Fitbit, Inc. (NYSE:FIT), the leading global wearables brand,
today reported revenue of $353 million, GAAP net loss per share of
($0.25), non-GAAP net loss per share of ($0.08), GAAP net loss of
($58.2) million and Adjusted EBITDA loss of ($28) million for its
second quarter of 2017.
“Consumer demand in the second quarter was better than
anticipated, enabling Fitbit to reduce channel inventory and
generate better sales. We are executing according to our
transition plan and have increased confidence in achieving our full
year results," said co-founder and CEO James Park. “Our
smartwatch, which we believe will deliver the best health and
fitness experience in the category, is on track for delivery ahead
of the holiday season and will drive a strong second half of
the year. In the long term, we are confident in our vision for the
future and are uniquely positioned to succeed by leveraging our
brand, community, and data to drive positive health outcomes.”
Second Quarter 2017 Financial Summary
For the Three Months Ended
For the Six Months Ended In millions, except percentages and
per share amounts
July 1,2017
July 2,2016
July 1,2017
July 2,2016
GAAP Results Revenue
$ 353.3 $ 586.5
$
652.2 $ 1,091.9 Gross Margin
42.2 % 41.8 %
41.0 % 43.8 % Net Income (Loss)
$ (58.2
) $ 6.3
$ (118.3 ) $ 17.4 Net Income
(Loss) Per Share
$ (0.25 ) $ 0.03
$
(0.52 ) $ 0.07
Non-GAAP Results Gross Margin
43.0 % 42.0 %
41.6 % 44.1 % Net Income
(Loss)
$ (19.3 ) $ 29.5
$ (53.7
) $ 54.0 Net Income (Loss) Per Share
$ (0.08
) $ 0.12
$ (0.23 ) $ 0.22
Adjusted
EBITDA $ (28.2 ) $ 48.3
$
(80.5 ) $ 93.4
Devices Sold 3.4 5.7
6.3 10.5 For additional information regarding the
non-GAAP financial measures, see “Non-GAAP Financial Measures” and
“Reconciliation of GAAP to Non-GAAP Financial Measures” below. For
additional information regarding our quarterly reporting calendar,
see “Change to Quarterly Reporting Calendar” below.
Second Quarter 2017 Financial Highlights
- U.S. revenue contracted 55% to $199
million, EMEA revenue grew 9% to $109 million, APAC revenue grew
46% to $21 million, and Americas excluding U.S. revenue contracted
11% to $24 million, all year-over-year from the second quarter of
2016.
- New products introduced in the last 12
months, Fitbit Charge 2™, Fitbit Alta HR™, and Fitbit Flex 2™
represented 81% of revenue.
- Average selling price increased 4%
sequentially from the first quarter of 2017 and 2% year-over-year
from the second quarter of 2016 to $100.76 per device.
- Accessory and other revenue added the
equivalent of $3.98 per device.
- Gross margin was 42.2%, and non-GAAP
gross margin was 43.0%, each favorably impacted by product mix, the
increase in average selling price and lower warranty expense.
- GAAP operating expenses declined 10% to
$213 million and non-GAAP operating expenses declined 7% to $191
million, both year-over-year from the second quarter of 2016.
Second Quarter 2017 Business Highlights
- Sold 3.4 million devices, up 14%
sequentially from the first quarter of 2017, down 40%
year-over-year from the second quarter of 2016.
- 38% of the activations in the quarter
came from customers who made repeat purchases. Of the repeat
purchasers, 39% came from customers who were inactive for 90 days
or greater.
- The Fitbit app was the #1 downloaded
health and fitness application, based on U.S. downloads, on both
the iOS and Android platforms.
- The Community section in the Fitbit
app, which includes a Feed feature designed to increase engagement
and offer users a supportive environment continued to grow. Since
launching the feature in March 2017, more than 2.5 million users
have joined a Group and more than 11.2 million users have utilized
the Feed, with more than 648 million views of shared posts.
Third Quarter 2017 Guidance
- Revenue in the range of $380 million to
$400 million.
- Non-GAAP net loss per share in the
range of ($0.05) to ($0.02).
- Adjusted EBITDA loss in the range of
($12) million to breakeven.
- Effective non-GAAP tax rate of
approximately 46%.
- Stock-based compensation expense
estimated in the range of $23 million to $25 million and share
count of approximately 230 million.
Full Year 2017 Guidance
- Revenue in the range of $1.55 billion
to $1.7 billion.
- Non-GAAP gross margin of 42.5% to
44%.
- Non-GAAP net loss per share in the
range of ($0.40) to ($0.22).
- Non-GAAP free cash flow loss in the
range of ($80) million to ($50) million.
- Effective non-GAAP tax rate of
approximately 46%.
- Stock-based compensation expense in the
range of $90 million to $100 million and share count of
approximately 230 million.
For additional information regarding the non-GAAP financial
measures presented above, see “Non-GAAP Financial Measures”
below.
Webcast and Conference Call Information
Fitbit will host a conference call today at 5:00 p.m. Eastern
Time, 2:00 p.m. Pacific Time, to discuss its results. Investors may
access a free, live webcast of the call through the Investor
section of Fitbit’s website at investor.fitbit.com. The call can
also be accessed by dialing (877) 719-9786 or (719) 325-2499,
access code 5413896. A replay of the call will be archived on
Fitbit’s website for the following six months.
Forward Looking Statements
This press release contains forward-looking statements that
involve risks and uncertainties, including statements regarding our
outlook for the third quarter 2017 and full year 2017, the quality
of our smartwatch user experience, the timing of the retail
availability of our smartwatch, our performance in the second half
of the year, and our long-term market opportunity. These
forward-looking statements are only predictions and may differ
materially from actual results due to a variety of factors,
including: the effects of the highly competitive market in which we
operate, including competition from much larger technology
companies; our ability to anticipate and satisfy consumer
preferences in a timely manner; our ability to successfully develop
and timely introduce new products and services or enhance existing
products and services; retail and customer acceptance of existing
and new products; any inability to accurately forecast consumer
demand and adequately manage our inventory; our ability to ship
products on the timelines we anticipate and unexpected delays; our
ability to detect, prevent or fix quality issues in our products or
services; uncertain ability to retain employees; our reliance on
third-party suppliers, contract manufacturers, and logistics
providers, and our limited control over such parties; delays in
procuring components and product from these third parties or their
suppliers; the ability of third parties to successfully manufacture
and ship in a timely manner quality products; seasonality; product
liability issues, security breaches or other defects, which may
adversely affect product performance, our reputation and brand
awareness and overall market acceptance of our products and
services; ability to integrate acquired technologies and employees
into our operations, particularly in new geographies; warranty
claims; the fact that the market for connected health and fitness
devices is relatively new and unproven; the ability of our channel
partners to sell our products; litigation and related costs;
privacy; and other general market, political, economic and business
conditions.
Additional risks and uncertainties that could affect our
financial results are included under the caption “Risk Factors” in
our Annual Report on Form 10-K for the full year ended December 31,
2016, and our most recently filed Quarterly Report on Form 10-Q
which are available on our Investor Relations website at
investor.fitbit.com and on the SEC website at www.sec.gov. All
forward-looking statements contained herein are based on
information available to us as of the date hereof and we do not
assume any obligation to update these statements as a result of new
information or future events.
Change to Quarterly Reporting Calendar
Our fiscal year ends on December 31 of each year. In the first
quarter of 2016, we adopted a 4-4-5 week quarterly
calendar. We did not adjust operating results for quarters prior to
2016. There were 91 days in each of the three months
ended July 1, 2017 and July 2, 2016.
Disclosure of Material Information
Fitbit announces material information to its investors using SEC
filings, press releases, public conference calls and on its
Investor Relations page on the company’s website at
http://investor.fitbit.com.
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are
prepared and presented in accordance with GAAP, we use the
following non-GAAP financial measures in this press release:
non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating
expenses, non-GAAP operating income (loss), non-GAAP net income
(loss), non-GAAP diluted net income or loss per share, adjusted
EBITDA, and non-GAAP effective tax rate. The presentation of these
financial measures is not intended to be considered in isolation or
as a substitute for, or superior to, financial information prepared
and presented in accordance with GAAP.
We use non-GAAP measures to internally evaluate and analyze
financial results. We believe these non-GAAP financial measures
provide investors with useful supplemental information about the
financial performance of our business, enable comparison of
financial results between periods where certain items may vary
independent of business performance, and enable comparison of our
financial results with other public companies, many of which
present similar non-GAAP financial measures.
There are limitations associated with the use of non-GAAP
financial measures as an analytical tool. In particular, many of
the adjustments to our GAAP financial measures reflect the
exclusion of certain items, specifically stock-based compensation
expense, depreciation, amortization of intangible assets, interest
income (expense), net and the related income tax effects of the
aforementioned exclusions, that are recurring and will be reflected
in our financial results for the foreseeable future. In addition,
these measures may be different from non-GAAP financial measures
used by other companies, limiting their usefulness for comparison
purposes. A reconciliation of our non-GAAP financial measures to
their most directly comparable GAAP measures has been provided in
the financial statement tables included in this press release, and
investors are encouraged to review the reconciliation.
Guidance for non-GAAP financial measures excludes Jawbone
litigation costs, stock-based compensation, impact of
restructuring, amortization of acquired intangible assets, and tax
effects associated with these items. We have not reconciled
guidance for non-GAAP financial measures to their most directly
comparable GAAP measures because certain items that impact these
measures are uncertain, out of our control and/or cannot be
reasonably predicted. Accordingly, a reconciliation of the non-GAAP
financial measure guidance to the corresponding GAAP measures is
not available without unreasonable effort.
The following are explanations of the adjustments that are
reflected in one or more of our non-GAAP financial measures:
- Stock-based compensation expense
relates to equity awards granted primarily to our employees. We
exclude stock-based compensation expense because we believe that
the non-GAAP financial measures excluding this item provide
meaningful supplemental information regarding operational
performance. In particular, companies calculate stock-based
compensation expense using a variety of valuation methodologies and
subjective assumptions.
- In January 2017, the Company conducted
a reorganization of its business, including a reduction in
workforce. The restructuring costs impacted our results for the
first quarter of 2017. Restructuring costs primarily included
severance-related costs. We believe that excluding this expense
provides greater visibility to the underlying performance of our
business operations, facilitates comparison of our results with
other periods, and may also facilitate comparison with the results
of other companies in our industry.
- Litigation expense relates to legal
costs incurred due to litigation with Aliphcom, Inc. d/b/a Jawbone.
We exclude these expenses because we do not believe these expenses
have a direct correlation to the operations of our business and
because of the singular nature of the claims underlying the Jawbone
litigation matters. We began excluding Jawbone litigation costs in
the second quarter of 2016 as these costs significantly increased
in 2016, and may continue to be material for the remainder of 2017.
Although not excluded in reporting for the first quarter of 2016,
these litigation expenses were $9.1 million in that quarter.
- In March 2014, we recalled the Fitbit
Force after some of our users experienced allergic reactions to
adhesives in the wristband. This recall primarily impacted our
results for the fourth quarter of 2013, the first quarter of 2014
and the fourth quarter of 2015.
- Amortization of intangible assets
relates to our acquisition of FitStar, Pebble and Vector. We
exclude these amortization expenses because we do not believe these
expenses have a direct correlation to the operation of our
business.
- Income tax effect of non-GAAP
adjustments relates to the tax effect of the adjustments that we
incorporate into non-GAAP financial measures such
as stock-based compensation, amortization of intangibles,
restructuring and valuation allowance in order to provide a more
meaningful measure of non-GAAP net income (loss).
About Fitbit, Inc. (NYSE: FIT)
Fitbit helps people lead healthier, more active lives by
empowering them with data, inspiration and guidance to reach their
goals. As the leading global wearables
brand, Fitbit designs products and experiences that track
everyday health and fitness. Fitbit’s diverse line of award-winning
products
includes Fitbit Surge®, Fitbit Blaze®, Fitbit Charge
2™, Alta HR™, Alta®, Fitbit Flex
2™, Fitbit One® and Fitbit Zip® activity
trackers, as well as the Aria® Wi-Fi Smart
Scale. Fitbit products are carried in 54,000 retail
stores and in 65 countries around the globe. Fitbit Health
Solutions develops health and wellness solutions designed to help
increase engagement, improve health outcomes, and drive a positive
return for employers, health plans and health systems. Fitstar
by Fitbit offers a digital health and fitness platform that
helps and inspires users to get fit anytime, anywhere, and has a
footprint of over 9 million downloads across the Fitstar Personal
Trainer and Fitstar Yoga apps, with availability in 155
countries.
Fitbit and the Fitbit logo are trademarks or
registered trademarks of Fitbit, Inc. in the U.S. and
other countries. Additional Fitbit trademarks can be found
at www.fitbit.com/legal/trademark-list. Third-party trademarks
are the property of their respective owners. Connect with us
on Facebook, Instagram or Twitter and
share your Fitbit experience.
FITBIT, INC. CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (In thousands, except for per share amounts)
(unaudited)
Three Months Ended
Six Months Ended
July 1,2017
July 2,2016
July 1,2017
July 2,2016
Revenue $ 353,299 $ 586,528 $ 652,241 $ 1,091,884 Cost of revenue
204,054 341,559 384,697 613,160 Gross profit
149,245 244,969 267,544 478,724 Operating
expenses: Research and development 80,543 79,909 168,301 152,157
Sales and marketing 100,732 118,138 191,906 225,189 General and
administrative 31,379 37,262 62,125 72,964
Total operating expenses 212,654 235,309 422,332
450,310 Operating income (expense) (63,409 ) 9,660 (154,788
) 28,414 Interest income, net 193 839 1,289 1,421 Other income, net
303 (463 ) 836 1,105 Income (loss) before income
taxes (62,913 ) 10,036 (152,663 ) 30,940 Income tax expense
(benefit) (4,673 ) 3,695 (34,344 ) 13,564 Net income (loss)
$ (58,240 ) $ 6,341 $ (118,319 ) $ 17,376 Net income
(loss) per shares: Basic $ (0.25 ) $ 0.03 $ (0.52 ) $ 0.08
Diluted $ (0.25 ) $ 0.03 $ (0.52 ) $ 0.07 Weighted average
shares used to compute net income (loss) per share: Basic 230,322
218,850 228,788 217,431 Diluted 230,322
242,328 228,788 242,143
FITBIT,
INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In
thousands) (unaudited)
July 1,2017
December 31,2016
Assets Current assets: Cash and cash equivalents $ 318,708 $
301,320 Marketable securities 357,090 404,693 Accounts receivable,
net 216,346 477,825 Inventories 141,504 230,387 Prepaid expenses
and other current assets 97,717 66,346 Total current
assets 1,131,365 1,480,571 Property and equipment, net 80,135
76,553 Goodwill 51,036 51,036 Intangible assets, net 24,768 27,521
Deferred tax assets 162,899 174,097 Other assets 10,886
10,448
Total assets $ 1,461,089 $ 1,820,226
Liabilities and Stockholders’ Equity Current
liabilities: Accounts payable $ 83,966 $ 313,773 Accrued
liabilities 347,517 390,561 Deferred revenue 44,427 49,904 Income
taxes payable 599 7,694 Total current liabilities
476,509 761,932 Other liabilities 59,244 59,762 Total
liabilities 535,753 821,694 Stockholders’
equity: Common stock and additional paid-in capital 911,080 859,368
Accumulated other comprehensive loss (12,733 ) (978 ) Retained
earnings 26,989 140,142 Total stockholders’ equity
925,336 998,532
Total liabilities and
stockholders’ equity $ 1,461,089 $ 1,820,226
Reconciliation of GAAP to Non-GAAP Financial
Measures (In thousands, except percentages and per share
amounts) (unaudited)
Three Months Ended
Six Months Ended
July 1,2017
July 2,2016
July 1,2017
July 2,2016
Non-GAAP gross profit: GAAP gross profit $ 149,245 $ 244,969
$ 267,544 $ 478,724 Stock-based compensation expense 1,492 1,084
1,510 2,393 Impact of restructuring — — 37 — Intangible assets
amortization 1,319 451 2,638 903
Non-GAAP gross profit $ 152,056 $ 246,504 $ 271,729
$ 482,020
Non-GAAP gross margin: GAAP
gross margin 42.2 % 41.8 % 41.0 % 43.8 % Stock-based compensation
expense 0.4 0.2 0.2 0.2 Impact of restructuring 0.0 0.0 0.0 0.0
Intangible assets amortization 0.4 0.0 0.4 0.1
Non-GAAP gross margin 43.0 % 42.0 % 41.6 % 44.1 %
Non-GAAP research and development: GAAP research and
development $ 80,543 $ 79,909 $ 168,301 $ 152,157 Stock-based
compensation expense (12,648 ) (11,725 ) (26,992 ) (22,118 ) Impact
of restructuring — — (2,744 ) — Non-GAAP
research and development $ 67,895 $ 68,184 $ 138,565
$ 130,039
Non-GAAP sales and marketing:
GAAP sales and marketing $ 100,732 $ 118,138 $ 191,906 $ 225,189
Stock-based compensation expense (3,987 ) (2,927 ) (7,235 ) (5,462
) Impact of restructuring — — (2,000 ) —
Non-GAAP sales and marketing $ 96,745 $ 115,211 $
182,671 $ 219,727
Non-GAAP general and
administrative: GAAP general and administrative $ 31,379 $
37,262 $ 62,125 $ 72,964 Stock-based compensation expense (3,839 )
(4,664 ) (7,994 ) (8,197 ) Impact of restructuring — — (1,594 ) —
Litigation expense - Jawbone (1,533 ) (11,558 ) (1,419 ) (11,558 )
Impact of Fitbit Force recall — 11 — — Intangible assets
amortization (58 ) (82 ) (115 ) (163 ) Non-GAAP general and
administrative $ 25,949 $ 20,969 $ 51,003 $
53,046
Reconciliation of GAAP to Non-GAAP
Financial Measures (In thousands, except percentages and per
share amounts) (unaudited)
Three Months
Ended Six Months Ended
July 1,2017
July 2,2016
July 1,2017
July 2,2016
Non-GAAP operating expenses: GAAP operating expenses $
212,654 $ 235,309 $ 422,332 $ 450,310 Stock-based compensation
expense (20,474 ) (19,316 ) (42,221 ) (35,777 ) Impact of
restructuring — — (6,338 ) — Litigation expense - Jawbone (1,533 )
(11,558 ) (1,419 ) (11,558 ) Impact of Fitbit Force recall — 11 — —
Intangible assets amortization (58 ) (82 ) (115 ) (163 ) Non-GAAP
operating expenses $ 190,589 $ 204,364 $ 372,239
$ 402,812
Non-GAAP operating income
(loss): GAAP operating income (loss) $ (63,409 ) $ 9,660 $
(154,788 ) $ 28,414 Stock-based compensation expense 21,966 20,400
43,731 38,170 Impact of restructuring — — 6,375 — Litigation
expense - Jawbone 1,533 11,558 1,419 11,558 Impact of Fitbit Force
recall — (11 ) — — Intangible assets amortization 1,377 533
2,753 1,066 Non-GAAP operating income (loss) $
(38,533 ) $ 42,140 $ (100,510 ) $ 79,208
Non-GAAP net income (loss) and net income (loss) per share:
Net income (loss) $ (58,240 ) $ 6,341 $ (118,319 ) $ 17,376
Stock-based compensation expense 21,966 20,400 43,731 38,170 Impact
of restructuring — — 6,375 — Litigation expense - Jawbone 1,533
11,558 1,419 11,558 Impact of Fitbit Force recall — (11 ) — —
Intangible assets amortization 1,377 533 2,753 1,066 Income tax
effect of non-GAAP adjustments 14,056 (9,297 ) 10,335
(14,126 ) Non-GAAP net income (loss) $ (19,308 ) $ 29,524 $
(53,706 ) $ 54,044 GAAP diluted shares 230,322
242,328 228,788 242,143 Other dilutive equity awards — —
— — Non-GAAP diluted shares 230,322
242,328 228,788 242,143 Non-GAAP diluted net
income (loss) per share $ (0.08 ) $ 0.12 $ (0.23 ) $ 0.22
Reconciliation of GAAP to Non-GAAP
Financial Measures (In thousands, except percentages and per
share amounts) (unaudited)
Three Months
Ended Six Months Ended July 1,
July 2, July 1, July
2, 2017 2016 2017 2016 Adjusted
EBITDA: Net income (loss) $ (58,240 ) $ 6,341 $ (118,319 ) $
17,376 Impact of Fitbit Force recall — (11 ) — — Stock-based
compensation expense 21,966 20,400 43,731 38,170 Impact of
restructuring — — 6,375 — Litigation expense - Jawbone 1,533 11,558
1,419 11,558 Depreciation and intangible assets amortization 11,435
7,178 21,952 14,186 Interest income, net (193 ) (839 ) (1,289 )
(1,421 ) Income tax expense (benefit) (4,673 ) 3,695 (34,344
) 13,564 Adjusted EBITDA $ (28,172 ) $ 48,322 $
(80,475 ) $ 93,433
Stock-based compensation
expense: Cost of revenue $ 1,492 $ 1,084 $ 1,510 $ 2,393
Research and development 12,648 11,725 27,333 22,118 Sales and
marketing 3,987 2,927 7,622 5,462 General and administrative 3,839
4,664 7,994 8,197 Total stock-based
compensation expense* $ 21,966 $ 20,400 $ 44,459
$ 38,170 * A portion of stock-based
compensation expense for the six months ended July 1, 2017 was
allocated to and included in "Impact of restructuring," thus
explaining the difference between the total stock-based
compensation expense by function presented in the immediately above
table compared to the amounts presented in the other tables
presented above.
FITBIT, INC. Revenue by
Geographical Region (In thousands) (unaudited)
Three Months Ended Six Months
Ended July 1, July 2, July
1, July 2, 2017 2016
2017 2016 United States $ 199,201 $ 445,192 $
369,621 $ 796,877 Americas, excluding United States 24,412 27,375
44,380 50,769 Europe, Middle East, and Africa 108,601 99,471
196,373 174,195 APAC 21,085 14,490 41,867
70,043 Total $ 353,299 $ 586,528 $ 652,241 $
1,091,884
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Investors:Fitbit, Inc.Tom Hudson,
415-604-4106investor@fitbit.comorMedia:Fitbit, Inc.Jen
Ralls, 415-722-6937PR@fitbit.com
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