GoPro, Inc.

Good day, everyone, and welcome to GoPro's first quarter 2019 earnings results conference call. Today's call is being recorded. And at this time, it's my pleasure to turn the conference over to Christopher Clark, head of corporate communications.

Thanks, operator. Good afternoon, everyone, and welcome to GoPro's first quarter 2019 earnings conference call. With me today are GoPro CEO Nicholas Woodman and CFO Brian McGee. Before we get started, I'd like to remind everyone that our remarks today may include forward-looking statements. Forward-looking statements and all other statements that are not historical facts are not guarantees of future performance and are subject to a number of risks and uncertainties which may cause actual results to differ materially. Additionally, any forward-looking statements made today are based on assumptions as of today. We do not undertake any obligation to update these statements as a result of new information or future events. Information concerning our risk factors is available in our most recent annual report on Form 10-K for the year ended December 31, 2018, which is on file with the Securities and Exchange Commission and in other reports that we may file from time to time with the SEC. We may discuss gross margin, operating expense, net profit and loss, as well as basic and diluted net profit and loss per share in accordance with GAAP and additionally on a non-GAAP basis. We believe that non-GAAP information is useful because it can enhance the understanding of our ongoing economic performance. We use non-GAAP reporting internally to evaluate and manage our operations. We choose to provide this information to enable investors to perform comparisons of operating results in a manner similar to how we analyze our own operating results. A reconciliation of gap to non-gap operating expenses can be found in the press release that was issued this afternoon. In addition to the earnings press release, we have posted slides containing detailed financial data and metrics for the first quarter of 2019. These slides, as well as a link to today's live webcast, and a replay of this conference call is posted on the GoPro Investor Relations website for your reference. All income statement related numbers that are discussed today during the call, other than revenue, are not GAAP, unless otherwise noted. Now I'd like to turn the call over to GoPro's founder and CEO, Nicholas Woodman.

Thanks, Chris, and good afternoon. Today, Brian and I will take you through GoPro's first quarter 2019 performance. In short, we had a great quarter. Strong consumer demand for the Hero 7 line, improved collaboration with our retailers, and continued execution drove our results. Revenue in the quarter was $243 million, representing 20% growth year-over-year. And as Brian will detail, we are raising our 2019 revenue and earnings guidance. Strong sell-through and a mixed shift towards our flagship Hero 7 Black led to an 8% sequential and year-over-year increase in ASPs to $288. Inventory is at appropriate levels in each of our global markets thanks to effective channel management and consistent demand for the Hero 7 line. Our Q1 benefited from improved channel marketing collaboration with our distributors and retail partners around the world. Our channel partners are benefiting from the strength of Hero 7 Black and are motivated to drive awareness and sell-through in their markets. This contributed to our Q1 results and we believe it will positively impact Q2 as well. We'd like to take this opportunity to thank our channel partners for their support of GoPro and the Hero 7 line. It's a team effort and together we're making an impact. To capitalize on our momentum, We doubled our year-over-year marketing spend in Q1. New creative campaigns and improved conversion rates drove positive results. Revenue is up in all regions, and GoPro.com achieved record traffic and sales during the quarter, with unique site visits up 38% year-over-year and web store conversions improving approximately 175% year-over-year. Thanks to the strength of our product lineup and improvements we've made to the shopping experience at GoPro.com. We're committed to growing our GoPro.com direct sales channel as it represents an opportunity for us to improve margin over time. We believe Hero 7 Black's industry-leading hyper-smooth video stabilization and the improved video quality it enables is having a positive impact on our social channels. Organic viewership of GoPro content in Q1 hit 173 million views, an all-time quarterly high. And our social following increased by 1.3 million to approximately 40 million, driven primarily by increases on Instagram and YouTube. In April, GoPro received recognition for its social media performance, winning two Shorty Awards. One for best user-generated content and one for best overall presence on Instagram. And just last week, we announced that our YouTube channel achieved a significant milestone, surpassing 2 billion lifetime views. All this is contributing to growth in each of our regions. In the U.S., according to NPD Group, in the first quarter, GoPro captured 89% unit share, and 97% dollar share of our category, up from 86% and 95% respectively year over year. Also in the U.S., the Hero 7 line represented the top three selling cameras in our category, and Hero 7 Black was the number one selling camera in all of digital imaging by unit volume. GoPro also gained market share internationally in Q1, According to GFK, in Europe, in the $199 and above price band, GoPro grew to 86% unit and dollar share, up from 85% and 84%, respectively, year over year. GoPro also grew within the APAC region during Q1. According to GFK, Agregate sell-through in China, Japan, Korea, and Thailand grew 11% on a dollar basis year-over-year. Our subscription service Plus has grown to 220,000 paying subscribers, up over 10% since we reported on our last call, and up 50% year-over-year. In mid-April, we rolled out the full benefits of Plus to additional international markets. We expect to accelerate our Plus subscription service through enhancing our offering, continued international expansion, increased marketing, and new distribution channels. We see Plus as an important opportunity to grow margin and operating profit, and we are investing accordingly. To summarize our first quarter, sales are strong in each of our markets around the world, and we're proactively driving our business with our channel partners. We're maintaining a disciplined approach to expense management, and we are lowering our 2019 operating expense target to approximately $390 million, which is below our previously stated target of $400 million. We continue to expand our plus subscription offering while growing our core camera business in all of our regions around the world. And given the success we've seen with launching new products every year to wow our customers, I'm happy to share that we're planning an exciting, refreshed lineup at all price points in Q4, including our next generation spherical camera and an innovative multi-year roadmap that we believe will result in continued momentum, growth, and profitability for GoPro in 2019 and beyond. And now with that, I'll turn the call over to Brian.