Despite a difficult first quarter, with sales hit by the Covid-19 crisis, Fitbit managed to return to profit. It was helped by a $145 million tax benefit from operating loss carrybacks as part of a government program to help companies through the coronavirus pandemic. Net income reached $20.3 million, compared with a net loss of $79.5 million a year ago.
Fitbit’s revenues declined by 31 percent to $188.2 million in the quarter, weighed down by a 26 percent drop in the number of devices sold to 2.2 million units. There was only one product introduction in the quarter, as compared to three for the same quarter in 2019. The product launched was the Charge 4, a health and fitness tracker with Sleep tools, Fitbit Pay and built-in GPS. The average selling price declined by 11 percent to $81, due to an increase in reserves for product returns, rebates and promotions, and price protection during the coronavirus pandemic.
Fitbit Premium, a paid membership in the Fitbit app that uses consumers’ data to deliver personalized guidance, saw revenues rocket by 195 percent. Fitbit Health Solutions reached revenues of $27 million.
During the quarter, smartwatch revenues represented 54 percent of Fitbit’s total sales, compared with 42 percent for the year-ago quarter. Trackers made up 42 percent of total revenues, compared with 57 percent last year. Revenues from accessories and other products accounted for 4 percent of sales.
Sales outside the U.S. accounted for 46 percent of revenues and were off by 37 percent to $86 million. In EMEA, they dropped by 35 percent to $57 million. U.S. sales went down by 24 percent to $102 million, and they tumbled by 30 percent in the rest of the Americas. Fitbit’s business in Asia-Pacific fell by 47 percent to $18 million.
Overall, Fitbit’s gross margin contracted by 3.7 percentage points to 29.2 percent, negatively impacted by higher reserves associated with the coronavirus pandemic.
As previously reported, the company is partnering with Stanford Medicine, Scripps Research Institute and others to research how wearables data can detect, track and contain infectious diseases.
Meanwhile, Google’s deal to buy the company for $2.1 billion, announced late last year, is still under intense scrutiny from regulators in Europe and the U.S. Many commentators believe that the U.S. Department of Justice could block the deal altogether due to concerns that it would substantially lessen competition, as the health and other biometric data that Google would obtain through Fitbit would make its data empire too big. In a blogpost, Rick Osterloh, Google’s senior vice president in charge of devices & services, argued that the merger could “help spur innovation in wearables and build products to benefit even more people around the world.”
