GoPro’s IPO Filing Imputes Market Cap of Nearly $2 Billion

The San Mateo, CA company grew gross margins by nearly 600 basis points (bps) to 41 percent in the first quarter ended March 31, 2014 by simultaneously cutting production costs for its camera units 10 percent and raising average sales price 3 percent, according to an S1 registration statement filed with the Securities & Exchange Commission May 20. GoPro shipped 100,000 Hero+3 units, or 11 percent, fewer that during the quarter ended March 31, 2013, when shipments surged as the company recovered from production delays.  The absence of those shipments sent GPRO sales down 19.4 percent to $235.7 million and adjusted EBITDA down 30.0 percent to $28.6 million compared with the year earlier quarter. Gross margins, however, increased 590 basis points (bps) to 40.9 percent.

 

GoPro earned net income of $60.6 million on sales of $985.7 million in 2013, up 87.4 and 87.6 percent respectively from 2012. The company’s stock would be listed on the NASDAQ and trade under the symbol GPRO. While the company has not priced its IPO, its board valued its common stock at $16.39 a share in March for the purposes of granting stock options. That imputes a market cap of more than $1.84 billion, or nearly 14 times adjusted 2013 EBITDA and about 27 times book value as of March 31.  For comparison purposes, the action-sports inspired audio company Skullcandy Inc., which is the midst of a multi-year turnaround, is valued at nearly 16 times trailing 12 month EBITDA.

 

 

The filing marks a milestone for GoPro Founder, Chairman, President and CEO Nicholas Woodman, 38, who founded the company in 2004 after returning from a six-month surf odyssey in Southeast Asia that inspired him to create a wrist camera people could use to photograph themselves surfing. He pedaled his invention at action sports trade shows, raised a few hundred thousand dollars from family and essentially established the point-of-view, action camera category without taking any outside capital. In 2011, GoPro raised $88 million in its first venture capital round. It raised another $200 million in 2011 from an affiliate of its Taiwanese contract manufacturer Foxconn Technology Group.

 

 

Woodman, his wife Jill Woodman and their trust remain the company’s largest shareholders with 55.1 million shares, or 48.8 percent of shares. The second largest shareholder is RW Camera Holdings with a 16.3 percent stake, followed by Foxconn affiliate Foxteq Holdings with 10.4 percent.

 

 

Since launching its first high-definition, or HD, “capture device” in July 2009, GoPro has sold more than 8.5 million HD cameras, including more than 3.8 million in 2013, according to the filing. Its video cameras are now sold in more than 100 countries and through more than 25,000 retail stores and it supplied the #1 selling camcorder (by dollars and units) in the United States in 2013. The company’s Hero cameras represented a 45 share of the U.S. camcorder market (by dollars) in 2013, up from an 11 percent share during December 2011, according to the filing.

 

 

The IPO comes amid mounting competition from not only other consumer electronics companies like Sony, but established outdoor brands like Garmin, which introduced its first video camera – the Virb – a year ago. Contour Inc., a Seattle-area POV camera maker also founded in 2004, emerged from receivership in April with new backers. Some hi-tech pundits expect Google and Apple to join the fray.

 

 

GoPro plans to use the net proceeds from its share of the offering for general corporate purposes, including working capital and to fully repay a 2.75 percent term loan that had an outstanding balance of $111.0 million as of March 31, 2014.  It may also use a portion of the net proceeds to acquire or invest in complementary businesses, technologies or assets, including a new media management and distribution platform that would attempt to monetize the torrent of GoPro content now being posted to the web.

 

 

In 2013, GoPro customers uploaded to YouTube approximately 2.8 years worth of video featuring “GoPro” in the title. Also on YouTube, in the first quarter of 2014, there was an average of 6,000 daily uploads and more than 1.0 billion views representing over 50.0 million watched hours of videos with “GoPro” in the title, filename, tags or description. In the first quarter, GoPro entered an agreement with Microsoft to develop and launch the GoPro Channel on Xbox Live that will provide it access to advertising revenue, fees from third-party sponsorship of the GoPro Channel and the ability to sell its products directly to consumers as they watch GoPro programming. The company expects to begin earning revenue from GoPro Channel advertising and sponsorship opportunities on Xbox Live and GoPro Channel advertising on YouTube and Virgin America in the current quarter.

 

 

While GoPro got its start with independent surf, ski and motorsports specialty retailers, Best Buy accounted for 17 percent of revenue in 2013 and 13 percent in the three months ended March 31, 2014. International distributor X-treme Video accounted for another 10 percent of sales during the most recent quarter.

 

 

Regardless of what happens with the IPO, GoPro has already made Woodman a very wealthy man. He sold 24.2 million of his preferred stock in February 2011 for $61.2 million. In December of 2012, he, his wife and their trust received $57.1 million of $117.4 million in dividends paid out by the company.

 

 

The IPO is being underwritten by a syndicate of nine banks lead by J.P. Morgan, Citigroup and Barclays that includes: Allen & Company LLC; Stifel, Nicolaus & Company, Incorporated; Robert W. Baird & Co. Incorporated; MCS Capital Markets LLC; Piper Jaffray & Co.; and Raymond James & Associates, Inc., according to an S1 the company filed late Monday.