Safe Harbor Statement

Transcription

1 May 2018

2 Safe Harbor Statement This presentation contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties, including statements regarding our financial outlook for the first quarter 2018 and the full year of 2018; our future collaboration with Google in digital health and wearables; expected revenue from new product introductions; expected growth in Fitbit Health Solutions; expected trends in free cash flow, average selling price, capital expenditures, tax rate and device mix; our expansion within healthcare; increasing user engagement; and consumer demand for connected health and fitness trackers and smartwatches. These forwardlooking statements are only predictions and may differ materially from actual results due to a variety of factors, including: the effects of the highly competitive market in which we operate, including competition from much larger technology companies; our ability to anticipate and satisfy consumer preferences in a timely manner; our ability to successfully develop and timely introduce new products and services or enhance existing products and services; retail and customer acceptance of existing and new products; any inability to accurately forecast consumer demand and adequately manage our inventory; our ability to ship products on the timelines we anticipate and unexpected delays; our ability to detect, prevent or fix quality issues in our products or services; uncertain ability to retain employees; our reliance on third-party suppliers, contract manufacturers, and logistics providers, and our limited control over such parties; delays in procuring components and product from these third parties or their suppliers; the ability of third parties to successfully manufacture and ship in a timely manner quality products; seasonality; product liability issues, security breaches or other defects, which may adversely affect product performance, our reputation and brand awareness and overall market acceptance of our products and services; ability to integrate acquired technologies and employees into our operations, particularly in new geographies; warranty claims; the fact that the market for connected health and fitness devices is relatively new and unproven; the ability of our channel partners to sell our products; litigation and related costs; privacy; and other general market, political, economic and business conditions. Additional risks and uncertainties that could affect our financial results are included under the caption Risk Factors in our Annual Report on Form 10-K for the full year ended December 31, 2016, and our most recently filed Quarterly Report on Form 10-Q, which are available on our Investor Relations website at investor.fitbit.com and on the SEC website at All forward-looking statements contained herein are based on information available to us as of the date hereof and we do not assume any obligation to update these statements as a result of new information or future events. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make. This presentation also includes certain financial measures that are not calculated in accordance with U.S. generally accepted accounting principles, or GAAP. These non-gaap financial measures are in addition to, and not as a substitute for or superior to measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-gaap financial measures versus their nearest GAAP equivalents. For example, other companies may calculate non-gaap financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-gaap financial measures as tools for comparison. We have provided a reconciliation of those measures to the most directly comparable GAAP measures, which is available in the appendix. Trademarks: Fitbit and the Fitbit logo are trademarks or registered trademarks of Fitbit, Inc. in the United States and other countries. Additional Fitbit trademarks can be found at Third-party trademarks are the property of their respective owners. 2

3 Our Vision TO MAKE EVERYONE IN THE WORLD HEALTHIER

4 Our Mission Help people achieve greater health and fitness results by empowering them with intelligent insights, personalized guidance, and the motivation to reach their goals.

5 Our History Who We Are: We're a passionate team dedicated to health and fitness who are building products that help transform people's lives. While health can be serious business, we feel it doesn't have to be. We believe you're more likely to reach your goals if you're encouraged to have fun, smile, and feel empowered along the way. Founded. Launched first product.. Scaling business and rapid growth. Went Public. Transitioning the business

6 Our Assets Brand: #1 Wearables Brand Globally Community: Large Social Fitness Network with 25 million active users* Data: One of the largest activity, exercise, & sleep databases *(As of 12/31/17)

7 # Wearable Devices brand globally sold to date 1 78M 86 Countries 47K Stores # 1 Health & Fitness app on ios and Android (U.S.)* WIDE RANGE of devices and price points (*As of 12/31/17)

8 One of the Largest Activity, Exercise & Sleep Databases 116B hours of heart rate data tracked 102T steps 6.5B nights of sleep 213B minutes of exercise tracked (*As of 3/15/18)

9 Focus on Outcomes and Conditions Wellness Manage Weight Get More Active & Fit Sleep Better Reduce Stress Health Diabetes Heart Health Sleep Apnea Mental Health Across All Ages 2017 Fitbit Inc. All rights reserved. 9

10 Q1 Financial Highlights Generated $248 million revenue, non-gaap net loss per share of ($0.17). Generated $10 million in cash flow from operations and free cash flow of ($2) million. Average selling price up 16% y/y to $112 per device. Accessory and other revenue added an addition $3.67 per device. Non-GAAP gross margin increased 710 basis points y/y to 47%. (Improved product quality and lower warranty costs. Benefited from $12.4 million in revenue recognized from the release of outstanding reserves and rebates related to Wynit.) Non-GAAP operating expenses declined 4% y/y to $174 million. $658 million in cash, cash equivalents, and marketable securities on the balance sheet as of the quarter end.

11 Q1 Business Highlights Sold 2.2 million devices. Introduced 2 new smartwatches, Fitbit Versa TM our mass appeal smartwatch, and co-branded Adidas Fitbit Ionic. Introduced kids targeted tracker, Fitbit Ace TM. Products introduced over the past year represented 34% of revenue. Acquired Twine Health, an innovative, proven health coaching platform. Non-device revenue, including paid premium and Fitbit Health Solutions software revenue, grew 30% y/y. Leveraged Fitbit OS investment, launched Versa with approximately 45% lower developmental hours than Ionic. Reduced warranty costs declined and released $12.4 million in reserves associated with the Q3 17 bankruptcy filing of distributor, Wynit.

12 Growing User Community & Brand Relevancy Total Devices Sold Leading global wearable brand with 78 million devices sold since inception. Added 8 million social Feed users in and users collectively joined Feed an additional 2.4 million times in Q1. One of the largest social fitness networks as of year-end. 18,000 developers have joined the Fitbit developer community. In Q1, 38% percent of all activations came from repeat users; of the repeat customers, 49% came from users who were inactive for 90 days or greater. 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q (units in millions)

13 Balance Sheet and Cash Flow Q4 16 Q1 18 Inventory $145.4 Inventory Turns 4.0 Accounts Receivables $214.4 Days Sales Outstanding 61 Capital Expenditures $12.6 Cap Expenditures as % of Revenue 5.1% Significant financial flexibility. Anticipate approximately $80 million in cash refunds related to taxes paid in prior years. Expect to invest in the business both organically and inorganically. Key areas of focus, International, Fitbit Health Solutions and Software Services. Free Cash Flow ($2.4) Cash & Marketable Securities $658.4 ($ in millions, excluding % cap X, turns and DSO)

14 Announced Recent Partnership with Google Focused on three key areas: Cloud: Move data infrastructure to Google s cloud platform. Healthcare: Work together to drive positive health outcomes at scale, leveraging Google s Healthcare API and Fitbit s Health Solutions platform. Fitbit data will not share data, but leverage Google s tools and machine learning. Wearables: Collaborate on the future of wearables. Will work together to leverage both company s assets to drive innovation from OS to hardware and software experiences.

15 Key Initiatives: Transforming business Adapting to the changing wearable device market. Expand within healthcare. Build business sustainability / operational excellence. Driving behavior change / increase engagement.

16 FY 17 Guidance FY 18 Guidance Revenue ~$1.5 Billion Non-GAAP OPEX $740 million Capex as % of revenue ~4% Non-GAAP free cash flow Breakeven Stock-based compensation ~$110M Non-GAAP share count (basic/diluted) 248M/260M Guidance Context: We extrapolated the demand trend forecasted in Q and incorporated a further reduction in channel inventory levels. We expect smartwatches to become the majority of revenue in H2. Expect ASP to be up y/y driven by mix shift and roughly flat with Q1. Expect gross margins to decline as smartwatches become a greater % of mix, partially offset by operating efficiencies in how we run the business. Expect to reduce non-gaap opex by ~$60 million y/y. Expect free cash flow to be break-even, excluding expected ~$80 million tax refund payment. ($ in millions, except percentages and per share amounts) Expect full-year tax rate volatility driven by geographic mix of revenue and shift to profitability / tax credits.

17 THANK YOU

18 GAAP to Non-GAAP Reconciliation To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-gaap financial measures in this presentation: non-gaap gross profit, non-gaap gross margin, non-gaap operating expenses, non-gaap operating loss, non- GAAP net loss, non-gaap diluted net loss per share, adjusted EBITDA, and non-gaap free cash flow. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. We use non-gaap measures to internally evaluate and analyze financial results. We believe these non-gaap financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and enable comparison of our financial results with other public companies, many of which present similar non-gaap financial measures. There are limitations associated with the use of non-gaap financial measures as an analytical tool. In particular, many of the adjustments to our GAAP financial measures reflect the exclusion of certain items, specifically stock-based compensation expense, depreciation, amortization of intangible assets, interest income, net and the related income tax effects of the aforementioned exclusions, that are recurring and will be reflected in our financial results for the foreseeable future. In addition, these measures may be different from non-gaap financial measures used by other companies, limiting their usefulness for comparison purposes. A reconciliation of our non-gaap financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included in this presentation, and investors are encouraged to review the reconciliation. Guidance for non-gaap financial measures excludes Jawbone litigation costs, stock-based compensation, impact of restructuring, amortization of acquired intangible assets, and tax effects associated with these items. We have not reconciled guidance for non-gaap financial measures to their most directly comparable GAAP measures because certain items that impact these measures are uncertain, out of our control and/or cannot be reasonably predicted. Accordingly, a reconciliation of the non-gaap financial measure guidance to the corresponding GAAP measures is not available without unreasonable effort. 18

19 GAAP to Non-GAAP Reconciliation The following are explanations of the adjustments that are reflected in one or more of our non-gaap financial measures: Stock-based compensation expense relates to equity awards granted primarily to our employees. We exclude stock-based compensation expense because we believe that the non-gaap financial measures excluding this item provide meaningful supplemental information regarding operational performance. In particular, companies calculate stock-based compensation expense using a variety of valuation methodologies and subjective assumptions. In January 2017, the Company conducted a reorganization of its business, including a reduction in workforce. The restructuring costs impacted our results for the first quarter of Restructuring costs primarily included severance-related costs. We believe that excluding the is expenses provides great visibility to the underlying performance of our business operations, facilitates comparison of our results with other periods, and may also facilitate comparison with the results of other companies in our industry. Litigation expense relates to legal costs incurred due to litigation with Aliphcom, Inc. d/b/a Jawbone. We exclude these expenses because we do not believe these expenses have a direct correlation to the operations of our business and because of the singular nature of the claims underlying the Jawbone litigation matters. We began excluding Jawbone litigation costs in the second quarter of 2016 as these costs significantly increased in 2016, and may continue to be material for the remainder of Although not excluded in reporting for the first quarter of 2016, these litigation expenses were $9.1 million in that quarter. Amortization of intangible assets relates to our acquisitions of FitStar, Pebble, Vector and Twine Health. We exclude these amortization expenses because we do not believe these expenses have a direct correlation to the operation of our business. Income tax effect of non-gaap adjustments relates to the tax effect of the adjustments that we incorporate into non-gaap financial measures such as stock-based compensation, amortization of intangibles, restructuring and valuation allowance in order to provide a more meaningful measure of non-gaap net income (loss). 19

20 GAAP to Non-GAAP Reconciliation (In thousands, except percentages and per share amounts) Non-GAAP gross profit: Three Months Ended March 31, 2018 April 1, 2017 GAAP gross profit $ 114,123 $ 118,299 Stock-based compensation expense 1, Impact of restructuring GAAP gross profit 37 Intangible assets amortization 1,516 1,319 Non-GAAP gross profit $ 116,737 $ 119,673 Non-GAAP gross margin (as a percentage of revenue): GAAP gross margin 46.0% 39.6% Stock-based compensation expense 0.4 Impact of restructuring Intangible assets amortization Non-GAAP gross margin 47.1% 40.0% 20

21 GAAP to Non-GAAP Reconciliation (In thousands, except percentages and per share amounts) Three Months Ended March 31, 2018 April 1, 2017 Non-GAAP research and development: GAAP research and development $ 89,336 $ 87,758 Stock-based compensation expense (14,671) (14,344) Impact of restructuring (2,744) Non-GAAP research and development $ 74,665 $ 70,670 Non-GAAP sales and marketing: GAAP sales and marketing $ 72,052 $ 91,174 Stock-based compensation expense (3,447) (3,248) Impact of restructuring (2,000) Intangible assets amortization (161) Non-GAAP sales and marketing $ 68,444 $ 85,926 Non-GAAP general and administrative: GAAP general and administrative $ 36,088 $ 30,746 Stock-based compensation expense (4,425) (4,155) Litigation (expense) credit (765) 114 Impact of restructuring (1,594) Intangible assets amortization (71) (58) Non-GAAP general and administrative $ 30,827 $ 25,053 21

22 GAAP to Non-GAAP Reconciliation (In thousands, except percentages and per share amounts) Three Months Ended March 31, 2018 April 1, 2017 Non-GAAP operating expenses: GAAP operating expenses $ 197,476 $ 209,678 Stock-based compensation expense (22,543) (21,747) Litigation (expense) credit (765) 114 Impact of restructuring (6,338) Intangible assets amortization (232) (58) Non-GAAP operating expenses $ 173,936 $ 181,649 22

23 GAAP to Non-GAAP Reconciliation (In thousands, except percentages and per share amounts) Three Months Ended March 31, 2018 April 1, 2017 Non-GAAP operating income (loss) and operating income (loss) before income taxes: GAAP operating loss $ (83,353) $ (91,379) Stock-based compensation expense 23,641 21,765 Litigation (expense) credit 765 (114) Impact of restructuring 6,375 Intangible assets amortization 1,748 1,377 Non-GAAP operating loss (57,199) (61,976) Interest income, net 1,350 1,096 Other income, net Non-GAAP operating loss before income taxes $ (55,332) $ (60,347) 23

24 GAAP to Non-GAAP Reconciliation (In thousands, except percentages and per share amounts) Three Months Ended March 31, 2018 April 1, 2017 Non-GAAP net loss and net loss per share: Net loss $ (80,877) $ (60,079) Stock-based compensation expense 23,641 21,765 Litigation (expense) credit 765 (114) Impact of restructuring 6,375 Intangible assets amortization 1,748 1,377 Income tax effect of non-gaap adjustments 13,767 (3,722) Non-GAAP net loss $ (40,956) $ (34,398) GAAP diluted shares 239, ,511 Other dilutive equity awards Non-GAAP diluted shares 239, ,511 Non-GAAP diluted net loss per share $ (0.17) $ (0.15) 24

25 GAAP to Non-GAAP Reconciliation (In thousands, except percentages and per share amounts) Three Months Ended March 31, 2018 April 1, 2017 Non-GAAP free cash flow: Net cash provided by operating activities $ 10,158 $ 49,138 Purchase of property and equipment (12,616) (28,157) Non-GAAP free cash flow $ (2,458) $ 20,981 Net cash provided by investing activities $ 31,170 $ 24,466 Net cash used in financing activities $ (4,934) $ (546) 25

26 GAAP to Non-GAAP Reconciliation (In thousands, except percentages and per share amounts) Three Months Ended March 31, 2018 April 1, 2017 Revenue on a Constant Currency Basis International GAAP Revenue $ 108,368 $ 128,523 Foreign exchange effect (9,306) International revenue excluding foreign exchange effect $ 99,062 International GAAP revenue year-over-year change (16)% International GAAP revenue excluding foreign exchange effect year-over-over change (23)% US GAAP revenue $ 139,496 $ 170,420 US GAAP revenue year-over-year change (18)% 26

27 GAAP to Non-GAAP Reconciliation (In thousands, except percentages and per share amounts) Adjusted EBITDA: Three Months Ended March 31, 2018 April 1, 2017 Net loss $ (80,877) $ (60,079) Stock-based compensation expense* 23,641 21,765 Litigation (expense) credit 765 (114) Impact of restructuring 6,375 Depreciation and intangible assets amortization 12,204 10,517 Interest income, net (1,350) (1,096) Income tax benefit (609) (29,671) Adjusted EBITDA $ (46,226) $ (52,303) * A portion of stock-based compensation expense for the year ended December 31, 2017 was allocated to and included in "Impact of restructuring," thus explaining the difference between the total by function presented in this table compared to the amounts presented in the above tables. 27

28 THANK YOU