GoPro, Inc.

and welcome to GoPRO's Q2 2022 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Gillian Hoover, Vice President of Investor Relations. Please go ahead, ma'am.

Thank you, Operator, and thanks for everyone for your patience. We were experiencing some technical difficulties this morning causing delay in your ability to join and wanted to wait so as many of you could join as possible. Welcome to GoPRO's second quarter 2022 earnings conference call. With me today are GoPRO's CEO, Nicholas Woodman, and CFO and COO, Brian McGee. Today's agenda will include a brief introduction from Nick and some commentary from Brian, followed by Q&A. For detailed information about our second 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 and the war in Ukraine. 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. To better understand the risks and uncertainties that could cause actual results to differ from our commentary, We refer you to 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 is updated in future filings with the SEC, including the quarterly report on Form 10-Q for the quarter ended June 30th, 2022. Today, we may discuss gross margins, operating expense, net profit and loss, EBITDA, as well as basic and diluted net profit and loss per share in accordance with GAAP, and 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 information and metrics for the second quarter 2022. The management commentary slides, as well as a link to today's live webcast and the replay of this conference call are posted on the investor relations section of GOPRO's website for your reference. Unless otherwise noted, all income statement-related members that are discussed in the management commentary other than revenue are non-GAAP. Now, I'll turn the call over to GoPro's founder and CEO, Nicholas Woodman.

Thanks, Jolene, and hi, everybody. Thank you for joining us today. As we shared in the management commentary, which we posted to the investor relations section of our website, in Q2 2022, GoPro delivered a fifth consecutive profitable quarter on a GAAP basis at $0.02 per share and our eighth consecutive quarter of profitability on a non-GAAP basis at $0.08 per share. Camera sell-through outpaced expectations, and we drove significant year-over-year growth in subscribers and subscription revenue. Both revenue and non-GAAP EPS in Q2 exceeded expectations at $251 million and $0.08 per share, respectively. Direct-to-consumer revenue increased nearly 9% year-over-year to $95 million, or 38% of revenue. And subscription and service revenue hit a new quarterly milestone of $20 million, positively impacting our bottom line. Our subscription service continues to be a powerful financial engine for GoPro and represents our fastest-growing, highest-margin, and most profitable products. We ended Q2 with 1.91 million subscribers, a 65% year-over-year increase of approximately 754,000 GoPro subscribers, and we are on the cusp of surpassing 2 million GoPro subscribers, which translates into $100 million of annual recurring subscription revenue with gross margin of 70% to 80%. We are on track with our plans to launch several exciting new hardware and software products in the back half of 2022, wowing our customers with blistering new performance made easy thanks to significant updates to our software experience that will put a premium on convenience. We expect our new products and services to add to the momentum we enjoyed in Q2. I want to thank everyone at GoPro for their incredible work. We're thriving during challenging times thanks to your world-class execution. I'd also like to thank all of you on the call with us today. It's an exciting time at GoPro, and we're grateful for your support and participation in our growth story. Before jumping into Q&A, Brian has a few comments to share.