08/05/2020

Fitbit Reports Second Quarter Results for the Three Months Ended July 4, 2020

  • Revenue of $261 million, GAAP Net Loss Per Share of $(0.39), Non-GAAP Net Loss Per Share of $(0.12)
  • GAAP and Non-GAAP gross margins expand driven by 102% year-over-year growth in Fitbit.com sales

SAN FRANCISCO--(BUSINESS WIRE)-- Fitbit, Inc. (NYSE:FIT) today reported revenue of $261 million, GAAP net loss per share of $(0.39), non-GAAP net loss per share of $(0.12), GAAP net loss of $(104) million, non-GAAP net loss of $(32) million, cash flow from operations of $33 million, and non-GAAP free cash flow of $28 million for its second quarter of 2020.

“We have been focused on helping our community stay physically active and mentally well during the pandemic. In this uncertain COVID-19 environment, we are seeing consumers turn to options that enable them to take charge of their health, such as Fitbit devices. In addition, many customers have taken advantage of Fitbit’s free premium trial offering and signed up for our subscription service,” said James Park, co-founder and CEO. “While COVID-19 has impacted our business and there continues to be uncertainty around consumer demand and the economy, we are encouraged by the 12% year-over-year POS sales growth we’ve seen at retail and through Fitbit.com.”

 

Second Quarter 2020 Financial Summary

 

 

For the Three Months Ended

 

For the Six Months Ended

In millions, except percentages and per share amounts

 

July 4, 2020

 

June 29, 2019

 

July 4, 2020

 

June 29, 2019

GAAP Results

 

 

 

 

 

 

 

 

Revenue

 

$

261.3

 

 

$

313.6

 

 

$

449.4

 

 

$

585.4

 

Gross Margin

 

35.6

%

 

34.5

%

 

32.9

%

 

33.8

%

Net loss

 

$

(104.1)

 

 

$

(68.5)

 

 

$

(83.8)

 

 

$

(148.0)

 

Net loss Per Share

 

$

(0.39)

 

 

$

(0.27)

 

 

$

(0.31)

 

 

$

(0.58)

 

Non-GAAP Results

 

 

 

 

 

 

 

 

Gross Margin

 

37.6

%

 

35.6

%

 

35.2

%

 

34.9

%

Net loss

 

$

(31.5)

 

 

$

(35.8)

 

 

$

(96.1)

 

 

$

(73.8)

 

Net loss Per Share

 

$

(0.12)

 

 

$

(0.14)

 

 

$

(0.36)

 

 

$

(0.29)

 

Adjusted EBITDA

 

$

(31.8)

 

 

$

(30.8)

 

 

$

(107.3)

 

 

$

(74.0)

 

Devices Sold

 

2.5

 

 

3.5

 

 

4.6

 

 

6.5

 

 

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

Second Quarter 2020 Financial Highlights

  • Sold 2.5 million devices, down 30% year-over-year, driven by the introduction of one new product in the first half of 2020 versus four new products in the first half of 2019. Average selling price increased 16% year-over-year to $100 per device. The year-over-year price increase was driven primarily by the higher percentage of sales through the Fitbit.com channel, which grew 102% year-over-year to $66 million of sales.
  • U.S. revenue represented 63% of total revenue or $165 million, down 9% year-over-year.
  • International revenue represented 37% of total revenue and declined 27% to $97 million: EMEA revenue declined 17% to $72 million, APAC revenue declined 47% to $14 million and Americas excluding U.S. revenue declined 45% to $10 million, (all on a year-over-year basis).
  • New devices introduced in the past 12 months, Fitbit Charge 4™, Fitbit Versa 2™, and Fitbit Aria Air™, represented 71% of revenue.
  • GAAP gross margin was 35.6% and non-GAAP gross margin was 37.6%. GAAP gross margin increased 120 basis points and non-GAAP gross margin increased 200 basis points year-over-year driven by higher average selling price, the mix shift to Fitbit.com and growth of premium revenue, as well as $9 million decrease in excess and obsolete inventory write-downs.
  • GAAP operating expenses represented 70.5% of revenue, increasing 3% year-over-year to $184 million driven by costs related to the pending acquisition by Google LLC; non-GAAP operating expenses represented 54.6% of revenue, decreasing 11% year-over-year to $143 million driven by lower marketing costs and lower customer service costs.

Second Quarter 2020 Operational Highlights

  • Consumer demand for Fitbit devices was strong in the second quarter with POS up 12% in the second quarter. This was driven by 34% growth in smartwatch sales, led by sales of Versa 2.
  • Revenue lagged POS sales driven by a large reduction in channel inventory. Global inventory in the channel declined by approximately one million units.
  • Smartwatches represented 40% of revenue, trackers represented 56% of revenue and non-device software offerings were 4% of revenue. Tracker sales benefited from the introduction of Charge 4 in the first quarter of 2020. Non-device revenue grew 195% year-over-year driven by the growth of our consumer premium health offering.
  • Following the introduction in the first quarter of 2020 of a 90-day free trial offering of Fitbit Premium to give users more tools to stay healthy during COVID-19, we began to see healthy levels of conversion from free to paid users. Fitbit ranked as a top 10 paid app within the Health & Fitness category on both Google Play and the iOS Store in the United States in the second quarter and now ranks as the number one paid app in the U.S. in Google Play and top five in the iOS store.
  • Our Fitbit Health Solutions business was negatively impacted by COVID-19 and represented 7% of revenue, or $17 million.
  • We introduced a COVID-19 resource tab in our free app that provides access to helpful information, tools, and resources, such as connecting with a doctor virtually.
  • We announced a broader research effort in coordination with health industry leaders like Stanford Medicine and The Scripps Research Institute, to study how data from wearables can detect, track, and contain infectious diseases like COVID-19.
  • We developed a high-quality, low-cost, easy to use emergency ventilator, Fitbit Flow, which has obtained Emergency Use Authorization from the U.S. Food and Drug Administration, to help address urgent global needs during COVID-19.

COVID-19-Related Impact to Financials

  • Our business during the second quarter of 2020 was negatively impacted by the outbreak of COVID-19, which has caused disruptions in the development, manufacture, shipment, and sales of our products.
  • We maintained the COVID-19 credit allowance of $6 million during the second quarter of 2020.
  • The current circumstances are dynamic and unprecedented, and the impacts of COVID-19 on our business operations, including the duration and severity of the effect on overall consumer demand, cannot be predicted. However, we expect COVID-19 and associated mitigation efforts to continue to have a significant negative impact on our results in 2020, including our liquidity, although the nature and extent will depend on future developments that are evolving and highly uncertain.

Additional Highlights and Information

  • Fitbit announced its entry into a Merger Agreement with Google on November 1, 2019. Upon close of the all-cash transaction, which is subject to customary closing conditions, Fitbit stockholders will receive $7.35 per share in cash, valuing the company at a fully diluted equity value of approximately $2.1 billion.
  • Fitbit stockholders approved the transaction on January 3, 2020.
  • Regulatory review of the transaction is ongoing. On August 4, 2020, the European Commission announced it has initiated a Phase II review of the transaction. The duration of a Phase II review cannot be foreseen with certainty. While we still expect Fitbit and Google to secure the necessary regulatory approvals and to close the transaction in 2020, the time frame may extend beyond that. Moreover, the extent to which COVID-19 may impact the timing of receipt of these approvals is uncertain and cannot be predicted. Prior to closing, we do not expect to provide additional updates on the regulatory process other than during the release of future earnings reports.
  • Due to the pending acquisition by Google, Fitbit does not plan to host an earnings conference call nor provide next-quarter or full-year guidance.

Forward Looking Statements

This press release contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. In some cases, you can identify these forward-looking statements by the use of terms such as “expect,” “will,” “continue,” or similar expressions, and variations or negatives of these words, but the absence of these words does not mean that a statement is not forward-looking. All statements other than statements of historical fact could be deemed forward-looking statements, including, but not limited to: our ability to develop innovative products and services that can help people during the COVID-19 pandemic; any statements regarding the anticipated impact of COVID-19 on our business; the expected timing of the completion of the transaction with Google; the ability of Google and us to complete the proposed transaction considering the various conditions to the transaction, some of which are outside the parties’ control, including those conditions related to regulatory approvals; any statements concerning the expected development or competitive performance relating to Fitbit’s products and services; and any statements of assumptions underlying any of the foregoing. A number of important factors and uncertainties could cause actual results or events to differ materially from those described in these forward-looking statements, including without limitation: the impact of COVID-19 on our business, results of operations, or financial condition, including the development, manufacturing, and shipment of our products; general public health, market, political, economic and business conditions, including the impact of COVID-19 on global economic conditions and consumer confidence and spending; 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 and cost-effective manner; our ability to successfully develop, timely introduce, and achieve retail and customer acceptance of new products and services, or enhance existing products and services, including software and subscription services; our ability to accurately forecast consumer demand and adequately manage our inventory; our ability to ship products on the timelines we anticipate and avoid unexpected delays; our ability to detect, prevent or fix quality issues in our products and services; our ability to attract and 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 products from third parties or their suppliers; the ability of third parties to manufacture and ship quality products in a timely manner; seasonality of demand; the concentrated nature of our retailer and distributor base; product liability issues, security breaches, or other factors that may adversely affect product performance and overall market acceptance of our products and services; our ability to integrate acquired technologies and employees of acquired businesses into our operations, particularly in new geographies; warranty claims; the relatively new and unproven market for trackers and wearable devices; the ability of our channel partners to sell our products; litigation and related costs; the impact of privacy and data security laws; changes in tax laws; the impact of tariffs; the failure to satisfy any of the conditions to the consummation of the proposed transaction with Google, including the receipt of certain governmental and regulatory approvals; the occurrence of any event, change, or other circumstance that could give rise to the termination of the Merger Agreement; the outcome of any legal proceedings that may be instituted against us related to the Merger Agreement or the proposed transaction; unexpected costs, charges or expenses resulting from the proposed transaction; the occurrence of a Company Material Adverse Effect (as defined in the Merger Agreement).

Additional risks and uncertainties are included under the caption “Risk Factors” in our Annual Report on Form 10-K for the full year ended December 31, 2019, and our Quarterly Report Form 10-Q for the three months ended April 4, 2020, which are available on our Investor Relations website at investor.fitbit.com and on the Security Exchange Commission (SEC) website at www.sec.gov. Once filed with the SEC, additional information will be set forth in our Quarterly Report on Form 10-Q for the three months ended July 4, 2020. 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. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on such statements.

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 income (loss), non-GAAP basic/diluted net income (loss) per share, free cash flow, non-GAAP research and development expenses, non-GAAP sales and marketing expenses, non-GAAP general and administrative expenses, 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, acquisition-related costs, 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:

  • 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. Companies calculate stock-based compensation expense using a variety of valuation methodologies and subjective assumptions.
  • Acquisition-related costs relates to bonuses in connection with the Merger, integration costs, advisory and consulting, legal, accounting, tax, other professional service fees, and SEC filing fees to the extent associated with the pending Merger or our acquisition of other companies.
  • 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.
  • Amortization of intangible assets relates to our acquisitions of FitStar, Pebble, Vector and Twine Health. We exclude these amortization expenses because we do not believe they 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.
  • We define free cash flow as net cash provided by (used in) operating activities less purchase of property and equipment. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can possibly be used for investing in our business and strengthening the balance sheet, but it is not intended to represent the residual cash flow available for discretionary expenditures. Free cash flow is not prepared in accordance with U.S. GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with U.S. GAAP.

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. 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 Charge 4™, Fitbit Charge 3™, Fitbit Inspire HR™, Fitbit Inspire™, and Fitbit Ace 2™ activity trackers, as well as the Fitbit Ionic™ and Fitbit Versa™ family of smartwatches, Fitbit Flyer™ wireless headphones, and Fitbit Aria™ family of connected scales. Fitbit products are carried in over 39,000 retail stores and in over 100 countries around the globe. Powered by one of the world’s largest health and fitness social 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 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 United States, 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 and Twitter and share your Fitbit experience

 

FITBIT, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

(unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

July 4, 2020

 

June 29, 2019

 

July 4, 2020

 

June 29, 2019

 

 

 

 

 

 

 

 

Revenue

$

261,272

 

 

$

313,556

 

 

$

449,430

 

 

$

585,446

 

Cost of revenue

168,230

 

 

205,342

 

 

301,466

 

 

387,779

 

Gross profit

93,042

 

 

108,214

 

 

147,964

 

 

197,667

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

83,733

 

 

70,919

 

 

165,322

 

 

147,958

 

Sales and marketing

65,470

 

 

83,060

 

 

122,431

 

 

151,676

 

General and administrative

35,049

 

 

24,865

 

 

77,090

 

 

51,557

 

Total operating expenses

184,252

 

 

178,844

 

 

364,843

 

 

351,191

 

Operating loss

(91,210)

 

 

(70,630)

 

 

(216,879)

 

 

(153,524)

 

Interest income, net

13

 

 

2,622

 

 

1,306

 

 

6,088

 

Other income, net

2,237

 

 

461

 

 

2,233

 

 

1,734

 

Loss before income taxes

(88,960)

 

 

(67,547)

 

 

(213,340)

 

 

(145,702)

 

Income tax expense (benefit)

15,137

 

 

971

 

 

(129,537)

 

 

2,281

 

Net loss

$

(104,097)

 

 

$

(68,518)

 

 

$

(83,803)

 

 

$

(147,983)

 

Net loss per share:

 

 

 

 

 

 

 

Basic

$

(0.39)

 

 

$

(0.27)

 

 

$

(0.31)

 

 

$

(0.58)

 

Diluted

$

(0.39)

 

 

$

(0.27)

 

 

$

(0.31)

 

 

$

(0.58)

 

Shares used to compute net loss per share:

 

 

 

 

 

 

 

Basic

267,872

 

 

256,160

 

 

266,742

 

 

254,659

 

Diluted

267,872

 

 

256,160

 

 

266,742

 

 

254,659

 

 

FITBIT, INC.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

July 4, 2020 December 31, 2019

 

 

 

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

343,476

 

 

$

334,479

 

Marketable securities

 

104,755

 

 

184,023

 

Accounts receivable, net

 

215,394

 

 

435,269

 

Inventories

 

65,371

 

 

136,752

 

Income tax receivable

 

26,753

 

 

573

 

Prepaid expenses and other current assets

 

31,829

 

 

28,656

 

Total current assets

 

787,578

 

 

1,119,752

 

Property and equipment, net

 

78,552

 

 

82,756

 

Operating lease right-of use-assets

 

65,579

 

 

70,225

 

Goodwill

 

64,812

 

 

64,812

 

Intangible assets, net

 

9,668

 

 

16,746

 

Deferred tax assets

 

26,017

 

 

4,111

 

Other assets

 

10,269

 

 

9,684

 

Total assets

 

$

1,042,475

 

 

$

1,368,086

 

Liabilities and Stockholders’ Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

79,726

 

 

$

194,626

 

Accrued liabilities

 

358,288

 

 

513,530

 

Operating lease liabilities

 

21,687

 

 

23,511

 

Deferred revenue

 

32,589

 

 

32,307

 

Income taxes payable

 

1,448

 

 

636

 

Total current liabilities

 

493,738

 

 

764,610

 

Long-term deferred revenue

 

4,626

 

 

8,535

 

Long-term operating lease liabilities

 

61,410

 

 

67,902

 

Other liabilities

 

52,385

 

 

39,776

 

Total liabilities

 

612,159

 

 

880,823

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

Class A and Class B common stock

 

27

 

 

26

 

Additional paid-in capital

 

1,153,520

 

 

1,126,827

 

Accumulated other comprehensive income

 

350

 

 

188

 

Accumulated deficit

 

(723,581)

 

 

(639,778)

 

Total stockholders’ equity

 

430,316

 

 

487,263

 

Total liabilities and stockholders’ equity

 

$

1,042,475

 

 

$

1,368,086

 

 

FITBIT, INC.

Condensed Consolidated Statements of Cash Flow

(in thousands)

(unaudited)

 

Three Months Ended

 

Six Months Ended

 

July 4, 2020

 

June 29, 2019

 

July 4, 2020

 

June 29, 2019

Cash Flows from Operating Activities

 

 

 

 

 

 

 

Net loss

$

(104,097)

 

 

$

(68,518)

 

 

$

(83,803)

 

 

$

(147,983)

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

Provision for doubtful accounts

(441)

 

 

16

 

 

6,045

 

 

48

 

Provision for excess and obsolete inventory

3,415

 

 

2,644

 

 

13,260

 

 

4,122

 

Depreciation

10,453

 

 

16,733

 

 

21,042

 

 

30,106

 

Non-cash lease expense

6,953

 

 

3,902

 

 

8,477

 

 

11,615

 

Accelerated depreciation of property and equipment

613

 

 

170

 

 

626

 

 

170

 

Amortization of intangible assets

3,049

 

 

2,061

 

 

7,078

 

 

4,121

 

Stock-based compensation

19,770

 

 

20,547

 

 

39,497

 

 

41,091

 

Deferred income taxes

(21,865)

 

 

154

 

 

(21,819)

 

 

134

 

Other

319

 

 

212

 

 

324

 

 

162

 

Changes in operating assets and liabilities, net of acquisition:

 

 

 

 

 

 

 

Accounts receivable

(32,669)

 

 

(8,031)

 

 

213,830

 

 

155,561

 

Inventories

36,243

 

 

9,775

 

 

56,544

 

 

(41,183)

 

Prepaid expenses and other assets

22,320

 

 

1,862

 

 

(5,753)

 

 

14,416

 

Income taxes receivable

113,074

 

 

(449)

 

 

(26,180)

 

 

(409)

 

Accounts payable

(19,279)

 

 

(18,861)

 

 

(123,657)

 

 

(100,517)

 

Accrued liabilities and other liabilities

2,464

 

 

(28,048)

 

 

(141,269)

 

 

(97,964)

 

Lease liabilities

(6,144)

 

 

(8,605)

 

 

(10,900)

 

 

(13,577)

 

Deferred revenue

(1,427)

 

 

(1,216)

 

 

(3,627)

 

 

(3,475)

 

Income taxes payable

(251)

 

 

(771)

 

 

813

 

 

(514)

 

Net cash provided by (used in) operating activities

32,500

 

 

(76,423)

 

 

(49,472)

 

 

(144,076)

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

Purchase of property and equipment

(4,994)

 

 

(4,731)

 

 

(8,550)

 

 

(10,827)

 

Purchases of marketable securities

 

 

(108,880)

 

 

(59,735)

 

 

(220,495)

 

Sales of marketable securities

 

 

2,016

 

 

 

 

2,016

 

Maturities of marketable securities

71,174

 

 

111,120

 

 

139,365

 

 

239,429

 

Net cash provided by (used in) investing activities

66,180

 

 

(475)

 

 

71,080

 

 

10,123

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

Payment of financing lease liability

(1,384)

 

 

(340)

 

 

(1,384)

 

 

(937)

 

Proceeds from issuance of common stock

544

 

 

5,881

 

 

1,002

 

 

6,812

 

Taxes paid related to net share settlement of restricted stock units

(6,361)

 

 

(4,227)

 

 

(12,229)

 

 

(10,649)

 

Net cash provided by (used in) financing activities

(7,201)

 

 

1,314

 

 

(12,611)

 

 

(4,774)

 

Net increase (decrease) in cash and cash equivalents

91,479

 

 

(75,584)

 

 

8,997

 

 

(138,727)

 

Cash and cash equivalents at beginning of period

251,997

 

 

410,813

 

 

334,479

 

 

473,956

 

Cash and cash equivalents at end of period

$

343,476

 

 

$

335,229

 

 

$

343,476

 

 

$

335,229

 

 

FITBIT, INC.

Reconciliation of GAAP to Non-GAAP Financial Measures

(in thousands, except percentages and per share amounts)

(unaudited)

 

Three Months Ended

 

Six Months Ended

 

July 4, 2020

 

June 29, 2019

 

July 4, 2020

 

June 29, 2019

Non-GAAP gross profit:

 

 

 

 

 

 

 

GAAP gross profit

$

93,042

 

 

$

108,214

 

 

$

147,964

 

 

$

197,667

 

Stock-based compensation expense

2,033

 

 

1,521

 

 

4,212

 

 

2,951

 

Impact of restructuring

 

 

 

 

 

 

190

 

Acquisition-related costs

1,497

 

 

 

 

2,262

 

 

 

Intangible assets amortization

1,548

 

 

1,853

 

 

3,940

 

 

3,707

 

Non-GAAP gross profit

$

98,120

 

 

$

111,588

 

 

$

158,378

 

 

$

204,515

 

 

 

 

 

 

 

 

 

Non-GAAP gross margin (as a percentage of revenue):

 

 

 

 

 

 

 

GAAP gross margin

35.6

%

 

34.5

%

 

32.9

%

 

33.8

%

Stock-based compensation expense

0.8

 

 

0.5

 

 

0.9

 

 

0.5

 

Impact of restructuring

 

 

 

 

 

 

 

Acquisition-related costs

0.6

 

 

 

 

0.5

 

 

 

Intangible assets amortization

0.6

 

 

0.6

 

 

0.9

 

 

0.6

 

Non-GAAP gross margin

37.6

%

 

35.6

%

 

35.2

%

 

34.9

%

 

 

 

 

 

 

 

 

Non-GAAP research and development:

 

 

 

 

 

 

 

GAAP research and development

$

83,733

 

 

$

70,919

 

 

$

165,322

 

 

$

147,958

 

Stock-based compensation expense

(11,442)

 

 

(11,892)

 

 

(22,561)

 

 

(23,880)

 

Impact of restructuring

 

 

 

 

 

 

(1,550)

 

Acquisition-related costs

(9,653)

 

 

 

 

(15,364)

 

 

 

Non-GAAP research and development

$

62,638

 

 

$

59,027

 

 

$

127,397

 

 

$

122,528

 

 

 

 

 

 

 

 

 

Non-GAAP sales and marketing expense:

 

 

 

 

 

 

 

GAAP sales and marketing

$

65,470

 

 

$

83,060

 

 

$

122,431

 

 

$

151,676

 

Stock-based compensation expense

(2,899)

 

 

(3,175)

 

 

(5,674)

 

 

(6,313)

 

Impact of restructuring

 

 

 

 

 

 

(589)

 

Acquisition-related costs

(1,836)

 

 

 

 

(4,240)

 

 

 

Intangible assets amortization

(1,354)

 

 

(136)

 

 

(2,797)

 

 

(271)

 

Non-GAAP sales and marketing

$

59,381

 

 

$

79,749

 

 

$

109,720

 

 

$

144,503

 

 

 

 

 

 

 

 

 

Non-GAAP general and administrative expense:

 

 

 

 

 

 

 

GAAP general and administrative

$

35,049

 

 

$

24,865

 

 

$

77,090

 

 

$

51,557

 

Stock-based compensation expense

(3,396)

 

 

(3,959)

 

 

(7,050)

 

 

(7,947)

 

Impact of restructuring

 

 

 

 

 

 

(129)

 

Acquisition-related costs

(10,934)

 

 

 

 

(17,826)

 

 

 

Intangible assets amortization

(147)

 

 

(72)

 

 

(341)

 

 

(143)

 

Non-GAAP general and administrative

$

20,572

 

 

$

20,834

 

 

$

51,873

 

 

$

43,338

 

 

FITBIT, INC.

Reconciliation of GAAP to Non-GAAP Financial Measures

(in thousands, except percentages and per share amounts)

(unaudited)

 

Three Months Ended

 

Six Months Ended

 

July 4, 2020

 

June 29, 2019

 

July 4, 2020

 

June 29, 2019

Non-GAAP operating expenses:

 

 

 

 

 

 

 

GAAP operating expenses

$

184,252

 

 

$

178,844

 

 

$

364,843

 

 

$

351,191

 

Stock-based compensation expense

(17,737)

 

 

(19,026)

 

 

(35,285)

 

 

(38,140)

 

Impact of restructuring

 

 

 

 

 

 

(2,268)

 

Acquisition-related costs

(22,423)

 

 

 

 

(37,430)

 

 

 

Intangible assets amortization

(1,501)

 

 

(208)

 

 

(3,138)

 

 

(414)

 

Non-GAAP operating expenses

$

142,591

 

 

$

159,610

 

 

$

288,990

 

 

$

310,369

 

 

 

 

 

 

 

 

 

Non-GAAP operating loss and loss before income taxes:

 

 

 

 

 

 

 

GAAP operating loss

$

(91,210)

 

 

$

(70,630)

 

 

$

(216,879)

 

 

$

(153,524)

 

Stock-based compensation expense

19,770

 

 

20,547

 

 

39,497

 

 

41,091

 

Impact of restructuring

 

 

 

 

 

 

2,458

 

Acquisition-related costs

23,920

 

 

 

 

39,692

 

 

 

Intangible assets amortization

3,049

 

 

2,061

 

 

7,078

 

 

4,121

 

Non-GAAP operating loss

(44,471)

 

 

(48,022)

 

 

(130,612)

 

 

(105,854)

 

Interest income, net

13

 

 

2,622

 

 

1,306

 

 

6,088

 

Other income, net

2,237

 

 

461

 

 

2,233

 

 

1,734

 

Non-GAAP loss before income taxes

$

(42,221)

 

 

$

(44,939)

 

 

$

(127,073)

 

 

$

(98,032)

 

 

 

 

 

 

 

 

 

Non-GAAP net loss and net loss per share:

 

 

 

 

 

 

 

Net loss

$

(104,097)

 

 

$

(68,518)

 

 

$

(83,803)

 

 

$

(147,983)

 

Stock-based compensation expense

19,770

 

 

20,547

 

 

39,497

 

 

41,091

 

Impact of restructuring

 

 

 

 

 

 

2,458

 

Acquisition-related costs

23,920

 

 

 

 

39,692

 

 

 

Intangible assets amortization

3,049

 

 

2,061

 

 

7,078

 

 

4,121

 

Income tax effect of non-GAAP adjustments

25,832

 

 

10,139

 

 

(98,582)

 

 

26,474

 

Non-GAAP net loss

$

(31,526)

 

 

$

(35,771)

 

 

$

(96,118)

 

 

$

(73,839)

 

 

 

 

 

 

 

 

 

GAAP diluted shares

267,872

 

 

256,160

 

 

266,742

 

 

254,659

 

Other dilutive equity awards

 

 

 

 

 

 

 

Non-GAAP diluted shares

267,872

 

 

256,160

 

 

266,742

 

 

254,659

 

Non-GAAP diluted net loss per share

$

(0.12)

 

 

$

(0.14)

 

 

$

(0.36)

 

 

$

(0.29)

 

 

FITBIT, INC.

Reconciliation of GAAP to Non-GAAP Financial Measures

(in thousands, except percentages and per share amounts)

(unaudited)

 

Three Months Ended

 

Six Months Ended

 

July 4, 2020

 

June 29, 2019

 

July 4, 2020

 

June 29, 2019

Free cash flow:

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

$

32,500

 

 

$

(76,423)

 

 

$

(49,472)

 

 

$

(144,076)

 

Purchases of property and equipment

(4,994)

 

 

(4,731)

 

 

(8,550)

 

 

(10,827)

 

Free cash flow

$

27,506

 

 

$

(81,154)

 

 

$

(58,022)

 

 

$

(154,903)

 

Net cash provided by (used in) by investing activities

$

66,180

 

 

$

(475)

 

 

$

71,080

 

 

$

10,123

 

Net cash provided by (used in) financing activities

$

(7,201)

 

 

$

1,314

 

 

$

(12,611)

 

 

$

(4,774)

 

 

 

 

 

 

 

 

 

Adjusted EBITDA:

 

 

 

 

 

 

 

Net loss

$

(104,097)

 

 

$

(68,518)

 

 

$

(83,803)

 

 

$

(147,983)

 

Stock-based compensation expense

19,770

 

 

20,547

 

 

39,497

 

 

41,091

 

Impact of restructuring

 

 

 

 

 

 

2,458

 

Acquisition-related costs

23,920

 

 

 

 

39,692

 

 

 

Depreciation and intangible assets amortization

13,502

 

 

18,792

 

 

28,120

 

 

34,225

 

Interest expense, net

(13)

 

 

(2,622)

 

 

(1,306)

 

 

(6,088)

 

Income tax benefit (expense)

15,137

 

 

971

 

 

(129,537)

 

 

2,281

 

Adjusted EBITDA

$

(31,781)

 

 

$

(30,830)

 

 

$

(107,337)

 

 

$

(74,016)

 

 

 

 

 

 

 

 

 

Stock-based compensation expense:

 

 

 

 

 

 

 

Cost of revenue

$

2,033

 

 

$

1,521

 

 

$

4,212

 

 

$

2,951

 

Research and development

11,442

 

 

11,892

 

 

22,561

 

 

23,880

 

Sales and marketing

2,899

 

 

3,175

 

 

5,674

 

 

6,313

 

General and administrative

3,396

 

 

3,959

 

 

7,050

 

 

7,947

 

Total stock-based compensation expense

$

19,770

 

 

$

20,547

 

 

$

39,497

 

 

$

41,091

 

 

FITBIT, INC.

Revenue by Geographic Region

(in thousands)

(unaudited)

 

Three Months Ended

 

Six Months Ended

 

July 4, 2020

 

June 29, 2019

 

July 4, 2020

 

June 29, 2019

United States

$

164,729

 

 

$

180,862

 

 

$

266,768

 

 

$

315,953

 

Americas, excluding United States

10,455

 

 

19,178

 

 

21,198

 

 

34,505

 

Europe, Middle East, and Africa

72,375

 

 

87,563

 

 

129,381

 

 

174,661

 

Asia Pacific

13,713

 

 

25,953

 

 

32,083

 

 

60,327

 

Total

$

261,272

 

 

$

313,556

 

 

$

449,430

 

 

$

585,446

 

 

 

Investor Contact:

Tom Hudson, (415) 604-4106
investor@fitbit.com

Media Contact:

Jen Ralls, (415) 722-6937
PR@fitbit.com

Source: Fitbit, Inc.