GoPro, Inc.

Good afternoon. Thank you for attending the GoPro first quarter 2022 earnings call. My name is Matt and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to our host, Jalene Hoover, Vice President of Investor Relations. Jalene, please go ahead.

Thank you, Matt. Good afternoon, everyone, and welcome to GoPRO's first quarter 2022 earnings conference call. With me today are GoPRO's CEO, Nicholas Woodman, and CFO and COO, Brian McGee. Today's call will include a brief introduction from Nick, followed by Q&A. For detailed information about our first quarter 2022 performance and our outlook, please read the management commentary we've posted to the investor relations section of GoPRO's website. Before I pass the call to Nick, 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, including but not limited to uncertainty related to the duration and impact of the COVID-19 pandemic. This means that results could change at any time. Our commentary about our business results and the outlook is based on the information available as of today's date, and 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 31st, 2021. 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, EBITDA, as well as basic and diluted net profit and loss per share in accordance with GAAP and additionally on the 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, and 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 GAAP to non-GAAP operating expenses can be found in the press release that was issued this afternoon, which is posted on the investor relations section of our website. In addition to the earnings press release and management commentary, we have posted slides containing detailed financial data and metrics for the first quarter of 2022. The management commentary slides, as well as a link to today's live webcast and a replay of this conference call, are posted on the investor relations section of GOCO's website for your reference. Unless otherwise noted, all income statement related numbers that are discussed today during the call, other than revenue, are non-GAAP.

now i'll turn the call over to gopro's founder and ceo nicholas whitton thanks jillian and hi everybody thank you for joining us today i want to recognize today was a tough day in the market but we are happy to be able to report that what we believe is good news for gopro investors as we shared in the management commentary which we posted to the investor relations section of our website we hit the ground running in 2022 launching New camera SKUs derived from our industry-leading Hero 10 black camera, a premium high-margin, high-ASP accessory, and new desktop software that furthers our position as the world leader in software-based video stabilization. We are excited to be making significant progress against our strategy to further diversify our product portfolio, addressing specific use cases to expand our TAM. We also delivered solid business performance in the quarter with revenue of $217 million, gross margin of 42%, and gap and non-gap EPS of four and nine cents respectively. The first quarter of 2022 represents GoPro's seventh consecutive quarter of profitability on a non-gap basis, a trend we expect to continue throughout the year. First quarter 2022 delivered year-over-year growth across key financial metrics, including revenue, which increased by 6%, operating profit, which increased by 162%, and net income, which increased by 214%. GoPro subscribers grew 85% year-over-year to 1.74 million, and we are seeing positive usage trends that make it clear subscribers are taking advantage of their subscription benefits. We initiated our $100 million share repurchase program, buying back $10 million of shares during the quarter, and we grew our cash balance year over year, ending with $450 million. All in all, we had an exceptional Q1. And I want to thank everyone at GoPro for their world-class execution. We have much to be excited about as we look forward to the rest of the year. Operator, we're now ready to take questions.

Certainly.

If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered.

The 1st question is from Anna Glaskin with Jefferies.

Your line is now open.

Hi, good afternoon. Thanks for taking our question. I guess first starting off with expectations for unit units shipped in 2022. Can you talk about what's embedded here in terms of the recent product launches that were just announced versus the legacy, you know, franchise flagship products like the hero and subsequent launches there.

Hi, Anna. This is Brian. Let me start. Our guidance for 2022 in units is consistent with what we talked about in February. From a unit standpoint, low single digits, and then continued increases in ASPs due to continued shift of product to the high end, um and uh the growth in our subscription uh business we also um expect a total of four new cameras uh in 2022 i think we talked about two on the last call so we just announced two in the first half and we have two more new ones uh coming in the second half so that gives us um voted confidence in in the numbers And I'll also point out, if you look at kind of how we guided Q2, historically, we have lists, sequential lists of between 10 to 20% on units, and we're up 17% in Q2, which is driving the 240 million revenue guidance we gave, plus or minus five. And there'll be, units will be down on a year-over-year basis. up sequentially. AFPs will be down a little bit sequentially. That's more mixed, but up year over year quite helpfully. And we expect good growth in AFPs in 2022. So those are the main drivers for Q2. And then you get to Q4, and we have two new products. We typically are up on a sell-through basis 30% to 50% year over year. And the way we've modeled it with demand planning, we have a lot of data on customer demand and how many SKUs we have and price points of SKUs. So we're very comfortable with the 22 outlook guidance and for Q2, Q3, and Q4.

Great, thanks. And then 1, follow up here, you know, it's great to see that the retail subscriber tax rate continues to increase 39% in the quarter. What are the key levers here that could continue to narrow the gap. Toward the subscriber and how are you thinking about, you know. Improving that conversion within the retail channel.

That's a great question. Brian, maybe I'll take it first and then you can pile on. Yeah, a primary driver of why we've been able to improve that conversion rate from last year's 18% to 39% in Q1 of this year is because we've done a much better job of incorporating the the benefits of being a subscriber into the quick app, which is, you know, our GoPro app, um, and getting those benefits in front of, uh, users that have bought their GoPro at retail. Um, and it's just night and day more clear to people why they, what the benefits are and why, uh, they should consider becoming a subscriber. Uh, and we're not done, um, Later this year, the app will continue to evolve and make the subscriber benefits even easier for people to experience. And then ultimately, we think that's going to have a positive impact on converting them to being subscribers. Today, we're primarily telling people and they're converting. And in the future, we're going to be making it more experiential for people And we think that's going to, you know, convert even better. And then as well, we're going to continue to improve the convenience of taking advantage of the subscription benefits for our users via the app. So we expect, you know, even today as we're seeing strong usage trends and we're really happy to see how subscribers are taking advantage of the benefits, we think that that's going to increase over time as we make the whole experience even more convenient for them. So net-net, we're really happy with how things are going, and we have a lot on tap to continue to improve.

Yeah, and let me maybe add to that. From our perspective, subscription is GoPro's financial engine. We grew subscriber growth 85% year over year, Up to 19 million, 73% growth. That's 70 to 80 points of margin. So it's very profitable. And as we look out through the year, we expect to be over $80 million in subscription and service revenue in 2022. And as you look at kind of the, also this is in what I would call an investment year for subscriptions at retail. We've increased retail attach, as we said, to 39% from about 18 a year ago by marketing to the retail cohort to convert them via the app with promotions and price points, and that's also resulting in improved conversion. But this cohort we know also behaves similarly, almost identically actually, to those who are taking subscriptions on gopro.com. And so we expect to have very similar retention rates and renewals that'll be at a $50 full price point in 2023. Now this is an amplifier to our subscription revenue and margin in 23 where we think revenue will grow again by greater than 50% over 2022. That's a big increase and it's a 70 to 80 points of margin that delivers a lot of margin dollars year over year to the bottom line.

Great. And sorry, if I may, one more follow-up here. I appreciate, you know, the color on the number of subscribers or the percent of subscribers who are using the cloud for storage. I guess, do you have any color on how this looks by cohort and, you know, storage usage and as an indicator of maintaining the subscription?

Yeah, two pieces of good news is, as I mentioned, they behave the same. So they're basically identical in how much content people put in the cloud, whether it came from retail or gopro.com. So they're comparable from that perspective. The other really good indicator is what's coming from retail is from all cameras. It's not just the flagship. It's actually in proportion. It's flagship, which is Hero 10, Hero 9, Hero 8, and Max. And they're being added proportionately. So even people who are buying Hero 8 and older cameras are actually subscribing. That shows you that there's a real benefit to the subscription for people who are buying GoPro. It's not just a flagship. It's across the board. It's mostly flagship on GoPro.com. because that's what we mostly sell on gopro.com, but via retail, it's proportional, which is great.

Great. Thanks so much.

Thank you. The next question is from Martin Yang with Oppenheimer. Your line is now open.

Hi, good afternoon. Thank you for taking my question. My first question is related to the question asked by previous analysts. So when you think about different ways to convert users into subscribers, how about different channels for conversion? For example, the upcoming desktop editing suite, is that a driver for future conversion into 23? Yes.

Go ahead. Yeah. Well, our upcoming desktop app will certainly be a driver for subscription because it will court consumers who prefer to use a desktop for managing, editing, and getting the most out of their content, where as today we're Mobile focused and that doesn't work for everybody interestingly as you go higher up the passion curve for personal content creation People tend to shift to a desktop platform because you can It's a more convenient more powerful platform obviously for for managing your and editing your content. So we're excited about that we've shared on previous calls that we we used to have a desktop application and that we long ago sunsetted, but we still have seen very significant use of that application, even though we don't support it anymore, which is obviously a clear sign that there's healthy demand for an updated desktop offering from GoPro. And that will sync with your mobile and cloud GoPro experience and be great. quite powerful and convenient. We think it's going to be very well received by people, so we're really excited about it. So, yes, we do think that our desktop app will be a subscription driver. And another important driver, obviously, is increasing unit sales over time. As Brian noted, that's a really important point, that we're seeing similar subscription rates amongst owners of all of our cameras, whether it's Hero 8, Hero 9, our flagship 10 Black, Max. It's really encouraging to see that the subscription is appealing to people who are buying in at different price points, different performance levels. And it also bodes well for our strategy to increase our product portfolio of cameras and potentially enter new product categories that we're not currently in to address the needs of specialized users. You know, we've shared that we don't see any reason why GoPro can't return to the 4 million and greater number of units sold through a year And, you know, we're targeting 3.3 this year, but both through an organic resurgence of sell-through, you know, when the economy and geopolitical and travel normalcy returns to the world, we think that we're going to be in a really good position. And then you layer on top of that the the broader portfolio that we're, product portfolio, hardware portfolio that we're building, we feel really confident about our ability to grow our unit volume, which will clearly translate into accelerated subscription growth, which is really exciting to think about because it, as Brian noted, subscription is the financial engine of GoPro. It has such a significant margin and EBITDA impact on our business that it frankly can be quite transformative as we look a few years out. So all very exciting to think about. Thank you, Nick. Appreciate the insight.

Thank you.

The next question is from Nick Todorov with Longbow Research. Your line is now open.

Yeah, thanks. And good afternoon, guys. Nick, first question for you. Can you talk about the TAMs of the new cameras? I guess probably for the ones that you've announced far and maybe help us size those TAMs. And I would also like to hear from you talk about the added value. of hero bones versus using the camera that already comes with most high-end drones?

As far as TAM goes, it's more or less the same answer I just shared, which is we're targeting 3.3 million units this year, and we are confident that we can continue to grow that number back to levels of four million or greater over time, like pre-pandemic GoPro. And some of that will be organic and some of that will be inorganic through us expanding the breadth of our hardware offerings, both in terms of camera and potentially product categories that we're not in yet. And our strategy is, as we've shared, to address user segments that might be considered niche by other businesses. But for GoPro, we've proven that niches add up to a pretty significant whole. And that's how we built this business, built this brand to be as durable as it's been over the years. You know, the history of GoPro is we started out building cameras for surfers and then mountain bikers and race car drivers and moto enthusiasts and skiers and on and on and on. And eventually people interested in professional content creation, influencers, bloggers. And today you've got GoPro, which is really a business built on stitching together many, many, many niche use cases, specializing our products for those niche use cases. And you've got a very diversified customer base that we're building for and solving problems that no other company is solving. We're addressing the needs of some of the most passionate people on the planet who have very specific problems that they're trying to solve. And therein is a bit of our secret sauce as to how we've built such a durable business. And so our strategy with derivative products like Bones is to just continue to build on those niches and to, in a safe, predictable manner, grow our business rather than swinging for the fences with big mass market winners. We're excited about hitting singles and doubles. It's historically worked really well for the business. As in baseball, you occasionally go for a double and you catch a hold of it and you accidentally hit a home run. So we're definitely leaving ourselves open for that opportunity as well. And I say all of this and want to remind everybody that we still are going to be wowing our customers with our new flagship cameras every year because that's the core of our business. But at the periphery and on top of that, we can leverage that technology to produce lower cost to develop derivative cameras that can help us incrementally grow our business as well. So I would put the Bones product into that category of a smaller yet important and influential user group that we think we can super serve better than anybody else given our technology. And your question about why would somebody put this camera bones on their small cinematic drone as opposed to the cameras that are built into some drones. It comes down to image quality and the outright performance of the camera and the FPV first person view drone cinematography community has spoken loudly that they want smaller, lighter GoPros to mount on their small, fast, agile drones because they want the best image quality and they see GoPro as the company that's building the best cameras for their needs to the point where drone cinematographers were buying Hero 10s, stripping them down, voiding the warranty and then enclosing them in homemade cases and flying them as a do-it-yourself lightweight GoPro solution. And we've just been seeing enough of that over the years and getting enough feedback from cinematographers that they'd be excited if we would build something like that for them, so we did. And that's part of why I say we think that we're the only company or one of the only companies that can serve these enthusiasts in this way. And it feels great to finally be responding to all the demand, all the requests that we've had over the years to build a specialized camera like that for this important group.

Got it. Thanks for the detailed answer, Nick. Makes sense. A question on kind of the assumptions around second half growth. It implies quite a pickup in units. So maybe can you help us understand how are you assuming How much of growth in the second half will come from some of the new products that, you know, whether they could be a little bit more mass market in order to drive the units versus growth from the traditional, the hero flagship line? How much of that growth should we think about coming up from the new products versus the legacy in the second half?

New products will drive most of the growth. On the new products, I'd expect a flagship. And then there's one other, which we have very good historical analytics on for driving demand. So that's why we're pretty comfortable with what the demand outlook would be between Q3 and Q4. Obviously, the older cameras still play a role, 10, 9, and a bit of 8, and Max, which has continued to do So the new products are more mass appeal versus more niche-like.

Got it. Okay, and if I can squeeze one financial question. You made a comment in the prepared remarks about the success and the expansion of the accessory portfolio. Brian, what can you share from a financial standpoint to help us understand how much accessories add to either ASP or sales or any other metric that help us frame that?

Yeah, we're growing our expectations to grow accessories this year. We don't break out how big it is, but it is significant part of our business. And it's margin accretive to the company. So it's positive there. It's also a significant benefit to our subscribers. You know, part of the deal on the subscription is financial. I mean, they pay 50 bucks and then they get $100 off a camera, up to 50% off on accessories. And a significant amount of our accessories that are sold actually are to that group. So they're engaged with GoPro and buying quite a bit of accessories. So That's a powerful force on the business that also builds the relationship with the customer and keeps them in as a subscriber and why we have healthy retention rates. So it's a positive in almost every direction.

One thing I'd like to add, Nikolai, to your question about bones and future cameras is that I should add that we're really happy with the sell-through that we're seeing since the launch of Bones and our other new camera SKU, the Hero 10 Black Creator Edition. Both those cameras are selling through either in line with our forecast or above what we had expected in terms of sell-through. So, great job. Congratulations to the GoPro team on successfully launching These two new products were sold so far really good. We're really encouraged by that. And then you made a comment about how we're looking for quite an uptick later in the year and what were these cameras that were coming out, how are they going to support that? Brian, do you want to add to your answer about how we're not expecting anything out of the ordinary for Q4 as it relates to our historical performance?

Yeah, I kind of test on that with Anna's question too, but yeah, we expect typically in any year we have a lift, sell through the lift in Q4, sequentially from Q3 of 30 to 50%. And it's lower if we have a lower number of units and it's higher if we have more units to put into the market, particularly knowing what we're going to put into the market. So that gives us... a very good understanding of demand and demand profiles and where we should be lining up as we look ahead to Q3 and Q4. Got it.

Thanks, guys. Good luck. Thank you. The next question is from Eric Woodring with Morgan Stanley. Your line is now open.

Hi, this is Patrick on for Eric. Thanks for taking the questions this afternoon. So if we look back over the last three years, second quarter selling grows sequentially by a little bit more than 30%. And I believe you guys are guiding to an 18% sequential selling growth. So we're just looking to better understand, you know, what are some of the drivers that are limiting selling growth on the second quarter?

Yeah, we typically see it as From a unit perspective, 10% to 20% sequential lift from Q1. Our number has never been as high as what you've got, not in the last three years. And so, yeah, we're up 17% in Q2 and expect to do about 675,000 sell-through in a quarter. So that's up. And that's up more, and we expect to pull channel inventory down again in Q2 because that sets us up for success in the second half where we see more units coming. So we're in line with what our normal lists are from a sequential perspective.

Okay, great. Thanks for the color there. And then, you know, one more from my end, if you just kind of look at the U.S. dollar and the recent strength, how are you thinking about, you know, potential pricing action in international markets as you work to offset both currency and component cost inflation?

Yeah, included in our guidance of 40.5% plus or minus 50 bps, that's down sequentially from 42% At least 1%, maybe up to one and a half is going to be currently related with the strength of the dollar in March and April. Component costs are also included in our guidance. As far as pricing goes, we've already moved up the price curve. And if we try to move prices up, I think that's going to have a deteriorating effect on demand. It'll be more of a negative actually than a positive. And so that I don't think really makes sense. The other thing is we have such a large subscription business that we get a little bit of air cover there from a margin perspective because it's going to grow as well in Q2. And with the margin profile, that's why I call it the financial engine for GoPro. It helps to keep margins in the 40s as we continue to grow that. So we can buffer a little bit here on component prices and currency. uh because we have a diversified business between you know our hardware and cameras and what accessories and what we're able to deliver in the market on subscription it really is a diversified way of looking at the business great appreciate the caller thank you thank you the next question is from jim suva with citigroup your line is now open

Thank you. I have kind of a strategy question for Nick and then a financial question for Brian. So Nick, this year with the launch of the Creator as well as Bones, is it kind of fair to think that now the cadence has turned into a little bit of a tick and tock cadence, like tick first half of the year, more specialized needs and talk second half of the year? consumer bigger market appeal if I understand it correctly how it's playing out this year and then the last part of that is is the bones if I remember it's like only available in the US or is that maybe just upon launch and then later on more global I just found that kind of interesting and then for Brian on financial um is there anything we should be aware of in our modeling going forward whether it be Inflation for research design engineers, employees, merit increases. You know, we've lived in a tough world of COVID for a long time and not much merit increases for employees or converts that are coming due or anything that could impact OPEX or share count, not only for, kind of like going forward. Thanks, gentlemen.

On the TikTok, are we changing our launch cadence? I would say I wouldn't read into that. It makes sense what you said, but no. At the same time, we are likely to continue to surprise and delight you with future product launches. So listen for perhaps some clues in what we share, but I don't think you can be as definitive as the way that you laid it out. And then in terms of Bones being a U.S. launch, we're being very thoughtful about how we roll out some products versus others, which are more sure to have mainstream appeal and so forth like that. With Bones, we wanted to learn. It was about speed to market. We were able to get that product out a lot quicker if we focused on the U.S., and then learn about demand and grow from there. So chalk it up to being quick market and thoughtful about how we approach what we see as an important opportunity for us to super serve a very influential group of content creators that are helping keep GoPro at the forefront of some of the most exciting content that's being generated. For those of you on the call who aren't aware, The majority of really wow shots that you're seeing from drones these days are being captured with much smaller, lighter, more agile drones that people are flying with. Pilots are flying with goggles that they wear that give them a first-person view as though they're sitting in the cockpit of the drone. and they're mounting stripped down GoPros and now bones to their drones to capture film quality footage. The majority of really wow drone shots these days are not being captured with the larger, heavier, slower, less nimble drones that you may have been familiar with when we were making drones ourselves. So the world has changed. It's evolved. And it's great to see GoPros still being the camera of choice for capturing these amazing aerial perspectives.

Great. Thanks, Nick. That's perfect. And Brian, anything about converts or, you know, OpEx or Merit or on the P&L that you're aware of?

Sure. Yeah, on the converts, We paid down our convert, $125 million April 15th, so we reduced our debt. Ironically, we made over $150 million of cash flow in the last year, and that enabled us to tidy that up and pay it off. We do expect cash to end the year between $450 and $480 million, and we'll exit Q2 at about $330 million. So as is typical, in the second half, we generate most of our free cash flow. It's worth noting that we were named the number one large employer by Upside Magazine. Part of the reason for that, well, there's lots of reasons, but you mentioned merit. We actually did a pretty sizable merit increase to our employee base this year. It was, I think, double what we had typically done That's factored into our guidance of 340 to 345 million of OPEX in the year, as well as any inflationary aspects to the business. We can keep it contained in there. So I'd also point out that it kind of goes with the number one large employer. Our retention rates with employees globally has been exceptional. And that's been great, great teamwork, great continuity. And we're really, really pleased with the retention rate.

Great. So just to be clear, Brian, it sounds like the convert, the balance sheet we see today still has it in it, but now in the quarter it's paid off, so we should make that adjustment going forward. Am I correct?

Yeah. We should remove $125 million from short-term debt. And cash would end at $330 million for Q2.

Great. Thank you, gentlemen, so much for the details and clarifications. It's greatly appreciated. Yeah.

And share count should be about 178 million shares in Q2 as well.

Thank you. The last question comes from Paul Chung of J.T. Morgan. Your line is now open.

Hi, guys. Thanks for taking my question. So, you know, we're hearing some softness from EMEA consumers, you know, across different products. Looks like EMEA did quite well for you in the quarter, but what are you seeing here to start QQ? Anything you want to call out and other trends you're seeing in maybe other regions? Looks like Asia also had a good quarter.

Yeah. Both Asia was up 11% year over year, and Q1 in Europe was up 24%, quite strong. America was down a bit. We saw some softness there maybe later in the quarter. People talk about rates in the market. We're seeing good sell-through right now. We're going for 675,000 units and we're tracking to that. EMEA actually is running just ended with me this morning, running slightly ahead of where we have them pegged for the quarter. So we're still seeing really good, solid demand in Europe, as well as Asia and North America. I think it's still a little slow, but that's starting to pick up. Some of the new products have helped to create an addition in bones, are doing well or exceeding where we thought we would be. So all those are collectively helping to drive the software in the business.

Gotcha. And then for your guidance, are you kind of baking in any sort of rebound and travel related activity? And do you have any, you know, data on how travel trends kind of provide uplifts and in certain channels and how that impacts the overall business in general that were to pick up meaningfully?

Yeah. If, if we haven't factored in travel, um, travels up domestically in the U S but international travel has not picked up and that's where we're going to see the bigger list because as international travel increases that now we're selling to cruise is selling to duty free stores. So across Europe and then in a destination spots in Asia, So we don't have that market right now that's been eviscerated once COVID hit. And so as that comes back, you know, travel represented, you know, historically as we were running 4 million units, about 10% of what we sold. So it's a sizable tailwind once that comes back.

Okay, great. And then your sub count for the year was reiterated. You know, just talk about the visibility into that target 2.2 million bogey. You know, what incremental features can we expect here, and what are some of the most attractive features that are keeping subs, you know, engaged on the platform? I think you mentioned, like, storage was a key feature.

Nick, you want that, or do you want me to take it?

Yeah. We've shared that it's a major initiative for us this year to move our editing tools from our mobile app into the cloud, which is going to make the experience far more convenient, fast, and ultimately successful for our users. That's a big one that's going to drive engagement. As we noted, it's great to see 72% of users storing footage in the cloud, I should say, of subscribers storing footage in the cloud, and helping them more conveniently make use of that is obviously going to have very high positive impact, we think, on engagement, utilization of the experience. And then we're just going to continue to chip away at doing a better job of incorporating the benefits into the app experience, into the camera experience, so that it just starts to work more and more intuitively for our users, which will also, for our subscribers, which will also help them get more out of being a subscriber. And I also shared, I think in the first question of the day that, We're going to be, by the end of the year, doing a much better job of helping all of our camera owners experience subscription benefits for a period, which we think will really help drive conversion. We're doing a great job converting today, but we're just telling people about the benefits. There's nothing experiential about it today, so they have to take our word for it. before they become a subscriber. That's going to be dramatically improved later this year, so we're excited about that. And then the other really big thing that I've shared several times today is the expansion of our hardware product portfolio to court more users who have needs that go beyond what we address today. We think we can grow our TAM by doing so, obviously grow revenue, but most importantly, grow subscription because since we're seeing such a strong conversion rate amongst buyers of all of our cameras, we're confident that as we introduce more cameras and grow our TAM and bring in new customers that we otherwise wouldn't have, that we can convert them to subscribers at similar rates that we're doing today. And I also think that long-term there's an opportunity for GoPro to begin selling new types of products than from what we sell today to expand TAM further. You know, staying within the guidelines and strengths of our brand and courting the same types of consumers that we are today is But there's no reason why we can't leverage additional products other than cameras to bring in new subscribers as well. So that represents an exciting long-term growth opportunity for us. I think it would be short-sighted and too limiting to think of a GoPro unit as we think of getting back to 4 million and above units as only being cameras. We don't see it that way.

Great. And then last question. So, you know, cash guidance here, pretty, pretty good to just, you know, strong free cash flow for the year. Sounds like you're, you're in a good place with inventory, have enough for kind of releases later this year. You know, so, so can you, you know, how much cash do you need to run the business? I mean, free cash flow seems like it's stabilizing, becoming pretty, you know, high quality. Can you, materially buy back a lot of shares from here. Thank you.

Oh, sure. Yeah, as we exit, well, we put together $100 million authorized, $100 million buyback. We've bought 10 so far. So, yeah, we have the opportunity to buy more back as we get through this year and into 2023. So, yeah, I can go materially higher if we continue to generate the kind of cash, pre-cash flow that we're doing. I mean, our numbers imply we're going to be, you know, 180, 190 million EBITDA this year, right, up from 170-something last year. And, you know, look ahead. Just what I said on subscription alone on 23, because it's just math and how, this thing layers out, that's another, you know, big chunk of margin that goes into a gross profit and the bottom line in 23. So we can, we can, I would see more expansion in 23 from a buyback perspective than 22. Cause I'm going to, you know, realize it and then, and then pay it out. And then remember in 25, we have to pay back the second convert that's due in November. which is 145 million.

Okay, thank you. Thank you.

There are no additional questions waiting at this time, so I will pass the conference over to the management team for closing remarks.

Thank you, operator, and thank you, everyone, for joining today's call. We look forward to connecting with you at a slate of upcoming events later this quarter. and on our next earnings call in August. Until then, this is Team Go Pro signing off.

That concludes the Go Pro first quarter 2022 earnings call. Thank you for your participation. You may now disconnect your line.