NYSE: FIT $ 6.16 -0.19 -2.99% Volume: 4,231,059 October 19, 2017
08/05/2015

Fitbit Reports Second Quarter 2015 Results

Revenue of $400 Million, Up 253% Year-Over-Year
Non-GAAP EPS of $0.21 Up from $0.09 a Year Earlier

SAN FRANCISCO--(BUSINESS WIRE)-- Fitbit, Inc. (NYSE:FIT), the leader in the connected health and fitness market, today announced financial results for its second quarter ended June 30, 2015.

“Our second quarter results included our highest quarterly revenue in the eight-year history of Fitbit,” said James Park, Fitbit co-founder and CEO. “In the quarter, we introduced new features and services, expanded brand awareness, increased global distribution and further penetrated the corporate wellness market. We remain focused on continuing to deliver innovative products and services that empower people around the world to reach their health and fitness goals.”


 
 

Second Quarter 2015 Financial Summary





 


Three Months Ended

June 30,


Six Months Ended

June 30,

In thousands, except percentages and per share amounts


2014   2015
2014   2015
Revenue
$ 113,572

$ 400,412

$ 222,387

$ 737,166
Gross margin







GAAP
51 %
47 %
46 %
48 %
Non-GAAP*
52 %
47 %
56 %
48 %
Net income







GAAP
$ 14,753

$ 17,681

$ 23,625

$ 65,678
Non-GAAP*
$ 18,345

$ 51,313

$ 43,240

$ 107,487
Diluted net income per share







GAAP
$ 0.07

$ 0.07

$ 0.11

$ 0.29
Non-GAAP*
$ 0.09

$ 0.21

$ 0.21

$ 0.47








 
Adjusted EBITDA*
$ 29,088

$ 86,245

$ 71,116

$ 179,628

Devices sold


1,720

4,458

3,295

8,324












 

* For information regarding the non-GAAP financial measures, see “Non-GAAP Financial Measures” and “Reconciliation of GAAP to Non-GAAP Financial Measures” below.

Second Quarter 2015 and Recent Fitbit Highlights

  • Sold 4.5 million connected health and fitness devices in the second quarter of 2015
  • International revenue increased 250% year-over-year for the second quarter of 2015, driven by EMEA and APAC year-over-year revenue growth of 301% and 292%, respectively, for the second quarter of 2015
  • Released an update to the Fitbit Surge, enabling GPS bike tracking
  • Redesigned Fitbit mobile experience, including the visual redesign of the daily activity graphs for iPhone, Android and Windows Phones
  • Expanded partnership with Tory Burch
  • Teamed up with Kellogg’s, showcasing Fitbit Flex on 20 million packages nationwide
  • Entered into Corporate Wellness agreements with Geico, Sutter Health, Transunion, Quicken Loans, and several financial institutions. To date, we have signed over 50 of the Fortune 500 companies to our Corporate Wellness offerings

Outlook

Fitbit’s outlook for the third quarter of 2015 is as follows:

  • Revenue in the range of $335 million to $365 million
  • Non-GAAP gross margin in the range of 47% to 48%
  • Non-GAAP tax rate of approximately 37%
  • Stock-based compensation expense in the range of $15 million to $17 million
  • Non-GAAP diluted net income per share in the range of $0.07 to $0.10
  • Adjusted EBITDA in the range of $35 million to $45 million
  • Non-GAAP diluted share count between 247 million and 249 million

Fitbit’s outlook for the full year of 2015 is as follows:

  • Revenue in the range of $1.6 billion to $1.7 billion
  • Non-GAAP gross margin in the range of 47% to 48%
  • Non-GAAP tax rate of approximately 37%
  • Stock-based compensation expense in the range of $50 million to $54 million
  • Non-GAAP diluted net income per share in the range of $0.69 to $0.77
  • Adjusted EBITDA in the range of $275 million to $310 million
  • Non-GAAP diluted share count between 235 million and 240 million

Webcast and Conference Call Information

Fitbit management will host a conference call and live webcast for analysts and investors today at 2 p.m. Pacific Time (5 p.m. Eastern Time) to discuss Fitbit’s financial results.

To listen to the live conference call, please dial toll free 1-888-206-4912 or 1-913-312-0699, access code 1660528, approximately 15 minutes prior to the start of the call. A live webcast of the conference call will be accessible on the “IR Events & Presentations” section of Fitbit’s website at https://investor.fitbit.com. To access the live webcast, please log in 15 minutes prior to the start of the call to download and install any necessary audio software. The webcast will be recorded and the recording will be available on Fitbit’s website, https://investor.fitbit.com, approximately two hours after the call and for six months thereafter.

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 leader in the connected health and fitness category, Fitbit designs products and experiences that track everyday health and fitness. Fitbit’s diverse line of award-winning products includes Fitbit Surge, Fitbit Charge HR, Fitbit Charge, Fitbit Flex, Fitbit Zip and Fitbit One activity trackers, as well as the Aria Wi-Fi Smart Scale. Fitbit products are carried in over 45,000 retail stores and in more than 50 countries.

Fitbit, the Fitbit logo, Fitbit Surge, Fitbit Charge HR, Fitbit Charge, Fitbit Flex, Fitbit One, Fitbit Zip, PurePulse, MobileRun, Aria and FitStar are trademarks, service marks and/or registered trademarks of Fitbit, Inc. in the United States and in other countries. All other trademarks, service marks, and product names used herein are the property of their respective owners. FIT-F.

Connect with us on Facebook or Twitter and share your Fitbit experience.

Forward Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding Fitbit’s financial outlook for the third quarter and the full year of 2015 and Fitbit’s plans to introduce new products and services. 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; difficulty in predicting consumer preferences; any inability to successfully develop and introduce new products and services or enhance existing products and services; any inability to accurately forecast consumer demand and adequately manage our inventory; 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; quarterly and seasonal fluctuations; our reliance on third-party suppliers, contract manufacturers, and logistics providers, and our limited control over such parties; the ability of our channel partners to sell our products; market acceptance of our other products and services beyond wearable devices; the fact that the market for connected health and fitness devices is relatively new and unproven; other litigation; privacy; and 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 Prospectus filed pursuant to Rule 424(b) filed with the SEC on June 18, 2015, which is available on our Investor Relations website at investor.fitbit.com and on the SEC website at www.sec.gov. Additional information will also be set forth in other filings that the company makes with the SEC from time to time. 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.

Non-GAAP Financial Measures

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP gross margin; non-GAAP gross profit as a percentage of revenue; non-GAAP operating expenses; non-GAAP operating income; non-GAAP net income; non-GAAP diluted shares; non-GAAP diluted net income per share; 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 items, specifically stock-based compensation expense, amortization of intangible assets, 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.

The following are explanations of the adjustments that are reflected in one or more of our non-GAAP financial measures:

  • 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 and the first quarter of 2014.
  • 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.
  • Revaluation of redeemable convertible preferred stock warrant liability is a non-cash charge that will not recur in the periods following our initial public offering.
  • Amortization of intangible assets relates to our acquisition of FitStar. We exclude these amortization expenses because we do not believe these expenses have a direct correlation to the operation of our business.
  • The change in contingent consideration relates to our acquisition of FitStar. This is a non-recurring benefit that has no 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 in order to provide a more meaningful measure of non-GAAP net income.
  • Adjustment to shares includes the conversion of the redeemable convertible preferred stock into shares of common stock as though the conversion had occurred at the beginning of all periods presented, and the shares issued in our initial public offering in June 2015, as if they had been outstanding since the beginning of the second quarter of 2015.

For more information on our non-GAAP financial measures and a reconciliation of such measures to the nearest GAAP measure, please see the “Reconciliation of GAAP to Non-GAAP Financial Measures” table in this press release.

 
FITBIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share amounts)
(unaudited)

  Three Months Ended

June 30,

  Six Months Ended

June 30,



2014   2015
2014   2015
Revenue
$ 113,572

$ 400,412

$ 222,387

$ 737,166
Cost of revenue
55,183  
212,870  
119,229  
380,415  
Gross profit
58,389  
187,542  
103,158  
356,751  
Operating expenses:







Research and development
11,809

30,492

20,897

52,918
Sales and marketing
13,311

69,690

24,584

113,557
General and administrative
7,443

14,648

16,060

27,629
Change in contingent consideration
 
(7,704 )
 
(7,704 )
Total operating expenses
32,563  
107,126  
61,541  
186,400  
Operating income
25,826

80,416

41,617

170,351
Interest expense, net
(452 )
(379 )
(861 )
(846 )
Other expense, net
(3,687 )
(45,308 )
(4,906 )
(58,385 )
Income before income taxes
21,687  
34,729  
35,850  
111,120  
Income tax expense
6,934  
17,048  
12,225  
45,442  
Net income
$ 14,753

$ 17,681

$ 23,625

$ 65,678








 
Less: noncumulative dividends to preferred stockholders
(1,327 )
(1,212 )
(2,640 )
(2,526 )
Less: undistributed earnings attributable to participating securities
(10,423 )
(11,244 )
(16,293 )
(45,907 )
Net income attributable to common stockholders—basic
3,003

5,225

4,692

17,245
Add: undistributed earnings to dilutive participating securities
1,058  
1,862  
1,618  
7,003  
Net income attributable to common stockholders—diluted
$ 4,061  
$ 7,087  
$ 6,310  
$ 24,248  








 
Net income per share attributable to common stockholders:







Basic
$ 0.07  
$ 0.09  
$ 0.12  
$ 0.35  
Diluted
$ 0.07  
$ 0.07  
$ 0.11  
$ 0.29  
Weighted average shares used to compute net income per share attributable to common stockholders:







Basic
40,193  
58,548  
40,174  
49,922  
Diluted
60,487  
95,190  
59,983  
82,841  












 
 
FITBIT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)

  December 31,

2014

  June 30,

2015

Assets



Current assets:



Cash and cash equivalents
$ 195,626

$ 461,276
Accounts receivable, net
238,859

252,023
Inventories
115,072

186,870
Deferred tax assets
33,555

49,625
Prepaid expenses and other current assets
13,614  
18,163
Total current assets
596,726

967,957
Property and equipment, net
26,435

30,945
Goodwill


22,157
Intangible assets, net


13,263
Other assets
9,890  
12,308
Total assets
$ 633,051  
$ 1,046,630

Liabilities, Redeemable Convertible Preferred Stock, and Stockholders’ Equity





Current liabilities:



Fitbit Force recall reserve
$ 22,476

$ 12,894
Accounts payable
195,666

193,594
Accrued liabilities
70,940

79,618
Deferred revenue
9,009

21,346
Income taxes payable
30,631

795
Long-term debt, current portion
132,589  
Total current liabilities
461,311

308,247
Redeemable convertible preferred stock warrant liability
15,797

Other liabilities
12,867  
15,031
Total liabilities
489,975

323,278




 
Redeemable convertible preferred stock
67,814

Stockholders’ equity



Common stock and additional paid-in capital
7,983

590,310
Accumulated other comprehensive income
37

122
Retained earnings
67,242  
132,920
Total stockholders’ equity
75,262  
723,352

Total liabilities, redeemable convertible preferred stock, and stockholders’ equity


$ 633,051  
$ 1,046,630







 
 
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except percentages and per share amounts)
(unaudited)

  Three Months Ended

June 30,

  Six Months Ended

June 30,



2014   2015
2014   2015
Non-GAAP gross profit:







GAAP gross profit
$ 58,389

$ 187,542

$ 103,158

$ 356,751
Stock-based compensation expense
129

825

188

1,271
Impact of Fitbit Force recall




22,163

(2,040)
Intangible assets amortization
 
467  
 
467  
Non-GAAP gross profit
$ 58,518  
$ 188,834  
$ 125,509  
$ 356,449  








 
Non-GAAP gross profit as a percentage of revenue:







GAAP gross profit as a percentage of revenue
51 %
47%
46 %
48%
Stock-based compensation expense
1






Impact of Fitbit Force recall




10


Intangible assets amortization
 
 
 
 
Non-GAAP gross profit as a percentage of revenue
52 %
47 %
56 %
48 %








 
Non-GAAP operating expenses:







GAAP operating expenses
$ 32,563

$ 107,126

$ 61,541

$ 186,400
Stock-based compensation expense
(532 )
(6,922 )
(787 )
(11,379 )
Impact of Fitbit Force recall
(1,483 )
(69 )
(4,359 )
73
Intangible assets amortization


(82 )


(82 )
Change in contingent consideration
 
7,704  
 
7,704  
Non-GAAP operating expenses
$ 30,548  
$ 107,757  
$ 56,395  
$ 182,716  








 
Non-GAAP operating income:







GAAP operating income
$ 25,826

$ 80,416

$ 41,617

$ 170,351
Stock-based compensation expense
661

7,747

975

12,650
Impact of Fitbit Force recall
1,483

69

26,522

(2,113 )
Intangible assets amortization


549



549
Change in contingent consideration
 
(7,704 )
 
(7,704 )
Non-GAAP operating income
$ 27,970  
$ 81,077  
$ 69,114  
$ 173,733  








 
Non-GAAP net income and net income per share:







Net income
$ 14,753

$ 17,681

$ 23,625

$ 65,678
Stock-based compensation expense
661

7,747

975

12,650
Impact of Fitbit Force recall
1,483

69

26,522

(2,113 )

Revaluation of redeemable convertible preferred stock warrant liability


3,842

46,320

5,195

56,655
Intangibles assets amortization


549



549
Change in contingent consideration


(7,704 )


(7,704 )
Income tax effect of non-GAAP adjustments
(2,394 )
(13,349 )
(13,077 )
(18,228 )
Non-GAAP net income
$ 18,345  
$ 51,313  
$ 43,240  
$ 107,487  
















 
 
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except percentages and per share amounts)
(unaudited)

  Three Months Ended

June 30,

  Six Months Ended

June 30,



2014   2015
2014   2015
GAAP diluted shares
60,487

95,190

59,983

82,841

Diluted effect of redeemable convertible preferred stock conversion


139,504

126,020

139,504

132,898
Initial public offering shares


20,173



10,081
Other dilutive equity awards
1,886  
1,766  
1,793  
1,801  
Non-GAAP diluted shares
201,877  
243,149  
201,280  
227,621  
Non-GAAP diluted net income per share
$ 0.09  
$ 0.21  
$ 0.21  
$ 0.47  








 
Adjusted EBITDA:







Net income
$ 14,753

$ 17,681

$ 23,625

$ 65,678
Impact of Fitbit Force recall
1,483

69

26,522

(2,113 )
Stock-based compensation expense
661

7,747

975

12,650
Revaluation of redeemable convertible preferred







stock warrant liability
3,842

46,320

5,195

56,655
Depreciation and intangible assets amortization
963

4,705

1,713

8,174
Change in contingent consideration


(7,704 )


(7,704 )
Interest expense, net
452

379

861

846
Income tax expense
6,934  
17,048  
12,225  
45,442  
Adjusted EBITDA
$ 29,088  
$ 86,245  
$ 71,116  
$ 179,628  








 
Stock-based compensation expense:







Cost of revenue
$ 129

$ 825

$ 188

$ 1,271
Research and development
192

3,138

284

5,017
Sales and marketing
120

1,322

183

2,629
General and administrative
220  
2,462  
320  
3,733  
Total stock-based compensation expense
$ 661  
$ 7,747  
$ 975  
$ 12,650  
















 
 
FITBIT, INC.
Revenue by Geographical Region
(In thousands)
(unaudited)

          Three Months Ended
June 30,
  Six Months Ended
June 30,






2014   2015
2014   2015












 
United States




$ 88,504

$ 312,666

$ 178,335

$ 577,975
Americas excluding United States




7,177

16,799

10,893

30,228
Europe, Middle East, and Africa




9,915

39,712

18,639

74,768
APAC




7,976  
31,235  
14,520  
54,195
Total




$ 113,572  
$ 400,412  
$ 222,387  
$ 737,166



















 

Source: Fitbit, Inc.

Fitbit, Inc.

Investor Contact:

Peter Salkowski, 415-604-4106

investor@fitbit.com

or

Media Contact:

Jen Ralls, 415-941-0037

PR@fitbit.com