GoPro, Inc.

hello everybody and welcome to the gopro third quarter 2023 earnings conference call my name is sam and i'll be coordinating your call today if you'd like to ask a question during the presentation you may do so by pressing star followed by one on your telephone keypad i will now hand you over to your host christopher clark vp of corporate communications to begin so christopher please go ahead thank you sam good afternoon everyone and welcome to gopro's third 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 third quarter 2023 performance and our outlook, please read our Q3 23 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 the 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-get. Now I'll turn the call over to GoPRO's founder and CEO, Nicholas Woodman.

Thanks, Chris, and thanks, everybody, for joining us today. I'm excited to share the positive progress we're making against the growth and TAM expansion strategy we initiated in May 2023, a strategy we believe will drive meaningful revenue, subscriber, and profit growth over the next two years. As a reminder, this strategy included a return to lower pre-pandemic pricing to drive unit sales, the reintroduction of entry-level priced GoPro cameras to reach new customers, increased marketing to drive awareness, expanding GoPro's global retail channel presence to better serve consumers post-pandemic shopping behavior. In Q3 2023, both revenue and non-GAAP earnings per share exceeded the midpoint of our guidance. Revenue was $294 million, and non-GAAP earnings per share was $0.04. And we ended the quarter on target with 2.5 million subscribers. In September, we launched our new $399 flagship camera, Hero 12 Black, loaded with powerful new features for both professional and casual users, and further establishing GoPro as the performance and value benchmark for our industry. As I mentioned, revenue for the quarter was ahead of guidance. This was a result of Hero 12 Black and our entry-level price point cameras both exceeding our expectations. Our entry-level SKUs generated 19% of camera revenue, demonstrating their TAM expanding potential without cannibalizing our high-end SKUs. Third quarter 2023 retail channel revenue grew 12% year-over-year to $231 million. or 78% of total revenue. Total camera unit sales grew 31% sequentially and 16% year-over-year. Total camera units sold into retail grew 35%, and retail sell-through grew 29%, respectively, year-over-year, aided by our renewed focus on growing our retail channel presence. last quarter we shared a target of adding approximately 2 000 new retail doors globally by the end of 2023 and i'm happy to report that we're tracking ahead of that goal having already added 2 500 new retail doors as of today our work with these retailers includes refreshed point of purchase merchandisers improved in-store brand presence and enhanced account management to enable premium representation in each retail location. Our 2024 target is to open more than 3,000 additional retail doors globally, bringing our total to approximately 25,000 doors, which would be an increase of more than 30% from when we initiated this growth strategy in May of this year, 2023. To further leverage our growing retail network and expand our TAM, over the next two years, we plan to introduce several new types of cameras beginning in the second quarter of 2024. We believe each of these new camera SKUs will address distinct use cases and will be built at improved margin profiles, which we expect to contribute materially to revenue and earnings in 2024 and 2025. In addition to scaling our presence at retail, we continue to enhance the shopping experience at gopro.com where we sell in more than 60 countries. While gopro.com is a significant direct to consumer sales channel representing 22% of revenue in Q3, including our subscription revenue. It's also where consumers can learn about our complete end to end camera and software ecosystem, which includes our subscription service. Our subscription service continues to perform. as both a high value solution for subscribers and a high margin revenue stream for GoPro. We finished Q3 on target with 2.5 million subscribers representing 20% growth year over year. Subscriber attach and retention rates remain strong and we expect to finish 2023 with between 2.5 and 2.6 million subscribers with additional subscriber growth in 2024. As an added benefit for GoPro subscribers, later this month we're launching a desktop version of our Quick app for macOS at no additional charge. The Quick desktop app will bring the simplicity and convenience of automatic edits to desktop users, along with manual editing and media management tools, synced editing between mobile and desktop apps, plus the ability to import footage from any camera. We plan to launch a Windows version of the Quick Desktop app in the second quarter of 2024. As a part of the Quick Desktop app launch, we're introducing a new premium plus $99 subscription tier that includes an advanced desktop-based HyperSmooth Pro video stabilization feature, plus increased cloud storage for footage captured with any cameras. GoPro subscribers at both the original $49 premium tier and the new $99 premium plus tier will continue to enjoy unlimited cloud storage of footage captured with their GoPro at original quality. We expect our new Quick Desktop app to further establish GoPro as an exciting end-to-end content creation solution for consumers, whether they're just getting started or they're an advanced creator. Our innovative auto editing experience represents a convenient starting point for new creators, and we believe the ongoing investments we're making in AI and computer vision will help maintain GoPro as an innovator in this space. To reinforce GoPro's commitment to innovation and engineering excellence, we recently welcomed Vince Nakayama as GoPro's new Senior Vice President of Engineering. Vince brings a unique blend of software, hardware, and UX experience to GoPro, having delivered many unique product and content experiences while holding influential roles at HP, Silicon Graphics, NetApp, Apple, Sony, Amazon, Flex, and Microsoft. He's passionate about cameras and cutting-edge technologies, and we're excited for him to augment our efforts in AI to help our customers enrich their content and discover more utility in the use of their cameras and accessories. On the marketing front, we're making solid progress in driving awareness and visibility for GoPro's brand through increased marketing collaboration with our retail channel partners, as well as expanded athlete and event sponsorships and activations that align with the markets we serve. An example of this is the recently expanded slate of motorsports series GoPro is now aligned with as the official action camera partner, MotoGP. FIA Karting World Championships, AMSOIL Championship Off-Road, Pro Motocross Championship, Monster Energy Supercross, MXGP, World Supercross, Formula Drift, and Nitrocross. These partnerships, along with the many other sponsorships in other verticals we serve, benefit both GoPro and the series themselves through the incredible content we produce together. content that authentically demonstrates the performance of our products and legitimizes our brand in the sport. We're excited about our future, which would not be possible without our approximately 900 passionate employees. I want to thank them for their commitment to excellence. We foster a workplace culture of respect and accountability, an approach that yields consistently high employee engagement rates and third-party recognition. Most recently, we were recognized by US News and World Report as one of the best places to work, adding to Outside Magazine's recognition of GoPro as one of the 50 best places to work for the past two years. We're excited for the upcoming holiday season. Demand is strong, we're making steady progress expanding our retail network, and we're looking forward to launching new margin-accretive hardware in 2024 while continuing to enhance our software and subscription offerings. We believe our strategy positions us well for the rest of the year and will yield meaningful unit, revenue, subscriber, and profit growth in 2024 and 2025. Now, I'll pass the call over to Brian to share some color on our Q4 outlook.