GoPro to restructure, to accelerate direct-to-consumer activities

GoPro Inc. announced a $100 million reduction to 2020 operating expenses including a 20% workforce reduction – and plans to further reduce non-headcount related operating expenses to $250 million in 2021 – as well as accelerated plans to go direct to consumer. The company said the direct business is a “meaningful contributor” to profitability in recent years.

“GoPro’s global distribution network has been negatively impacted by the COVID-19 pandemic, driving us to transition into a more efficient and profitable direct-to-consumer-centric business over the course of this year,” said Nicholas Woodman, GoPro’s founder and CEO. “We are crushed that this forces us to let go of many talented members of our team, and we are forever grateful for their contributions.”

In 2019, attracted an average of 7 million unique visitors each month, generated more than 20% of revenue in top European markets and nearly 20% in the United States.

“We have a clear opportunity to super-serve consumers’ demand for our products in a more direct and efficient manner which can have a positive impact on the profitability of our business,” Woodman added.

GoPro management says it will continue to sell to select leading retailers in key regions but will be shifting primarily to consumer-direct sales to drive growth in regions where already enjoys a strong share of the market.

“We believe our more direct-to-consumer-centric approach is better aligned with the current business climate, is accretive to ASP and gross margin, and positions us well for when consumer demand begins to normalize,” said Brian McGee, CFO/COO, GoPro. “Substantially reduced operating expenses combined with improving ASP and gross margin significantly lowers the threshold to achieve profitability.”

To lead the company’s direct-to-consumer growth initiatives spanning hardware, software and subscription sales, GoPro appointed Aimée Lapic as Chief Digital Officer. Lapic was most recently Chief Marketing Officer for Pandora, and prior to that at Banana Republic where she was CMO/general manager for

GoPro’s shift to a more consumer-direct approach includes the following expense reductions:

  • $100 million reduction in non-GAAP operating expenses in 2020 and plans to further reduce operating expenses into 2021 to $250 million
  • Workforce reduction of more than 200 employees, or more than 20%
  • Office space reductions in five geographies
  • Sales and marketing expenditure reductions in 2020 and beyond
  • Additional reductions in spending across the business

GoPro also reported Woodman will forego the remainder of his salary through the end of 2020 and GoPro’s board volunteered to forego the remainder of their cash compensation through the end of 2020.

GoPro confirmed these reductions will not impact its 2020 product roadmap, which includes new hardware, software and subscription products that will serve both GoPro camera owners and smartphone-only users.

Additionally, GoPro is withdrawing its Q1 and full-year 2020 guidance due to global uncertainty related to the COVID-19 pandemic, and is providing a preview of its Q1 results:

  • Revenue of approximately $119 million
  • Non-GAAP EPS loss is expected to be in the mid $0.30 loss per share range
  • Street ASP of $350, a 23% sequential increase
  • Sell-thru of approximately 700,000 cameras during the quarter
  • Reduced channel inventory by nearly 30%
  • Cash and equivalents of $125 million as of March 31, 2020

The restructuring of GoPro’s business will result in an estimated aggregate charge of $31 million to $49 million.