Fitbit reported revenues for the third quarter that rose by 5 percent from the year-ago quarter to $363.9 million, driven by higher average selling prices. The net loss grew slightly to $54.5 million on a GAAP accounting basis, but it declined sharply on a non-GAAP basis to $8.3 million from $26.7 million in the year-ago period.
DTC and e-commerce grew by 54 percent to $42 million in the quarter. On a GAAP basis, the gross margin improved by 6.2 percentage points to 37.3 percent due to lower promotions and warranty expenses, combined with higher direct sales and growth in the premium segment of the wearables market. However, R&D expenses increased by 38 percent. Operating costs went up by 54 percent, partly because of expenses related to its planned acquisition by Google.
Fitbit said it sold 3.3 million devices in the quarter, which compares with 3.5 million units sold in the third quarter of 2019, but their average selling price increased by 8 percent year-on-year to $104 per device, driven by the introduction of higher-priced smartwatches such as the Fitbit Sense, a health smartwatch with an ECG app that helps users understand and manage their stress. The management also highlighted the new Health Metrics Dashboard, which tracks metrics such as breathing rate, heart rate variability and oxygen saturation. Smartwatch sales also benefited from the introduction of the new Sense and Versa 3 models .
Overall, smartwatches represented 60 percent of revenues, while trackers and non-device software offerings accounted for 36 percent and 4 percent of revenues, respectively. The company’s Fitbit Premium program, which was launched one year ago, now has more than 500,000 paid subscribers.
By region, sales in the U.S. declined by 6 percent to $195 million, while international revenues jumped by 20 percent to $169 million. EMEA grew by 23 percent to $102 million, while the Americas excluding U.S. surged by 55 percent to $26 million, but Asia-Pacific declined by 1 percent to $41 million.
The group declined to provide a guidance for the full year, citing the pending review by the European Commission into the proposed merger with Google. While it still expects that the two companies will secure the necessary approvals to close the transaction in 2020, Fitbit noted that the time frame may extend beyond that because of the Covid-19 pandemeic. It said that it does not expect to provide additional updates on the regulatory process other than during the release of future earnings reports.
Among other issues, European regulators have concerns over Google’s ability to use data collected from Fitbit devices to enable more targeted advertising decisions.
