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GoPro (GPRO) Q3 Loss Narrower Than Expected, Revenues Fall

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GoPro, Inc. (GPRO - Free Report) reported mixed third-quarter 2019 results, wherein revenues declined year over year but net loss narrowed. The action video camera maker’s performance was primarily driven by launch of HERO8 Black and MAX and healthy demand for HERO7 cameras with robust market share in Europe and Japan. Lower operating expenses and inventory management also acted as tailwinds for business operations.

Net Loss

On a GAAP basis, net loss for the September quarter was $74.8 million or loss of 51 cents per share compared with net loss of $27.1 million or loss of 19 cents per share in the year-ago quarter. The year-over-year wider net loss was primarily due to lower revenues.

However, non-GAAP net loss came in at $61.3 million or loss of 42 cents per share compared with net loss of $6.1 million or loss of 4 cents per share in the year-ago quarter. The bottom line was narrower than the Zacks Consensus Estimate of a loss of 48 cents.

GoPro, Inc. Price, Consensus and EPS Surprise

Revenues

GoPro generated revenues of $131.2 million, down 54.1% from $285.9 million a year ago, primarily due to substantial decline in sales in the Americas, Europe, Middle East and Africa (EMEA) and Asia and Pacific (APAC) region owing to production delays of HERO8 Black. The top line, however, surpassed the consensus estimate of $125 million.

Revenues from Americas came in at $60.4 million (46% of total revenues), down 49.7% from $120.1 million in the year-ago quarter. Revenues from EMEA were $49.4 million (37.7%), down 48.3% from $95.6 million and APAC generated $21.4 million (16.3%), down 69.5% from $70.2 million.

Revenues from Direct channel were $71.7 million (54.7% of total revenues), down 46.4% from $133.7 million. Revenues from Distribution channel came in at $59.5 million (45.3%), down 60.9% from $152.2 million year over year.

The company shipped 0.5 million camera units during the reported quarter, down 56.3% year over year. During the first nine months of 2019, the company had $250 million in inventory compared with $116.5 million. This short-term increase in inventory was due to the delay in shipping HERO8 Black Cameras due to production delays resulting from shift in production facilities from China to Mexico to nullify the impact of trade war and related tariffs. HERO7 Black and MAX represented more than 75% of third-quarter camera revenues.

Cash Flow & Liquidity

GoPro utilized $112.7 million of net cash from operating activities during the first nine months of 2019 compared with $90.8 million in the year-ago period. As of Sep 30, 2019, the company had $43 million in cash and cash equivalents with $146.2 million of long-term debt.

Guidance

For the fourth quarter, revenues are expected to be in the range of $550-$585 million with non-GAAP earnings of 74-84 cents per share and GAAP earnings of 65-75 cents. Gross margin is expected in the vicinity of 40%, while operating expenses are likely to be about $105 million.

For the full year, revenues are expected to be in the range of $1.22-$1.25 billion, up 6% to 9%. Non-GAAP earnings is anticipated to be 30-40 cents per share. GAAP EPS is likely to be loss of 10 cents to breakeven with EBITDA of about $90 million.

Zacks Rank & Stocks to Consider

GoPro currently has a Zacks Rank #5 (Strong Sell).

A few better-ranked stocks in the broader industry are Sony Corporation (SNE - Free Report) and TEGNA Inc. (TGNA - Free Report) , each sporting a Zacks Rank #1 (Strong Buy), and Roku, Inc. (ROKU - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sony surpassed earnings estimates in each of the trailing four quarters, the average positive surprise being 86.9%.

TEGNA outpaced earnings estimates in each of the trailing four quarters, the average positive surprise being 8%.

Roku surpassed earnings estimates in each of the trailing four quarters, the average positive surprise being 74.4%.

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