Fitbit, Inc. (NYSE:FIT) today reported revenue of $272 million, GAAP net loss per share of $(0.31), non-GAAP net loss per share of $(0.15), GAAP net loss of $(79) million, non-GAAP net loss of $(38) million, cash flow from operations of $(68) million and free cash flow of $(74) million for its first quarter of 2019.
“We saw continued momentum across our business in the first quarter, with revenue up 10% and devices sold up 36% year-over-year. Smartwatch device sales increased 117% year-over-year and the introduction of our new trackers, Inspire and Inspire HR, helped spark the first quarter of year-over-year growth in tracker device sales in three years. In addition, our Fitbit Health Solutions business grew 70% with revenue of $30.5 million, demonstrating great progress towards our $100 million revenue target for 2019,” said James Park, co-founder and CEO. “New users are continuing to join the Fitbit platform with active users increasing in the first quarter, underscoring the effectiveness of our strategy to bring more users onto the Fitbit platform with the introduction of more accessible, affordable devices.”
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First Quarter 2019 |
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| For the Three Months Ended | ||||||||
| In millions, except percentages and per share amounts | March 30, 2019 | March 31, 2018 | ||||||
| GAAP Results | ||||||||
| Revenue | $ | 271.9 | $ | 247.9 | ||||
| Gross Margin | 32.9 | % | 46.0 | % | ||||
| Net Loss | $ | (79.5 | ) | $ | (80.9 | ) | ||
| Net Loss Per Share | $ | (0.31 | ) | $ | (0.34 | ) | ||
| Non-GAAP Results | ||||||||
| Gross Margin | 34.2 | % | 47.1 | % | ||||
| Net Loss | $ | (38.1 | ) | $ | (41.0 | ) | ||
| Net Loss Per Share | $ | (0.15 | ) | $ | (0.17 | ) | ||
| Adjusted EBITDA | $ | (43.2 | ) | $ | (46.2 | ) | ||
| Devices Sold | 2.9 | 2.2 | ||||||
| For additional information regarding the non-GAAP financial measures, see “Non-GAAP Financial Measures” and “Reconciliation of GAAP to Non-GAAP Financial Measures” below. Please note that certain terms used here, including “active user,” “activations,” and “repeat users,” are defined in our Annual Report on Form 10-K for the full year ended December 31, 2018 and the most recently filed Quarterly Report on Form 10-Q. |
First Quarter 2019 Financial Highlights
First Quarter 2019 Operational Highlights
Second Quarter 2019 Guidance
Full Year 2019 Guidance
For additional information regarding the non-GAAP financial measures presented above, see “Non-GAAP Financial Measures” below.
Webcast and Conference Call Information
Fitbit will host a conference call today at 5:00 p.m. Eastern Time, 2:00 p.m. Pacific Time, to discuss its results. Investors may access a live webcast of the call through the Investor section of Fitbit’s website at investor.fitbit.com. The call can also be accessed by dialing (888) 394-8218 or (646) 828-8193, access code 2305191. A replay of the call will be archived on Fitbit’s website for the following six months.
Forward Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding our outlook for the second quarter of 2019 and full year 2019; product mix and capabilities; trends in device sales, average selling price, revenue, operating expenses, capital expenditures, free cash flow, gross margins, non-GAAP net loss per share, stock-based compensation expense, adjusted EBITDA, non-GAAP effective tax rate, and basic/diluted share count; growth of our user base; growth in Fitbit Health Solutions and software services and their impact on gross margins; and consumer and retail demand for smartwatches and trackers. 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; our ability to anticipate and satisfy consumer preferences in a timely manner; the market acceptance of our smartwatches and their future potential; our ability to successfully develop and timely introduce new products and services, including recurring non-device revenue offerings, to enhance existing products and services, and to engage and expand our user base; retail and customer acceptance of existing and new products; our ability to accurately forecast consumer demand and adequately manage our inventory; the impact of changes in tax laws or the adoption of accounting pronouncements on our operating results; our ability to timely ship products; our reputation, brand awareness, and the overall market acceptance of our products and services; our ability to achieve the objectives of strategic and operational initiatives and to align our resources and cost structure with business conditions; our ability to detect, prevent or fix quality issues in our products or services; our reliance on third-party suppliers, contract manufacturers, and logistics providers, and our limited control over such parties; delays in procuring components and product from these third parties or their suppliers; the ability of third parties to successfully manufacture quality products and ship in a timely manner; litigation and related costs; seasonality of product sales; our ability to attract and retain employees; product liability issues, security breaches, or other defects that may adversely affect product performance; our ability to integrate acquired technologies and the employees of acquired businesses into our operations, particularly in new geographies; warranty claims; the fact that the market for wearable devices is relatively new and unproven; the ability of our channel partners to sell our products; privacy issues; tariffs or other import restrictions; and other 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 Annual Report on Form 10-K for the full year ended December 31, 2018 and our most recently filed Quarterly Report on Form 10-Q which are available on our Investor Relations website at investor.fitbit.com and on the SEC website at www.sec.gov. Once filed with the SEC, additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended March 30, 2019. 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.
Disclosure of Material Information
Fitbit announces material information to its investors using SEC filings, press releases, public conference calls and on its Investor Relations page on the company’s website at http://investor.fitbit.com.
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 loss, non-GAAP basic/diluted net loss per share, non-GAAP free cash flow, non-GAAP effective tax rate, 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, 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.
Guidance for non-GAAP financial measures excludes stock-based compensation, impact of restructuring, amortization of acquired intangible assets, and tax effects associated with these items. We have not reconciled guidance for non-GAAP financial measures to their most directly comparable GAAP measures because certain items that impact these measures are uncertain, out of our control, and/or cannot be reasonably predicted. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measures is not available without unreasonable effort.
The following are explanations of the adjustments that are reflected in one or more of our non-GAAP financial measures:
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 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 2™ Wi-Fi Smart Scale. Fitbit products are carried in over 39,000 retail stores and in 87 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 U.S. 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 or Twitter and share your Fitbit experience.
| FITBIT, INC. | ||||||||
| Condensed Consolidated Statements of Operations | ||||||||
|
(In thousands, except per share amounts) |
||||||||
|
(unaudited) |
||||||||
| Three Months Ended | ||||||||
| March 30, 2019 | March 31, 2018 | |||||||
| Revenue | $ | 271,890 | $ | 247,865 | ||||
| Cost of revenue | 182,437 | 133,742 | ||||||
| Gross profit | 89,453 | 114,123 | ||||||
| Operating expenses: | ||||||||
| Research and development | 77,039 | 89,336 | ||||||
| Sales and marketing | 68,616 | 72,052 | ||||||
| General and administrative | 26,692 | 36,088 | ||||||
| Total operating expenses | 172,347 | 197,476 | ||||||
| Operating loss | (82,894 | ) | (83,353 | ) | ||||
| Interest income, net | 3,466 | 1,350 | ||||||
| Other income, net | 1,273 | 517 | ||||||
| Loss before income taxes | (78,155 | ) | (81,486 | ) | ||||
| Income tax expense (benefit) | 1,310 | (609 | ) | |||||
| Net loss | $ | (79,465 | ) | $ | (80,877 | ) | ||
| Net loss per share: | ||||||||
| Basic | $ | (0.31 | ) | $ | (0.34 | ) | ||
| Diluted | $ | (0.31 | ) | $ | (0.34 | ) | ||
| Shares used to compute net loss per share: | ||||||||
| Basic | 253,124 | 239,431 | ||||||
| Diluted | 253,124 | 239,431 | ||||||
|
FITBIT, INC. |
||||||||
|
Condensed Consolidated Balance Sheets |
||||||||
|
(In thousands) |
||||||||
|
(unaudited) |
||||||||
|
March 30, 2019 |
December 31, 2018 |
|||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 410,813 | $ | 473,956 | ||||
| Marketable securities | 233,383 | 249,493 | ||||||
| Accounts receivable, net | 250,582 | 414,209 | ||||||
| Inventories | 174,478 | 124,871 | ||||||
| Income tax receivable | 6,917 | 6,957 | ||||||
| Prepaid expenses and other current assets | 26,481 | 42,325 | ||||||
| Total current assets | 1,102,654 | 1,311,811 | ||||||
| Property and equipment, net | 95,275 | 106,286 | ||||||
| Operating lease right-of use-assets | 99,144 | — | ||||||
| Goodwill | 60,979 | 60,979 | ||||||
| Intangible assets, net | 21,559 | 23,620 | ||||||
| Deferred tax assets | 4,436 | 4,489 | ||||||
| Other assets | 10,423 | 8,362 | ||||||
| Total assets | $ | 1,394,470 | $ | 1,515,547 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 165,551 | $ | 251,657 | ||||
| Accrued liabilities | 363,751 | 437,234 | ||||||
| Operating lease liabilities | 30,209 | — | ||||||
| Deferred revenue | 28,655 | 29,400 | ||||||
| Income taxes payable | 1,349 | 1,092 | ||||||
| Total current liabilities | 589,515 | 719,383 | ||||||
| Long-term deferred revenue | 5,922 | 7,436 | ||||||
| Long-term operating lease liabilities | 98,219 | — | ||||||
| Other liabilities | 29,001 | 52,790 | ||||||
| Total liabilities | 722,657 | 779,609 | ||||||
| Stockholders’ equity: | ||||||||
| Class A and Class B common stock | 25 | 25 | ||||||
| Additional paid-in capital | 1,070,224 | 1,055,046 | ||||||
| Accumulated other comprehensive income (loss) | 96 | (66 | ) | |||||
| Accumulated deficit | (398,532 | ) | (319,067 | ) | ||||
|
Total stockholders’ equity |
671,813 | 735,938 | ||||||
| Total liabilities and stockholders’ equity | $ | 1,394,470 | $ | 1,515,547 | ||||
| FITBIT, INC. | ||||||||
| Condensed Consolidated Statements of Cash Flow | ||||||||
| (In thousands) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended | ||||||||
| March 30, 2019 | March 31, 2018 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss | $ | (79,465 | ) | $ | (80,877 | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Provision for doubtful accounts | 32 | — | ||||||
| Provision for inventory obsolescence | 1,478 | 6,337 | ||||||
| Depreciation | 13,373 | 10,456 | ||||||
| Non-cash lease expense | 7,713 | — | ||||||
| Write-off of property and equipment | — | 7,259 | ||||||
| Amortization of intangible assets | 2,060 | 1,748 | ||||||
| Stock-based compensation | 20,544 | 23,641 | ||||||
| Deferred income taxes | (20 | ) | (1,799 | ) | ||||
| Other | (50 | ) | (275 | ) | ||||
| Changes in operating assets and liabilities, net of acquisition: | ||||||||
| Accounts receivable | 163,592 | 191,982 | ||||||
| Inventories | (50,958 | ) | (27,307 | ) | ||||
| Prepaid expenses and other assets | 12,594 | 39,610 | ||||||
| Fitbit force recall reserve | 46 | (132 | ) | |||||
| Accounts payable | (81,656 | ) | (84,155 | ) | ||||
| Accrued liabilities and other liabilities | (69,962 | ) | (70,147 | ) | ||||
| Lease liabilities | (4,972 | ) | — | |||||
| Deferred revenue | (2,259 | ) | (6,010 | ) | ||||
| Income taxes payable | 257 | (173 | ) | |||||
| Net cash provided by (used in) operating activities | (67,653 | ) | 10,158 | |||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of property and equipment | (6,096 | ) | (12,616 | ) | ||||
| Purchases of marketable securities | (111,615 | ) | (141,404 | ) | ||||
| Sales of marketable securities | — | 50,795 | ||||||
| Maturities of marketable securities | 128,309 | 148,041 | ||||||
| Acquisition, net of cash acquired | — | (13,646 | ) | |||||
| Net cash provided by investing activities | 10,598 | 31,170 | ||||||
| Cash Flows from Financing Activities | ||||||||
| Repayment of debt | — | (747 | ) | |||||
| Financing lease | (597 | ) | — | |||||
| Proceeds from issuance of common stock | 931 | 992 | ||||||
| Taxes paid related to net share settlement of restricted stock units | (6,422 | ) | (5,179 | ) | ||||
| Net cash used in financing activities | (6,088 | ) | (4,934 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | (63,143 | ) | 36,394 | |||||
| Cash and cash equivalents at beginning of period | 473,956 | 341,966 | ||||||
| Cash and cash equivalents at end of period | $ | 410,813 | $ | 378,360 | ||||
| FITBIT, INC. | ||||||||
| Reconciliation of GAAP to Non-GAAP Financial Measures | ||||||||
| (In thousands, except percentages and per share amounts) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended | ||||||||
| March 30, 2019 | March 31, 2018 | |||||||
| Non-GAAP gross profit: | ||||||||
| GAAP gross profit | $ | 89,453 | $ | 114,123 | ||||
| Stock-based compensation expense | 1,430 | 1,098 | ||||||
| Impact of restructuring | 190 | — | ||||||
| Intangible assets amortization | 1,854 | 1,516 | ||||||
| Non-GAAP gross profit | $ | 92,927 | $ | 116,737 | ||||
| Non-GAAP gross margin (as a percentage of revenue): | ||||||||
| GAAP gross margin | 32.9 | % | 46.0 | % | ||||
| Stock-based compensation expense | 0.5 | 0.4 | ||||||
| Impact of restructuring | 0.1 | — | ||||||
| Intangible assets amortization | 0.7 | 0.6 | ||||||
| Non-GAAP gross margin | 34.2 | % | 47.1 | % | ||||
| Non-GAAP research and development: | ||||||||
| GAAP research and development | $ | 77,039 | $ | 89,336 | ||||
| Stock-based compensation expense | (11,988 | ) | (14,671 | ) | ||||
| Impact of restructuring | (1,550 | ) | — | |||||
| Non-GAAP research and development | $ | 63,501 | $ | 74,665 | ||||
| Non-GAAP sales and marketing expense: | ||||||||
| GAAP sales and marketing | $ | 68,616 | $ | 72,052 | ||||
| Stock-based compensation expense | (3,138 | ) | (3,447 | ) | ||||
| Impact of restructuring | (589 | ) | — | |||||
| Intangible assets amortization | (135 | ) | (161 | ) | ||||
| Non-GAAP sales and marketing | $ | 64,754 | $ | 68,444 | ||||
| Non-GAAP general and administrative expense: | ||||||||
| GAAP general and administrative | $ | 26,692 | $ | 36,088 | ||||
| Stock-based compensation expense | (3,988 | ) | (4,425 | ) | ||||
| Litigation expense | — | (765 | ) | |||||
| Impact of restructuring | (129 | ) | — | |||||
| Intangible assets amortization | (71 | ) | (71 | ) | ||||
| Non-GAAP general and administrative | $ | 22,504 | $ | 30,827 | ||||
| Non-GAAP operating expenses: | ||||||||
| GAAP operating expenses | $ | 172,347 | $ | 197,476 | ||||
| Stock-based compensation expense | (19,114 | ) | (22,543 | ) | ||||
| Litigation expense | — | (765 | ) | |||||
| Impact of restructuring | (2,268 | ) | — | |||||
| Intangible assets amortization | (206 | ) | (232 | ) | ||||
| Non-GAAP operating expenses | $ | 150,759 | $ | 173,936 | ||||
| FITBIT, INC. | ||||||||
| Reconciliation of GAAP to Non-GAAP Financial Measures | ||||||||
| (In thousands, except percentages and per share amounts) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended | ||||||||
| March 30, 2019 | March 31, 2018 | |||||||
| Non-GAAP operating loss and loss before income taxes: | ||||||||
| GAAP operating loss | $ | (82,894 | ) | $ | (83,353 | ) | ||
| Stock-based compensation expense | 20,544 | 23,641 | ||||||
| Litigation expense | — | 765 | ||||||
| Impact of restructuring | 2,458 | — | ||||||
| Intangible assets amortization | 2,060 | 1,748 | ||||||
| Non-GAAP operating loss | (57,832 | ) | (57,199 | ) | ||||
| Interest income, net | 3,466 | 1,350 | ||||||
| Other income, net | 1,273 | 517 | ||||||
| Non-GAAP loss before income taxes | $ | (53,093 | ) | $ | (55,332 | ) | ||
| Non-GAAP net loss and net loss per share: | ||||||||
| Net loss | $ | (79,465 | ) | $ | (80,877 | ) | ||
| Stock-based compensation expense | 20,544 | 23,641 | ||||||
| Litigation expense | — | 765 | ||||||
| Impact of restructuring | 2,458 | — | ||||||
| Intangible assets amortization | 2,060 | 1,748 | ||||||
| Income tax effect of non-GAAP adjustments | 16,335 | 13,767 | ||||||
| Non-GAAP net loss | $ | (38,068 | ) | $ | (40,956 | ) | ||
| GAAP diluted shares | 253,124 | 239,431 | ||||||
| Other dilutive equity awards | — | — | ||||||
| Non-GAAP diluted shares | 253,124 | 239,431 | ||||||
| Non-GAAP diluted net loss per share | $ | (0.15 | ) | $ | (0.17 | ) | ||
| Free cash flow: | ||||||||
| Net cash provided by (used in) operating activities | $ | (67,653 | ) | $ | 10,158 | |||
| Purchases of property and equipment | (6,096 | ) | (12,616 | ) | ||||
| Free cash flow | $ | (73,749 | ) | $ | (2,458 | ) | ||
| Net cash provided by investing activities | $ | 10,598 | $ | 31,170 | ||||
| Net cash used in financing activities | $ | (6,088 | ) | $ | (4,934 | ) | ||
| FITBIT, INC. | ||||||||
| Reconciliation of GAAP to Non-GAAP Financial Measures | ||||||||
| (In thousands, except percentages and per share amounts) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended | ||||||||
| March 30, 2019 | March 31, 2018 | |||||||
| Adjusted EBITDA: | ||||||||
| Net loss | $ | (79,465 | ) | $ | (80,877 | ) | ||
| Stock-based compensation expense | 20,544 | 23,641 | ||||||
| Litigation expense | — | 765 | ||||||
| Impact of restructuring | 2,458 | — | ||||||
| Depreciation and intangible assets amortization | 15,433 | 12,204 | ||||||
| Interest income, net | (3,466 | ) | (1,350 | ) | ||||
| Income tax expense (benefit) | 1,310 | (609 | ) | |||||
| Adjusted EBITDA | $ | (43,186 | ) | $ | (46,226 | ) | ||
| Stock-based compensation expense: | ||||||||
| Cost of revenue | $ | 1,430 | $ | 1,098 | ||||
| Research and development | 11,988 | 14,671 | ||||||
| Sales and marketing | 3,138 | 3,447 | ||||||
| General and administrative | 3,988 | 4,425 | ||||||
| Total stock-based compensation expense | $ | 20,544 | $ | 23,641 | ||||
| FITBIT, INC. | |||||||
| Revenue by Geographic Region | |||||||
| (In thousands) | |||||||
| (unaudited) | |||||||
| Three Months Ended | |||||||
| March 30, 2019 | March 31, 2018 | ||||||
| United States | $ | 135,091 | $ | 139,496 | |||
| Americas, excluding United States | 15,327 | 16,100 | |||||
| Europe, Middle East, and Africa | 87,098 | 64,538 | |||||
| APAC | 34,374 | 27,731 | |||||
| Total | $ | 271,890 | $ | 247,865 | |||
View source version on businesswire.com: https://www.businesswire.com/news/home/20190501005817/en/
Investor Contact:
Tom Hudson, (415) 604-4106
investor@fitbit.com
Media Contact:
Jen Ralls, (415) 722-6937
PR@fitbit.com