GoPro (GPRO) Q3 Earnings Beat Estimates, Revenues Up Y/Y
GoPro's (GPRO) third-quarter 2021 top line benefits from higher subscription revenues and robust sales of premium products across all regions and channels.
GoPro, Inc. GPRO reported healthy third-quarter 2021 results, with both the bottom line and the top line surpassing their respective Zacks Consensus Estimate. Despite the current volatile environment, the company maintained its impressive momentum on the back of solid direct-to-consumer revenues, subscription-centric strategy, and increasing demand for premium cameras across all regions. Encouraged by its diligent operational execution, the company also benefited from higher subscription revenues fueled by a growing customer base.
On a GAAP basis, net income in the September quarter was $311.8 million or $1.92 per share compared with $3.3 million or 2 cents per share in the prior-year quarter. The year-over-year substantial improvement was mainly driven by top-line expansion.
Quarterly non-GAAP net income came in at $55.3 million or 34 cents per share compared with $31 million or 20 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 14 cents.
GoPro, Inc. Price, Consensus and EPS Surprise
GoPro generated revenues of $316.7 million, up 12.9% from $280.5 million in the year-ago quarter. The surge in revenues was mainly driven by robust sales of premium products across all regions and channels, along with an accretive subscriber base. This enhanced the company’s margins significantly. The top line surpassed the consensus estimate of $293 million.
Strong retail partnerships and expanding direct-to-consumer and subscription businesses boosted substantial unit sell amid the pandemic. Also, effective supply chain and channel inventory management together with successful new product launches acted as major tailwinds.
Further, GoPro shipped 832,000 camera units during the reported quarter, down 9.9% year over year, and witnessed a sell-through of slightly less than 800,000 units. Further, its channel inventory is estimated to slightly decline in the fourth quarter, exiting the year between 500,000 and 550,000 camera units in the channel. Driven by higher subscription revenues, GoPro outdid the 1 million subscriber mark and recorded 1.34 million subscribers, representing 168% year-over-year growth, at the close of the reported quarter.
GoPro expects to surpass 1.7 million subscribers by the year-end, thereby approaching the 2 million subscriber milestone. The company’s Quik App tapped 168,000 subscribers, contributing to revenues in the reported quarter.
Region-wise, revenues from the Americas came in at $160.9 million (50.8% of total revenues), up 2% from $157.7 million in the year-ago quarter. Revenues from Europe, Middle East and Africa were $85.8 million (27.1%), up 32.8% from $64.6 million, and the Asia Pacific generated $70 million (22.1%), up 20.3% from $58.2 million.
On the basis of channels, revenues from GoPro.com were $94.4 million (29.8% of total revenues), up 16.1% from $81.3 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 $80.2 million, up 6.2%, and subscription revenues came in at $14.2 million compared with $5.8 million in the year-ago quarter. Encouraged by a healthy 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 the Retail channel came in at $222.3 million (70.2%), up 11.6% from $199.2 million a year ago. With a majority of the stores opening post the lockdown, driven by higher vaccination rates, people are inclined to shop more physically. This drove retail channel’s performance in the third quarter.
The company had $120.9 million in inventory compared with $132.8 million in the year-ago quarter. The inventory reductions were mainly driven by an upward sell-through trend across all regions. The company unveiled its flagship camera, HERO10 Black, in the third quarter with its patent portfolio exceeding 1,000 U.S. granted patents, bringing the tally to more than 1,600 granted patents globally.
Gross profit was $138.1 million, up 39% year over year. Total operating expenses were $89.5 million, down from $90.5 million, primarily due to lower general and administrative expenses. Operating income came in at $48.6 million compared with $8.9 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 2021. Cameras with suggested retail prices at $300 and above contributed 98% to revenues in the reported quarter, up from 83% in third-quarter 2020, reflecting growing demand for GoPro’s premium products.
Cash Flow & Liquidity
During the first nine months of 2021, GoPro generated $65.3 million of net cash from operating activities against $12.5 million of cash utilization in the year-ago period. As of Sep 30, 2021, the company had $296.4 million in cash and cash equivalents with $109.5 million of long-term debt.
Q4 & Full-Year 2021 Guidance
GoPro provided guidance for fourth-quarter 2021 and full-year 2021. For the fourth quarter, revenues are estimated to be $380 million +/- $5 million while gross margins are expected to be 40.5% +/- 50 basis points. The sell-through of GoPro camera units is expected to be around 1.1 million units. Adjusted earnings are anticipated to be 35 cents +/- 3 cents per share.
For full-year 2021, revenues are estimated to be $1,150 million +/- $5 million while gross margins are expected to be 41% +/- 20 basis points. The sell-through of GoPro camera units is expected to be around 3.4 million units. Adjusted earnings are anticipated to be 83 cents +/- 3 cents per share.
Despite the uncertainties arising from the COVID-19 pandemic, 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 change 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 the 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 #3 (Hold).
Some better-ranked stocks in the broader industry are Sonos, Inc. SONO, Panasonic Corporation PCRFY, and Sirius XM Holdings Inc. SIRI. While Sonos sports a Zacks Rank #1 (Strong Buy), Panasonic and Sirius XM carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Sonos delivered a trailing four-quarter earnings surprise of 297.3%, on average.
Panasonic delivered a trailing four-quarter earnings surprise of 23.2%, on average.
Sirius XM delivered a trailing four-quarter earnings surprise of 28.5%, on average.
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