Currency headwinds from a stronger U.S. dollar impacted GoPro’s total revenues and gross margin in the third quarter. Still, the company was able to increase its subscriber base and service revenue by 55 percent and 48 percent, respectively, to 2.1 million and $21 million during the period.
Revenues declined 3.6 percent to $305.1 million (+2% currency neutral) from $316.7 million as the company sold approximately 700,000 units during the period ended Sept. 30. Total units were down 4 percent year-over-year, largely due to the company’s decision to remove low-end cameras from its product assortment. The decision has had a positive impact on average unit retail prices. On a currency-neutral basis, the average unit selling price rose 6 percent to $405 in the third quarter.
Net income was $17.6 million against $311.8 million as operating income declined 49.7 percent to $24.4 million from $48.6 million. Gross margin at 38.2 percent fell short of a 39.0 percent target, and adjusted Ebitda as a percentage of revenues declined to 11.5 percent from 19.1 percent in the year-ago quarter.
The fourth quarter has historically been GoPro’s strongest period annually. The company is targeting the sale of 950,000 units, a gross margin in the 35.0 percent range and total revenues of $325 million or more despite the likelihood of increased promotions and a reduction of “open to buy” dollars due to excess inventories at retail.
Looking ahead, the maker of the new Hero11 Black camera says it will offer sync’d mobile, cloud and desktop software experiences in 2023 that will help drive new subscriber engagement. Additionally, the company intends to offer a higher-priced subscription tier for those looking more, according to CEO Nicholas Woodman. The group has already surpassed two million subscribers and is positioned to generate more than $100 million in annual recurring revenue from them on a gross margin of 70-80 percent.
