GoPro, Inc.

Hello everybody and welcome to today's GoPro third quarter 2022 earnings call. My name is Drew and I'll be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing star one on your telephone keypad. If you change your mind, press star followed by two. I'm now going to hand over to Jolene Hoover, Vice President, Investor Relations to begin. Please go ahead.

Thank you, Drew. Good afternoon, everyone, and welcome to GoPRO's third 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 third 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 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 the 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 with the SEC, including the quarterly report on Form 10-Q for the quarter ended September 30th, 2022. 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 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 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 gap to non-gap 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 third 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 numbers 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. Thanks for joining us today. As we shared in the management commentary, which we posted to the investor relations section of our website, in Q3 2022, GoPro delivered revenue of $305 million at the high end of guidance and cash flow from operations of $41 million. Gap EPS was $0.10, and non-gap EPS was $0.19. Like many companies, GoPro's results for the quarter were impacted by a stronger U.S. dollar. On a constant currency basis, Q3 revenue would have been approximately $18 million higher year over year, or up 2%, gross margin over 40% versus 38% actual results, and EBITDA to revenue approximately 16% versus 12% actual results. Considering global FX and macro economic challenges, we're pleased with our Q3 2022 results. Q3 was an exciting period of new product launches and milestones. In September, we introduced our new Hero 11 lineup of cameras, Hero 11 Black, Hero 11 Black Creator Edition, and Hero 11 Black Mini. And we're happy to report that many will begin shipping to GoPro.com customers the week of November 7th and will be available at retail beginning the week of November 14th. We also launched an enhanced cloud experience that automatically sends highlight videos to subscribers. And in August, we surpassed 2 million GoPro subscribers and are positioned to generate more than $100 million in annual recurring revenue. with gross margin between 70 and 80%. GoPro subscription continues to drive value for our customers while serving as a powerful financial engine for our business. At the end of Q3, GoPro subscribers and subscription and service revenue grew respectively by 55% and 48% year-over-year to $2.1 million and $21 million. which positively contributes to gross margin and our bottom line. We are on track to achieve 2.2 million subscribers by year end. GoPro's resilience during these challenging macroeconomic times is testament to the meaningful role GoPro plays in people's lives, helping them capture and share experiences that would otherwise be impossible to document. We believe we're advancing our global relevance as a digital imaging solutions company that serves the world's most active and creative people. And our ongoing execution is thanks entirely to our talented and passionate employees. Looking ahead to 2023, we plan to invest in people, technology, and innovation that yield leading edge products and services with an emphasis on subscription value creation and growth. While we anticipate continued macroeconomic headwinds in 2023, and potentially beyond, we are confident in our ability to operate GoPro as a profitable company and to strategically position the company for when the global economy improves and currency exchange rates normalize. Our business is strong, our products are market leading, and we feel well positioned for the future. Before jumping into Q&A, Brian has a few comments to share.