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GoPro, Fox Factory announce Q1 results

GoPro, Inc. and Fox Factory Holding Corp. have each announced their financial results for the first quarter 2016:

Fox Factory First Quarter Fiscal 2016 Highlights

  • Sales increased 18.3% to $80.2 million compared to $67.8 million in the same period last fiscal year
  • Gross margin increased 360 basis points to 31.3% compared to 27.7% in the same period last fiscal year
  • Net income was $3.3 million, or $0.09 per diluted share, compared to $0.8 million, or $0.02 per diluted share in the same period last fiscal year
  • Non-GAAP adjusted net income was $6.0 million, or $0.16 adjusted earnings per diluted share, compared to $4.4 million, or $0.12 adjusted earnings per diluted share in the same period last fiscal year
  • Adjusted EBITDA was $11.5 million compared to $9.4 million in the same period last fiscal year

"We started 2016 with solid momentum across both our bike and powered vehicle product offerings. Strong operational execution enabled us to achieve sales growth above our expectations and earnings at the high end of our guidance," stated Larry L. Enterline, FOX's Chief Executive Officer. "We remain confident that FOX is well positioned for future growth as we benefit from our diversified product portfolio and the team's continued execution of our strategic initiatives. We believe these efforts will drive profitability and enhance long-term shareholder value."

Sales for the first quarter of fiscal 2016 were $80.2 million, an increase of 18.3% as compared to sales of $67.8 million in the first quarter of fiscal 2015. This increase reflects a 26.7% increase in sales of bike products and a 9.1% increase in sales of powered vehicle products.  The increase in bike product sales was primarily due to the continued success of the Company's model year 2016 product line up, particularly in the OEM channel, and a shift in the timing of certain customer orders from the second quarter into the first quarter of fiscal 2016. The increase in sales of powered vehicle products was primarily due to higher demand for on and off-road suspension products.

Gross margin was 31.3% for the first quarter of fiscal 2016, a 360 basis point improvement from gross margin of 27.7% in the first quarter of fiscal 2015.  The improvement in gross margin was primarily due to favorable product and customer mix as well as manufacturing efficiencies.  Additionally, gross margin improved due to the non-recurrence of costs associated with the West Coast port slowdown in the first quarter of 2015 and lower acquisition related inventory costs. On a non-GAAP basis, gross margin, excluding the effects of acquisition related costs, increased 210 basis points as compared to the first quarter of last year.  A reconciliation of gross margin to non-GAAP gross margin is provided at the end of this press release.

Total operating expenses were $19.4 million for the first quarter of fiscal 2016 compared to $17.2 million in the first quarter of the prior fiscal year.  Operating expenses increased to support development and promotion of the Company's products and brands. Timing of research and development and marketing expenses often shifts between years and quarters depending on a number of factors including product launch cycles.  Additionally, the Company continued to invest in strategic initiatives such as its new enterprise resource planning (ERP) system and the Marzocchi mountain bike product line.  Partially offsetting these increases were reductions in amortization of certain purchased intangibles and acquisition related costs.  As a percentage of sales, operating expenses improved to 24.2% for the first quarter of fiscal 2016 from 25.4% in the first quarter of fiscal 2015.

Operating income was $5.7 million for the first quarter of fiscal 2016, compared to operating income of $1.5 million in the first quarter of fiscal 2015.

Other expense was $1.3 million for the first quarter of fiscal 2016 as compared to $0.3 million in the first quarter of fiscal 2015.  The increase in other expense was primarily due to foreign currency transaction losses, including the impact from currency on the payment of earn-out compensation made in connection with one of the Company's recent acquisitions.

The effective tax rate was approximately 26.0% in the first quarter of 2016, compared to 37.1% in the first quarter of 2015.  The improvement in the effective tax rate was primarily due to the Company's ongoing global tax initiative.

Net income in the first quarter of fiscal 2016 was $3.3 million, compared to $0.8 million in the first quarter of the prior fiscal year.  Earnings per diluted share for the first quarter of fiscal 2016 were $0.09, compared to $0.02 in the first quarter of fiscal 2015.

Non-GAAP adjusted net income was $6.0 million, or $0.16 adjusted earnings per diluted share, compared to $4.4 million, or $0.12 adjusted earnings per diluted share in the same period last fiscal year.  Reconciliations of net income to non-GAAP adjusted net income and the calculation of non-GAAP adjusted earnings per share are provided at the end of this press release.

Adjusted EBITDA in the first quarter of fiscal 2016 was $11.5 million, compared to $9.4 million in the first quarter of fiscal 2015. Adjusted EBITDA margin in the first quarter of fiscal 2016 was 14.3%, compared to 13.8% in the first quarter of fiscal 2015.  Reconciliations of net income to adjusted EBITDA and the calculation of adjusted EBITDA margin are provided at the end of this press release.

Balance Sheet Highlights

As of April 1, 2016, the Company had cash and cash equivalents of $9.3 million. Total debt was $57.2 million, compared to $47.9 million as of December 31, 2015.   Inventory was $75.0 million as of April 1, 2016, compared to $68.2 million as of December 31, 2015.  As of April 1, 2016, accounts receivable and accounts payable were $33.9 million and $40.4 million, respectively, compared to December 31, 2015 balances of $43.7 million and $32.1 million, respectively.  The changes in accounts receivable, inventory and accounts payable are primarily attributable to business growth and the Company's normal seasonality.  Accrued expenses were $12.8 million at the end of the first quarter, a decrease of $10.4 million compared to year end due primarily to a scheduled earn-out payment related to one of the Company's recent acquisitions.  Additionally, during the quarter the Company repurchased 500,000 shares at $15.895 per share for an aggregate price of $7.9 million.  The repurchase was in connection with the offering and sale of common stock by selling stockholders pursuant to the Company's registration statement on Form S-3.

Fiscal 2016 Guidance

For the second quarter of fiscal 2016, the Company expects sales in the range of $95 million to $101 million and non-GAAP adjusted earnings per diluted share in the range of $0.25 to $0.30.

For the full fiscal year 2016, the Company reiterates its previous guidance for sales in the range of $375 million to $395 million and non-GAAP adjusted earnings per diluted share in the range of $1.05 to $1.13.

Non-GAAP adjusted earnings per diluted share exclude the following items net of applicable tax: amortization of purchased intangibles, contingent consideration valuation adjustment, acquisition related compensation expense including related foreign currency transaction gains or losses, certain acquisition related adjustments and expenses, and offering expenses.

GoPro First Quarter Fiscal 2016 Highlights

  • According to The NPD Group's Retail Tracking Service, GoPro accounted for 4 of the top 5 products on a unit basis in the combined digital camera/camcorder category in the U.S. HERO4 Silver remains the best-selling digital image camera on a unit and dollar basis. HERO4 Session moved to the #2 spot from #8 in the fourth quarter of 2015 on a unit basis in the combined digital camera/camcorder category in the U.S.
  • According to NPD, GoPro's first quarter combined digital camera/camcorder unit share in the U.S. increased 150 basis points year-over-year to 20.9%.
  • According to GfK, GoPro's first quarter digital imaging unit share in Europe increased 200 basis points year-over-year to 10.5%. In the first quarter, GoPro accounted for 6 of the top 10 camcorders in Europe on a unit basis.
  • International sales totaled more than 50% of total GoPro revenue in Q1 2016.
  • China remained a top ten market for GoPro in the first quarter. GoPro opened its first retail shop in Tianjin, China. GoPro's shop is situated in one of the city's most popular shopping streets.
  • The GoPro Developer Program is an initiative that provides GoPro toolkits for developers creating mobile apps that connect directly toGoPro products.  The program launched in April with 100 partners including BMW, Fisher-Price, Polar, Telefonica, and Toyota.
  • The GoPro Mobile App was downloaded 2.8 million times in the first quarter, totaling almost 27 million cumulative downloads; Q1 installs of GoPro Studio totaled almost 1.5 million, totaling nearly 16.5 million cumulative installs, with average daily video exports up 33.5% year-over-year to over 52,000 in the first quarter.
  • Launched GoPro Director's Program which invites external video directors to help expand the notion of what is possible with GoProtechnology.
  • Introduced Custom Solutions that integrate GoPro's camera technology and HEROCast, GoPro's wireless HD micro transmitter, into products and systems used in professional productions, enabling unique, never- before-seen perspectives. Over the past year GoPro Custom Solutions have been used in professional productions including: MotoAmerica, MotoGP, NHL, PGA TOUR and the GRAMMY Awards.
  • Introduced GoPro VR, a platform to view and share immersive content. The platform allows users to experience the immersive world of 360-degree video and transforms users' screens into a virtual portal, showcasing original content from GoPro and a global community of artists.
  • Omni, a six-camera spherical array, named Best 360-degree Video Rig at NAB 2016 by Videomaker. GoPro started taking pre-orders for Omni for August delivery.
  • Odyssey rigs ship to artists and professional film makers. Odyssey is GoPro's panoramic stereoscopic 16-camera rig optimized to work with Google's Jump.
  • GoPro extended an agreement with the world's premiere cycling event, Tour de France.

Business Outlook:

We continue to estimate our full year 2016 revenue to be in the range of $1.35 billion to $1.5 billion, in line with the guidance we provided on February 3, 2016.

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