On January 13th, GoPro filed an 8-K with the SEC. In the press release it included, they announced expected fourth quarter revenue of $435 million and $1.6 billion for the year and a projected gross margin of 34.5% to 35.5%. The annual number represents 16% year over year revenue growth. By way of comparison, in the quarter that ended December 31, 2014, GoPro reported revenues of $633.9 million and had a gross profit margin of 47.9%.
In the company’s last conference call on October 28th, CFO Jack Lazar indicated that they, “… anticipate [fourth quarter] revenue of between $500 million and $550 million. At the midpoint of our guidance, this represents a decrease of 17% year-over-year for the fourth quarter and an increase of 23% for the full year of 2015.”
I just reported a couple of days ago on a similar announcement from Skullcandy, and I wonder if we won’t see some more from other public companies. It’s a tough market out there even when you are doing things right.
Here’s how GoPro describes the cause of the reduced projections.
“Fourth quarter revenue reflects lower than anticipated sales of its capture devices due to slower than expected sell through at retailers, particularly in the first half of the quarter. Fourth quarter revenue includes a $21 million reduction for price protection related charges resulting from the HERO4 Session repricing in December. Non-GAAP gross margin for the fourth quarter of 2015, excluding the impact of price protection and a charge of between $30 million and $35 million to cost of revenue for excess purchase order commitments, excess inventory, and obsolete tooling is anticipated to be between 44.5% and 45.5%. Non-GAAP gross margin for the fourth quarter of 2015 is anticipated to be between 34.5% and 35.5%. Non-GAAP operating expenses for the fourth quarter of 2015 are estimated to be between $150.0 million and $152.5 million. Cash, cash equivalents and marketable securities at December 31, 2015 totaled approximately $475 million.”
Just to get right to it, I hate this “non-GAAP” crap no matter who does it. The idea that we shouldn’t consider $21 million in “price protection” payments, inventory write downs, writing off tooling or making payments for products they over ordered (which I think is what they mean) in evaluating GoPro’s results is just ludicrous. In whose world aren’t these actual business expenses?
You know, I’ve just had an epiphany. From now on, when I evaluate my results in the stock market, I’m only going to consider the stocks I made money in. That should improve my bottom line.
I’d like to make a plea to all the companies who take the non-GAAP approach. Please don’t treat us like we’re so stupid. Has it occurred to you that you lose credibility with your stakeholders by taking this approach?
You will note that the quote above from the press release refers to “Non-GAAP gross margin for the fourth quarter” twice. I think the second time is supposed to be just GAAP gross margin because it refers to an expected gross margin of around 35% for the quarter compared to 45% in in the first reference.
Earnings for 4th quarter and the year will be released after market close on February 3rd. I will look forward to seeing the results.