- Revenue of $248 million, GAAP Loss
Per Share of ($0.34), Non-GAAP Loss Per Share of ($0.17)
- Launched Mass Appeal Smartwatch,
Fitbit Versa, to Expand User Base
Fitbit, Inc. (NYSE:FIT), the leading global wearables brand,
today reported revenue of $248 million, GAAP net loss per share of
($0.34), non-GAAP net loss per share of ($0.17), GAAP net loss of
($81) million, non-GAAP net loss of ($41) million, cash flow from
operations of $10 million and free cash flow of ($2) million for
its first quarter of 2018.
“We made important progress in the transformation of our
business in the first quarter as we continue to adapt to the
changing wearables market. Early sell through of Fitbit Versa, our
first true mass appeal smartwatch, has been the best in our
company’s history, positioning us to expand our user base and
capture greater share of the fast-growing smartwatch market,” said
James Park, co-founder and CEO. “We continued to deepen our
relationship with our users, investing in software and services
that deliver on our promise of helping people achieve better health
outcomes. To this end, we closed the acquisition of Twine Health
and, most recently announced a long-term collaboration with Google
that will accelerate innovation in digital health and
wearables.”
First Quarter 2018
For the Three Months Ended In millions, except
percentages and per share amounts
March 31, 2018
April 1, 2017 GAAP Results Revenue
$
247.9 $ 298.9 Gross Margin
46.0 % 39.6 % Net
Loss
$ (80.9 ) $ (60.1 ) Net Loss Per Share
$ (0.34 ) $ (0.27 )
Non-GAAP Results
Gross Margin
47.1 % 40.0 % Net Loss
$
(41.0 ) $ (34.4 ) Net Loss Per Share
$
(0.17 ) $ (0.15 )
Adjusted EBITDA $
(46.2 ) $ (52.3 )
Devices Sold 2.2 3.0
For additional information regarding the non-GAAP financial
measures, see “Non-GAAP Financial Measures” and “Reconciliation of
GAAP to Non-GAAP Financial Measures” below.
First Quarter 2018 Financial Highlights
- Sold 2.2 million wearable devices.
Average selling price increased 16% year-over-year to $112 per
device driven by the growing mix of smartwatch devices.
- U.S. revenue represented 56% of revenue
or $140 million, down 18% year-over-year.
- International revenue represented 44%
and declined 16% year-over-year to $108 million: EMEA revenue
declined 26% to $65 million; Americas ex. U.S. revenue declined 19%
to $16 million; and APAC revenue grew 33% to $28 million, all
year-over-year, respectively.
- New devices introduced in the past
year, Fitbit IonicTM, Fitbit VersaTM and Fitbit Aria 2TM and
accessory Fitbit Flyer, represented 34% of revenue.
- GAAP gross margin was 46.0%, and
non-GAAP gross margin was 47.1%. Both GAAP and non-GAAP gross
margin benefited from $12.4 million in revenue recognized from the
release of outstanding reserves and rebates related to Wynit, in
addition to lower warranty costs.
- GAAP operating expenses represented 80%
of revenue, and non-GAAP operating expenses represented 70% of
revenue.
First Quarter 2018 Operational Highlights
- Smartwatch revenue nearly doubled to
approximately 30% of revenue, on a sequential basis from the fourth
quarter of 2017.
- Strong Versa pre-orders, and the best
sell-through sales in North America of any device in the company’s
history in the first week of availability.
- Tracker device sales impacted by a
reduction in retail channel tracker inventory. Exited the first
quarter of 2018 with a relatively clean retail channel.
- Leveraged Fitbit operating system
investment, launched Versa with approximately 45% lower development
hours than Ionic.
- 38% of activations came from repeat
users; of the repeat users, 49% came from users who were inactive
for 90 days or greater.
- 18,000 developers have joined the
Fitbit developer community.
Second Quarter 2018 Guidance
- We expect results to be impacted by the
reduced demand by the channel for trackers, partially offset by an
increase in smartwatch revenue, driven primarily by Versa sales. We
expect smartwatches to grow as a percentage of revenue, but our
overall mix to continue to be skewed towards trackers. We expect
revenue to decline approximately 19% year-over-year and to be in a
range of $275 million to $295 million.
- Non-GAAP basic net loss per share in
the range of ($0.27) to ($0.23).
- Capital expenditures as a percentage of
revenue of approximately 5%.
- With lower receivables entering the
second quarter of 2018, we expect free cash flow to decline from
the first quarter of 2018 to approximately ($85) million in the
second quarter of 2018.
- Effective non-GAAP tax rate of
approximately 25%.
- Stock-based compensation expense of
approximately $26 million and basic share count of approximately
242 million.
Full Year 2018 Guidance
- We reiterate our full-year 2018 revenue
guidance of approximately $1.5 billion. We have extrapolated the
tracker demand trend we have experienced in the first quarter of
2018 and incorporated a further reduction in channel inventory
levels. We expect smartwatch revenue to become the majority of
revenue in the second half of the year. We expect average selling
price to be up year over year and roughly flat with the first
quarter of 2018. We expect to grow Fitbit Health Solutions and
increase premium subscribers, but this growth will be relatively
immaterial to wearable device revenue.
- We expect gross margins to trend lower
through 2018 as smartwatches become a greater percentage of our
revenue mix, partially offset by operating efficiencies.
- We expect to drive operating expenses
7% lower, to a target of $740 million.
- Capital expenditures as a percentage of
revenue of approximately 4%.
- We expect free cash flow to decline
less than revenue and expect to breakeven for 2018. Guidance
excludes the benefit of an expected $80 million tax refund
payment.
- We expect effective non-GAAP tax rate
to be volatile driven by geographic mix of revenue, tax credits,
and shift to profitability.
- Stock-based compensation expense of
approximately $110 million and basic/diluted share count of
approximately 248/260 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 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 (888) 339-3513 or (719) 457-2618, access code
8366625. 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 second quarter 2018 and full year 2018; our future
collaboration with Google in digital health and wearables; expected
device mix; trends in smartwatch revenue, average selling price,
our ability to reduce operating expenses, capital expenditures,
free cash flow, gross margins, and non-GAAP tax rate; our expected
growth of our user base, our share of the smartwatch market, and
Fitbit Health Solutions and premium subscribers; and consumer and
retail demand for smartwatches and trackers. 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,
2017. Additional information will also be set forth in our
Quarterly Report on Form 10-Q for the quarter ended March 31,
2018. 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.
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 loss, non-GAAP operating loss before
income taxes, non-GAAP net loss, non-GAAP diluted net loss per
share, non-GAAP free cash flow, and adjusted EBITDA. 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, 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.
- Amortization of intangible assets
relates to our acquisition of FitStar, Pebble, Vector and Twine
Health. 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 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 and provide motivation for
everyday health and fitness. Fitbit’s diverse line of innovative
and popular products include Fitbit Blaze®, Fitbit
Charge 2®, Fitbit Alta HR™, Fitbit Alta®, Fitbit
Ace™, Fitbit Flex 2®, and Fitbit Zip® activity
trackers, as well as the Fitbit Ionic™ and Fitbit
Versa™ smartwatches, Fitbit Flyer™ wireless
headphones and Fitbit Aria 2™Wi-Fi Smart Scale. Fitbit
products are carried in over 47,000 retail stores and in 86
countries around the globe. Powered by one of the world’s largest
social fitness networks and databases of health and fitness data,
the Fitbit platform delivers personalized experiences, insights and
guidance through leading software and interactive tools, including
the Fitbit and Fitbit Coach apps, and the Fitbit OS for
smartwatches. 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.
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 March 31,
2018 April 1, 2017 Revenue $ 247,865 $ 298,942
Cost of revenue 133,742 180,643 Gross profit 114,123
118,299 Operating expenses: Research and development
89,336 87,758 Sales and marketing 72,052 91,174 General and
administrative 36,088 30,746 Total operating expenses
197,476 209,678 Operating loss (83,353 ) (91,379 )
Interest income, net 1,350 1,096 Other income, net 517 533
Loss before income taxes (81,486 ) (89,750 ) Income tax
benefit (609 ) (29,671 ) Net loss $ (80,877 ) $ (60,079 )
Net loss per shares: Basic $ (0.34 ) $ (0.27 ) Diluted $ (0.34 ) $
(0.27 ) Weighted average shares used to compute net loss per share:
Basic 239,431 226,511 Diluted 239,431 226,511
FITBIT, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS (In thousands) (unaudited)
March 31, 2018
December 31, 2017 Assets Current assets: Cash
and cash equivalents $ 378,360 $ 341,966 Marketable securities
279,994 337,334 Accounts receivable, net 214,355 406,019
Inventories 145,373 123,895 Income tax receivable 77,746 77,882
Prepaid expenses and other current assets 59,109 97,269
Total current assets 1,154,937 1,384,365 Property and
equipment, net 104,530 104,908 Goodwill and intangible assets, net
90,726 73,392 Deferred tax assets 4,158 3,990 Other assets 14,750
15,420
Total assets $ 1,369,101 $
1,582,075
Liabilities and Stockholders’ Equity
Current liabilities: Accounts payable $ 132,910 $ 212,731 Accrued
liabilities 382,384 452,137 Deferred revenue 31,272 35,504 Income
taxes payable 755 928 Total current liabilities
547,321 701,300 Long-term deferred revenue 5,176 6,928 Other
liabilities 54,345 49,884 Total liabilities 606,842
758,112 Stockholders’ equity: Common stock 24
24 Additional paid-in capital 976,022 956,060 Accumulated other
comprehensive income (loss) 329 (9 ) Accumulated deficit (214,116 )
(132,112 ) Total stockholders’ equity 762,259 823,963
Total liabilities and stockholders’ equity $ 1,369,101
$ 1,582,075
FITBIT, INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOW (In thousands) (unaudited)
Three Months Ended March 31, 2018
April 1, 2017 Cash Flows from Operating
Activities Net loss $ (80,877 ) $ (60,079 ) Adjustments to
reconcile net loss to net cash provided by operating activities:
Provision for inventory obsolescence 6,337 3,997 Depreciation
10,456 9,140 Write-off of property and equipment 7,259 —
Amortization of intangible assets 1,748 1,377 Stock-based
compensation 23,641 22,493 Deferred income taxes (1,799 ) (5,005 )
Other (275 ) (183 ) Changes in operating assets and liabilities,
net of acquisition: Accounts receivable 191,982 282,917 Inventories
(27,307 ) 27,193 Prepaid expenses and other assets 39,610 (976 )
Fitbit Force recall reserve (132 ) (295 ) Accounts payable (84,155
) (176,619 ) Accrued liabilities and other liabilities (70,147 )
(52,173 ) Deferred revenue (6,010 ) (3,000 ) Income taxes payable
(173 ) 351
Net cash provided by operating activities
10,158 49,138
Cash Flows from Investing
Activities Purchase of property and equipment (12,616 ) (28,157
) Purchases of marketable securities (141,404 ) (129,661 ) Sales of
marketable securities 50,795 4,256 Maturities of marketable
securities 148,041 178,028 Acquisition, net of cash acquired
(13,646 ) —
Net cash provided by investing activities
31,170 24,466
Cash Flows from Financing
Activities Proceeds from issuance of common stock 992 2,581
Repayment of debt (747 ) — Taxes paid related to net share
settlement of restricted stock units (5,179 ) (3,127 )
Net cash
used in financing activities (4,934 ) (546 ) Net increase in
cash and cash equivalents 36,394 73,058 Effect of exchange rate on
cash and cash equivalents — (99 ) Cash and cash equivalents at
beginning of period 341,966 301,320 Cash and cash
equivalents at end of period $ 378,360 $ 374,279
FITBIT, INC. RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES (In thousands, except percentages and per
share amounts) (unaudited)
Three Months Ended
March 31, 2018 April 1, 2017 Non-GAAP gross
profit: GAAP gross profit $ 114,123 $ 118,299 Stock-based
compensation expense 1,098 18 Impact of restructuring — 37
Intangible assets amortization 1,516 1,319 Non-GAAP
gross profit $ 116,737 $ 119,673
Non-GAAP
gross margin (as a percentage of revenue): GAAP gross margin
46.0 % 39.6 % Stock-based compensation expense 0.4 — Impact of
restructuring — — Intangible assets amortization 0.6 0.4
Non-GAAP gross margin 47.1 % 40.0 %
Non-GAAP
research and development: GAAP research and development $
89,336 $ 87,758 Stock-based compensation expense (14,671 ) (14,344
) Impact of restructuring — (2,744 ) Non-GAAP research and
development $ 74,665 $ 70,670
Non-GAAP
sales and marketing: GAAP sales and marketing $ 72,052 $ 91,174
Stock-based compensation expense (3,447 ) (3,248 ) Impact of
restructuring — (2,000 ) Intangible assets amortization (161 ) —
Non-GAAP sales and marketing $ 68,444 $ 85,926
Non-GAAP general and administrative: GAAP general and
administrative $ 36,088 $ 30,746 Stock-based compensation expense
(4,425 ) (4,155 ) Litigation (expense) credit (765 ) 114 Impact of
restructuring — (1,594 ) Intangible assets amortization (71 ) (58 )
Non-GAAP general and administrative $ 30,827 $ 25,053
Non-GAAP operating expenses: GAAP operating expenses
$ 197,476 $ 209,678 Stock-based compensation expense (22,543 )
(21,747 ) Litigation (expense) credit (765 ) 114 Impact of
restructuring — (6,338 ) Intangible assets amortization (232 ) (58
) Non-GAAP operating expenses $ 173,936 $ 181,649
FITBIT, INC. RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES (In thousands, except percentages and per
share amounts) (unaudited)
Three Months Ended
March 31, 2018 April 1, 2017 Non-GAAP
operating loss and loss before income taxes: GAAP operating
loss $ (83,353 ) $ (91,379 ) Stock-based compensation expense
23,641 21,765 Litigation (expense) credit 765 (114 ) Impact of
restructuring — 6,375 Intangible assets amortization 1,748
1,377 Non-GAAP operating loss (57,199 ) (61,976 ) Interest
income, net 1,350 1,096 Other income, net 517 533
Non-GAAP operating loss before income taxes $ (55,332 ) $ (60,347 )
Non-GAAP net loss and net loss per share: Net loss $
(80,877 ) $ (60,079 ) Stock-based compensation expense 23,641
21,765 Litigation (expense) credit 765 (114 ) Impact of
restructuring — 6,375 Intangible assets amortization 1,748 1,377
Income tax effect of non-GAAP adjustments 13,767 (3,722 )
Non-GAAP net loss $ (40,956 ) $ (34,398 ) GAAP diluted
shares 239,431 226,511 Other dilutive equity awards — —
Non-GAAP diluted shares 239,431 226,511
Non-GAAP diluted net loss per share $ (0.17 ) $ (0.15 )
Non-GAAP free cash flow: Net cash provided by operating
activities $ 10,158 $ 49,138 Purchases of property and equipment
(12,616 ) (28,157 ) Non-GAAP free cash flow $ (2,458 ) $ 20,981
Net cash provided by investing activities $ 31,170 $
24,466 Net cash used in financing activities $ (4,934 ) $
(546 )
FITBIT, INC. RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES (In thousands, except percentages
and per share amounts) (unaudited)
Three Months Ended
March 31, 2018 April 1, 2017 Adjusted
EBITDA: Net loss $ (80,877 ) $ (60,079 ) Stock-based
compensation expense* 23,641 21,765 Litigation (expense) credit 765
(114 ) Impact of restructuring — 6,375 Depreciation and intangible
assets amortization 12,204 10,517 Interest income, net (1,350 )
(1,096 ) Income tax benefit (609 ) (29,671 ) Adjusted EBITDA $
(46,226 ) $ (52,303 )
Stock-based compensation
expense: Cost of revenue $ 1,098 $ 18 Research and development
14,671 14,344 Sales and marketing 3,447 3,248 General and
administrative 4,425 4,155 Total stock-based
compensation expense* $ 23,641 $ 21,765 * A portion
of stock-based compensation expense for the three months ended
April 1, 2017 was allocated to and included in "Impact of
restructuring," thus explaining the difference between the total by
function presented in this table compared to the amounts presented
in the above tables.
FITBIT, INC. REVENUE BY
GEOGRAPHICAL REGION (In thousands) (unaudited)
Three Months Ended March 31, 2018 April 1,
2017 United States $ 139,496 $ 170,420 Americas, excluding
United States 16,100 19,968 Europe, Middle East, and Africa 64,538
87,772 APAC 27,731 20,782 Total $ 247,865 $ 298,942
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version on businesswire.com: https://www.businesswire.com/news/home/20180502006366/en/
Fitbit, Inc.Investor Contact:Tom Hudson,
415-604-4106investor@fitbit.comorMedia Contact:Jen Ralls,
415-722-6937PR@fitbit.com
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