capture devices due to slower than expected sell through at retailers, particularly in the first half of the quarter.
    • Fourth quarter revenue includes a $21 million reduction for price protection related charges resulting from the HERO4 Session repricing in December.
  • GPRO lowered non-GAAP gross margin to 34.5-35.5%from 45.5-46.5%.
  • GoPro implemented a reduction in its workforce of ~7 percent. The Company estimates it will incur ~$5-10 mln of restructuring expenses in Q1.
  • Zander Lurie resigned from his role as Senior Vice President of GoPro Entertainment and has been appointed to serve on GoPro's board of directors.

Key Metrics

  • Units Shipped- Q3 was 1583 which was down 3% q/q
  • Inventory- Increased 32% q/q to $289 mln on the heels of the disappointing HERO4 launch.
    • Inventory Turns was 3.4x compared to 2.7x in Q2
    • Inventory Days was 122.3 compared to 87.7 in Q2. 

Q3 Recap

  • GPRO reported Q3 (Sep) earnings of $0.25 per share, $0.04 worse than the Capital IQ Consensus of $0.29. Revenues rose 43.0% year/year to $400.34 mln vs the $431.48 mln Capital IQ Consensus.
  • Gross Margin 46.6%, Guidance 45.5-46.5%; Q2 46.4%
  • The Board of Directors of GoPro authorized the Company to repurchase up to $300 million of its Class A capital stock, commencing in the fourth quarter of 2015.

YOU PLAYED YOURSELF

GoPro (halted) just missed by $0.11, rev in-line with warning; guided Q1 revs well below consensus; guided FY16 revs below consensus; names Brian McGee CFO .

  • Reports Q4 (Dec) adj. loss of $0.08 per share, $0.11 worse than the Consensus of $0.03; revenues fell 31.1% year/year to $436.6 mln ($448.56 mlnConsensus); gross margin 29.6%.

  • GPRO Warned on Jan 13: Lowered Q4 rev to $435 mln from $500-550 mln; non-GAAP GM to 34.5-35.5% from 45.5-46.5%.

This story continues to get ugly for the camera maker and their CEO Nick Woodman. Non-GAAP gross margin was impacted by a charge of ~$57 mln to cost of revenue for excess purchase order commitments, excess inventory and obsolete tooling resulting from the Company's decision to discontinue production of the HERO cameras.

This charge is greater than the $30-35 mln that co warned about in January.

  • The company issues downside guidance for Q1, sees Q1 revs of $160-180 mln vs. $300.67 mln Capital IQ Consensus; non-GAAP gross margin 35-37%.
  • Co issues downside guidance for FY16, sees FY16 revs of $1.35-1.50 bln vs. $1.63 bln Capital IQ Consensus Estimate. 
  • Commencing in the fourth quarter of 2015, GoPro has acquired ~1.5 million shares of its Class A capital stock at an average price per share of approximately $23.05.

FUGLY

No matter how you slice it, this quarter was fucking ugly. If you are bullish you're either "punting" or you're blind. To slash estimates the way they did a month ago and follow up with this bullshit which is significantly worse than what they said just a month ago shows a very poor management at hand. 

The derivative to this is Ambarella which will be taken to the woodshed in sympathy for Mr. Woodman and his staff's incompetence. 

BIAS: Don't play yourself. HARD SELL -- Shit performance, shit management, shit "new products". An acquisition is their only way out at this point. 

 

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