GoPro, Inc.

Good day, ladies and gentlemen, and welcome to today's GoPros third quarter 2019 results conference call. I'd like to remind everyone that this conference is being recorded. And then at this time, I would like to turn the floor over to Christopher Clark, Vice President of Communications.

Thanks, Operator. Good afternoon, everyone, and welcome to GoPros third 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 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. Today, 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 our operating results in a manner similar to how we analyze our own operating results. A reconciliation of GAAP to non-GAAP operating expenses can be found in the press release that was issued this afternoon. In addition to the press release, we have posted slides containing detailed financial data and metrics for the third quarter 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 I'm going to update you on the positive reception of our new product lineup and some key performance metrics. Then Brian will take you through GoPro's third quarter performance and our improved outlook for the rest of 2019 and 2020. Simply put, all signs indicate Hero 8 Black and Max are unquestionable hits. Since launch, unit sales of Hero 8 Black at GoPro.com have eclipsed every previous new GoPro, including last year's flagship Hero 7 Black by 40%. Hero 8 Black has also generated the highest social engagement and positive sentiment metrics of any new GoPro, up 57% over Hero 7 Black a year ago. Considering the success Hero 7 Black went on to have, it's exciting to consider how Hero 8 Black can contribute to our business. And Max is proving to be a standout as well. Through the month of October at GoPro.com, Unit sales of Max shattered the debut performance of its predecessor, Fusion, by a factor of four. Max is like having three cameras in one, addressing multiple consumer segments, be it users looking for a Max stabilized hero camera, a feature-rich vlogging camera, or a professional-grade 360 camera. As we've shared, we believe Max is going to play an increasingly important role in our business going forward. helping to raise ASPs and gross margins while delivering the wow innovation our customers demand. Joining Hero 8 Black and Max in our new lineup are Hero 7 Black at $329 and Hero 7 Silver at $199. We promised we were going to strengthen our business by maximizing value and performance at every price point, and we've delivered. You won't find a weak spot in our offering this holiday, and we're confident in our lineup's ability to grow both top line and EPS in the fourth quarter of 2019 and 2020. As we mentioned, since launch, Hero 8 Black and Max have sold through at record levels at GoPro.com. And in fact, all camera models are selling well at GoPro.com. with aggregated camera unit sales up 50% year-over-year. We believe GoPro.com's sell-through performance serves as an encouraging indicator of demand as sell-through ramps in retail channels. Our investment in consumer research has led to a focused and highly innovative roadmap. Thanks to our customers' input and GoPro's incredible product and engineering teams, Hero 8 Black and Max both redefine what's possible with a camera. We're confident these new products, along with our long-term hardware and software roadmap, can help us take more share of the greater $13 billion digital imaging market. And while we anticipated this level of demand for our new products, the aforementioned positive social sentiment metrics are beyond our expectations. As I mentioned, Hero8 Black generated a 57% lift in positive sentiment over Hero7 Black, setting a record for a new GoPro camera. In the first month, our product videos, social posts, and other launch-related assets achieved a global reach of $857 million, up 5% from the launch of Hero7 Black. We generated 70 million engagements on social channels. Up 74% from Hero 7 Black. And the Hero 8 Black launch video has become the most viral launch asset in our history. This momentum builds off the widespread media and consumer acclaim we continue to see for our new products. To give you a sense of the global press coverage GoPro receives during launch, there were nearly 4,000 articles and reviews published in the 10 days after our product announcement. Reviewers acknowledge that we've taken our products to the next level of performance, versatility, and importantly, appeal by addressing both the needs of our traditional customers as well as entirely new customer segments such as vloggers. Again, we believe that by extending GoPro's brand and products to solve problems for a broader set of consumers, we can grow our TAM while taking more share from the greater $13 billion digital imaging market. To further amplify excitement for Hero 8 Black & Max during the holiday quarter, we are rolling out an aggressive marketing campaign that includes out-of-home advertisements, including billboards in major cities around the world, a return to television in the United States, Germany, Australia, and Japan, and in theaters for major film releases. And we will, of course, maintain a significant presence on digital platforms throughout the holiday quarter. And speaking of marketing, GoPro content generated another record-setting quarter in Q3 with 234 million organic views, up 35% over our previous record set in Q1 of 2019. Organic GoPro video views on channels like YouTube and Instagram increased 48% sequentially and 64% year-over-year. These are huge gains on top of already large viewership numbers. And GoPro's brand continues to scale on social platforms, gaining 1.2 million new followers across all channels to surpass 42 million. Another area where GoPro is excelling is software. We shared on our last earnings call that we merged the quick mobile editing app into the GoPro app for a simplified one-app experience. Within the first month of release, we saw monthly active users grow 8% and a 73% jump in the number of people using the app's automated editing tools. This resulted in a 131% increase in total edit sessions. This engagement bodes well for our plans to monetize the app in 2020. And we're fired up about how our Plus subscription service is doing. As of November 4th, our Plus subscriber count was 305,000, up 21% since our last earnings call. This accelerated growth is a result of several factors, including increased international availability, newly introduced annual subscriptions, and improved in-cart accessibility at gopro.com. With this momentum and our planned roadmap, we're targeting to exit 2020 with between 600,000 to 700,000 paying plus subscribers. Momentum. We've got it across our entire business, be it our market-defining cameras, Our rapidly advancing mobile app or our accelerating high margin subscription service, GoPro is steadily advancing on all fronts. This puts us in a strong position for the rest of 2019 and we're confident in our ability to grow both top line and EPS in 2020. And with that, I'll hand it over to Brian.