Fitbit logged a steep loss in the second quarter on a sharp sales decline. But shares closed up 77 cents, or 15.2 percent, to $5.84 on Thursday as results came in better-than-expected and officials indicated that its first smartwatch would be arriving in time for holiday selling.
He added, “Our upcoming smartwatch device will deliver a combination of features that consumers have not yet seen in a smartwatch, including a health and fitness first focus, cross-platform compatibility, water resistance to 50 meters, industry-leading GPS tracking, and an easy-to-use software developer kit that will enable innovation and deeper connections to the healthcare system. All of this will come with multiday battery life at an attractive price.”
Park also stated that consumer demand in the quarter for its fitness trackers was better than anticipated, enabling Fitbit to reduce channel inventory and generate better sales. While well below year-ago levels, results were slightly ahead of the company’s guidance and officials remain confident in hitting its guidance for the year.
Said Park, “We are executing according to our transition plan. Demand for connected health and fitness trackers has been better than forecasted, enabling us to outperform in the first half of the year.”
Sales in the quarter reached $353.3 million versus $586.5 million in the same period a year ago, a decline of 39.8 percent.
The fitness tracker specialist showed a loss of $58.2 million, or 25 a share, in the period against earnings of $6.3 million, or 3 cents, a year ago. The operating loss came to $63.4 million against operating earnings of $9.7 million.
On a non-GAAP basis, the operating loss came to $38.5 million against earnings of $42.1 million. The non-GAAP net loss was $19.3 million, or 8 cents, against earnings of $29.5 million, or 12 cents. Adjusted EBITDA showed a loss of $28.2 million against earnings of $48.3 million.
When it reported first-quarter earnings on May 3, Fitbit said it expected second quarter sales in the range of $330 million to $350 million, a non-GAAP net loss per share in the range of 14 to 17 cents, and an adjusted EBITDA loss in the range of $45 million to $55 million.
By region, U.S. revenue in the quarter contracted 55 percent to $199 million, EMEA revenue climbed 9 percent to $109 million, APAC revenue jumped 46 percent to $21 million, and Americas excluding U.S. revenue declined 11 percent to $24 million.
Average selling prices increased 4 percent sequentially from the first quarter of 2017 and 2 percent year-over-year from the year-ago quarter, to $100.76 per device. Accessory and other revenue added the equivalent of $3.98 per device.
Gross margin was 42.2 percent, and non-GAAP gross margin was 43.0 percent, each favorably impacted by product mix, the increase in average selling price and lower warranty expense. GAAP operating expenses declined 10 percent to $213 million and non-GAAP operating expenses declined 7 percent to $191 million.
Fitbit sold 3.4 million devices in the quarter, up 14 percent sequentially from the first quarter of 2017 although down 40 percent year-over-year from the second quarter of 2016. New products introduced in the last 12 months, Fitbit Charge 2, Fitbit Alta HR, and Fitbit Flex 2 represented 81 percent of revenue.
Fitbit noted that 38 percent of the activations in the quarter came from customers who made repeat purchases. Of the repeat purchasers, 39 percent came from customers who were inactive for 90 days or greater.
The Fitbit app also ranked as the #1 downloaded health and fitness application, based on U.S. downloads, on both the iOS and Android platforms. The Community section in the Fitbit app, which includes a Feed feature designed to increase engagement and offer users a supportive environment continued to grow. Since launching the feature in March 2017, more than 2.5 million users have joined a Group and more than 11.2 million users have utilized the Feed, with more than 648 million views of shared posts.
For the third quarter, Fitbit expects revenue in the range of $380 million to $400 million, which compares to $503.8 million in the 2016 third quarter. The company expects a non-GAAP net loss per share in the range of 2 to 5 cents and adjusted EBITDA in the range of breakeven to a loss of $12 million. In the year-ago quarter, Fitbit delivered non-GAAP net earnings of 11 cents and adjusted EBITDA of $80.8 million.
For the full year, projections include:
- Revenues are expected in the range in the range of $1.55 billion to $1.7 billion, down from $2.17 billion;
- Non-GAAP gross margin of 42.5 percent to 44 percent, up from 39.3 percent;
- Non-GAAP net loss per share in the range of 22 cents to 40 cents, versus earnings of 12 cents in the prior year.
Previously, Fitbit had targeted revenue for this year in the range of $1.5 billion to $1.7 billion and non-GAAP net loss per share in the range of 22 cents to 44 cents.
Photo courtesy Fitbit