GoPro(GPRO) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - GoPro generated non-GAAP EPS of $0.20 and$ 100 million of operating cash flow in Q3 2020, with expectations to be profitable for the full year 2020 [8][10] - Revenue growth of 109% sequentially, with record GoPro.com revenue of $81 million [10] - Estimated sell-through of approximately 955,000 cameras, exceeding expectations [10] Business Line Data and Key Metrics Changes - The launch of HERO9 Black and the GoPro subscription service contributed significantly to revenue and subscriber growth [9][10] - 85% of HERO9 Black purchases were made with a subscription, indicating a strong attach rate [21] - Higher average order values and accessory attach rates were observed among subscriber customers compared to non-subscribers [9][23] Market Data and Key Metrics Changes - The direct-to-consumer model is driving improved cash flow and margins, with expectations for continued growth in 2021 [10][25] - The company expects to exit 2020 with low channel inventory, positioning itself well for 2021 [10][56] Company Strategy and Development Direction - GoPro's strategy focuses on making the subscription service central to its business model, enhancing customer lifetime value and profitability [9][10] - The company aims to expand its direct-to-consumer approach, which is more profitable than retail channels [25][56] - Future product development will be informed by consumer research to address both existing user needs and attract new customers [46][48] Management's Comments on Operating Environment and Future Outlook - Management noted a shift in consumer behavior due to COVID-19, with increased local outdoor activities driving demand for GoPro products [15][16] - The company anticipates continued strong performance in Q4 and beyond, supported by a robust subscription model [10][42] - Management expressed confidence in the ability to grow the subscriber base significantly in 2021, with a target of nearly 2 million subscribers [22][42] Other Important Information - GoPro is focusing on enhancing the value of its subscription service to improve retention rates and reduce churn [50][52] - The company is developing a new app experience aimed at smartphone users, which could create additional subscription revenue opportunities [61][62] Q&A Session Summary Question: Change in business model and cash management - Management highlighted improvements in working capital, with DSOs improving to 35 days and expected to decrease further [12] Question: Changing demographics and market penetration - Management noted a shift in consumer behavior towards local activities, which has increased the relevance of GoPro products [15][16] Question: Subscriber attach rates through different channels - Higher attach rates were observed for subscriptions purchased through GoPro.com compared to retail [21] Question: Future cash flow modeling - Management indicated that cash flow seasonality has improved due to the direct-to-consumer model [34] Question: Operating expenses guidance for 2021 - Management expects operating expenses to be in the range of$ 290 million for 2021, with flexibility to adjust if necessary [39] Question: Subscriber growth expectations - Management anticipates exceeding 700,000 subscribers by year-end, with a potential to reach nearly 2 million by the end of 2021 [42] Question: New app experience for smartphone users - Management discussed plans for a new app that addresses widespread problems for both GoPro and smartphone users, aiming to expand the brand's reach [61][62]