Fitbit Inc (NYSE:FIT), the leader in the connected health and fitness market, today reported revenue of $586.5 million, GAAP diluted net income per share of $0.03, non-GAAP diluted net income per share of $0.12, GAAP net income of $6.3 million, and adjusted EBITDA of $48.3 million, for its second quarter of 2016.
“Second quarter results reflect accelerated unit and revenue growth in the U.S. and EMEA, our two largest markets, despite an unusually strong Q215 with the full availability of Fitbit Charge HR fulfilling built-up demand in that quarter,” said James Park, Fitbitco-founder and CEO. “Our strong profitability reflects careful management of operating expenses, while we continue to invest in future growth. Based on the progress of our business, against a backdrop of a growing worldwide opportunity for our products, we remain confident in our guidance for the year.”
Second Quarter 2016 Financial Highlights
- Sold 5.7 million devices
- Q216 revenue increased 46% year-over-year
- U.S. comprised 76% of Q216 revenue; EMEA 17%, APAC 2%, and Other Americas 5%
- U.S. revenue grew 42% year-over-year; EMEA 150%, APAC (54)%, and Other Americas 63%
- APAC was impacted by factors including the progressive shut down of retailer Dick Smith in Australia and a reduction of channel inventory. Excluding the Australia impact, APAC revenue increased 98% year-over-year.
- New products, Fitbit BlazeTM and AltaTM, including related accessories, comprised 54% of Q216 revenue, compared to 50% in Q116
- Gross margin was affected by an increase in warranty reserves for legacy products, with an expectation the additional reserves taken will adequately cover future warranty liability, allowing a return to more normalized gross margins beginning in Q316
- The 120% GAAP and 90% non-GAAP year-over-year increase in operating expense reflects increased investments in R&D and marketing to drive innovation and growth
Second Quarter 2016 and Recent Fitbit Operational Highlights
- Of all the activations of Alta and Blaze in the second quarter, approximately two-thirds were by new customers, and the other third were by people who own, or previously owned, another Fitbit device. Similar to last quarter, approximately a fifth of those repeat purchasers were reactivations, having been inactive for 90 days or more
- Together, Blaze and Alta accessories grew 40% sequentially from Q116, and all accessories together grew 21% sequentially
- Completed the installation of new, larger display materials in many Fitbit retail locations
- Launched Chinese, Japanese and Korean language versions of products into their respective markets, and launched a relationship with Alibaba’s TMall platform, generating 100 million consumer impressions and approximately 1.3 million unique visitors to TMall
- R&D headcount grew to 863 in Q216, comprising 59% of the company’s headcount
Outlook and Guidance
Fitbit’s outlook for the third quarter of 2016 is as follows:
- Revenue in the range of $490 to $510 million
- Non-GAAP gross margin of approximately 48% to 49%
- Adjusted EBITDA in the range of $70 to $80 million
- Non-GAAP diluted net income per share in the range of $0.17 to $0.19
- Non-GAAP diluted share count between 244 and 247 million
- Stock-based compensation expense in the range of $26 to $28 million
- Non-GAAP tax rate of approximately 30%
Fitbit’s outlook for the full year of 2016 is as follows:
- Revenue in the range of $2.5 to $2.6 billion
- Non-GAAP gross margin of approximately 47%
- Adjusted EBITDA in the range of $430 to $490 million
- Non-GAAP diluted net income per share in the range of $1.12 to $1.24
- Non-GAAP diluted share count between 244 and 250 million
- Stock-based compensation expense in the range of $92 to $97 million
- Non-GAAP tax rate of approximately 30% (Original Source)
Shares of Fitbit are up nearly 7% to $14.05 in after-hours trading. FIT has a 1-year high of $51.90 and a 1-year low of $11.65. The stock’s 50-day moving average is $13.03 and its 200-day moving average is $14.56.
On the ratings front, Fitbit has been the subject of a number of recent research reports. In a report issued on July 29, Wedbush analyst Nick McKay reiterated a Buy rating on FIT, with a price target of $18, which implies an upside of 31% from current levels. Separately, on July 22, Baird’s William Power maintained a Hold rating on the stock and has a price target of $16.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Nick McKay and William Power have a total average return of -26.1% and 3.7% respectively. McKay has a success rate of 20.0% and is ranked #3887 out of 4083 analysts, while Power has a success rate of 54.0% and is ranked #982.
The street is mostly Bullish on FIT stock. Out of 16 analysts who cover the stock, 10 suggest a Buy rating and 6 recommend to Hold the stock. The 12-month average price target assigned to the stock is $21.00, which represents a potential upside of 52.4% from where the stock is currently trading.
Fitbit, Inc. is engaged in the development of wearable device which tracks data of an individual’s health. It offersproducts which can track a person’s activities, such as calories burned, sleep quality, steps, and distance. The data collected allows an individual to monitor their progress towards their own personal goals.