GoPro, Inc.

Hello and welcome to the Go Pro second quarter 2023 earnings conference call. My name is Elliot and I'll be coordinating your calls today. If you would like to register a question during today's event, please press star followed by one on your telephone keypad. I would now like to hand over to Christopher Clark, Vice President of Corporate Communications. The floor is yours. Please go ahead.

Thank you, Elliot. Good afternoon, everyone, and welcome to Go Pro's second quarter 2023 earnings conference call. With me today are GoPRO's CEO, Nicholas Woodman, and CFO and COO, Brian McGee. Today's agenda will include commentary from Nick and Brian, followed by Q&A. For detailed information about our second quarter 2023 performance and our outlook, please read our Q2 2023 earnings press release and 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. This means that results could change at any time 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, 2022, which is on file with the Securities and Exchange Commission. and 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, adjusted EBITDA, as well as basic and diluted net profit and loss per share in accordance with GAAP and on a non-GAAP basis. 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. Unless otherwise noted, all income statement-related numbers that are discussed in the management commentary and remarks made today, other than revenue, are non-gaps. Now I'll turn the call over to GoPro's founder and CEO, Nicholas Woodman.

Thanks, Chris, and thanks, everyone, for joining us today. Today, Brian and I will share commentary on our Q2 performance as well as our outlook before going into Q&A. I want to encourage all on the call to read the detailed management commentary we posted on our investor relations website. On May 9th, we announced an updated go-to-market strategy, which included a return to lower pre-pandemic pricing and a renewed emphasis on our retail channels to better serve consumers post-pandemic shopping behavior. We're happy to report that this has had a positive impact on our businesses and second quarter revenue and subscriber growth exceeded our expectations. Our improved sell-through has sustained thus far into Q3, driven by our retail channels. Revenue in the quarter was $241 million, 10% above our guidance. GoPro subscribers grew 27% year-over-year to $2.44 million, also surpassing our expectations. sell-through of our entry-level priced $199 Hero 8 and $249 Hero 9 Black cameras enjoyed a combined sequential lift of more than 50%, highlighting the importance of the entry-level product category as a TAM expanding opportunity. It's important to note that the sales lift was incremental and did not cannibalize our higher priced products. As a reminder, The key points of our Q2 updated go-to-market strategy included restoring camera pricing to lower pre-pandemic price points and discontinuing subscription-related camera discounts at the time of purchase at GoPro.com, reintroducing entry-level price cameras to drive meaningful volume and subscriber growth, restoring our world-class presence at retail by increasing global distribution to best-in-class retailers that can help drive awareness and sell-through, and scaling our marketing spend to pre-pandemic levels over time. At the start of the COVID pandemic, we exited approximately 30% of our retail doors globally and focused on driving much of our business to GoPro.com as consumers primarily shopped from home. We significantly reduced our marketing spend and raised camera prices by $100 over a two-year period due to supply chain constraints. This strategy worked extremely well for us during the pandemic, yet limited our growth post-pandemic. With our updated go-to-market strategy, we saw an immediate uptick in demand at retail across all regions. This enabled our global sales team to hit the ground running, working closely with existing retail and distribution partners, re-engaging former partners, and adding highly motivated new partners. Our strategy is to grow our business with best in class distributors and retailers who span the spectrum from influential core specialty retailers who enhance our brand to larger big box retailers who drive volume and mass market awareness of our products. Enthusiasm amongst our distributors and retailers is high as they recognize the strength of our product line, our brand, and the opportunity to grow our respective businesses together. We're excited about the pace at which we're opening new doors, particularly in EMEA, which was the hardest hit by our pandemic door count reductions. To date, we've opened nearly 800 new doors in EMEA, and we're targeting approximately 2,000 total new doors worldwide by the end of 2023, with additional growth in 2024 and 2025. In addition to new doors, we're enhancing GoPro's brand presence at retail with updated point of purchase displays. To drive greater awareness of GoPro and to support revenue growth in the second half of this year, we are increasing our investment in marketing. We are partnering with key retailers to amplify awareness, leveraging our collective reach to excite consumers during our upcoming launch and throughout the holiday season. It's great to be aligning once again with our retail partners in a meaningful way that we haven't been able to do since before the pandemic. An indication of our sell-through momentum post-strategy shift can be found in GoPro's results during the Amazon Prime Day period. Circona reported that consumer spending over Amazon's July Prime Day saw discretionary and general merchandise sales decrease 3% year-over-year, with unit sales down 8%. By contrast, During the same period, total GoPro camera unit sales for North America, which includes both our retail channels and GoPro.com, were up 6% year over year. Our subscription business continues to be a highlight. As mentioned, we closed Q2 ahead of our expectations with 2.44 million subscribers, a 27% year over year increase. The attach rate via our app from cameras purchased at retail exceeded 40% in the second quarter, up from approximately 33% a year ago. Attach rates from cameras purchased via gopro.com post our go-to-market strategy shift exceeded 40% as well. These subscription attach rates confirm the value our customers see in our subscription offering. In Q4... We're excited to introduce an all new desktop app that will make it easy for GoPro subscribers to organize and edit their GoPro content. Our new desktop app will sync with the subscribers cloud and mobile app to provide a consistent and convenient experience across platforms. GoPro subscribers will enjoy full access to the desktop app and all of its powerful features at no additional charge. There will also be a premium level subscription offering for consumers that want to import footage from any camera, expanding GoPro's relevance as a digital imaging software solution to a much broader audience, an opportunity we intend to aggressively pursue over time. I want to thank our employees who have continued to execute at such a high level time and time again. Your passion for our customers and our products are what make GoPro such a powerful brand. And I also want to thank our retail and distribution partners for their positive response to our go-to-market strategy shift. We're excited to grow our brand and business with you, and we are grateful for our partnership. GoPro's retail channel represents a phenomenal opportunity to get our product and brand in front of consumers in an experiential way, and we couldn't be more excited for this upcoming holiday season. Now, I'll hand the call over to Brian to share some color on Q2 and our outlook for the rest of the year.