Fitbit Inc (NYSE:FIT) reported revenue of $353 million, GAAP net loss per share of ($0.25), non-GAAP net loss per share of ($0.08), GAAP net loss of ($58.2) million and Adjusted EBITDA loss of ($28) million for its second quarter of 2017.
“Consumer demand in the second quarter was better than anticipated, enabling Fitbit to reduce channel inventory and generate better sales. We are executing according to our transition plan and have increased confidence in achieving our full year results,” said co-founder and CEO James Park. “Our smartwatch, which we believe will deliver the best health and fitness experience in the category, is on track for delivery ahead of the holiday season and will drive a strong second half of the year. In the long term, we are confident in our vision for the future and are uniquely positioned to succeed by leveraging our brand, community, and data to drive positive 0health outcomes.”
Second Quarter 2017 Financial Highlights
- U.S. revenue contracted 55% to $199 million, EMEA revenue grew 9% to $109 million, APAC revenue grew 46% to $21 million, and Americas excluding U.S. revenue contracted 11% to $24 million, all 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% of revenue.
- Average selling price increased 4% sequentially from the first quarter of 2017 and 2% year-over-year from the second quarter of 2016 to $100.76 per device.
- Accessory and other revenue added the equivalent of $3.98 per device.
- Gross margin was 42.2%, and non-GAAP gross margin was 43.0%, each favorably impacted by product mix, the increase in average selling price and lower warranty expense.
- GAAP operating expenses declined 10% to $213 million and non-GAAP operating expenses declined 7% to $191 million, both year-over-year from the second quarter of 2016.
Second Quarter 2017 Business Highlights
- Sold 3.4 million devices, up 14% sequentially from the first quarter of 2017, down 40% year-over-year from the second quarter of 2016.
- 38% of the activations in the quarter came from customers who made repeat purchases. Of the repeat purchasers, 39% came from customers who were inactive for 90 days or greater.
- The Fitbit app was 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.
Third Quarter 2017 Guidance
- Revenue in the range of $380 million to $400 million.
- Non-GAAP net loss per share in the range of ($0.05) to ($0.02).
- Adjusted EBITDA loss in the range of ($12) million to breakeven.
- Effective non-GAAP tax rate of approximately 46%.
- Stock-based compensation expense estimated in the range of $23 million to $25 million and share count of approximately 230 million.
Full Year 2017 Guidance
- Revenue in the range of $1.55 billion to $1.7 billion.
- Non-GAAP gross margin of 42.5% to 44%.
- Non-GAAP net loss per share in the range of ($0.40) to ($0.22).
- Non-GAAP free cash flow loss in the range of ($80) million to ($50) million.
- Effective non-GAAP tax rate of approximately 46%.
- Stock-based compensation expense in the range of $90 million to $100 million and share count of approximately 230 million.
Shares of Fitbit are up nearly 4.5% to $5.30 in after-hours Thursday. FIT has a 1-year high of $17.18 and a 1-year low of $4.90. The stock’s 50-day moving average is $5.35 and its 200-day moving average is $5.75.
On the ratings front, Fitbit has been the subject of a number of recent research reports. In a report issued on June 23, Stifel analyst Jim Duffy reiterated a Hold rating on FIT, with a price target of $6, which represents a potential upside of 18% from where the stock is currently trading. Separately, on June 22, Oppenheimer’s Andrew Uerkwitz reiterated a Buy rating on the stock and has a price target of $8.00.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Jim Duffy and Andrew Uerkwitz have a yearly average return of 3.1% and 8.6% respectively. Duffy has a success rate of 52% and is ranked #1670 out of 4638 analysts, while Uerkwitz has a success rate of 57% and is ranked #562.
Overall, one research analyst has rated the stock with a Sell rating, 4 research analysts have assigned a Hold rating and 3 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $7.08 which is 39% above where the stock opened today.
Fitbit, Inc. engages in the development of wearable device which tracks data of an individual’s health. The company offers wrist-based and clippable devices, which can track users daily steps, calories burned, distance traveled and active minutes and display a real-time feedback. Its users also measure floors climbed, sleep duration and quality, and its products track heart rate and GPS-based information such as speed, distance, and exercise routes. Fitbit was founded by Eric N. Friedman & James Park in March, 2007 and is headquartered in San Francisco, CA.