After a strong third quarter that led the company to say it had finally turned the corner, GoPro reported fourth-quarter results that came in below expectations, even though it had already significantly lowered its guidance last month. On Jan. 8, the company had issued a warning saying that it expected revenues to be approximately $340 million, instead of the $460 million originally forecast. It also announced plans to cut 254 jobs, which represents 20 percent of its workforce, and dropped its drone business due to a “hostile regulatory environment.”

The company's revenues for the quarter were off by 38.1 percent from the year-ago period to $334.8 million. The management said that 2017 was marked by three strong quarters of operating efficiency, but was overshadowed by a miss in the holiday period. Although the company saw solid demand for Hero6 Black action cameras early in the quarter, demand for its mid-priced camera, Hero5 Black, was weaker than expected. However, on Dec. 10, prices on the Hero5 Black and Hero5 Session were reduced by $100 and as a result, the unit sell-through of Hero5 Black in the U.S. and Europe more than doubled in December and the sell-through of Hero5 Session approximately tripled. This led the management to say that this shows that there is significant demand for GoPro “at the right price,” despite the tighter margins.

The management also boasted that it launched the Hero6 Black and Fusion products to “critical acclaim,” significantly advancing the convenience of its camera app and cloud ecosystem. It said it learned that a meaningful percentage of GoPro's customer-base are loyal repeat buyers, open to upgrading to a newer model and responding to a discount on a lower model, adding that it needs to do a better job bringing value to entry-level products to attract new fans.

The gross margin for the quarter dropped by 15.4 percentage points to 23.8 percent. The net loss was $55.8 million, down from a net loss of $115.7 million for the same period a year ago.

For the full year 2017, revenues inched down by 0.5 percent to $1,179 million. The company highlighted several achievements. For the fourth straight year, GoPro's portfolio captured more than 80 percent of the action camera category by unit volume in the U.S., according to the NPD Group. In Europe, GoPro held shares of 69 percent and 44 percent in the action camera category in value and volume, respectively. Japan was another highlight, with unit sales of cameras up by 96 percent. In China, a top-10 market for GoPro, the year-on-year increase in units reached 28 percent.

Globally, GoPro gained more than 4.8 million new social media followers in 2017, growing its total following by 16 percent to 35 million across all platforms. Meanwhile, GoPro content was viewed 700 million times on social media platforms, up by more than 25 percent year-over-year.

The annual gross margin dropped by 6.4 percentage points to 32.6 percent. Adjusted Ebitda, which excludes items such as the effects of stock-based compensation, acquisition-related costs and restructuring costs, was a negative $26.5 million, against positive adjusted Ebitda of $44.3 million in 2016. The net loss of $182.8 million for the year compares with a net loss of $419 million recorded for the prior year.

Based on its performance in the fourth quarter, the management listed six priorities for GoPro for 2018: strengthening analytics and understanding of its customer, increasing investment in marketing, broadening price points, eliminating friction in its camera, mobile and cloud experience, bringing more value to subscription offerings and attracting talent.

The management concluded by saying that 2018 represents an opportunity to combine the sell-through it is now seeing with the higher-margin products it plans to release in the second half of the year. Revenues are expected to be down in the first half, but should go up again in the second half.

Margins are projected to be in the mid-20 percent range in the first half, recovering to the upper-30 percent range in the second half, due to the introduction of new higher-margin products. Impacting margins in the first half will be the sell-off of the remaining inventory of its Karma drone, which currently has a margin of zero, as well as the launch of an entry-level SKU camera that will carry an initial margin below the corporate average.