Fitbit Inc., reported revenue of $574 million, GAAP basic net loss per share of 65 cents, non-GAAP basic net loss per share of 56 cents, GAAP net loss of $146.3 million and adjusted EBITDA loss of $144.2 million for its fourth quarter of 2016.

For the full year 2016, Fitbit reported revenue of $2.17 billion, GAAP basic net loss per share of 47 cents, non-GAAP basic net loss per share of 12 cents, GAAP net loss of $102.8 million, and adjusted EBITDA of $30 million.

“Our 10-year history of building this category, coupled with our powerful brand and engaged global community gives us confidence we are making the right investments to support our vision and drive long-term success,” said James Park, Fitbit co-founder and CEO. “We will leverage our leadership position, recently acquired talent and IP, and the valuable data we collect to improve demand and continue to set the pace of innovation for the industry through more personalized experiences, deeper insights and guidance, expansion into new categories and deeper integration within the healthcare system.”

To reduce operating costs, improve efficiencies and strengthen performance while maintaining necessary investment to drive future growth and maintain its global leadership position, Fitbit reduced 2016 exit operating expense run rate by $200 million.

The company conducted a reorganization, including a reduction in force, that impacted 107 positions, or 6 percent of the global workforce. It also hired a new executive vice president of operations, Jeff Devine, to manage overall operations, customer service and quality. Devine brings more than 25 years of operating experience scaling global technology brands including Cisco, Nokia and Hewlett Packard.

 Fourth Quarter 2016 Financial Highlights

  • For the fourth quarter of 2016, U.S. revenue contracted 28 percent, EMEA revenue grew 58 percent, APAC revenue contracted 56 percent and Other Americas revenue contracted 12 percent.
  • New products Fitbit Charge 2, Alta, Fitbit Blaze and Fitbit Flex 2 represented 96 percent of revenue.

GAAP gross margin was 22.1 percent, and non-GAAP gross margin was 22.4 percent, negatively impacted by the following charges:

  • Write-down of tooling equipment and component inventory of $78 million
  • Increased rebates and channel pricing of promotions of $42 million recorded as a reduction in revenue
  • Increased return reserves of $41 million due to greater channel inventory
  • Increased warranty reserves for legacy products of $17 million.
  • GAAP operating expenses represented 54.4 percent of revenue, non-GAAP operating expenses represented 49.6 percent of revenue.

Full Year 2016 Financial Highlights

  • Revenue for the full year 2016 increased 17 percent. GAAP gross profit decreased 6 percent, while non-GAAP gross profit decreased 5 percent.
  • GAAP net income decreased 159 percent, non-GAAP net income decreased 110 percent, and adjusted EBITDA decreased 92 percent.
  • U.S. revenue grew 11 percent, EMEA revenue grew 86 percent, APAC revenue contracted 26 percent, and Other Americas revenue grew 19 percent.
  • The U.S. comprised 71 percent of revenue, EMEA 18 percent, APAC 6 percent, and Other Americas 5 percent.
  • New products Fitbit Charge 2, Alta, Fitbit Blaze and Fitbit Flex 2 represented 70 percent of revenue.
  • Cash, cash equivalents, and marketable securities totaled $706 million compared to $664 million as of December 31, 2015.

Fourth Quarter 2016 And Recent Fitbit Operational Highlights

  • Active users grew 37 percent to 23.2 million from 16.9 million at year end 2015.
  • Acquired assets from Pebble for $23 million and Vector Watch for $15 million, comprised of intellectual property and talent.
  • Including the acquisitions, headcount ended the year at 1,753 employees, with 61 percent in research and development.
  • In Digital Health, added key partnerships with leading companies, including Medtronic, and an integration with one of the largest U.S. health plans, demonstrating the early potential of devices in different healthcare settings.

Full Year 2017 Guidance

  • Revenue in the range of $1.5 billion to $1.7 billion, with non-GAAP gross margins in the range of 42.5 percent to 44 percent.
  • Reduced 2016 exit operating expense run rate by $200 million to an operating expense for 2017 of approximately $850 million, which includes the separation of 107 employees, realigning sales and marketing spend, and improved optimization of research and development investments.
  • Non-GAAP basic net loss per share in the range of 22 cents to 44 cents and non-GAAP free cash flow of approximately negative $50 million to $100 million.
  • Effective non-GAAP tax rate of approximately 50 percent.
  • Stock-based compensation expense estimated at $100 million to $110 million and basic share count of approximately 233 million.

First Quarter 2017 Guidance

  • Revenue to be in the range of $270 million to $290 million.
  • Non-GAAP basic net loss per share in the range of 18 cents to 20 cents.
  • Effective non-GAAP tax rate of approximately 50 percent.
  • Stock-based compensation expense estimated at $23 million to $25 million and basic share count of approximately 226 million.

Photo courtesy Fitbit