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Fitbit 3Q17 report ?3
I've finished reviewing Fitbit's conference call and I'm really
struck by how sneakily good it is. In addition to the $8M
distributor bankruptcy hit, which is completely a one-off, the
company had a $6M loss due to euro strength. The bankruptcy alone
decreased earnings by 3 cents per share; without it Fitbit would
have been profitable for the quarter. Figures like these are
masking operational strength in a quarter that clearly included
almost no Ionic sales, mainly due to timing and restricted initial
supply. Even so, Fitbit recorded positive EBiTDA, $5M in cash
flow for the quarter.
Looking forward, Ionic and Blaze are the #1 and #2 most
purchased-wearables in the U.S. on Amazon. So far, 14% of Ionic
buyers also bought the Flyer headphones. That's a number that I
will expect to improve in the next report. Direct-to-consumer
sales also grew 21% year-over-year to $33M and, assuming that
trend continues, it should help margins considerably. Data like
this, and the fact that the 42% repeat customer figure is the best
to date leads me to think that I've underestimated the stickiness
of FitBit's user base. The flip side is that the transition to
Ionic may be slower than I was thinking, as reflected by
management's comments about ASPs only increasing marginally for
the fourth quarter.
That tells me that the near-term downside is limited, despite my long-term concerns. While this report indicates that the immediate upside may not turn out as big I was hoping, it's still much better than prior market expectations. I'll still want to see Fitbit increasing its user base, and that's where the fourth quarter will still be a pivotal stepping stone towards healthcare partnerships. Management also says the
FDA is pretty committed to providing a really accelerated pathway for approvalI'd like to know what that means in quantified terms, but I think Fitbit's superior sensor array can prove to be a differentiating factor. Though there have been plenty of anecdotal cases from various vendors, Fitbit is already starting to go beyond that by citing 98% detection of atrial fibrillation with less than a 1% false positive rate. FIT remains a GRoDT stock, but when I look at the details here, I think shares should take a big upward jump, simply based on the risk/reward prospects. I don't know when or if the market will see everything that I did in this report, but it makes me much more willing to take a wait-and-see approach, regardless of what happens tomorrow morning.
On 11/01/2017 05:57 PM, Esekla wrote:
Fitbit has reported its third quarter results:
- a loss of 1 cent per share beats by 3 cents
- on revenue of $393M, which beats by $1M
- guidance for sales of $570-600M beats by $7M at the mid-point
- FY adjusted loss is expect to come in between 27 and 23 cents per share.
The results include an $8M hit due to the company's largest distributor in the U.S. going bankrupt. 3.6M devices were sold for the quarter, and 42% of the activations came from customers who made repeat purchases. Of the repeat purchasers, 39% came from customers who had been inactive for 90 days or greater.
All of this is fairly in-line with my own projections. Gross margin came in at 45.2%, well ahead of my estimate. Shares were initially up, but are now back to about even. The report indicates to me that Fitbit is getting good traction with its new devices, but intends to spend heavily to promote them. As such, I don't think the after hours action is very indicative. This report is likely to generate upgrades from analysts, and I think we could easily see FIT shares appreciate substantially as they point out the multiple bright spots.