To Our Shareholders,
2015 was filled with challenges, lessons and valuable opportunities that will contribute to our business in the years ahead.
2016 is a building year which we began with a strategic focus on the needs of consumers and a dedication to improving the
simplicity of our products and services. In 2016, we are focused on three major strategic initiatives which we believe will
beneficially impact our business later this year.
Listen Carefully to The Consumer—GoPro was built on a simple ‘good-better-best’ strategy that ensured
the right product at the right price for each level of consumer – introductory, aspiring intermediate and advanced.
In 2015, we learned that too many products at varying prices is distracting and confusing to the consumer.
We learned that we need to focus our development on the products and solutions that consumers really need
…and nothing more. We exited 2015 committed to making this happen.
Accelerate Making it ‘Easier and Faster’ to GoPro—Our introduction of HERO4 Silver and Session
made it dramatically easier to use a GoPro. So much so that my one-year old son, Bodhi, could pick up a Session,
press the shutter button and the GoPro would turn on and begin recording. On the software front, we recognized
a need to accelerate the ease of offloading, accessing and editing for our users. GoPro has a vision for creating a
simple, seamless user experience that spans capturing, creating, and enjoying engaging content. We exited 2015
committed to making this happen.
Think Bigger and Broader—2015 also inspired us to think bigger about GoPro and its potential as a
‘content enabling platform.’ As we looked forward to the software experience we are building for our customers,
and for ourselves, it became clear to us that by limiting the experience to only content captured with a GoPro
we were limiting the reach and relevance of ‘GoPro as a platform.’ We began to think of ways to open GoPro up
to include anyone with a smartphone, DSLR or any camera for that matter. In doing so, we can provide GoPro’s
content management and editing benefits to many -- dramatically scaling the reach and relevance of our platform
to a much, much broader global audience. We exited 2015 committed to making this happen.
2016 is the year we expect the vision to come together. These lessons and perspectives combine with our refined product
roadmap to position 2016 as a critical building year. This is the year for realizing our vision for a unified consumer experience:
a simplified, seamless experience for capturing, creating and enjoying engaging personal content.
• Every GoPro will be easy enough for a child to use.
• There will be GoPros that connect to the cloud and synchronize content automatically.
• GoPro’s mobile app will make it easy to access content on-the-go and also provide a high-quality yet simple editing
experience for delivering engaging videos in less than a minute.
This, combined with this year’s introduction of industry-forging new products like our 16-camera surround rig, Odyssey,
and our 6-camera spherical rig, Omni, illustrates that GoPro is delivering the type of system and software innovation and
invention that made it a leader in traditional digital imaging. And our soon-to-be-released drone, Karma, enables a robotic
GoPro experience that will leave little doubt that our passion for ‘what’s next’ is alive and well and that robotics will continue
to expand the potential of our business for years to come.
We exited 2015 committed to making all of this happen.
And we expect to exit 2016 looking very much like that company we envisioned during our IPO: a powerful and globally
recognized brand, led by an inspired team which is focused on enabling a new era of personal content creation for connected
consumers – be they GoPro customers, smartphone users or users of other devices. In this way, we believe GoPro can
realize our vision at the largest scale.
Personally – and as a major shareholder in this company – I have never been more excited or confident in GoPro’s future.
Thank you for your support and your belief in our future.
Nicholas Woodman
Founder, Chairman and Chief Executive Officer
Selected Financial Data
($ in millions)
Revenue
Gross Profit
Gross Margin %
Net Income
Adjusted EBITDA
Cash and Investments
Total Assets
Working Capital
2011
2012
2013
2014
2015
$ 234
$ 526
$ 986
$ 1,394
$ 1,620
123
52.3
25
53
29
104
227
43.2
32
75
36
247
362
36.7
61
134
101
440
627
45.0
128
293
422
918
673
41.6
36
179
474
1,103
$ 44
$ 70
$ 57
$ 564
$ 538
• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
Revenue
(in millions)
Net Income
(in millions)
$1,620
$1,394
$986
$128
$61
$526
$234
$32
$25
$36
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
Capture Devices Shipped
(in millions)
Headcount
R&D Headcount
6.6
5.2
3.8
2.3
1.1
2011
2012
2013
2014
2015
1,539
676
970
415
646
250
2013
2014
2015
147
36
2011
347
123
2012
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission file number: 001-36514
GOPRO, INC.
(Exact name of registrant as specified in its charter)
Delaware
77-0629474
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
3000 Clearview Way
San Mateo, California
(Address of principal executive offices)
94402
(Zip Code)
(650) 332-7600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Class A Common Stock, par value $0.0001
(Title of each class)
The NASDAQ Stock Market LLC
(Name of each exchange on which registered)
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of Act. Yes No
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the Registrant was required to submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of
the Exchange Act.
Large accelerated filer
Accelerated filer
Non accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2015, the last business day of the
registrant's most recently completed second fiscal quarter, was approximately $5,005,600,000 based upon the closing price reported for
such date on the NASDAQ Global Select Market.
On January 31, 2016, the registrant had 100,761,057 shares of Class A common stock and 36,104,708 shares of Class B common
stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for its 2016 Annual Meeting of Stockholders (the “Proxy Statement”), to be filed
within 120 days of the registrant’s fiscal year ended December 31, 2015, are incorporated by reference in Part II and Part III of this
Annual Report on Form 10-K. Except with respect to information specifically incorporated by reference in this Annual Report on Form
10-K, the Proxy Statement is not deemed to be filed as part of this Annual Report on Form 10-K.
GoPro, Inc.
Index
PART I
PART II
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Mine Safety Disclosures
Item 5.
Item 6.
Item 7.
Item 7A.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Consolidated Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of
Operations
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Item 9A.
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Controls and Procedures
Item 9B.
Other Information
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
PART III
Item 12.
Item 13.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accounting Fees and Services
Item 15.
Exhibits, Financial Statement Schedules
PART IV
Signatures
Page
1
8
27
27
27
27
28
30
31
47
48
77
77
78
78
78
78
78
78
79
80
PART I.
Special note regarding forward-looking statements
The discussions set forth in this Annual Report on Form 10-K contain statements concerning potential future
events. Such forward-looking statements are based upon assumptions by the Company’s management, as of the
date of this Annual Report on Form 10-K, including assumptions about risks and uncertainties faced by the
Company. In addition, management may make forward-looking statements orally or in other writings, including,
but not limited to, in press releases, in the annual report to stockholders and in the Company’s other filings with
the Securities and Exchange Commission. Readers can identify these forward-looking statements by their use of
such words as “expect," “anticipate," “believe," "may," "will," "estimate," "continue," "intend," "target," "goal,"
"plan," or variations of such words and similar expressions. Forward-looking statements include plans to include
new product offerings in "Item 1. Business" and other sections of this Annual Report on Form 10-K, projections of
results of operations, and any discussion of the trends and other factors that drive our business and future results
in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” including
the discussion appearing there under "Looking Ahead to 2016," and other sections of this Annual Report on Form
10-K. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only
as of their date. If any of management's assumptions prove incorrect or should unanticipated circumstances arise,
the Company's actual results could materially differ from those anticipated by such forward-looking statements.
The differences could be caused by a number of factors or combination of factors including, but not limited to,
those factors identified under Item 1A. Risk Factors.” Readers are strongly encouraged to consider those factors
when evaluating any forward-looking statements concerning the Company. The Company does not undertake to
update any forward-looking statements in this Annual Report on Form 10-K to reflect future events or
developments.
Item 1. Business
Company overview
GoPro, Inc. (“GoPro” or “we” or “the Company”) is transforming the way people visually capture and share their
lives. We do this by enabling people to capture compelling, immersive photo and video content of themselves in
their day to day life as well as participating in their favorite activities. Our consumers include some of the world’s
most active and passionate people. The volume and quality of their shared GoPro content, coupled with their
enthusiasm for our brand, are driving awareness and demand for our products. To date, our cameras (capture
devices) and mountable and wearable accessories have generated substantially all of our revenue. We have
been expanding the distribution of our GoPro originally produced content that we collectively refer to as GoPro
Entertainment, to engage and build relationships with consumers. We believe this strategy will result in new
GoPro capture device purchases and provide us long term opportunities to monetize our GoPro Entertainment
efforts.
What began as an idea to help athletes self-document themselves engaged in their sport, GoPro has become a
standard for how people capture themselves engaged in their interests, whatever they may be. From extreme to
mainstream, professional to consumer, GoPro enables the world to capture and share its passions in the form of
immersive and engaging content.
Our business focus
Enabling immersive and engaging content is at the core of our business. We develop product solutions to enable
consumers to capture, manage, share and enjoy some of the most important moments in their lives.
Capture
Our capture devices enable professional quality capture and exceptional versatility at affordable prices. Our
products’ small, lightweight, waterproof, and durable designs make them easy to use even in highly challenging
situations. In addition, our seamless integration with mobile devices via the GoPro App, enables engaging self-
capture during virtually any activity. Through 2015, we have shipped approximately 20 million cumulative capture
devices and there have been approximately 24 million cumulative downloads of the GoPro App.
1
Manage
We seek to eliminate the pain point of managing content by making it easy for our consumers to transfer footage
from their cameras to a system that efficiently organizes their content and facilitates convenient editing and
sharing. GoPro Studio and the GoPro App, available at no charge from our website, reflect the early stages of our
content management platform strategy.
Share
By facilitating the capture, management and editing of engaging photos and videos, we are ultimately helping our
consumers share more compelling personal content. GoPro Studio and the GoPro App facilitate the posting of
photos and videos directly to leading social networks and content platforms, including Facebook, Instagram,
Pinterest, Twitter, Vimeo and YouTube. Every day, GoPro users share tens of thousands of hours of video and
innumerable photos on social media, driving awareness and enthusiasm for this content, as well as for GoPro’s
own brand and products.
Enjoy
GoPro enables the production of entertaining and inspiring content, both in the form of our consumers’ user-
generated content (UGC), as well as GoPro Entertainment. This content often features professional athletes,
celebrities and entertainers, as well as everyday people engaged in their favorite activities.
We believe that increasing our consumers’ enjoyment of their content enhances the value proposition of capturing
and sharing their lives with our products and has led to our aspiration of GoPro becoming one of the world's
leading activity capture companies. Also, having recognized the role GoPro content plays in attracting and
exciting consumers, we are expanding the distribution of GoPro Entertainment to engage and build relationships
with consumers who do not currently own a GoPro capture device.
We distribute GoPro Entertainment through what we refer to as the GoPro Network, a collection of GoPro
Channels hosted on a variety of online destinations and partner platforms, including Facebook, Instagram,
Pinterest, Twitter and YouTube and distribution partners, including Amazon Fire TV, Comcast Watchable, LG
Smart TVs, Microsoft Xbox entertainment systems, PlayStation® Network, Roku, SkyQ, Vessel Entertainment and
Virgin America. The revenue earned from GoPro Channel advertising and sponsorship opportunities was not
material to us in 2015, 2014 and 2013. Long-term, we seek to monetize GoPro Entertainment.
The virtuous cycle
We believe our business focus results in a virtuous cycle and a self-reinforcing consumer acquisition model that
fuels our growth. Our products in the hands of our consumers enable compelling, authentic content that
organically increases awareness for GoPro and drives demand for our products. As a result, we have historically
achieved significant growth. In 2015, 2014 and 2013, we generated revenue of $1,620.0 million, $1,394.2 million
and $985.7 million, and reported net income of $36.1 million, $128.1 million and $60.6 million, respectively.
Our strategy
We intend to continue building our existing capture device business while also launching complementary new
device categories including unmanned aircraft systems (drones) and devices to enable virtual reality content
capturing. In addition, we expect to release new content management, editing and sharing solutions that will
provide increased value to our consumers, introduce new revenue streams and further differentiate us from
competitors. Key components of our strategy include the following:
Continue to introduce innovative capture devices, mounts and accessories
We relentlessly pursue our goal of developing the world’s most versatile capture devices and enabling self-
capture during any activity. To stay at the forefront of our industry, we are focused on continued product innovation
and leadership. For example, we develop our own digital signal processing technologies and other areas of
innovation include image science, mechanical design, device firmware, computer vision and audio, battery and
accessory design. In 2015, we introduced the HERO4 Session to our line of HERO4 capture devices and we plan
to launch our next-generation HERO5 capture devices in 2016. We will seek to leverage our brand strength and
product expertise to opportunistically enter new device categories, including the planned launch in 2016 of
GoPro's drone, Karma, as well as devices to enable virtual reality content capturing.
2
Develop seamless content management, editing and sharing solutions
We have increased our focus on the development of solutions that simplify the organizing, editing and sharing of
engaging content. To that end, we are developing an integrated content management platform. In 2016, we
expect to release the initial piece of this content management platform with the introduction of GoPro for Desktop,
which will enable consumers to more easily offload, access and edit content.
Scale GoPro as an entertainment brand
We believe GoPro Entertainment is a significant media asset which we also leverage to promote the sale of our
capture devices. We continue to invest in GoPro Entertainment and are seeking new revenue opportunities by
increasing production of GoPro originally produced content while simultaneously increasing the aggregation and
redistribution of our consumers’ “best of” UGC. Additionally, we continue to invest in developing, distributing and
promoting GoPro Entertainment programming on our own and additional partner platforms.
In 2015, we launched GoPro Awards and anticipate granting up to $5 million annually to creators of unique and
compelling GoPro content. Through February 2016, GoPro users have submitted over 90,000 content
submissions and we have awarded over $250,000 for video and photo content.
Expand our total addressable market
We believe the total market for enabling people to self-capture compelling, immersive photo and video content of
their everyday activities is large. To date, our product development and sales and marketing strategies have
enabled us to be a leader in vertical markets such as travel, snowsports, surfing, motorsports, music, hunting and
fishing, and we continue to target other vertical markets. We believe that our future growth will come from
continuing to reach and expand vertical markets and from broadening our user base to include consumers
seeking to capture their day-to-day lives. To grow our market share and revenue, we are investing to provide both
innovative and easy-to-use capture devices as well as intuitive and simple software tools in the future that enable
seamless sharing of personal experiences on desktop and mobile platforms for a variety of social media networks
and content sharing platforms.
Expand in international markets
We believe that international markets represent a significant growth opportunity for GoPro. Sales to customers
outside the U.S. were more than 50% of our 2015 revenue and have increased from 43% in 2014. We plan to
capitalize on the strength of our brand and continue to increase our presence worldwide, both with our capture
devices and the new products we expect to introduce in the upcoming years.
Expand in-store brand and sales footprint
We continue to invest heavily to produce GoPro-branded, video-enabled point of purchase (POP) merchandising
displays that we make available to nearly all of the retail outlets through which our products are sold. These
displays showcase engaging GoPro content and attractively present our cameras and accessories. Having
recognized our success in these stores, coupled with our expanding product portfolio, we have been successful
working with our retailers to further expand the footprint of our POP displays.
Extend strategic marketing relationships
We form relationships with marketing partners that use our products and services to promote their own brands
and properties. GoPro benefits not only from the expanded brand awareness that comes with such marketing
partnerships, but also being recognized as our partners’ technology enabler. We will continue developing and
leveraging strategic marketing relationships to increase GoPro brand awareness.
Expand brand awareness through increased advertising
We expect to increase our product marketing efforts in 2016. Notwithstanding the visibility we have garnered in
the consumer markets where we have historically focused through our product adoption and UGC and GoPro
Entertainment, we believe consumers in many emerging markets are not familiar with our brand and products. We
believe there is a significant opportunity for GoPro to expand awareness through increased advertising on
television, in print, online, and on billboards and other out of home advertising while continuing to scale our
promotional marketing efforts and trade show presence.
3
Products
Our core products are our HERO line of capture devices, the first HD version of which we introduced in 2009.
Since then, we have focused on continued innovation and development of our products and subsequently
launched the following cameras: the HERO2 in 2011, the HERO3 in 2012, the HERO3+ in 2013, the HERO4 and
HERO in 2014, and HERO+LCD, HERO4 Session and HERO+ in 2015. All products introduced prior to 2014
have been discontinued and in January 2016 we announced our decision to end-of-life the entry-level HERO,
HERO+ and HERO+LCD products. As a result, we have simplified our product line to a good-better-best offering
of our HERO4 Session, Silver and Black performance cameras. Our products are waterproof either out of the box
or with the included protective waterproof housing, and include select mounting accessories and have built-in Wi-
Fi and Bluetooth providing connectivity with a mobile device to enable remote control, content viewing and
sharing functionality. We offer the HERO4 Session, Silver and Black editions with increasingly better image
quality, enhanced capture features and accessory bundles from model to model at different price points.
We also offer a wide range of mounts and accessories, either bundled with a capture device or sold separately,
that enhance the functionality and versatility of our devices and enable our consumers to self-capture their
experiences during a variety of activities and from different viewpoints. Our mounts are designed to enable
consumers to capture content while engaged in a wide range of activities. These include equipment-based
mounts, such as the helmet, handlebar, roll bar, as well as grip and tripod mounts, such as the 3-way, a 3-in-1
mount that can be used as a camera grip, extension arm or tripod. We also enable consumers to wear mounts on
their bodies, such as our wrist housing, chest harness and head strap. Our accessories include the LCD Touch
BacPac, Battery BacPac, Smart Remote and Floaty Backdoor, which expand the features, versatility and
convenience of our cameras. Additionally, we offer spare batteries, charging accessories, cables to connect our
GoPro cameras to television monitors, video transmitters and external microphones, flotation devices, dive filters,
and anti-fogging solutions.
In addition, we currently make available two applications to all consumers at no charge that help our users
manage, edit and share their content. GoPro Studio is a video editing tool that allows our users to create
professional quality videos from their content. GoPro App allows users to control their GoPro cameras remotely
using a smartphone or tablet. In February 2016, we entered into definitive agreements to acquire two mobile
video editing application companies to further enhance our software offerings. In 2016, we plan to launch GoPro
for Desktop, the initial piece of our content management platform that will enable consumers to more easily
offload, access and edit content.
Seasonality
Our sales are subject to seasonal fluctuation. Historically, we have experienced the highest levels of revenue in
the fourth quarter of the year, coinciding with the holiday shopping season in the United States and Europe. Our
fourth quarter revenue comprised 27%, 45% and 37% of our 2015, 2014 and 2013 revenue, respectively. Sales of
consumer products are also heavily influenced by the timing of the release of new products, and in 2015, we
launched most of our products earlier in the year than in prior years. Fourth quarter 2015 revenue reflected global
retail sell-through that was weaker than the prior year. Additionally, fourth quarter 2014 revenue benefited from the
launch of our HERO4 Black and Silver capture devices just prior to the holiday season and there was no
significant corresponding product launch in 2015. Neither historical seasonal patterns nor historical patterns of
product introductions should be considered reliable indicators of our future pattern of product introductions, future
revenue or financial performance.
Segment information and geographic data
We operate as one reportable segment. Financial information about geographic areas is presented in Note 11 to
the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K.
Backlog
We do not believe that our backlog is meaningful as of any particular date or indicative of future sales, as our
customers can change or cancel orders with limited or no penalty and limited advance notice prior to shipment.
4
Research and development
We are passionate about developing new and innovative products that inspire our consumers and enhance our
brand. We are constantly innovating to deliver better performance, expanded functionality and increased
convenience to enhance the appeal of our products. In particular, we have increased our investment in software
application development to facilitate convenient content management, editing and sharing. We strive to remain a
market leader by consistently introducing innovative products that offer optimal performance and better software
functionality at affordable price points.
We have a user experience-driven approach to product development and our CEO leads product design. By
engaging with customers, consumers and opinion leaders in our core markets around the world, our development
team strives to introduce meaningful and empowering new features that expand the versatility and performance of
our products. In addition to our core product development team, we benefit from input received from our in-house
media production team that regularly travels the world capturing GoPro originally produced content using our
capture devices. We believe leveraging this content team to help refine existing products and influence future
products gives us a competitive advantage.
Our engineering team, which supports the development of capture devices, drones, firmware and software, has
grown from 250 in 2013 to 676 engineers on December 31, 2015. Our hardware engineering team is responsible
for developing technologies to support the concepts proposed by our product team. These core technologies
include new image silicon processors, image sensors and lenses, as well as the core algorithms that enable the
systems to operate and provide optimal performance and features. The hardware engineering team also
integrates these innovations and firmware into our product designs and develops our capture devices, drones,
mounts and accessories. The software engineering team is developing applications that enhance the functionality
of our products and facilitate the management, editing, sharing and viewing of media. These applications are
being developed for mobile, desktop and web-based platforms and powered by server-side services. The core
technologies include rendering engines to enable video editing, video encoding and decoding for smooth
playback and algorithms for moment identification.
Our research and development expense was $241.7 million, $151.9 million and $73.7 million for 2015, 2014 and
2013, respectively.
Manufacturing, logistics and fulfillment
While our products are designed in California, we outsource a significant majority of our manufacturing to contract
manufacturers located in China. We believe that using outsourced manufacturing enables greater scale and
flexibility than establishing our own manufacturing facilities. We periodically evaluate the need and advisability of
adding manufacturers to support our operations.
We have established a strategic commodity team that manages the pricing and supply of the key components of
our capture devices, including digital signal processors, sensors and lenses. Several key strategic parts are
purchased from the supplier by us and then consigned to our manufacturers, while the vast majority of parts are
procured directly by our contract manufacturers. We seek to use our commodity team to achieve competitive
pricing on the largest value-add components, and leverage our contract manufacturers’ volume purchases for
best pricing on common parts.
We have third-party fulfillment centers in California, China, Hong Kong, Brazil, and the Netherlands that deliver
our products from multiple locations worldwide. These facilities are either warehouse/fulfillment centers or full
service postponement centers (that perform light assembly in addition to warehouse/fulfillment). In addition, we
have third-party centers in California, Czech Republic, and China that perform in-region final packaging services.
Cameras are typically air freighted while accessories and packaging are generally regionally procured or shipped
via ocean freighter from our manufacturers in China to these fulfillment centers, where the products are packaged
for retail sale. Our fulfillment strategy allows us to reduce shipping costs, reduce custom levies, customize
products for local languages and improve inventory flexibility.
Sales channels and customers
We offer our products in over 40,000 retail outlets and in over 100 countries through our direct sales channel and
indirectly through our distribution channel. In 2015 and 2014, our direct sales accounted for 52% and 59% of our
revenue, respectively, and our distributors accounted for 48% and 41% of our revenue, respectively.
5
Direct sales
We sell directly to large and small retailers in the United States and EMEA, and directly to consumers around the
world through our e-commerce channels, as follows:
• Independent specialty retailers.
location-based
We use a network of
independent manufacturer
representatives to sell our products to independent specialty retailers focused on sports and consumer activity
capture markets. Our representatives provide highly personalized service to these retailers, including assisting
with product mix planning, channel marketing and in-store merchandising, taking orders and providing clinics to
educate retail sales personnel about GoPro products. We also have an internal, regionally focused sales team
that provides a secondary level of service to both the manufacturer representatives and these retailers.
Independent specialty retailers generally carry our higher end products, targeting their core customers who we
believe tend to be early adopters of new technologies. Independent specialty retailers outside of the
United States represent a similarly important sales channel for us, and we reach these customers indirectly
through our network of international distributors.
• Big box retailers. We sell to large retailers with a national presence, including Amazon.com, Inc., Best Buy,
Inc., Target Corporation and Wal-Mart, Inc. We support these retailers with a dedicated and experienced sales
management team that we believe enables us to reduce channel conflict. These large retailers generally carry
a varied subset of our products targeting their particular end-user customers. This helps us maintain in-store
product differentiation between sales channels and protects our brand image in our specialty retail markets.
Best Buy accounted for 14%, 20% and 17%, of our total revenue in 2015, 2014 and 2013, respectively, and
Amazon accounted for 12% of our total revenue in 2015.
• Mid-market retailers. We also sell to retailers with a large regional or national presence, often focused on
specific verticals such as consumer electronics, sporting goods, military, hunting and fishing and motor sports.
In the U.S., we sell directly to these mid-market retailers through our experienced sales teams assigned to
particular accounts and regions. Mid-market retailers generally carry a smaller subset of our products targeted
toward their end-user customers.
• E-commerce channel. We sell our full line of products directly to consumers around the world through our
online store at gopro.com, which we market through online and offline advertising. Sales through gopro.com
provide us insights into our consumer shopping behaviors, and serves as a platform for us to educate and
inform our consumers on our brand, products, and services.
We believe that our diverse direct sales channels are a key differentiator for GoPro and we differentiate our
products among these channels.
Distributors
We sell to over 50 distributors who resell our products to retailers in international markets and to certain specific
verticals in the United States. We have dedicated sales personnel focused on providing a high level of service to
these distributors, including assisting with product mix planning, channel marketing and in-store merchandising,
development of marketing materials, order assistance and educating the distributors’ sales personnel about
GoPro products. During 2015, we converted portions of our distributor sales into direct sales.
In-store merchandising
Our in-store merchandising strategy focuses on our POP displays that continuously show GoPro content on a
large video monitor and present our capture devices and accessories in an attractive manner. We provide our
POP display in sizes ranging from two to four feet wide by five feet tall to retailers at no cost. We also have
installed POP displays that are 12 feet wide by seven feet tall. Our capture devices are attractively arranged on
the displays and the breadth of our offerings, combined with the associated content, communicate the wide range
of uses for our products. As of December 31, 2015, we had over 25,000 POP displays in retail outlets.
Marketing and advertising
Our marketing and advertising programs are focused on engaging consumers by exposing them to compelling
GoPro content. We believe this approach enhances our brand while demonstrating the performance, durability
and versatility of our products. Our marketing and advertising efforts span a wide range of consumer interests and
leverage both traditional consumer marketing and lifestyle marketing strategies.
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Consumer marketing. Social media plays an important role in our consumer marketing strategy. Our consumers
capture and share personal GoPro content on social media and content sharing platforms like Facebook,
Instagram, Pinterest, Twitter, Vimeo and YouTube.
We also integrate UGC and GoPro originally produced content into advertising campaigns across various
platforms including television commercials, print, online, billboards and other out of home advertising, and at
consumer and trade facing events. This content also supports our in-store channel marketing efforts, appearing
on our POP displays and other in-store marketing materials.
Lifestyle marketing. Our lifestyle marketing programs focus on expanding GoPro brand awareness by engaging
consumers through relationships with key influencers, event promotions and other outreach efforts. We cultivate
strong relationships with influential athletes, celebrities, entertainers and brands, all of whom use our products to
create and share engaging content with their own fans and consumers. We also work directly with these partners
to create compelling content that we leverage to our mutual benefit across the GoPro Network.
Competition
The market for cameras and camcorders is highly competitive and characterized by frequent product introductions
and rapid technological advances. We believe the principal competitive factors impacting the market for our
products include quality, reliability and user experience, price and performance, design innovation, brand
recognition, marketing and distribution capability, service and support, and corporate reputation.
We compete against established, well-known camera manufacturers such as Canon Inc., Fujifilm Corporation,
Nikon Corporation, Olympus Corporation, Rollei GmbH & Co. KG and Vivitar Corporation, as well as large,
diversified electronics companies such as, Panasonic Corporation, Polaroid Corporation, Samsung Electronics
Co., Sony Corporation and VTech Technologies, and specialty companies such as Garmin Ltd. We believe we
compete favorably with these companies’ products. Our durable and versatile product design facilitates increased
functionality and wearability and we offer a variety of mounts and other accessories that enable a wide range of
consumer use cases that are difficult for other competing products to address. Further, we offer many
professional-grade features at attractive consumer price points, including our SuperView mode, which allows a
user to capture an immersive wide-angle perspective, and super high resolution video capability. We also provide
users with a suite of free desktop and mobile applications that enhance the overall GoPro experience. Moreover,
we believe we have achieved significant brand recognition in our target vertical markets. We believe our years of
experience working with active and influential consumers contributes to our ability to develop attractive products
and establishes the authenticity of our brand, thereby differentiating us from current and potential competitors.
Smartphones and tablets with photo and video functionality have significantly displaced traditional camera sales.
We believe that our capture devices enable differentiated use cases from mobile devices. In particular, we allow
users to self-capture their experiences in even the most challenging of environments, such as on and in water and
in other environments where mobile devices would be damaged, and to do so with their hands free to focus on
the activity and not the capture device. We believe that the small, rugged form factor coupled with the professional
quality video enabled by our capture devices makes them ideal for uniquely capturing important moments of our
users' lives. However, it is possible that in the future the manufacturers of these devices may design them for use
in a range of scenarios and conditions. In addition, new companies may emerge and offer competitive products
directly in our category.
We expect to enter the consumer drone market in 2016 and face significant competition from other companies
promoting their own drone and related products. These include established and start up drone manufacturers,
such as DJI Technology Co., Parrot SA, Yuneec and 3DR, who currently have or are attempting to gain a
substantial share of the emerging international drone market.
Intellectual property
Intellectual property is an important aspect of our business, and our practice is to seek protection for our
intellectual property as appropriate. Our trademarks, including “GoPro,” “HERO,” “Be a HERO,” “Session,”
“Karma,” among others, are a critical component of the value of our business. In addition, we hold many issued
and pending utility and design patents for various aspects of our capture devices and the applications that helps
our consumers manage, share and enjoy their content. Our patents cover areas that include physical structures,
image processing, operational firmware and software, post-processing software, distribution software, mount and
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accessory structures, as well as the ornamental aspects of our capture devices. As of February 23, 2016, we had
114 issued patents and 247 patent applications pending in the United States, and 87 corresponding issued
patents and 105 patent applications pending in foreign countries. We cannot be certain that our patent
applications will be issued or that any issued patents will provide us with any competitive advantage or will not be
challenged by third parties. Our issued U.S. patents will expire between 2024 and 2035 and our issued foreign
patents will expire between 2022 and 2040. We continually review our development efforts to assess our
innovations, including their patentability. We take active measures to protect our intellectual property against
unauthorized third party use, including misuse of our patents, copyrights, and trademarks, and other proprietary
rights.
In addition to the foregoing protections, we generally control access to and use of our proprietary and other
confidential information through the use of internal and external controls, including contractual protections with
employees, contract manufacturers, distributors and others. Despite these protections, we may be unable to
prevent third parties from using our intellectual property without our authorization, breaching any nondisclosure
agreements with us, or independently developing products that are similar to ours, particularly in those countries
where the laws do not protect our proprietary and intellectual property rights as fully as in the United States.
Employees
As of December 31, 2015 we had 1,539 employees. None of our employees are currently covered by a collective
bargaining agreement, and we have experienced no work stoppages. We consider our relationship with our
employees to be good.
Corporate Information
We were incorporated as Woodman Labs, Inc. in California and began doing business as GoPro in February
2004. We reincorporated in Delaware in December 2011 and in February 2014 we changed our name to GoPro,
Inc. Our principal executive offices are located at 3000 Clearview Way, San Mateo, California 94402, and our
telephone number is (650) 332-7600. We completed our initial public offering in July 2014 and our Class A
common stock is listed on the NASDAQ Global Select Market under the symbol “GPRO”.
We have registered and applied to register with the U.S. Patent and Trademark Office and the trademark offices
of other countries a number of trademarks including “GOPRO,” “HERO,” and the GoPro logo and GoPro Be a
Hero logo, as well as "KARMA." This Annual Report on Form 10-K also includes references to trademarks and
service marks of other entities, and those trademarks and service marks are the property of their respective
owners.
Available Information
Our website address is www.gopro.com. Through a link on the Investor Relations section of our website, we make
available the following filings as soon as reasonably practicable after they are electronically filed with or furnished
to the Securities and Exchange Commission (SEC): our Annual Report on Form 10-K, Quarterly Reports on Form
10-Q, Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act. All such filings are available free of charge. The information posted on
our website is not incorporated into this report. Further, a copy of this Annual Report on Form 10-K is located at
the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of
the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a
website that contains reports, proxy and information statements and other information regarding our filings at
www.sec.gov.
Item 1A. Risk Factors
You should carefully consider the risks described below and all other information contained in this Annual Report
on Form 10-K before making an investment decision. Our business, financial condition and results of operations
could be materially and adversely affected if any of the following risks, or other risks and uncertainties that are not
yet identified or that we currently think are immaterial, actually occur. In that event, the trading price of our shares
may decline, and you may lose part or all of your investment.
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Risks related to our business and industry
We depend on sales of our capture devices for substantially all of our revenue, and any decrease in the
sales of these products would harm our business.
We expect to continue to derive the substantial majority of our revenue from sales of cameras, mounts and
accessories for the foreseeable future. A decline in the price or unit demand for these products, whether due to
macroeconomic conditions, competition or otherwise, or our inability to increase sales of these products, would
harm our business and operating results more seriously than it would if we derived significant revenue from a
variety of product lines and services.
For example, although our annual revenue in 2015 of $1,620.0 million was up 16% from 2014, our fourth quarter
revenue of $436.6 million was down 31% year-over-year. Fourth quarter 2015 revenue reflected global sell-
through at retailers that was seasonally weaker than the prior year and the lack of a major new product launch in
the fourth quarter of 2015. Demand for our new HERO4 Session was less than expected, and our revenues and
operating results were negatively impacted by price reductions and corresponding price protection related
charges of approximately $40 million. We believed these price reductions were needed to stimulate sell-through
for this product. Additionally, we announced an end-of-life for our entry-level HERO line of capture devices in
order to simplify our product offerings. As a result, we recorded product realignment charges of approximately $57
million to cost of revenue in the fourth quarter of 2015. In future periods, we could again experience a decline in
revenue, or revenue could grow more slowly than we expect, which could have a material negative effect on our
future gross margins and operating results. Specifically, we anticipate our revenue to decline by over 50% in the
first quarter of 2016 on a year-over-year basis. In addition, we anticipate our full year 2016 revenue to decline as
compared to 2015. If sales of our capture devices continue to decline in future periods, our financial condition,
operating results and cash flows will be materially affected.
Changes in product mix may harm our financial results. If there is a shift in consumer demand from our higher-
priced to lower-priced capture devices in any or all of our market segments without a significant increase in units
sold, our revenues and gross profit would decrease. For example, in 2015, the average selling price of units
shipped decreased due to a higher mix of our lower-priced cameras, including the price reduced HERO4 Session
and entry-level HERO cameras, which adversely impacted our revenue and gross profit.
While we are pursuing additional products and services to add to our offerings, as described in the risk factors
that follow, we may not be successful in identifying or executing on such opportunities. For example, the
consumer drone market remains relatively new and the launch of our drone product may not result in long term
success or significant revenue for us. In addition, we do not have significant experience deriving revenue from the
distribution of GoPro content, and we cannot be assured that our investments in the development of software and
entertainment related initiatives will result in increased revenue. Also, pursuing these new markets requires
substantial operating expense investment and even if we do generate significant incremental revenue, we may
not be able to do so profitably.
As a result, our future growth and financial performance may depend heavily on our ability to develop and sell
enhanced versions of our capture devices. If we fail to deliver product enhancements, new releases or new
products that appeal to consumers, our future financial condition, operating results and cash flows will be
materially affected.
Our growth depends in part on further penetrating our total addressable market, and we may not be
successful in doing so.
Our growth historically has largely been fueled by the adoption of our products by people looking to self-capture
images of themselves participating in exciting physical activities. We believe that our future growth depends not
only on continuing to reach and expand this core demographic, but also broadening our user base to include a
more diverse group of consumers seeking to capture their daily lives. We believe that in order to expand our
market, we must provide both innovative and easy-to-use capture devices as well as intuitive and simple software
tools in the future that enable the seamless sharing of content, and we may not be able to do this on a timely
basis and we may not be successful in providing tools that are easy to use. Our growth also depends on
expanding the market with new capture perspectives, including spherical and aerial. While we are investing
resources, including in sales and marketing, to reach these expanded and new consumer markets, we cannot be
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assured that we will be successful in doing so. If we are not successful in penetrating additional markets, we
might not be able to grow our revenue and we may not recognize benefits from our investment in new areas.
To remain competitive and stimulate consumer demand, we must manage frequent product introductions
and transitions.
We believe that we must continually develop and introduce new products, enhance our existing products and
effectively stimulate customer demand for new and upgraded products to maintain or increase our revenue.
The success of new product introductions depends on a number of factors including, but not limited to, timely and
successful research and development, pricing, market and consumer acceptance, the effective forecasting and
management of product demand, purchase commitments and inventory levels, the management of manufacturing
and supply costs, and the risk that new products may have quality or other defects in the early stages of
introduction. In addition, the introduction or announcement of new products or product enhancements may
shorten the life cycle of our existing products or reduce demand for our current products, thereby offsetting any
benefits of successful product introductions and potentially lead to challenges in managing inventory of existing
products. Failure to complete product transitions effectively or in a timely manner could harm our brand and lead
to, among other things, lower revenue and excess inventory.
For example, demand for our new HERO4 Session was less than expected and our revenues and operating
results were negatively impacted by price reductions and corresponding price protection related charges of
approximately $40 million. We believed these price reductions were needed to stimulate sell-through for this
product. Additionally, we announced the end-of-life for our entry-level HERO line of capture devices in order to
simplify our product offering. As a result, we recorded product realignment charges of approximately $57 million to
cost of revenue in the fourth quarter of 2015. If we fail to effectively manage new product introductions and
transitions in the future, including our next generation capture devices, drones and content-management software
solutions, our revenue and profitability will be materially affected.
If we are unable to anticipate consumer preferences and successfully develop desirable products, we
might not be able to maintain or increase our revenue and profitability.
Our success depends on our ability to identify and originate product trends as well as to anticipate and react to
changing consumer demands in a timely manner. All of our products are subject to changing consumer
preferences that cannot be predicted with certainty. If we are unable to introduce appealing new products or novel
technologies in a timely manner, or our new products or technologies are not accepted by consumers, our
competitors may increase their market share, which could hurt our competitive position.
Our research and development efforts are complex and require us to incur substantial expenses to support the
development of our next generation capture devices, drones, content-management software solutions, and other
new products and services. Our research and development expense was $241.7 million, $151.9 million and $73.7
million for 2015, 2014 and 2013, respectively. We anticipate that research and development expense will continue
to increase in 2016. Unanticipated problems in developing products could also divert substantial resources, which
may impair our ability to develop new products and enhancements of existing products, and could further increase
our costs. We may not be able to achieve an acceptable return, if any, on our research and development efforts,
and our business may be adversely effected.
As we continually seek to enhance our products, we will incur additional costs to incorporate new or revised
features. We might not be able to, or determine that it is not in our interests to, raise prices to compensate for
these additional costs.
Our expected entrance into the consumer drone market is subject to numerous risks and uncertainties.
We plan to launch our first drone for recreational use in 2016. We have no experience in the consumer drone
market and expect to face significant competition from other companies promoting their own drone and related
products. These include established and start up drone manufacturers, such as DJI Technology Co., Parrot SA,
Yuneec and 3DR, who currently have or are attempting to gain a substantial share of the emerging international
drone market. Failure to timely launch a cost effective drone and/or failure to effectively compete in this new
market could damage our reputation, limit our growth and negatively affect our operating results.
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Regulations and legislation relating to the use of consumer drones in the United States and other countries where
we plan to sell our drones are evolving and may be subject to future changes that could negatively impact our
sales of such products. Effective December 21, 2015, U.S. consumers who own a drone over a certain weight
threshold must register with the Federal Aviation Administration's registry before they fly outdoors. It is possible
that further regulations in the United States or other countries could restrict the use of recreational drones and/or
require specific certification, qualifications or design modifications, which could have an unfavorable impact on our
future business, financial position and operating results.
In addition, our drones and related product offerings present new and difficult technology challenges, and we may
be subject to claims if users experience failures or other quality issues. If our drones malfunction or contain errors
or defects, collisions or crashes could occur resulting in property damage, personal injury or death. If any of these
events occurs, we could be subject to significant liability for personal injury and property damage.
We operate in a highly competitive market and the size and resources of some of our competitors may
allow them to compete more effectively than we can, which could result in a loss of our market share and
a decrease in our revenue and profitability.
The market for capture devices, including cameras and camcorders, is highly competitive. Further, we expect
competition to intensify in the future as existing competitors introduce new and more competitive offerings
alongside their existing products, and as market entrants introduce new products into our markets. Our products
are discretionary items for consumers subject to changing preferences that cannot be predicted with certainty.
Increased competition and changing consumer preferences may result in pricing pressures and reduced profit
margins and may impede our ability to continue to increase the sales of our products or cause us to lose market
share, any of which could substantially harm our business and results of operations.
We compete against established, well-known camera manufacturers such as Canon Inc., Fujifilm Corporation,
Nikon Corporation, Olympus Corporation, Rollei GmbH & Co. KG and Vivitar Corporation, as well as large,
diversified electronics companies such as, Panasonic Corporation, Polaroid Corporation, Samsung Electronics
Co., Sony Corporation and VTech Technologies, and specialty companies such as Garmin Ltd.
Many of our current competitors have substantial market share, diversified product lines, well-established supply
and distribution systems, strong worldwide brand recognition and greater financial, marketing, research and
development and other resources than we do. In addition, many of our existing and potential competitors enjoy
substantial competitive advantages, such as longer operating histories; the capacity to leverage their sales efforts
and marketing expenditures across a broader portfolio of products; broader distribution and established
relationships with channel partners; access to larger established customer bases; greater resources to make
acquisitions; larger intellectual property portfolios; and the ability to bundle competitive offerings with other
products and services.
Moreover, smartphones and tablets with photo and video functionality have significantly displaced the market for
traditional camera sales. It is possible that, in the future, the manufacturers of these devices, such as Apple Inc.
and Samsung, may design them for use in a range of conditions, including challenging physical environments, or
develop products with features similar to ours. In addition to competition or potential competition from large,
established companies, new companies may emerge and offer competitive products. Further, we are aware that
certain companies have developed cameras designed and packaged to appear similar to our products, which may
confuse consumers or distract consumers from purchasing GoPro products.
Additionally, we expect to enter the consumer drone market in 2016 and face significant competition from other
companies promoting their own drone and related products. These include established and start up drone
manufacturers, such as DJI Technology Co., Parrot SA, Yuneec and 3DR, who currently have or are attempting to
gain a substantial share of the emerging international drone market. Failure to effectively compete in this new
market could negatively affect our operating results and financial position.
We do not expect to continue to grow in the future at the same rate as we have in the past and profitability
in recent periods might not be indicative of future performance.
From 2013 to 2015, our annual revenue grew rapidly from $986 million to $1,620 million, which represents a
compounded annual growth rate of approximately 45%. As our revenue has increased, our annual growth rate
has slowed, and our historical growth should not be considered as indicative of our future performance. Although
our annual revenue in 2015 was up 16% compared to 2014, our fourth quarter revenue declined 31% on a year-
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over-year basis. In future periods, we could again experience a decline in revenue, or revenue could grow more
slowly than we expect, which could have a material negative effect on our future operating results. Specifically, we
anticipate our first quarter and full year 2016 revenue to decline on a year-over-year basis. Lower levels of
revenue and higher levels of operating expense investment may result in limited profitability or losses. For
example, we expect to record a substantial net loss in the first quarter of 2016, as compared to the net income we
recorded in the first quarter of 2015.
We may incur significant losses in the future for a number of reasons, including other risks described in this
Annual Report on Form 10-K, and we may encounter unforeseen expenses, difficulties, complications, delays and
other unknown factors.
If our sales fall below our forecasts, especially during the holiday season, our overall financial condition
and results of operations could be adversely affected.
Seasonal consumer shopping patterns significantly affect our business. We have traditionally experienced greater
revenues in the fourth quarter of each year due to demand related to the holiday season, and in some years, the
launch of new products heading into the holiday season. Fourth quarter revenue comprised 27%, 45% and 37%
of our 2015, 2014 and 2013 revenue, respectively. Given the strong seasonal nature of our sales, appropriate
forecasting is critical to our operations. We anticipate that this seasonal impact on our net sales is likely to
continue and any shortfalls in expected fourth quarter net sales, due to macroeconomic conditions, product
release patterns, a decline in the effectiveness of our promotional activities, supply chain disruptions, or for any
other reason, could cause our annual results of operations to suffer significantly. For example, in the fourth
quarter of 2015, our revenue declined on a year-over-year basis, which had a material negative impact on our
annual operating results for 2015. In addition, we typically experience lower revenue in the first quarter. In the first
quarter of 2015 and 2014 our revenue declined sequentially by 43% and 35%, respectively. In the first quarter of
2016, we expect our seasonal decline in revenue to be greater than what we have experienced historically.
Specifically, we anticipate our revenue to decline by over 50% in the first quarter of 2016 on a year-over-year
basis.
In contrast, a substantial portion of our expenses are personnel related and include salaries, stock-based
compensation, benefits and incentive-based compensation plan expenses, which are not seasonal in nature.
Accordingly, in the event of revenue shortfalls, we are generally unable to mitigate a negative impact on operating
margins in the short term. To the extent such revenue shortfalls recur in future periods, our operating results
would be harmed. For example, we expect to record a substantial net loss in the first quarter of 2016 due to lower
levels of revenue and higher levels of operating expense investment.
An economic downturn or economic uncertainty in our key U.S. and international markets may adversely
affect consumer discretionary spending and demand for our products.
Our products are discretionary items for consumers. Factors affecting the level of consumer spending for such
discretionary items include general market conditions, macroeconomic conditions, fluctuations in foreign
exchange rates and interest rates, and other factors such as consumer confidence, the availability and cost of
consumer credit, levels of unemployment and tax rates. For example, while much of our revenue is derived from
markets outside the U.S., the substantial majority of our sales occur in U.S. dollars and an increase in the value of
the dollar against foreign currencies increases the real cost of our products to consumers in those local markets.
As global economic conditions continue to be volatile or if economic conditions further deteriorate, consumers
may delay or reduce purchases of our products. Consumer demand for our products may not reach our sales
targets, or may decline, when there is an economic downturn or economic uncertainty. Our sensitivity to economic
cycles and any related fluctuation in consumer demand could adversely affect our business, financial condition
and operating results.
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We face substantial risks related to inventory, purchase commitments and long-lived assets, and we
could incur material charges related to these items that adversely affect our operating results.
To ensure adequate inventory supply and meet the demands of our retailers and distributors, we must forecast
inventory needs and place orders with our contract manufacturers and component suppliers based on our
estimates of future demand for particular products as well as accurately track the level of product inventory in the
channel to ensure we are not in an over or under supply situation. In addition, as we develop or introduce new
products and services, our older products and services will reach the end of their respective lifecycles. To the
extent we discontinue the manufacturing and sales of any products and services, we must manage the inventory
liquidation, supplier commitments and customer expectations. For example, in the fourth quarter of 2015, we
recorded product realignment charges of $57 million to cost of revenue for excess purchase order commitments,
excess inventory, and obsolete tooling, relating to the end-of-life of our entry-level HERO products and slower
than anticipated overall demand.
No assurance can be given that we will not incur additional charges in future periods related to our inventory
management or that we will not underestimate or overestimate forecast sales in a future period. Our ability to
accurately forecast demand for our products is affected by many factors, including product introductions by us and
our competitors, channel inventory levels, unanticipated changes in general market demand, macroeconomic
conditions or consumer confidence. If we do not accurately forecast customer demand for our products, we may
in future periods be unable to meet customer, retailer or distributor demand for our products, or may be required
to incur higher costs to secure the necessary production capacity and components, and our business and
operating results could be adversely affected.
We have experienced rapid growth in recent periods. If we fail to manage our expansion effectively, our
financial performance may suffer.
We have experienced rapid growth over the last several years which has placed a strain on our operations. As
of December 31, 2015, approximately 45% of our employees had been with us for less than one year and
approximately 68% for less than two years. Additionally, because of our growth, we have significantly expanded
our operating lease commitments. At December 31, 2015, our future non-cancelable operating lease
commitments through 2027 were $152.2 million. If our business and headcount do not grow resulting in excess
leased facility capacity and we are unable to sublease our facilities, our financial results could be adversely
affected.
Our success will depend in part upon our ability to manage our expansion effectively. To do so, we must continue
to increase the productivity of our existing employees and hire, train and manage new employees as needed. To
manage the growth of our operations and personnel, we will need to continue to improve our operational, financial
and management controls and our reporting processes and procedures, and implement more extensive and
integrated financial and business information systems. These additional investments have increased our
operating costs, which will make it more difficult for us to offset any future revenue shortfalls by reducing
expenses in the short term. Moreover, if we fail to scale our operations or manage our growth successfully, our
business, financial condition and operating results could be adversely affected.
In addition, in response to unfavorable market conditions or consumer demand, we may be required to
strategically realign our resources, adjust our product line and/or enact price reductions in order to stimulate
demand, and implement workforce reductions. Any such actions may result in the recording of special charges
including, inventory-related write-offs, workforce reductions, or other restructuring costs. Additionally, our
estimates with respect to the useful life or ultimate recoverability of our assets, including purchased intangible
assets and tooling, could also change and result in impairment charges.
For example, in January 2016, we adopted a restructuring plan that provided for a 7% reduction in our global
workforce. The implementation of this restructuring plan may be disruptive to our business, and following
completion of the restructuring plan our business may not be more efficient or effective than prior to
implementation of the plan. Our restructuring activities, including any related charges and the impact of the
related headcount reduction, could have a material adverse effect on our business, operating results, and
financial condition.
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We may acquire other businesses or receive offers to be acquired, which could require significant
management attention, disrupt our business, dilute stockholder value and adversely affect our operating
results.
As part of our business strategy, we have completed several acquisitions, and we expect to evaluate additional
acquisitions of, or strategic investments in other companies, products or technologies that we believe are
complementary to our business. For example, in February 2016, we entered into definitive agreements to acquire
two mobile video editing application companies for cash consideration of approximately $105 million to further
enhance our future software offerings.
We may not be able to find suitable acquisition candidates and we may not be able to complete acquisitions on
favorable terms, if at all. If we do complete acquisitions, we may not ultimately strengthen our competitive position
or achieve our goals, and any acquisitions we complete could be viewed negatively by users or investors. In
addition, if we fail to integrate successfully such acquisitions, or the technologies associated with such
acquisitions, into our company, the revenue and operating results of the combined company could be adversely
affected. Acquisitions may disrupt our ongoing operations, divert management from their primary responsibilities,
subject us to additional liabilities, increase our expenses and adversely impact our business, financial condition,
operating results and cash flows. We may not successfully evaluate or utilize the acquired technology and
accurately forecast the financial impact of an acquisition transaction, and consequently, we may be required to
take impairment charges, which would adversely affect our results of operations.
We may have to pay cash, incur debt or issue equity securities to pay for any such acquisition, each of which
could affect our financial condition or the value of our capital stock. The sale of equity to finance any such
acquisitions could result in dilution to our stockholders. If we incur debt it would result in increased fixed
obligations and could also subject us to covenants or other restrictions that would impede our ability to manage
our operations. In addition, our future operating results may be impacted by performance earnouts or contingent
payments. Furthermore, acquisitions may require large one-time charges and can result in increased debt or
contingent liabilities, adverse tax consequences, additional stock-based compensation expense and the recording
and subsequent amortization or impairments of amounts related to certain purchased intangible assets, any of
which could negatively impact our future results of operations. We may also record goodwill in connection with an
acquisition and incur goodwill impairment charges in the future. In the future, if our acquisitions do not yield
expected revenue, we may be required to take charges to our operating results based on this impairment
assessment process, which could adversely affect our results of operations.
We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital
needs.
In the future, we may require additional capital to respond to business opportunities, challenges, acquisitions or
unforeseen circumstances and may determine to engage in equity or debt financings or enter into credit facilities
for other reasons. We may not be able to timely secure additional debt or equity financing on favorable terms, or
at all. If we raise additional funds through the issuance of equity or convertible debt or other equity-linked
securities, our existing stockholders could suffer significant dilution. Any debt financing obtained by us in the
future could involve restrictive covenants relating to our capital raising activities and other financial and
operational matters, which may make it more difficult for us to obtain additional capital and to pursue business
opportunities, including potential acquisitions. If we are unable to obtain adequate financing or financing on terms
satisfactory to us, when we require it, our ability to grow or support our business and to respond to business
challenges could be significantly limited.
Our success depends on our ability to maintain the value and reputation of our brand.
Our success depends on the value and reputation of our brand, including our primary trademarks “GOPRO” and
“HERO”, as well as the GoPro logo and the GoPro "Be a Hero" logo. The GoPro brand is integral to the growth of
our business and expansion into new vertical markets. Maintaining, promoting and positioning our brand will
largely depend on the success of our marketing and merchandising efforts, our ability to provide consistent, high
quality products, and our consumers' satisfaction with the technical support and software updates we provide.
Failure to grow and maintain our brand or negative publicity related to our products, our consumers’ user-
generated content, the athletes we sponsor, the celebrities we are associated with, or the labor policies of any of
our suppliers or manufacturers could adversely impact our brand, business and operating results. Maintaining and
enhancing our brand will also require us to make substantial investments, although there is no guarantee that
these investments will increase sales of our products or positively impact our operating results.
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We rely on third-party suppliers, some of which are sole-source suppliers, to provide components for our
products.
Our ability to meet customer demand depends, in part, on our ability to obtain timely and adequate delivery of
components for our products. All of the components that go into the manufacturing of our cameras and
accessories are sourced from third-party suppliers, and some of these components are provided by a single
supplier or by a supplier that could potentially become a competitor.
If we lose access to components from a particular supplier, or experience a significant disruption in the supply of
products and components from a current supplier, we may be unable to locate alternative suppliers of comparable
quality at an acceptable price, or at all, and our business could be materially and adversely affected. In addition, if
we experience a significant increase in demand for our products, our suppliers might not have the capacity or
elect to meet our needs as they allocate components to other customers. Identifying a suitable supplier is an
involved process that requires us to become satisfied with the supplier’s quality control, responsiveness and
service, financial stability and labor and other ethical practices, and if we seek to source materials from new
suppliers there can be no assurance that we could do so in a manner that does not disrupt the manufacture and
sale of our products. Our reliance on single source, or a small number of, suppliers involves a number of
additional risks, including risks related to: supplier capacity constraints; price increases; timely delivery;
component quality; failure of a key supplier to remain in business and adjust to market conditions; delays in, or
the inability to execute on, a supplier roadmap for components and technologies; and natural disasters, fire, acts
of terrorism or other catastrophic events.
In particular, we incorporate video compression and image processing semiconductors from one provider,
Ambarella, Inc., into all of our cameras, and we do not currently have an alternative supplier for these key
components. If Ambarella stopped supplying components on acceptable terms, or at all, or we experienced delays
in receipt of components from Ambarella, we would experience a significant disruption in our ability to produce our
products, and our business would be materially and adversely affected.
Any significant disruption of our information systems, and our reliance on Software-as-a-Service (SaaS)
technologies from third parties, could adversely affect our business operations and financial results.
We are increasingly dependent on information systems to operate our e-commerce website, process transactions,
respond to consumer inquiries, manage our supply chain and inventory, ship goods on a timely basis, maintain
cost-efficient operations, and complete timely and accurate financial reporting.
Our information systems and those of third parties we use in our operations are vulnerable to cybersecurity risk,
including cyber-attacks such as computer viruses, physical or electronic break-ins and similar disruptions. These
systems periodically experience directed attacks intended to lead to interruptions and delays in our operations as
well as loss, misuse or theft of data. We have implemented certain systems and processes to restrict
unauthorized access and protect our data and systems. To date, unauthorized users have not had a material
impact on our systems; however, there can be no assurance that hackers may not be successful in the future. Any
material disruption or slowdown of our systems, including a disruption or slowdown caused by our failure to
successfully upgrade our systems, system failures, viruses, computer hackers or other causes, could affect our
financial systems and operations, and could cause delays in our supply chain or cause information, including data
related to customer orders, to be lost or delayed which could result in delays in the delivery of merchandise to our
stores and customers or lost sales, especially if the disruption or slowdown occurred during our seasonally strong
fourth quarter. Any of these events could reduce demand for our products, impair our ability to complete sales
through our e-commerce channels and cause our revenue to decline. If changes in technology cause our
information systems to become obsolete, or if our information systems are inadequate to handle our growth, we
could lose customers or our business and operating results could be adversely affected.
In particular, we are heavily reliant on SaaS enterprise resource planning systems to conduct our order and
inventory management, e-commerce and financial transactions and reporting. In addition, we utilize third-party
cloud computing services in connection with our business operations. Problems faced by us or our third-party
hosting/cloud computing providers, or content delivery network providers, including technological or business-
related disruptions, as well as cybersecurity threats, could adversely impact our business and operating results,
our ability to accurately report our financial results, as well as the experience of our consumers, which in turn
could adversely affect our business and operating results.
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As we expand our operations, we expect to utilize additional systems and service providers that may also be
essential to managing our business. Although the systems and services that we require are typically available
from a number of providers, it is time consuming and costly to qualify and implement these relationships.
Therefore, our ability to manage our business would suffer if one or more of our providers suffer an interruption in
their business, or experience delays, disruptions or quality control problems in their operations, or we have to
change or add systems and services. We may not be able to control the quality of the systems and services we
receive from third-party service providers, which could impair our ability to maintain appropriate internal controls
over financial reporting and complete timely and accurate financial reporting, and may impact our business,
operating results and financial condition.
Failure to adequately protect business and consumer data could harm our brand and our reputation in the
marketplace.
Changing regulations and laws governing the Internet, data privacy, data protection and e-commerce transactions
(including taxation, pricing and electronic communications) could impede the growth of our e-commerce business,
increase our cost of doing business and limit our ability to collect and use information collected from our users.
Further, new regulations limiting our ability to collect, use and disclose consumer data, or imposing additional
requirements with respect to the retention and security of consumer data, could limit our marketing activities and
could adversely affect our business and financial condition.
In our e-commerce services, we process, store and transmit consumer data. We also collect user data through
certain marketing activities. Failure to prevent or mitigate data loss or other security breaches, including breaches
of our vendors’ technology and systems, could expose us or our customers and consumers to a risk of loss or
misuse of such information, adversely affect our operating results, result in litigation or potential liability for us and
otherwise harm our business. Further, we are subject to general business regulations and laws, as well as
regulations and laws specifically governing the Internet, e-commerce and electronic devices. Existing and future
laws and regulations, or new interpretations of these laws, may adversely affect our ability to conduct our e-
commerce business.
We depend on key personnel to grow and operate our business. If we are unable to retain, attract and
integrate qualified personnel, our ability to develop and successfully grow our business could be harmed.
We believe that our future success is highly dependent on the contributions of our CEO and our executive
officers, as well as our ability to attract and retain highly skilled and experienced research and development, sales
and marketing and other personnel in the United States and abroad.
All of our employees, including our executive officers, are free to terminate their employment relationship with us
at any time, and their knowledge of our business and industry may be difficult to replace. We recently announced
the resignation of our Chief Financial Officer, and while he will be replaced by our existing Vice President of
Finance, this change in our executive management team could be disruptive to our operations. In addition, our
Senior Vice President of GoPro Entertainment recently resigned from his employment position with us and was
appointed to our board of directors. While he has been replaced by a new Vice President of GoPro Entertainment
to assume his responsibilities, this change in leadership could be disruptive to our business.
If more of our executive officers or other key employees leave, we may not be able to fully integrate new
personnel or replicate the prior working relationships, and our operations could suffer. Furthermore, in the case of
Nick Woodman, our founder and CEO, his departure could affect our ability to continue to attract other top
executives and potentially negatively impact the view of our brand. Qualified individuals are in high demand, and
we may incur significant costs to attract them. While we utilize competitive salary, bonus and long-term incentive
packages to recruit new executives, many of the companies with which we compete for experienced personnel
also have greater resources than we do. Competition for qualified personnel is particularly intense in the San
Francisco Bay Area, where our headquarters are located. Fluctuations in the price of our Class A common stock
may make it more difficult or costly to use equity compensation to motivate, incentivize and retain our employees.
If we are unable to attract and retain highly skilled personnel, we may not be able to achieve our strategic
objectives, and our business, financial condition and operating results could be adversely affected.
16
If we do not effectively maintain and further develop our sales channels, including developing and
supporting our retail sales channel and distributors, our business could be harmed.
As a consumer-facing company, we depend upon effective sales channels to reach the consumers who are the
ultimate purchasers of our products. In the United States, we primarily sell our products directly through a mix of
retail channels, including big box, mid-market and specialty retailers, and we reach certain U.S. markets through
distributors. In international markets, we primarily sell through distributors who in turn sell to local retailers;
however we also retain some direct sales relationships with certain customers. We depend on retailers to provide
adequate and attractive space for our products and POP displays in their stores. We further depend on our
retailers to employ, educate and motivate their sales personnel to effectively sell our products. If our retailers do
not adequately display our products, choose to promote competitors’ products over ours or do not effectively
explain to customers the advantages of our products, our sales could decrease and our business could be
harmed. Similarly, our business could be adversely affected if any of our large retail customers were to experience
financial difficulties, or change the focus of their businesses in a way that deemphasized the sale of our products.
We also continue to invest heavily in providing new retailers with POP displays and expanding the footprint of our
POP displays in existing stores, and there can be no assurance that this investment will lead to increased sales.
We currently depend on our distributors to reach certain market segments in the United States and to reach many
of our international retailers. Our distributors generally offer products from several different manufacturers.
Accordingly, we are at risk that these distributors may give higher priority to selling other companies’ products. We
have consolidated our distributor channels in certain regions, and if we were to lose the services of a distributor,
we might need to find another distributor in that area and there can be no assurance of our ability to do so in a
timely manner or on favorable terms. Further, our distributors build inventory in anticipation of future sales, and if
such sales do not occur as rapidly as they anticipate, our distributors will decrease the size of their future product
orders. We are also subject to the risks of our distributors encountering financial difficulties, which could impede
their effectiveness and also expose us to financial risk if they are unable to pay for the products they purchase
from us. Additionally, our international distributors buy from us in U.S. dollars and generally sell to retailers in local
currency so significant currency fluctuations could impact their profitability, and in turn, affect their ability to buy
future products from us.
We have converted portions of our distributors' business into direct sales, and if we were to do this on a larger
scale, it could create significant disruptions to our distribution channel and the associated revenue. Any reduction
in sales by our current distributors, loss of key distributors or decrease in revenue from our distributors could
adversely affect our revenue, operating results and financial condition.
A small number of retailers and distributors account for a substantial portion of our revenue, and if our
relationships with any of these retailers or distributors were to be terminated or the level of business with
them significantly reduced, our business could be harmed.
Our ten largest customers, measured by the revenue we derive from them, accounted for 52%, 50% and 51% of
our revenue for the years ended December 31, 2015, 2014 and 2013, respectively. One retailer accounted for
14%, 20% and 17% of our revenue for 2015, 2014 and 2013, respectively. A second retailer accounted for 12% of
our revenue in 2015. The loss of a small number of our large customers, or the reduction in business with one or
more of these customers, could have a significant adverse impact on our operating results. While we have
agreements with these large customers, these agreements do not require them to purchase any meaningful
amount of our products annually.
If we encounter problems with our distribution system, our ability to deliver our products to the market
and to meet customer expectations could be harmed.
We rely on third-party distribution facilities for substantially all of our product distribution to distributors and directly
to retailers. Our distribution facilities include computer controlled and automated equipment, which means their
operations may be vulnerable to computer viruses or other security risks, the proper operation of software and
hardware, electronic or power interruptions or other system failures. Further, because substantially all of our
products are distributed from only a few locations and by a small number of companies, our operations could be
interrupted by labor difficulties, extreme or severe weather conditions, or floods, fires or other natural disasters
near our distribution centers, or port shutdowns or other transportation-related interruptions along our distribution
routes. Additionally, we use one primary supplier for the third party distribution and if this supplier were to incur
financial difficulties, it could adversely affect our business.
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Our international business operations account for a significant portion of our revenue and are subject to
challenges and risks.
Revenue from outside the United States comprised 52%, 43% and 49% of our revenue in the years ended
December 31, 2015, 2014 and 2013, respectively, and we expect this portion to continue to be significant in the
future. Further, our supply chain partners have operations in countries including China, Brazil, Singapore, Czech
Republic, and the Netherlands. We intend to expand our relationships in these countries and may establish
additional relationships in other countries as we continue to expand our international operations. Operating in
foreign countries requires significant resources and considerable management attention, and we may enter new
geographic markets where we have limited or no experience in marketing, selling, and deploying our
products. International expansion has required and will continue to require us to invest significant funds and other
resources and we cannot be assured our efforts will be successful. International sales and operations may be
subject to risks such as:
• difficulties in staffing and managing foreign operations;
• burdens of complying with a wide variety of laws and regulations including product labeling;
• adverse tax effects and foreign exchange controls making it difficult to repatriate earnings and cash;
• the impact of foreign currency exchange rates and interest rates;
• political and economic instability;
• terrorist activities and natural disasters;
• trade restrictions;
• differing employment practices and laws and labor disruptions;
• the imposition of government controls;
• lesser degrees of intellectual property protection;
• tariffs and customs duties and the classifications of our goods by applicable governmental bodies;
• a legal system subject to undue influence or corruption; and
• a business culture in which illegal sales practices may be prevalent.
The occurrence of any of these risks could negatively affect our international business and consequently our
business, operating results and financial condition.
We may be subject to warranty claims that could result in significant direct or indirect costs, or we could
experience greater returns from retailers than expected, which could harm our business and operating
results.
We generally provide a 12-month warranty on all of our products, except in the European Union, or EU, where we
provide a two-year warranty on all of our products. Additionally, we anticipate introducing our drone product in
2016 and we have no historical experience related to warranty claims for this product. The occurrence of any
material defects in our products could make us liable for damages and warranty claims in excess of our current
reserves. In addition, we could incur significant costs to correct any defects, warranty claims or other problems,
including costs related to product recalls. Any negative publicity related to the perceived quality and safety of our
products could affect our brand image, decrease retailer, distributor and consumer demand, and adversely affect
our operating results and financial condition. Also, while our warranty is limited to repairs and returns, warranty
claims may result in litigation, the occurrence of which could adversely affect our business and operating results.
Consumers may be injured while engaging in activities with our products, and we may be exposed to
claims, or regulations could be imposed, which could adversely affect our brand, operating results and
financial condition.
Consumers use our capture devices, and we anticipate in 2016 our drones, to self-capture their participation in a
wide variety of physical activities, including extreme sports, which in many cases carry the risk of significant injury.
Consumers may also use our drones for a wide range of flight activity, including aerial data collection,
videography, and photography. We may be subject to claims that users have been injured or harmed by or while
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using our products, including false claims or erroneous reports relating to safety, security or privacy issues, or that
personal property has been damaged as a result of use of our drone. Although we maintain insurance to help
protect us from the risk of such claims, such insurance may not be sufficient or may not apply to all situations.
Similarly, proprietors of establishments at which consumers engage in challenging physical activities could seek to
ban the use of our products in their facilities to limit their own liability. In addition, if lawmakers or governmental
agencies were to determine that the use of our products increased the risk of injury to all or a subset of our users,
they may pass laws or adopt regulations that limit the use of our products or increase our liability associated with
the use of our products. Any of these events could adversely affect our brand, operating results and financial
condition.
Our intellectual property and proprietary rights may not adequately protect our products, and our
business may suffer if it is alleged or determined that our technology, products, or another aspect of our
business infringes third party intellectual property or if third parties infringe our rights.
We own patents, trademarks, copyrights, trade secrets, and other intellectual property (collectively “intellectual
property”) related to aspects of our products, software, services, and designs. Our commercial success may
depend in part on our ability to obtain and maintain these rights in the United States and abroad.
We regularly file patent applications to protect innovations arising from our research, development and design as
we deem appropriate. We may fail to apply for patents on important products, services, technologies or designs in
a timely fashion, or at all. We may not have intellectual property rights in all countries where unauthorized third
party copying or use of our technology occurs and the scope of our intellectual property might be more limited in
some countries. Our existing and future patents may not be sufficient to protect our products, services,
technologies, or designs and/or may not prevent others from developing competing products, services,
technologies, or designs. As a result, we cannot predict the validity and enforceability of our patents and other
intellectual property with certainty.
We have registered, and applied to register, certain of our trademarks in several jurisdictions worldwide. In some
of those jurisdictions, other filings exist for the same, similar or otherwise related products or services, which
could block the registration of our marks. Even if we are able to register our marks, competitors may adopt or file
similar marks to ours, register domain names that mimic or incorporate our marks, or otherwise infringe upon our
trademark rights. Although we police our trademark rights carefully, there can be no assurance that we are aware
of or that we will prevail in all such instances. Any of these negative outcomes could impact the strength, value
and effectiveness of our brand, as well as our ability to market our products.
Litigation may be necessary to enforce our intellectual property rights. Initiating infringement proceedings against
third parties can be expensive, take significant time, and divert management’s attention from other business
concerns. We may not prevail in litigation to enforce our intellectual property against unauthorized use.
Third parties have brought intellectual property infringement claims against us. We expect to continue to receive
such intellectual property claims in the future and will defend the Company vigorously against any such existing
and future legal proceedings. The occurrence of any of these events may adversely affect our business, financial
condition and operating results. For example, patent holding companies and practicing entities, including our
competitors, have alleged infringement of patent or other intellectual property infringement. We may not prevail
against such allegations. We may seek licenses from third parties where appropriate, but they could refuse to
grant us a license or demand commercially unreasonable terms. An adverse ruling in an intellectual property
infringement proceedings could force us to suspend or permanently cease the production or sale of
products/services, face a temporary or permanent injunction, redesign our products/services, rebrand our
products/services, pay significant settlement costs, pay third party license fees or damage awards, or give up our
intellectual property.
If we encounter issues with our manufacturers or suppliers, our business, brand, and results of
operations could be harmed and we could lose sales.
We do not have internal manufacturing capabilities and for 2015 relied on various contract manufacturers,
including Chicony Electronics Co. Ltd., Jabil Circuit Limited, and Sky Light Digital Limited/Sky Light Industrial
Limited to manufacture our products. We cannot be certain that we will not experience operational difficulties with
our manufacturers, including reductions in the availability of production capacity, errors in complying with product
specifications, insufficient quality control, failures to meet production deadlines, increases in manufacturing costs
and increased lead times. Additionally, our manufacturers may experience disruptions in their manufacturing
19
operations due to equipment breakdowns, labor strikes or shortages, natural disasters, component or material
shortages, cost increases or other similar problems. Further, in order to minimize their inventory risk, our
manufacturers might not order components from third-party suppliers with adequate lead time, thereby impacting
our ability to meet our demand forecast. Therefore, if we fail to manage our relationship with our manufacturers
effectively, or if they experience operational difficulties, our ability to ship products to our retailers and distributors
could be impaired and our competitive position and reputation could be harmed.
In the event that we receive shipments of products that fail to comply with our technical specifications or that fail
to conform to our quality control standards, and we are not able to obtain replacement products in a timely
manner, we risk revenue losses from the inability to sell those products, increased administrative and shipping
costs, and lower profitability. Additionally, if defects are not discovered until after consumers purchase our
products, they could lose confidence in the technical attributes of our products and our business could be harmed.
We do not control our contract manufacturers or suppliers, including their labor, environmental or other practices.
We require our contract manufacturers and suppliers to comply with our formal supplier code of conduct and
relevant standards and have ongoing audit programs in place to assess our suppliers' compliance with our
requirements. We periodically conduct audits of our contract manufacturers’ and suppliers’ compliance with our
code of conduct, applicable laws and good industry practices. However, these audits may not be frequent or
thorough enough to detect non-compliance. Deliberate violations of labor, environmental or other laws by our
contract manufacturers or suppliers, or a failure of these parties to follow ethical business practices, could lead to
negative publicity and harm our reputation or brand.
We continue to invest in the further development of a content management platform and the acquisition
and distribution of content for GoPro Entertainment, and we might not be successful in doing so.
We believe that enabling consumers to easily capture, manage, share and enjoy their GoPro content will increase
consumer interest in our products, and we continue to invest in improving our software offerings and the further
development of our content management platform to assist consumers with these tasks. The development of
these software offerings and other tools needed for these purposes requires different skills from our historical core
focus of developing capture devices.
We also continue to invest to scale GoPro Entertainment and develop new revenue opportunities by increasing
production of GoPro originally produced content while simultaneously increasing the aggregation and
redistribution of our consumers’ “best of” UGC and developing the GoPro content management platform.
Additionally, we are investing to develop and distribute the GoPro Channel on more partner platforms. We do not
have significant experience deriving revenue from the distribution of GoPro content and the execution of this
business strategy requires different skills from our historical core focus of developing capture devices.
To achieve our goals, we have continued to hire key personnel who we believe have the requisite skills and
experience to manage and execute on these plans. We cannot be assured of our ability to organize, manage and
execute these relatively new functions within our business. If we are not successful, we may not achieve our
goals of facilitating greater consumer use of their content and scaling GoPro Entertainment, and we might not
recover the investments we make in these efforts, which could adversely affect our business.
If we are unable to maintain or acquire rights to include intellectual property owned by others in the
content distributed by us, our marketing, sales or future business strategy could be affected or we could
be subject to lawsuits relating to our use of this content.
The distribution of GoPro content helps to market our brand and our products. If we cannot continue to acquire
rights to distribute UGC or acquire rights to use and distribute music, athlete and celebrity names and likenesses
or other content for our original productions or our entertainment distribution channels or for our software
products, our marketing efforts could be diminished, our sales could be harmed and our future content strategy
could be adversely affected. In addition, third-party content providers may allege that we have violated their
intellectual property rights. If we are unable to obtain sufficient rights, successfully defend our use of or otherwise
alter our business practices on a timely basis in response to claims of infringement, misappropriation, misuse or
other violation of third-party intellectual property rights, our business may be adversely affected. As a distributor of
content, we face potential liability for negligence, copyright, or trademark infringement or other claims based on
the nature and content of materials that we distribute. If we are found to be liable for infringement, then our
business may suffer.
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Failure to obtain new, and maintain existing, high-quality event, venue, athlete and celebrity sponsorships
could harm our business.
Establishing relationships with high profile sporting and entertainment events, venues, sports leagues and sports
associations, athletes and celebrity personalities to evaluate, promote and establish product credibility with
consumers, including entering into sponsorship and licensing agreements, has and will continue to be a key
element of our marketing strategy. However, as competition in our markets has increased, the costs of obtaining
and retaining event, venue, athlete and celebrity sponsorships and licensing agreements have increased.
Additionally, we may be forced to sign longer term sponsorships in order to retain relationships. If we are unable
to maintain our current associations with our event, venue, athlete and celebrity partners, or to do so at a
reasonable cost, we could lose the benefits of these relationships, and we may be required to modify and
substantially increase our marketing investments. In addition, actions taken by endorsers of our products that
harm their reputations could also harm our brand image with consumers. The failure to correctly identify high
impact events and venues or build partnerships with those who develop and promote those events and venues,
promising athletes or other appealing personalities to use and endorse our products, or poor performance by our
endorsers, could adversely affect our brand and result in decreased sales of our products.
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act, the U.K. Bribery
Act or similar anti-bribery laws in other jurisdictions in which we operate.
The global nature of our business and the significance of our international revenue create various domestic and
local regulatory challenges and subject us to risks associated with our international operations. The U.S. Foreign
Corrupt Practices Act (FCPA), the U.K. Bribery Act 2010, or the U.K. Bribery Act, and similar anti-bribery and
anticorruption laws in other jurisdictions generally prohibit U.S.-based companies and their intermediaries from
making improper payments to non-U.S. officials for the purpose of obtaining or retaining business, directing
business to another, or securing an advantage. In addition, U.S. public companies are required to maintain
records that accurately and fairly represent their transactions and have an adequate system of internal accounting
controls. Under the FCPA, U.S. companies may be held liable for the corrupt actions taken by directors, officers,
employees, agents, or other strategic or local partners or representatives. As such, if we or our intermediaries fail
to comply with the requirements of the FCPA or similar legislation, governmental authorities in the United States
and elsewhere could seek to impose substantial civil and/or criminal fines and penalties which could have a
material adverse effect on our business, reputation, operating results and financial condition.
We operate in areas of the world that experience corruption by government officials to some degree and, in
certain circumstances, compliance with anti-bribery and anticorruption laws may conflict with local customs and
practices. Our global operations require us to import and export to and from several countries, which
geographically expands our compliance obligations. In addition, changes in such laws could result in increased
regulatory requirements and compliance costs which could adversely affect our business, financial condition and
results of operations. We cannot be assured that our employees or other agents will not engage in prohibited
conduct and render us responsible under the FCPA or the U.K. Bribery Act. If we are found to be in violation of the
FCPA, the U.K. Bribery Act or other anti-bribery or anticorruption laws (either due to acts or inadvertence of our
employees, or due to the acts or inadvertence of others), we could suffer criminal or civil penalties or other
sanctions, which could have a material adverse effect on our business.
We are subject to governmental export and import controls and economic sanctions laws that could
subject us to liability and impair our ability to compete in international markets.
The U.S. and various foreign governments have imposed controls, export license requirements and restrictions on
the import or export of some technologies. Our products are subject to U.S. export controls, and exports of our
products must be made in compliance with various economic and trade sanctions laws. Furthermore, U.S. export
control laws and economic sanctions prohibit the provision of products and services to countries, governments,
and persons targeted by U.S. sanctions. Even though we take precautions to prevent our products from being
provided to targets of U.S. sanctions, our products, including our firmware updates, could be provided to those
targets or provided by our customers despite such precautions. Any such provision could have negative
consequences, including government investigations, penalties and reputational harm. Our failure to obtain
required import or export approval for our products could harm our international and domestic sales and adversely
affect our revenue.
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In 2014, we determined that we may have shipped some products to international customers that, prior to
shipment, may have required either a one-time product review or application for an encryption registration number
in lieu of such product review. We also determined that we provided controlled technology to our offshore
manufacturing partners without the required export licenses. We subsequently acquired the appropriate
encryption number and obtained an export license for the export of controlled technology to our offshore
manufacturing partners. Additionally, in 2014, we discovered our failure to file an annual self-classification report
and comply with record keeping requirements of the Export Administration Regulations of the U.S. Department of
Commerce's Bureau of Industry and Security and believe that we have now become compliant with the reporting
and recordkeeping requirements. We also identified possible firmware downloads for cameras to persons in
embargoed countries. We self-reported these potential violations to the Department of Commerce’s Bureau of
Industry and Security and also submitted a related supplemental disclosure and have taken, and continue to take,
remedial measures to prevent similar export control violations from occurring in the future. In October 2015, the
Department of Commerce notified us that it had completed its investigation of the potential export violations we
had reported and issued a cautionary letter, without imposing any penalties or restrictions.
In 2014, we also discovered potential sanctions violations involving transactions with sanctioned parties, the
provision of support services to persons in an embargoed country, and firmware updates to persons in several
embargoed countries. We have self-reported these potential violations to the U.S. Department of Treasury’s Office
of Foreign Assets Control and have also submitted a related supplemental disclosure and have taken and
continue to take remedial measures to prevent similar export control violations from occurring in the future. In
February 2015, the Treasury Department notified us that it had completed its review of the transactions we had
reported and issued a cautionary letter, without imposing any penalties or restrictions.
We could be subject to future enforcement action with respect to compliance with governmental export and import
controls and economic sanctions laws that result in penalties, costs, and restrictions on export privileges that
could have a material effect on our business and operating results.
Our effective tax rate and the intended tax benefits of our corporate structure and intercompany
arrangements depend on the application of the tax laws of various jurisdictions and on how we operate
our business.
The application of the tax laws of various jurisdictions, including the United States, to our international business
activities is subject to interpretation and depends on operating our business in a manner consistent with our
corporate structure and intercompany arrangements. The taxing authorities of the jurisdictions in which we
operate may challenge our methods for valuing technology, intercompany arrangements, including our transfer
pricing, or our current or historical tax positions, including with respect to research and development tax credits.
Any such challenge could be costly and time consuming to defend and may increase our worldwide effective tax
rate, and consequently adversely affect our financial position and results of operations.
Our corporate structure includes legal entities located in jurisdictions with income tax rates lower than the U.S.
statutory tax rate. Our intercompany arrangements result in income earned by such entities in accordance with
arm’s-length principles and commensurate with functions performed, risks assumed and ownership of valuable
corporate assets. We believe that income taxed in certain foreign jurisdictions at a lower rate relative to the U.S.
statutory rate will have a long-term beneficial impact on our worldwide effective tax rate.
Significant judgment is required in evaluating our tax positions and determining our provision for income taxes.
During the ordinary course of business, there are many transactions and calculations for which the ultimate tax
determination is uncertain. For example, our effective tax rates could be adversely affected by earnings being
lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries
where we have higher statutory rates, by changes in foreign currency exchange rates or by changes in the
relevant tax, accounting and other laws, regulations, principles and interpretations. As we operate in numerous
taxing jurisdictions, the application of tax laws can be subject to diverging and sometimes conflicting
interpretations by tax authorities of these jurisdictions. It is not uncommon for taxing authorities in different
countries to have conflicting views, for instance, with respect to, among other things, the manner in which the
arm’s-length standard is applied for transfer pricing purposes, or with respect to the valuation of intellectual
property. In addition, tax laws are dynamic and subject to change as new laws are passed and new interpretations
of the law are issued or applied. In particular, there is uncertainty in relation to the U.S. tax legislation in terms of
the future corporate tax rate but also in terms of the U.S. tax consequences of income derived from intellectual
property held in foreign jurisdictions.
22
Our existing corporate structure and intercompany arrangements have been implemented in a manner that we
believe complies with current tax laws. However, our tax liabilities may be adversely affected if such structure and
arrangements are challenged by a taxing authority or we are unable to appropriately adapt the manner in which
we operate our business or if the United States or other jurisdictions in which we do business change their tax
laws in a manner that adversely impacts our tax liabilities.
If we are unable to maintain effective internal controls in the future, we may not be able to produce timely
and accurate financial statements, which could adversely impact our investors’ confidence and our stock
price.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to evaluate and determine the
effectiveness of our internal controls over financial reporting, and to include a management report assessing the
effectiveness of our internal control over financial reporting. We expect that the requirements of these rules and
regulations will continue to increase our legal, accounting and financial compliance costs, making some activities
more time consuming and costly, placing significant demands on our financial and operational resources, as well
as our IT systems.
While we have determined that our internal control over financial reporting was effective as of December 31,
2015, we must continue to monitor and assess our internal control over financial reporting. Our control
environment may not be sufficient to remediate or prevent future material weaknesses or significant deficiencies
from occurring. A control system, no matter how well designed and operated, can provide only reasonable
assurance that the control system’s objectives will be met. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will
not occur or that all control issues and all instances of fraud will be detected.
If we identify future material weaknesses in our internal control over financial reporting, if we are unable to
continue to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, if we are unable to assert
that our internal control over financial reporting are effective, or if our independent registered public accounting
firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting,
investors may lose confidence in the accuracy and completeness of our financial reports and the market price of
our Class A common stock could be negatively affected, and we could become subject to investigations by the
stock exchange on which our securities are listed, the SEC or other regulatory authorities.
We use open source software in our platform that may subject our technology to general release or
require us to re-engineer our solutions, which may cause harm to our business.
We use open source software in connection with our services. From time to time, companies that incorporate
open source software into their products have faced claims challenging the ownership of open source software
and/or compliance with open source license terms. Therefore, we could be subject to suits by parties claiming
ownership of what we believe to be open source software or noncompliance with open source licensing terms.
Some open source software licenses require users who distribute or make available open source software as part
of their software to publicly disclose all or part of the source code to such software and/or make available any
derivative works of the open source code on unfavorable terms or at no cost. While we monitor our use of open
source software and try to ensure that none is used in a manner that would require us to disclose the source code
or that would otherwise breach the terms of an open source agreement, such use could nevertheless occur and
we may be required to release our proprietary source code, pay damages for breach of contract, re-engineer our
applications, discontinue sales in the event re-engineering cannot be accomplished on a timely basis or take other
remedial action that may divert resources away from our development efforts, any of which could adversely affect
our business, financial condition or operating results.
Any significant disruption to our e-commerce business could result in lost sales.
Online sales through gopro.com are subject to a number of risks. System interruptions or delays could cause
potential consumers to fail to purchase our products and could harm our reputation and brand. The operation of
our direct to consumer e-commerce business through gopro.com depends on the ability to maintain the efficient
and uninterrupted operation of online order-taking and fulfillment operations. Our e-commerce operations subject
us to certain risks that could have an adverse effect on our operating results, including risks related to the
computer systems that operate our website and related support systems, such as system failures, viruses,
computer hackers and similar disruptions. If we or our designated third party contractors are unable to maintain
23
and upgrade our e-commerce website or if we encounter system interruptions or delays, our operating results
could be adversely impacted.
If our estimates or judgments relating to our critical accounting policies and estimates prove to be
incorrect, our operating results could be adversely affected.
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
We base our estimates on historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, as provided in this Annual Report on Form 10-K in the section titled
“Management’s discussion and analysis of financial condition and results of operations.” The results of these
estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the
amount of revenue and expenses that are not readily apparent from other sources. Our operating results may be
adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions,
which could cause our operating results to fall below the expectations of securities analysts and investors,
resulting in a decline in our stock price. Significant assumptions and estimates used in preparing our consolidated
financial statements include those related to revenue recognition, inventory valuation, stock-based compensation
expense, warranty reserves, goodwill and acquired intangible assets, and accounting for income taxes including
deferred tax assets and liabilities.
If we fail to comply with environmental requirements, our business, financial condition, operating results
and reputation could be adversely affected.
We are subject to various environmental laws and regulations including laws governing the hazardous material
content of our products and laws relating to the collection of and recycling of electrical and electronic equipment.
Examples of these laws and regulations include the EU Restrictions of Hazardous Substances Directive, or the
RoHS Directive, and the EU Waste Electrical and Electronic Equipment Directive, or the WEEE Directive, as well
as the implementing legislation of the EU member states. Similar laws and regulations have been passed or are
pending in China, South Korea, Norway and Japan and may be enacted in other regions, including in the United
States, and we are, or may in the future be, subject to these laws and regulations.
The RoHS Directive and the similar laws of other jurisdictions ban the use of certain hazardous materials such as
lead, mercury and cadmium in the manufacture of electrical equipment, including our products. Although we have
policies and procedures in place requiring our contract manufacturers and major component suppliers to comply
with the RoHS Directive requirements, we cannot assure you that our manufacturers and suppliers consistently
comply with these requirements. In addition, if there are changes to these or other laws (or their interpretation) or
if new similar laws are passed in other jurisdictions, we may be required to re-engineer our products to use
components compatible with these regulations. This re-engineering and component substitution could result in
additional costs to us or disrupt our operations or logistics.
The WEEE Directive requires electronic goods producers to be responsible for the collection, recycling and
treatment of such products. Changes in interpretation of the directive may cause us to incur costs or have
additional regulatory requirements to meet in the future in order to comply with this directive, or with any similar
laws adopted in other jurisdictions. Our failure to comply with past, present and future similar laws could result in
reduced sales of our products, substantial product inventory write-offs, reputational damage, penalties and other
sanctions, which could harm our business and financial condition. We also expect that our products will be
affected by new environmental laws and regulations on an ongoing basis. To date, our expenditures for
environmental compliance have not had a material impact on our results of operations or cash flows and,
although we cannot predict the future impact of such laws or regulations, they will likely result in additional costs
and may increase penalties associated with violations or require us to change the content of our products or how
they are manufactured, which could have a material adverse effect on our business and financial condition.
The SEC’s conflict minerals rule has caused us to incur additional costs, could limit the supply and
increase the cost of certain minerals used in manufacturing our products, and could make us less
competitive in our target markets.
The SEC’s conflict minerals rule requires disclosure by public companies of the origin, source and chain of
custody of specified minerals, known as conflict minerals, that are necessary to the functionality or production of
products manufactured or contracted to be manufactured. The rule requires companies to obtain sourcing data
from suppliers, engage in supply chain due diligence, and file annually with the SEC a specialized disclosure
24
report on Form SD covering the prior calendar year. The rule could limit our ability to source at competitive prices
and to secure sufficient quantities of certain minerals (or derivatives thereof) used in the manufacture of our
products, specifically tantalum, tin, gold and tungsten, as the number of suppliers that provide conflict-free
minerals may be limited. We have and will continue to incur costs associated with complying with the rule, such as
costs related to the determination of the origin, source and chain of custody of the minerals used in our products,
the adoption of conflict minerals-related governance policies, processes and controls, and possible changes to
products or sources of supply as a result of such activities. Within our supply chain, we may not be able to
sufficiently verify the origins of the relevant minerals used in our products through the data collection and due
diligence procedures that we implement, which may harm our reputation. Furthermore, we may encounter
challenges in satisfying those customers that require that all of the components of our products be certified as
conflict-free, and if we cannot satisfy these customers, they may choose a competitor’s products. We continue to
investigate the presence of conflict materials within our supply chain.
Catastrophic events or political instability could disrupt and cause harm to our business.
Our headquarters is located in the San Francisco Bay Area of California, an area susceptible to earthquakes. A
major earthquake or other natural disaster, fire, act of terrorism or other catastrophic event in California or
elsewhere that results in the destruction or disruption of any of our critical business operations or information
technology systems could severely affect our ability to conduct normal business operations and, as a result, our
future operating results could be harmed. Our key manufacturing, supply and distribution partners have global
operations including in China, Singapore and the Netherlands as well as the United States. Political instability or
catastrophic events in any of those countries could adversely affect our business in the future, our financial
condition and operating results.
Risks related to Ownership of our Class A Common Stock
Our stock price has been and will likely continue to be volatile.
Since shares of our Class A common stock were sold in our IPO in July 2014 at a price of $24.00 per share, our
stock price has ranged from $16.89 to $98.47 through December 31, 2015. Our stock price may fluctuate in
response to a number of events and factors, such as quarterly operating results; changes in our financial
projections provided to the public or our failure to meet those projections; the public's reaction to our press
releases, other public announcements and filings with the SEC; significant transactions, or new features, products
or services by us or our competitors; changes in financial estimates and recommendations by securities analysts;
media coverage of our business and financial performance; the operating and stock price performance of, or other
developments involving, other companies that investors may deem comparable to us; trends in our industry; any
significant change in our management; and general economic conditions.
In addition, the stock market in general, and the market prices for companies in our industry, have experienced
volatility that often has been unrelated to operating performance. These broad market and industry fluctuations
may adversely affect the price of our stock, regardless of our operating performance. Price volatility over a given
period may cause the average price at which we repurchase our own stock to exceed the stock’s price at a given
point in time. Volatility in our stock price also impacts the value of our equity compensation, which affects our
ability to recruit and retain employees. In addition, some companies that have experienced volatility in the market
price of their stock have been subject to securities class action litigation. We have been the target of this type of
litigation and may continue to be a target in the future. Securities litigation against us could result in substantial
costs and divert our management’s attention from other business concerns, which could harm our business.
If we fail to meet expectations related to future growth, profitability, or other market expectations, our stock price
may decline significantly, which could have a material adverse impact on investor confidence and employee
retention. A sustained decline in our stock price and market capitalization could lead to impairment charges.
The dual class structure of our common stock has the effect of concentrating voting control with our CEO
and other directors and their affiliates.
Our Class B common stock has 10 votes per share, and our Class A common stock has one vote per share.
Stockholders who hold shares of Class B common stock hold approximately 78% of the voting power of our
outstanding capital stock as of December 31, 2015 with Mr. Woodman, our CEO, holding approximately 77% of
the outstanding voting power. Mr. Woodman is able to control all matters submitted to our stockholders, including
the election of directors, amendments of our organizational documents and any merger, consolidation, sale of all
25
or substantially all of our assets or other major corporate transaction. This concentrated control could delay, defer,
or prevent a change of control, merger, consolidation, or sale of all or substantially all of our assets that our other
stockholders support, or conversely this concentrated control could result in the consummation of such a
transaction that our other stockholders do not support. This concentrated control could also discourage a potential
investor from acquiring our Class A common stock due to the limited voting power of such stock relative to the
Class B common stock and might harm the trading price of our Class A common stock.
If securities analysts do not publish research or publish inaccurate or unfavorable research about our
business, our stock price and trading volume could decline.
The trading market for our Class A common stock depends in part on the research and reports that securities or
industry analysts publish about us or our business. If one or more of the analysts who cover us downgrade our
stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. If one
or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for
our stock could decrease, which might cause our stock price and trading volume to decline.
Delaware law and provisions in our restated certificate of incorporation and amended and restated
bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price
of our Class A common stock.
Our status as a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law
may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination
with an interested stockholder for a period of three years after the person becomes an interested stockholder,
even if a change in control would be beneficial to our existing stockholders. In addition, our restated certificate of
incorporation and amended and restated bylaws contain provisions that may make the acquisition of our company
more difficult without the approval of our board of directors, or otherwise adversely affect the rights of the holders
of our Class A and Class B common stock, including the following:
• our board of directors is not currently classified, but at such time as all shares of our Class B common stock
have been converted into shares of our Class A common stock, our board of directors will be classified into
three classes of directors with staggered three-year terms;
• so long as any shares of our Class B common stock are outstanding, special meetings of our stockholders
may be called by the holders of 10% of the outstanding voting power of all then outstanding shares of stock, a
majority of our board of directors, the chairman of our board of directors, our chief executive office or our
president;
• when no shares of our Class B common stock are outstanding, only the chairman of our board of directors,
our chief executive officer, our president or a majority of our board of directors will be authorized to call a
special meeting of stockholders;
• our stockholders may only take action at a meeting of stockholders and not by written consent;
• vacancies on our board of directors may be filled only by our board of directors and not by stockholders;
• directors may be removed from office with or without cause so long as our board of directors is not classified,
and thereafter directors may be removed from office only for cause;
• our restated certificate of incorporation provides for a dual class common stock structure in which holders of
our Class B common stock have the ability to control the outcome of matters requiring stockholder approval,
even if they own significantly less than a majority of the outstanding shares of our Class A and Class B
common stock, including the election of directors and significant corporate transactions, such as a merger or
other sale of our company or its assets;
• our restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be
established, and shares of which may be issued, by our board of directors without stockholder approval and
which may contain voting, liquidation, dividend and other rights superior to those of our Class A and Class B
common stock; and
• advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring
matters before an annual meeting of stockholders.
26
We do not intend to pay dividends in the foreseeable future.
We currently intend to retain any future earnings to finance the operation and expansion of our business, and we
do not expect to declare or pay any dividends in the foreseeable future. As a result, you may only receive a return
on your investment in our Class A common stock if the trading price of our Class A common stock increases.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
As of December 31, 2015, we leased office facilities around the world totaling approximately 475,000 square feet,
including approximately 250,000 square feet for our corporate headquarters in San Mateo, California.
All of our properties are currently leased. We believe our existing facilities are adequate to meet our current
requirements. If we were to require additional space, we believe we will be able to obtain such space on
acceptable, commercially reasonable terms. See Note 10 to the Notes to Consolidated Financial Statements of
this Annual Report on Form 10-K for more information about our lease commitments.
Item 3. Legal Proceedings
On January 13, 2016, a purported shareholder class action lawsuit was filed in the United States District Court for
the Northern District of California against the Company and certain of our officers. Similar complaints were filed on
January 21, 2016, February 4, 2016 and February 19, 2016. Each of the complaints purports to bring suit on
behalf of shareholders who purchased our publicly traded securities between July 21, 2015 and January 13, 2016
for the first three complaints and between November 26, 2014 and January 13, 2016 for the last filed complaint.
Each complaint purports to allege that defendants made false and misleading statements about our business,
operations and prospects in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The
complaint seeks unspecified compensatory damages, fees and costs.
On January 25, 2016, a purported shareholder class action lawsuit was filed in the Superior Court of the State of
California, County of San Mateo, against the Company, certain of our current and former directors and executive
officers and underwriters of our IPO. The complaint purports to bring suit on behalf of shareholders who
purchased our stock pursuant or traceable to the Registration Statement and Prospectus issued in connection
with our IPO and purports to allege claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933. The
complaint seeks unspecified damages and other relief.
Due to inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of these matters. We
are unable at this time to determine whether the outcome of the litigation would have a material impact on our
results of operations, financial condition or cash flow.
We are currently and in the future may continue to be subject to litigation, claims and assertions incidental to our
business, including patent infringement litigation and product liability claims, as well as other litigation of a non-
material nature in the ordinary course of business. We believe that the outcome of any existing litigation, either
individually or in the aggregate, will not have a material impact on our business, financial condition, results of
operations or cash flows.
Item 4. Mine Safety Disclosures
None.
27
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Our Class A common stock is listed on the NASDAQ Global Select Market ("NASDAQ") under the symbol
“GPRO”. Our Class B common stock is not listed nor traded on any stock exchange. The following table sets forth
the high and low closing sale price per share of our Class A common stock, as reported on the NASDAQ for the
periods indicated:
First Quarter
Second Quarter (1)
Third Quarter
Fourth Quarter
2015
2014
High
$66.87
$59.41
$64.74
$30.65
Low
$37.95
$40.89
$29.67
$16.89
High
—
$41.19
$96.45
$98.47
Low
—
$28.65
$36.10
$53.64
(1) The period reported for the second quarter of 2014 is from June 26, 2014 through June 30, 2014.
Holders
As of January 31, 2016, there were 49 holders of record of our Class A common stock and 67 holders of record of
our Class B common stock.
Dividends
We have not declared or paid any cash dividends on our capital stock in the two most recent fiscal years. We do
not currently intend to pay any cash dividends on our Class A or Class B common stock in the foreseeable future.
Securities Authorized for Issuance under Equity Compensation Plans
The information required by this item will be included in an amendment to this Annual Report on Form 10-K or
incorporated by reference from our Proxy Statement to be filed with the SEC for our 2016 Annual Meeting of
Stockholders within 120 days after the end of our fiscal year ended December 31, 2015.
28
Performance Graph
The graph below compares the cumulative total return on our Class A common stock with that of the S&P 500
Index and the S&P 500 Consumer Durables Index. The graph assumes $100 was invested (with reinvestment of
all dividends, as applicable) at the close of market on June 26, 2014 in the Class A common stock of GoPro, Inc.,
the S&P 500 Index and the S&P 500 Consumer Durables Index, and its relative performance is tracked through
December 31, 2015. Note that historic stock price performance is not intended to be indicative of future stock
price performance.
Sales of Unregistered Securities
Not applicable.
Use of Proceeds from Registered Securities
On June 25, 2014, the SEC declared our registration statement on Form S-1 (File No. 333-196083) effective for
our IPO. On November 19, 2014, the SEC declared our registration statement on Form S-1 (File No. 333-200038)
effective for our follow-on offering. There has been no material change in the planned use of proceeds from our
initial public offering or our follow-on offering as described in our final prospectuses filed with the SEC on June 26,
2014 and November 17, 2014, respectively.
29
Issuer Purchases of Equity Securities
Share repurchase activity for our Class A and Class B common stock during the three months ended December
31, 2015 was as follows (in thousands, except per share amounts):
Period
October 1 - 31, 2015
November 1 - 30, 2015
December 1 - 31, 2015
Total
Total Number of
Shares
Repurchased (1)
Average Price Paid
per Share (2)
—
1,545 $
—
1,545 $
—
23.05
—
23.05
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
Approximate Dollar
Value of Shares
that May Yet Be
Purchased Under
the Plans (1)
— $
1,545 $
— $
1,545
300,000
264,387
264,387
(1) Represents shares repurchased pursuant to the stock repurchase program approved by our board of directors on
September 30, 2015, authorizing the Company to repurchase up to $300.0 million of common stock.
(2) Represents the average price paid per share, exclusive of commissions.
Item 6. Selected Consolidated Financial Data
You should read the selected consolidated financial data below in conjunction with “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements, related
notes and other financial information included elsewhere in this Annual Report on Form 10-K. The consolidated
statements of operations data and the balance sheet data for the years ended, and as of, December 31, 2015,
2014, 2013, 2012, and 2011 are derived from our audited consolidated financial statements.
(in thousands, except per share amounts)
Consolidated statements of operations data:
Revenue
Gross profit
Gross margin
Operating income
Net income
Net income per share:
Basic
Diluted
2015
$ 1,619,971
$ 673,214
2014
$ 1,394,205
$ 627,235
Year ended December 31,
2013
$ 985,737
$ 361,784
2012
$ 526,016
$ 227,486
41.6%
45.0%
54,748
36,131
$ 187,035
$ 128,088
0.27
0.25
$
$
1.07
0.92
$
$
$
$
$
$
$
$
36.7%
98,703
60,578
$
$
43.2%
53,617
32,262
0.54 $
0.47 $
0.07
0.07
Other financial information:
Adjusted EBITDA (1)
Non-GAAP net income (2)
Non-GAAP diluted earnings per share (2)
$ 179,309
111,564
$
0.76
$
$ 293,380
$ 188,913
1.32
$
$ 133,726 $
$
$
68,826
0.50
75,288
—
—
2011
$ 234,238
$ 122,555
$
$
$
$
$
52.3%
38,779
24,612
0.26
0.24
52,873
—
—
(1) We define adjusted EBITDA as net income (loss) adjusted to exclude the impact of: provision for income taxes, interest income, interest
expense, depreciation and amortization, POP display amortization, and stock-based compensation.
(2) We define non-GAAP net income as net income (loss) adjusted to exclude stock-based compensation, acquisition-related costs, and
taxes related to the tax effect of these adjustments. Acquisition-related costs include the amortization of acquired intangible assets, as
well as third-party transaction costs for legal and other professional services. Non-GAAP earnings per share considers the conversion of
the redeemable convertible preferred stock into shares of common stock as though the conversion had occurred at the beginning of the
period and the initial public offering shares issued July 2014 as if they had been outstanding since the beginning of the period.
See "Non-GAAP Financial Measures" in Item 7. MD&A below for additional information and a reconciliation of net income to Adjusted EBITDA
and net income to non-GAAP net income, and a reconciliation of the shares used in the calculation of non-GAAP diluted earnings per share.
30
(in thousands)
Consolidated balance sheet data:
Cash, cash equivalents and marketable securities
Inventory
Working capital
Total assets
Total indebtedness
Redeemable convertible preferred stock
Total stockholders’ equity (deficit)
2015
2014
As of December 31,
2013
2012
$
474,058 $
188,232
538,066
1,102,976
—
—
772,033
422,256 $
153,026
564,274
917,691
—
—
641,204
101,410 $
111,994
57,446
439,671
113,612
77,198
(5,366)
36,485 $
60,412
69,618
246,665
129,395
77,138
(79,741)
2011
29,098
18,649
44,252
104,416
380
91,146
(24,095)
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion and analysis of our financial condition and results of operations should be read in
conjunction with our consolidated financial statements, related notes and other financial information appearing
elsewhere in this Annual Report on Form 10-K. In addition to historical consolidated financial information, the
following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual
results could differ materially from those discussed in the forward-looking statements as a result of a variety of
factors, including but not limited to, those discussed in “Risk Factors” and elsewhere in this Annual Report on
Form 10-K. Our MD&A is organized as follows:
• Overview. Discussion of our business and overall analysis of financial and other highlights affecting the
company in order to provide context for the remainder of MD&A.
• Components of Our Results of Operations. Description of the items contained in each operating revenue and
expense caption in the consolidated statements of operations.
• Results of Operations. Analysis of our financial results comparing 2015 to 2014 and 2014 to 2013.
• Liquidity and Capital Resources. Analysis of changes in our balance sheets and cash flows, and discussion of
our financial condition and potential sources of liquidity.
• Contractual Commitments. Overview of contractual obligations, including expected payment schedule, off-
balance sheet arrangements and indemnifications as of December 31, 2015.
• Critical Accounting Policies and Estimates. Accounting estimates that we believe are most important to
understanding the assumptions and judgments incorporated in our reported financial results and forecasts.
• Non-GAAP Financial Measures. A presentation of results reconciling GAAP to non-GAAP adjusted measures.
Overview
GoPro is transforming the way people visually capture and share their lives. We do this by enabling people to
capture compelling, immersive photo and video content of themselves participating in their day to day life as well
as their favorite activities. Our consumers include some of the world’s most active and passionate people. The
volume and quality of their shared GoPro content, coupled with their enthusiasm for our brand, drive awareness
and demand for our products. To date, our cameras (capture devices) and mountable and wearable accessories
have generated substantially all of our revenue. We sell our products globally through retailers, wholesale
distributors, and on our website. As of December 31, 2015, our products were sold to customers in more than 100
countries and through more than 40,000 retail outlets.
31
The following is a summary of measures presented in our consolidated financial statements and key metrics used
to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions.
40%
(71)%
(72)%
(73)%
63%
27%
(39)%
(41)%
(42)%
(dollars in thousands, except per share
amounts)
Revenue
Gross margin (1)
Operating expenses
Operating income (loss)
Net income (loss)
Diluted net income (loss) per share
Cash flow from operations
Key business metrics:
Three months ended December 31,
Year ended December 31,
2015
2014
Change
2015
2014
Change
$ 436,603 $ 633,913
(31)% $ 1,619,971 $ 1,394,205
29.4%
47.9%
(1,850) bps
41.6%
45.0%
16%
(340) bps
$ 169,805 $ 130,125
$
$
$
(41,294) $ 173,688
(34,451) $ 122,260
(0.25) $
0.83
$ 20,848 $
43,190
(124)% $
30% $ 618,466 $ 440,200
54,748 $ 187,035
36,131 $ 128,088
0.92
0.25 $
(130)% $
(52)% $ 157,611 $
(128)% $
96,922
Units shipped(2)
Adjusted EBITDA(3)
Non-GAAP net income (loss)(4)
$
Non-GAAP diluted earnings (loss) per share(4) $
$
2,002
2,385
(9,268) $ 202,854
(11,396) $ 144,898
(0.08) $
0.99
6,584
(16)%
5,180
(105)% $ 179,309 $ 293,380
111,564 $ 188,913
(108)% $
1.32
(108)% $
0.76 $
(1) One basis point (bps) is equal to 1/100th of 1%
(2) Represents the number of individually packaged capture device units that are shipped during a reporting period, net of any returns. We
monitor units shipped on a daily basis as it is a key indicator of revenue trends for a reporting period. We use units shipped to help optimize
our fulfillment operations and shipment allocations in order to better maintain operating efficiencies and improve customer satisfaction.
(3) We define adjusted EBITDA as net income (loss) adjusted to exclude the impact of: provision for income taxes, interest income, interest
expense, depreciation and amortization, POP display amortization, and stock-based compensation.
(4) We define non-GAAP net income as net income (loss) adjusted to exclude stock-based compensation, acquisition-related costs, and taxes
related to the tax effect of these adjustments. Acquisition-related costs include the amortization of acquired intangible assets, as well as
third-party transaction costs for legal and other professional services. Non-GAAP earnings per share considers the conversion of the
redeemable convertible preferred stock into shares of common stock as though the conversion had occurred at the beginning of the period.
Reconciliations of non-GAAP adjusted measures are presented under "Non-GAAP Financial Measures" below.
Fourth quarter 2015 snapshot
For the fourth quarter of 2015, we recorded revenue of $436.6 million, down 31% year-over-year, operating loss
of $41.3 million, down 124% year-over-year, and diluted net loss per share of $0.25, down 130% year-over-year.
We shipped 2.0 million capture devices in the fourth quarter of 2015, compared to 2.4 million in the same period in
2014. Fourth quarter 2015 revenue reflected global retail sell-through trends for our capture devices that were
weaker than fourth quarter 2014, as well as price protection related charges of approximately $21 million incurred
in connection with the reduction of the HERO4 Session selling price in December. In addition, our stronger fourth
quarter revenue in 2014 benefited from the introduction of our HERO4 Black and Silver capture devices just prior
to the holiday season, while in 2015 our new product introductions occurred earlier in the year. Gross margin of
29.4% and operating loss of $41.3 million were negatively impacted by lower units shipped year-over-year, the
repricing of HERO4 Session, and product realignment charges of approximately $57 million to cost of revenue
related to excess purchase commitments, inventory and obsolete tooling assets in connection with our decision to
end-of-life our entry level HERO line of capture devices to simplify our product offering.
2015 compared to 2014 highlights
For full year 2015, we achieved revenue of $1,620 million, up 16% year-over-year, operating income of $54.7
million, down 71% year-over-year, and diluted net income per share of $0.25, down 73% year-over-year. We
shipped 6.6 million capture devices in 2015, up 27% year-over-year, for approximately 20 million cumulative
devices shipped. Our year-over-year revenue growth was enabled by the overall expanded distribution of our
products internationally in EMEA and APAC. Sales outside of the United States represented 52% of our revenue
in 2015 compared to 43% in 2014. Full year revenue also reflected charges of approximately $40 million for price
protection and marketing development funds issued in connection with reductions of the HERO4 Session selling
32
price in September and December. Full year gross margin of 41.6% and operating income were adversely
impacted by decreased unit volumes in the latter part of the year, the repricing of HERO4 Session, and the
product realignment charges of $57 million described above. A substantial portion of our year-over-year growth in
operating expenses was primarily attributable to higher cash-based personnel-related expenses of approximately
$65.7 million, resulting from an approximate 60% growth in our global headcount, and higher advertising and
promotional activity costs of $30.8 million.
We generated cash flows from operating activities of $157.6 million for 2015. We ended the year with cash and
cash equivalents and marketable securities of $474.1 million, up 12% from a year ago. We purchased $51.2
million of property and equipment, up 88% year-over-year, and completed acquisitions amounting to $70.2 million.
On September 30, 2015, our board of directors authorized a program to repurchase up to $300 million of our
common stock. During the fourth quarter of 2015, we spent $35.6 million to repurchase shares of our Class A
common stock. The stock repurchase program will expire in September 2016 and is subject to termination or
extension at any time.
Looking Ahead to 2016
We currently estimate our full year 2016 revenue to be in the range of $1.35 billion to $1.5 billion. We expect our
revenue and gross margin percentage in the first quarter of 2016 to decrease year-over-year compared to the first
quarter of 2015. Gross margin will fluctuate in future periods based upon product, distributor, and geographical
mix. We expect total operating expenses will grow sequentially throughout the year, with a majority of this growth
occurring in research and development, as well as marketing.
In January 2016, we adopted a restructuring plan designed to better align the Company's resources to key growth
initiatives and reduced our global workforce by approximately 7%. We estimate that aggregate restructuring
expenses of approximately $5 million to $10 million will be incurred in the first quarter of 2016, substantially all of
which will be cash-based severance costs. We intend to reinvest savings related to the restructuring into our most
important priorities to drive future revenue growth.
On February 25, 2016, we entered into definitive agreements to acquire two privately-held companies whose
mobile video editing applications complement our strategy of enabling content managing, editing and sharing
across platforms. These applications enable editing solutions ranging from high quality automatically created edits
to advanced manual edits for both customers of our capture devices and also smartphone users who may be fans
of our brand but have yet to purchase a GoPro product or benefit from a GoPro content-enabling solution. The
aggregate purchase price of these acquisitions includes cash consideration of approximately $105 million as well
as certain deferred consideration subject to specified future employment conditions. The transactions are
expected to close in the first half of 2016 subject to the satisfaction of customary closing conditions.
Factors affecting performance
We believe that our future success will be dependent on many factors, including those further discussed below.
While these areas represent opportunities for us, they also represent challenges and risks that we must
successfully address in order to continue the growth of our business and improve our results of operations.
Investing in research and development. We believe that our performance is significantly dependent on the
investments we make in research and development and that we must continually develop and introduce
innovative new products, enhance existing products and effectively stimulate customer demand for existing and
future products. If we fail to innovate and enhance our product offerings, our brand, market position and revenue
may be adversely affected. Further, if our research and development efforts are not successful, we will not
recover the investments that we make in this aspect of our business.
Investing in sales and marketing. We intend to continue investing significant resources in our marketing,
advertising and brand management efforts. Sales and marketing investments will often occur in advance of any
sales benefits from these activities, and it may be difficult for us to determine if we are efficiently allocating our
resources in this area.
Leveraging software, services, and entertainment content. We intend to continue to increase our investment in the
development of software and services, as well as entertainment related initiatives. We believe we have significant
opportunities to establish new revenue streams from these software, services and entertainment investments.
However, we do not have significant experience deriving revenue from the distribution of GoPro content, and we
33
cannot be assured that these ongoing investments, which will occur before any material revenue contribution is
received, will result in increased revenue or profitability.
Expanding our total addressable market and growing internationally. Our long-term growth will depend in part on
our continued ability to expand our customer base and our presence in international markets. We intend to
broaden our user base to include a more diverse group of consumers by investing to provide both innovative and
easy-to-use capture devices as well as intuitive and simple software tools in the future that enable the seamless
sharing of content. We plan to increase our presence globally through the active promotion of our brand, the
formation of strategic partnerships, the introduction of new products and the growth of our international sales
channel.
Seasonality. Historically, we have experienced the highest levels of revenue in the fourth quarter of the year,
coinciding with the holiday shopping season in the United States and Europe. Timely and effective product
introductions and forecasting, whether just prior to the holiday season or otherwise, are critical to our operations
and financial performance.
Components of Our Results of Operations
Revenue. Our revenue is primarily comprised of product revenue, net of returns and sales incentives. Product
revenue is derived from the sale of our capture devices (cameras) and accessories directly to retailers, as well as
through our network of domestic and international distributors, and through gopro.com. We grant limited rights to
return product for certain large retailers and distributors. Upon shipment of our product to customers with such
rights, we reduce revenue equal to the estimated future returns related to the current period product revenue.
Additionally, we offer price protection discounts to certain customers when new capture devices are released. We
record price protection discounts, as a reduction to revenue, based on shipments subject to price protection.
Discounts recorded are based on an evaluation of inventory held by the customer at the time the price protection
offer is extended.
See "Critical Accounting Policies and Estimates" below and Note 2 to the consolidated financial statements for
information regarding our revenue recognition policy.
Cost of revenue. Our cost of revenue primarily consists of product costs, including costs of contract
manufacturing for production, third-party logistics and procurement costs, warranty repair costs, tooling equipment
depreciation, excess and obsolete inventory write-downs, amortization of acquired developed technology, and
certain allocated costs related to manufacturing management, facilities, and personnel-related expenses.
Operating expenses. We classify our operating expenses into three categories: research and development,
sales and marketing and general and administrative.
Research and development. Our research and development expense consists primarily of personnel-related
costs, including salaries, stock-based compensation and employee benefits. Research and development expense
also includes consulting and outside professional services costs, materials, depreciation and other supporting
overhead expenses associated with the development of our product and service offerings, as well as the
amortization of certain acquired intangible assets. All research and development costs are expensed as incurred.
Sales and marketing. Our sales and marketing expense represents the largest component of our operating
expense and consists primarily of advertising and marketing promotions of our products and services and
personnel-related costs, as well as POP display expenses and related amortization, sales commissions, trade
show and event costs, sponsorship costs, consulting and contractor expenses, and allocated overhead costs.
General and administrative. Our general and administrative expense consists primarily of personnel-related costs,
including salaries, stock-based compensation and employee benefits for our finance, legal, human resources,
information technology, and administrative personnel. The expense also includes professional service costs
related to accounting, tax, legal services, and allocated facilities, depreciation, and other supporting overhead
expenses.
34
Results of Operations
The following table sets forth the components of our consolidated statements of operations for each of the periods
presented and each of the periods presented as a percentage of revenue:
(dollars in thousands)
2015
2014
2013
Year ended December 31,
Dollars
$ 1,619,971
946,757
673,214
% of
Revenue
Dollars
% of
Revenue
Dollars
100% $ 1,394,205
766,970
58
627,235
42
100% $ 985,737
623,953
55
361,784
45
% of
Revenue
100%
63
37
Revenue
Cost of revenue(1)
Gross profit
Operating expenses:
Research and development(1)
Sales and marketing(1)
General and administrative(1)
Total operating expenses
Operating income
Other expense, net
Income before income taxes
Income tax expense
Research and development
Sales and marketing
General and administrative
Total stock-based compensation
$
Revenue
(in thousands)
Units shipped
Americas
Percentage of revenue
EMEA
Percentage of revenue
APAC
Percentage of revenue
Total revenue
241,694
268,939
107,833
618,466
54,748
(2,163)
52,585
16,454
36,131
1,492
18,024
13,762
47,402
80,680
15
17
7
38
3
—
3
1
2% $
151,852
194,377
93,971
440,200
187,035
(6,060)
180,975
52,887
128,088
$
$
835
11,640
10,428
48,496
71,399
Year ended December 31,
2015
6,584
2014
5,180
2013
3,849
$
$
$
868,772
54%
535,260
33%
215,939
$
$
$
890,352
64%
371,197
27%
132,656
13%
9%
$ 1,619,971
$ 1,394,205
$
$
$
$
557,285
56%
322,226
33%
106,226
11%
985,737
11
14
7
32
13
—
13
4
9% $
73,737
157,771
31,573
263,081
98,703
(7,374)
91,329
30,751
60,578
7
16
4
27
10
(1)
9
3
6%
$
$
690
3,003
5,670
1,524
10,887
2015 vs 2014 2014 vs 2013
% Change
% Change
27%
(2)%
44%
63%
16%
35%
60%
15%
25%
41%
Net income
$
(1) Includes stock-based compensation expense as follows:
Cost of revenue
$
2015 Compared to 2014. The year-over-year growth in revenues and units shipped during 2015 compared to
2014 was primarily driven by the transition from our prior generation products to the HERO4 line of capture
devices, including HERO4 Session, and the entry-level HERO capture devices. The year-over-year increase in
the EMEA and APAC regions resulted from the continued expansion of our business and distribution networks in
international markets. The year-over-year decrease in the Americas region resulted primarily from the launch of
35
new products in 2014 just prior to the holiday shopping season, which were initially shipped to this region. The
average selling price of units shipped, defined as total revenue divided by unit shipments, decreased
approximately 9% in 2015 due primarily to a slight change in product mix toward the entry-level HERO capture
devices, as well as increased charges of approximately $73 million for price protection and marketing
development funds, of which approximately $40 million related to reductions of the HERO4 Session selling price.
2014 Compared to 2013. The year-over-year growth in revenues and units shipped during 2014 compared to
2013 was primarily due to increased demand for our HERO3+ capture devices and the release of our HERO4
capture devices in the third quarter of 2014. The average selling price of units shipped increased 5% in 2014 due
to a favorable shift in mix to the HERO4 Silver and Black edition capture devices. Our revenue in 2014 also
increased, to a lesser extent, as a result of an increase in stand-alone accessory shipments.
Cost of revenue and gross margin
(dollars in thousands)
Cost of revenue
Stock-based and acquisition-related costs
Total cost of revenue
Gross profit
Gross margin
Year ended December 31,
2015
944,304
2,453
946,757
673,214
$
$
$
2014
765,247
1,723
766,970
627,235
$
$
$
2013
623,321
632
623,953
361,784
$
$
$
41.6%
45.0%
36.7%
2015 vs 2014 2014 vs 2013
% Change
% Change
23%
42%
23%
7%
(340) bps
23%
173%
23%
73%
830 bps
2015 Compared to 2014. Gross margin decreased by 340 basis points (bps) compared with 2014. The year-over-
year decrease in gross margin was primarily attributable to a 260 bps charge for product realignment costs of
approximately $57 million in the fourth quarter of 2015 for excess purchase commitments, inventory and obsolete
tooling assets. In addition, gross margin decreased due to a shift in product mix toward lower margin entry-level
HERO capture devices partially offset by continued improvements in production and supply chain costs. The year-
over-year effect of stock-based compensation and acquisition-related costs on gross margin was insignificant.
2014 Compared to 2013. Gross margin increased by 830 basis points compared with 2013. The year-over-year
increase in gross margin was primarily due to an 11% decrease in the unit costs of our HERO3+ and HERO4
capture devices compared to our HERO3 capture devices, and to a lesser extent, a 5% increase in the average
selling price of units shipped due to a favorable shift in mix to our HERO4 Black and Silver capture devices.
Operating expenses
Research and development
(dollars in thousands)
Research and development
Stock-based and acquisition-related costs
Total research and development expenses
2015
220,516
21,178
241,694
$
$
2014
140,315
11,537
151,852
$
$
$
$
2013
70,631
3,106
73,737
Year ended December 31,
2015 vs 2014 2014 vs 2013
% Change
% Change
57%
84%
59%
99%
271%
106%
Percentage of revenue
14.9%
10.9%
7.5%
2015 Compared to 2014. The year-over-year growth of $89.8 million in R&D expense in 2015 compared to 2014
was primarily attributable to higher cash-based personnel-related costs of $35.8 million, resulting from a 63%
growth in global headcount from December 31, 2014 to December 31, 2015, as well as increases in consulting
and outside professional service costs of $27.1 million and increases in materials, depreciation, and other
supporting overhead expenses of $16.4 million. Stock-based compensation increased $6.4 million in 2015 due to
higher employee headcount. Acquisition-related costs increased $3.1 million from intangible asset amortization
associated with acquisitions completed during 2015. The growth in R&D expense in absolute terms, and as a
percentage of revenue, was primarily driven by investments to support the development of our next generation
capture devices, drone-related products, content-management software solutions, and entertainment related
initiatives.
36
2014 Compared to 2013. The year-over-year growth of $78.1 million in R&D expense in 2014 compared to 2013
was primarily attributable to higher cash-based personnel-related costs of $31.3 million, resulting from a 66%
increase in headcount from December 31, 2013 to December 31, 2014, as well as increases in consulting and
outside professional service costs of $18.0 million and increases in materials, depreciation, and other supporting
overhead expenses of $17.5 million. Stock-based compensation increased $8.6 million due to higher employee
headcount. Higher expenses in 2014 were primarily driven by investments in the development of our HERO4 and
HERO line of capture devices, our software and services platform development, and research and development
related to future products.
Sales and marketing
(dollars in thousands)
Sales and marketing
Stock-based and acquisition-related costs
Total sales and marketing expenses
2015
255,045
13,894
268,939
$
$
2014
183,807
10,570
194,377
$
$
2013
151,959
5,812
157,771
$
$
Year ended December 31,
2015 vs 2014 2014 vs 2013
% Change
% Change
39%
31%
38%
21%
82%
23%
Percentage of revenue
16.6%
13.9%
16.0%
2015 Compared to 2014. The year-over-year growth of $74.6 million in sales and marketing expense in 2015
compared to 2014 was primarily attributable to higher advertising and promotional activity costs of $30.8 million
associated with expanded corporate branding campaigns initiated in the second half of 2015, as well as increases
in cash-based personnel-related costs of $24.4 million, resulting from a 67% growth in global headcount from
December 31, 2014 to December 31, 2015, increases in allocated facilities, depreciation and other supporting
overhead expenses of $7.5 million and increases in consulting and outside professional service costs of $6.2
million. Stock-based compensation increased $3.3 million in 2015 due to higher employee headcount.
2014 Compared to 2013. The year-over-year growth of $36.6 million in sales and marketing expense in 2014
compared to 2013 was primarily attributable to higher cash-based personnel-related costs of $16.8 million,
resulting from a 45% increase in headcount from December 31, 2013 to December 31, 2014, as well as increases
in facility and information technology support costs of $5.8 million and increases in advertising and promotional
activity costs of $2.1 million. Stock-based compensation increased $4.8 million due to higher employee
headcount.
General and administrative
(dollars in thousands)
General and administrative
Stock-based and acquisition-related costs
Total general and administrative expenses
2015
59,308
48,525
107,833
$
$
$
$
2014
45,475
48,496
93,971
$
$
2013
30,049
1,524
31,573
Year ended December 31,
2015 vs 2014 2014 vs 2013
% Change
% Change
30%
—%
15%
51%
3,082%
198%
Percentage of revenue
6.7%
6.7%
3.2%
37
2015 Compared to 2014. The year-over-year growth of $13.9 million in general and administrative expense in
2015 compared to 2014 was primarily attributable to increases in consulting and outside professional service
costs of $5.9 million, as well as an increase in cash-based personnel-related costs of $5.5 million resulting from a
41% growth in global headcount from December 31, 2014 to December 31, 2015 and increases in allocated
facilities, depreciation and other supporting overhead expenses of $2.3 million. Stock-based compensation
expenses decreased $1.1 million in 2015 due to a decrease in expense attributable to CEO RSUs of $9.0 million,
partially offset by increases of $7.9 million for long-term incentive awards. (See Note 6 to the Notes to
Consolidated Financial Statements of this Annual Report on Form 10-K.) Acquisition-related costs increased $1.1
million due to increased acquisition activity in 2015.
2014 Compared to 2013. The year-over-year growth of $62.4 million in general and administrative expense in
2014 compared to 2013 was primarily attributable to higher cash-based personnel-related costs of $10.2 million,
resulting from a 41% increase in headcount from December 31, 2013 to December 31, 2014, as well as increases
in allocated facilities, depreciation and other supporting overhead expenses of $2.4 million and increases in
consulting and outside professional service costs of $1.5 million. Stock-based compensation increased $47.0
million, of which $38.3 million was attributable to the vesting of CEO RSUs and the remainder was due to higher
employee headcount. (See Note 6 to the Notes to Consolidated Financial Statements of this Annual Report on
Form 10-K.)
Other expense, net
Other expense, net for 2015 of $2.2 million decreased $3.9 million from 2014, primarily due to lower interest
expense and debt related costs of $4.5 million as a result of our repayment of outstanding debt in 2014, coupled
with a $1.3 million increase in interest income associated with higher cash equivalents and marketable securities
throughout 2015, partially offset by losses of $1.9 million associated with foreign exchange rate movements and
other expenses. There were no material changes to other expense, net in 2014 as compared to 2013.
Provision for income taxes
(dollars in thousands)
Income tax expense
Effective tax rate
Year ended December 31,
2015
16,454
$
2014
52,887
$
2013
30,751
$
2015 vs 2014 2014 vs 2013
% Change
% Change
(69)%
72%
31.3%
29.2%
33.7%
2015 compared to 2014. Income tax expense for 2015 of $16.5 million decreased $36.4 million from 2014,
primarily due to lower pre-tax income. Our higher effective tax rate for 2015 compared to 2014 was due to higher
U.S. taxable income and lower international taxable income, which resulted from incurring a higher proportion of
our 2015 operating expenses in foreign jurisdictions. Additionally, our effective tax rate for 2015 was lower than
the federal statutory rate of 35% primarily due to benefits from research and development tax credits. (See Note
8 to the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K.)
2014 compared to 2013. Income tax expense for 2014 was $52.9 million compared to $30.8 million for 2013. Our
effective tax rate for 2014 was lower than for 2013 and the federal statutory rate of 35% primarily due to the
expansion of our operations into international jurisdictions that have lower overall statutory and withholding rates,
and increased benefit from research and development tax credits in federal and state jurisdictions.
38
Quarterly results of operations
The following table sets forth our unaudited quarterly consolidated results of operations for each of the eight
quarterly periods ended December 31, 2015. These unaudited quarterly results of operations have been prepared
on the same basis as our audited consolidated financial statements and, in our opinion, reflect all normal recurring
adjustments necessary for the fair statement of the results of operations for these periods. You should read the
following tables in conjunction with our consolidated financial statements and the related notes included
elsewhere in this Annual Report on Form 10-K. The results of operations for any quarter are not necessarily
indicative of the results of operations for a full year or any future periods.
(in thousands, except per share
amounts)
Consolidated statement of operations
data:
Revenue(2)
Cost of revenue(1)(3)
Gross profit
Operating expenses:
Research and development(1)
Sales and marketing(1)
General and administrative(1)(4)
Total operating expenses
Operating income (loss)
Other income (expense), net
Income (loss) before income taxes
Income tax (benefit) expense
Dec. 31,
2015
Sept. 30,
2015
June 30,
2015
March 31,
2015
Dec. 31,
2014
Sept. 30,
2014
June 30,
2014
March 31,
2014
Three months ended
$ 436,603 $ 400,340 $ 419,919 $ 363,109 $ 633,913 $ 279,971 $ 244,605 $ 235,716
139,202
141,736
330,100
225,579
199,376
213,710
308,092
128,511
186,630
194,340
163,733
303,813
66,432
82,649
20,724
169,805
(41,294)
322
(40,972)
(6,521)
67,372
66,427
25,195
58,453
63,494
26,255
49,437
56,369
35,659
46,074
61,226
22,825
158,994
148,202
141,465
130,125
27,636
46,138
22,268
173,688
(363)
122
(2,244)
(1,115)
27,273
8,474
46,260
11,229
20,024
3,272
172,573
50,313
155,932
124,039
102,869
96,514
42,376
48,109
20,097
110,582
13,457
(1,784)
11,673
(2,947)
14,620 $
34,663
43,701
41,171
119,535
(16,666)
(1,536)
(18,202)
1,639
28,739
41,341
9,878
79,958
16,556
(1,625)
14,931
3,882
(19,841) $
11,049
Net income (loss)
$
(34,451) $
18,799 $
35,031 $
16,752 $ 122,260 $
Net income (loss) per share attributable
to common stockholders:
Basic
Diluted
$
$
(0.25) $
0.14 $
0.26 $
0.13 $
0.96 $
(0.25) $
0.13 $
0.24 $
0.11 $
0.83 $
0.12 $
0.10 $
(0.24) $
(0.24) $
0.10
0.08
(1) Includes stock-based compensation expense as follows:
449 $
Cost of revenue
$
Research and development
Sales and marketing
General and administrative
5,907
4,248
7,516
410
4,872
3,516
9,072
350 $
283 $
280 $
3,710
2,932
3,535
3,066
11,197
19,617
6,154
4,135
8,687
Total stock-based compensation expense $
18,120 $
17,870 $
18,189 $
26,501 $
19,256 $
233 $
2,428
3,225
8,027
13,913 $
154 $
1,657
1,654
30,728
168
1,401
1,414
1,054
34,193 $
4,037
(2)
(3)
(4)
Included in revenue for the quarters ended September 30, 2015 and December 31, 2015 was a reduction of approximately $19 million and $21
million, respectively, for price protection and marketing development funds incurred in connection with the reduction of the HERO4 Session
selling price.
Included in cost of revenue for the quarter ended December 31, 2015 was a $57.0 million charge attributable to excess purchase order
commitments, inventory and obsolete tooling resulting primarily from our decision to end-of-life our entry-level HERO capture devices.
Included in general and administrative expense for the quarters ended June 30, 2014 and March 31, 2015 was stock-based compensation cost of
$28.9 million and $15.8 million, respectively, attributable to the issuance of 4.5 million RSUs to our CEO in June 2014.
39
Liquidity and Capital Resources
The following tables present selected financial information as of December 31, 2015 and 2014 and during the
fiscal years of 2015, 2014 and 2013:
(dollars in thousands)
Cash and cash equivalents
Marketable securities
Total cash, cash equivalents and marketable securities
Percentage of total assets
December 31,
2015
December 31,
2014
$
$
279,672
194,386
474,058
$
$
43 %
319,929
102,327
422,256
46%
(in thousands)
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing
activities
$
$
$
Year ended December 31,
2015
2014
157,611 $
(211,977) $
96,922 $
(133,904) $
2013
102,477
(21,237)
2015 vs 2014 2014 vs 2013
% Change
% Change
63%
58%
(5)%
531%
15,665 $
255,501 $
(16,315)
(94%)
(1,666)%
We believe our existing cash, cash equivalents and marketable securities balances and cash flow from operations
will be sufficient to meet our working capital needs, capital expenditures, outstanding commitments, and other
liquidity requirements for at least the next 12 months and the foreseeable future.
Our future capital requirements may vary materially from those currently planned and will depend on many
factors, including our rate of revenue growth, the timing and extent of spending on research and development
efforts and other business initiatives, the expansion of sales and marketing activities, the timing of new product
introductions, market acceptance of our products, and overall economic conditions. We have completed
acquisitions in the past and we expect to evaluate additional possible acquisitions of, or strategic investments in,
businesses, products, and technologies that are complementary to our business, which may require the use of
cash. For example, in February 2016, we entered into definitive agreements to acquire two mobile video editing
application companies for cash consideration of approximately $105 million to further enhance our future software
offerings.
As of December 31, 2015, $64.0 million of cash was held by our foreign subsidiaries, a substantial portion of
which we anticipate using to fund recent acquisitions that are expected to close in the first half of 2016. We do not
presently intend to repatriate the remainder of these funds, if any, for use in our domestic operations, but if we
were to do so, any such repatriated cash and cash equivalents could be subject to U.S. income taxes.
To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business
activities and requirements, we may be required to seek additional equity or debt financing. In the event
additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or
at all.
Cash flows from operating activities
Cash provided by operating activities of $157.6 million in 2015 was comprised of $36.1 million of net income, non-
cash adjustments to net income of $74.3 million (including stock-based compensation expense of $80.7
million), and net cash inflow of $47.2 million from operating assets and liabilities. Cash inflow related to operating
assets and liabilities consisted of an increase in accounts payable and other liabilities of $68.5 million, primarily
related to excess purchase commitments, and a decrease of $38.3 million in accounts receivable due to lower
fourth quarter 2015 revenue. These increases were partially offset by $35.0 million of higher inventory and an
increase in prepaid expenses and other assets of $23.3 million due to higher income tax receivables. The
increase in cash provided by operating activities of $60.7 million from 2014 to 2015 was primarily due to favorable
changes in working capital accounts.
Cash provided by operating activities of $96.9 million in 2014 was comprised of $128.1 million of net income, non-
cash adjustments to net income of $2.2 million, partially offset by $33.4 million in cash outflow from operating
40
assets and liabilities. Non-cash expense in 2014 primarily consisted of depreciation and amortization and
inventory-related write-offs partially offset by deferred taxes and a net tax benefit from stock-based compensation.
Cash outflow related to operating assets and liabilities in 2014 primarily consisted of decreases in cash of $62.3
million due to growth in accounts receivable from increased sales activity towards the end of the last quarter of
the year, $45.1 million for inventory built and $30.3 million from increases in prepaid expenses and other assets,
partially offset by a $98.4 million increase due to increased accrued liabilities and taxes and a $6.0 million
increase in deferred revenue driven by increased sales activity.
Cash flows from investing activities
Our primary investing activities consisted of purchases and sales of marketable securities, business acquisitions,
and purchases of property and equipment. Cash used in investing activities was $212.0 million during 2015 and
resulted from $220.1 million for purchases of marketable securities, $65.4 million for acquisitions, and $51.2
million for net purchases of property and equipment, partially offset by $124.7 million for net sales and maturities
of marketable securities. The increase in cash outflow in 2015 was primarily due to purchases of marketable
securities and business acquisition activity.
Cash used in investing activities of $133.9 million in 2014 increased from cash used for investing activities of
$21.2 million in 2013 due primarily to $103.8 million in purchases of marketable securities in 2014, a $9.2 million
increase in capital expenditures and $4.0 million in payments related to two business combinations.
Cash flows from financing activities
Our primary financing activities consisted of issuances of securities under our common stock plans and
repurchases of our Class A common stock. Cash provided by financing activities was $15.7 million in 2015 and
resulted primarily from $22.8 million in net proceeds received from employee stock option exercises and stock
purchases made through our employee stock purchase plan ("ESPP"), as well as $29.3 million of excess tax
benefit related to stock-based compensation, partially offset by payments of $35.6 million from the repurchase of
our Class A common stock.
Cash provided by financing activities of $255.5 million in 2014 increased from $16.3 million in 2013 due primarily
to $294.0 million of proceeds received from our public offerings of common stock in 2014, after deducting
underwriting discounts and commissions but before deducting offering costs, an increase of $76.9 million excess
tax benefit related to stock-based compensation and a $7.1 million increase in proceeds from the issuance of
stock due to exercises in connection with our equity plans, partially offset by an increase in the repayments of our
debt of $68.0 million and payments of deferred offering costs of $4.6 million.
Contractual Commitments
Contractual obligations
The following table summarizes our contractual obligations as of December 31, 2015:
1 year
(fiscal
2016)
2-3 years
(fiscal 2017
and 2018)
4-5 years
(fiscal 2019
and 2020)
Total
(in thousands)
Operating leases(1)
Sponsorship commitments(2)
Other contractual commitments(3)
Capital equipment purchase commitments(4)
$
152,237 $
16,597 $
35,365 $
19,186
4,574
5,086
9,889
3,153
5,086
6,577
1,421
—
Total contractual cash obligations
$
181,083 $
34,725 $
43,363 $
More than
5 years
(beyond
fiscal 2020)
70,522
—
—
—
70,522
29,753 $
2,720
—
—
32,473 $
(1) We lease our facilities under long-term operating leases, which expire at various dates through 2027. The lease agreements frequently include
leasehold improvement incentives, escalating lease payments, renewal provisions and other provisions which require us to pay taxes, insurance,
maintenance costs or defined rent increases.
(2) We sponsor events, resorts and athletes as part of our marketing efforts. In many cases, we enter into multi-year agreements with event
organizers and athletes.
(3) We purchase software licenses related to our financial and IT systems, which require payments over multiple years.
41
(4) We enter into contracts to acquire equipment for tooling and molds as part of our manufacturing operations. In addition, we incur purchase
commitments related to the manufacturing of our POP displays by third parties.
As of December 31, 2015, we recorded accrued liabilities for certain purchase commitments with contract
manufacturers for quantities in excess of our future demand forecasts.
Off-balance sheet arrangements
During the periods presented, we did not have any relationships with unconsolidated organizations or financial
partnerships, such as structured finance or special purpose entities, which would have been established for the
purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Indemnifications
We have entered into indemnification agreements with our directors and executive officers which require us to
indemnify our directors and executive officers against liabilities that may arise by reason of their status or
service. In addition, in the normal course of business, we enter into agreements that contain a variety of
representations and warranties and provide for general indemnification. It is not possible to determine the
maximum potential amount under these indemnification agreements due to our limited history with prior
indemnification claims and the unique facts and circumstances involved in each particular agreement. To date, the
payments we have made under these agreements have not had a material effect on our operating results,
financial position or cash flows. However, we may record charges in the future as a result of these indemnification
agreements.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with GAAP. The preparation of these
consolidated financial statements requires us to make estimates, assumptions and judgments that can
significantly impact the amounts we report as assets, liabilities, revenue, costs and expenses and the related
disclosures. Note 2 to the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K
describes the significant accounting policies and methods used in the preparation of the consolidated financial
statements. We base our estimates on historical experience and other assumptions that we believe are
reasonable under the circumstances. Our actual results could differ significantly from these estimates under
different assumptions and conditions. We believe that the accounting policies discussed below are critical to
understanding our historical and future performance as these policies involve a greater degree of judgment and
complexity. Our senior management has reviewed these critical accounting policies and related disclosures with
the Audit Committee of our board of directors.
Revenue recognition
Revenue is primarily derived from the sale of our capture devices and the related implied post contract support, or
PCS. We recognize revenue when all of the following criteria have been met:
• Persuasive evidence of an arrangement exists. Contracts or sales orders from our distributors, resellers or
online customers are generally used to determine the existence of an arrangement.
• Delivery has occurred. We consider delivery to have occurred once title and risk of loss has been transferred.
Shipping documents and customer acceptance, when applicable, are used to verify delivery.
• The sales price is fixed or determinable. We assess whether the sales price is fixed or determinable based on
the payment terms associated with the transaction and whether the sales price is subject to refund or
adjustment.
• Collectability is reasonably assured. We assess collectability based primarily on the creditworthiness of the
customer as determined by credit analysis, the customer’s payment history, and other relevant factors.
For most of our revenue, these criteria are met at the time the product is shipped. Our standard terms and
conditions of sale for non-web based sales do not allow for product returns other than under warranty. However,
we grant limited rights to return product for certain large retailers and distributors. Estimates of expected future
product returns are recognized at the time of sale based on analyses of historical return trends by customer class.
Upon recognition, we reduce revenue and cost of sales for the estimated returns. Return trends are influenced by
product life cycles, new product introductions, market acceptance of products, product sell-through, the type of
customer, seasonality, and other factors. Return rates can fluctuate over time, but are sufficiently predictable to
42
allow us to estimate expected future product returns. Actual returns in any future period could differ from our
estimates, which could impact the revenue that we report.
Our products include multiple element arrangements that generally include the following two separate units of
accounting: 1) the hardware component (camera and accessories) and the embedded firmware essential to the
functionality of the camera delivered at the time of sale, and 2) the implied right for the customer to receive PCS.
Judgment is required to properly identify the accounting units of multiple element arrangements and to determine
the manner in which revenue should be allocated among the units. We believe that our best estimate of the
selling price, or BESP, is the most appropriate methodology to determine the allocation of revenue. BESP reflects
our best estimates of what the selling prices of elements would be if they were sold regularly on a stand-alone
basis. Our process for determining BESP considers multiple factors that may vary over time depending upon the
unique facts and circumstances related to each deliverable, including: the level of support provided to customers,
estimated costs to provide our support, the amount of time and cost that is allocated to our efforts to develop the
undelivered elements, and market trends in the pricing for similar offerings. While changes in the allocation of the
estimated sales price between the units of accounting will not affect the amount of total revenue recognized for a
particular sales arrangement, any material changes in these allocations could impact the timing of revenue
recognition, which could have a material effect on our financial condition and results of operations.
In addition, we provide our customers with sales incentives including cooperative advertising and marketing
development funds. Additionally, we have historically provided certain distributors and retailers price protection
benefits for inventory on hand when we have reduced the recommended retail price of our products to the end
customer. We record reductions to revenue for estimated commitments related to sales incentives when the
related revenue is recognized or when a relevant event subsequently occurs. See Note 2 to the Notes to
Consolidated Financial Statements of this Annual Report on Form 10-K.
Inventory valuation and liability for purchase commitments
Inventory consists of finished goods and component parts and is stated at the lower of cost or market on a first-in,
first-out basis. Our inventory balances were $188.2 million and $153.0 million as of December 31, 2015 and 2014,
respectively. Our assessment of market value requires the use of estimates regarding the net realizable value of
our inventory balances, including an assessment of excess or obsolete inventory. We determine excess and
obsolete inventory based on multiple factors, including an estimate of the future demand for our products within a
specified time horizon, generally 12 months, product life cycle status, product development plans and current
sales levels. We also record a liability for noncancelable purchase commitments with contract manufacturers for
quantities in excess of our future demand forecasts consistent with the valuation of our excess and obsolete
inventory. The estimates used for future demand are also used for near-term capacity planning and inventory
purchases and are consistent with our revenue forecast assumptions. If our demand forecast is greater than the
actual demand, the amount of our loss will be impacted by our contractual ability to reduce inventory purchases
from our contract manufacturers. Our assumptions of future demand for our products are inherently uncertain,
and if there were to be an abrupt and substantial decline in demand for one or more of our products or a change
in our product development plans, we may be required to increase our inventory write-downs and our liability for
purchase commitments that would adversely affect our results of operations in the period when such write-downs
and/or excess commitments are recorded.
Warranty
We generally provide 12-month warranty coverage on all of our products except in the EU where we provide a
two-year warranty. Our warranty provides for repair or replacement of the associated products during the warranty
period. We establish a liability for estimated product warranty costs at the time product revenue is recognized.
The warranty obligation is affected by product failure rates and the related use of materials, labor costs and freight
incurred in correcting any product failure. Should actual product failure rates, use of materials or other costs differ
from our estimates, additional warranty liabilities could be required, which could materially affect our results of
operations.
Income taxes
We are subject to income taxes in the United States and multiple foreign jurisdictions. Our effective tax rates differ
from the U.S. federal statutory rate, primarily due to the tax impact of state taxes, income earned in our foreign
operations which are taxed at different rates than the U.S. federal statutory rate, R&D tax credits and
nondeductible stock-based compensation. Our effective tax rate was 31.3%, 29.2% and 33.7% in 2015, 2014 and
43
2013, respectively. The calculation of our current provision for income taxes involves the use of estimates,
assumptions and judgments while taking into account current tax laws, our interpretation of current tax laws and
possible outcomes of future tax audits. We review our tax positions quarterly and adjust the balances as new
information becomes available. Our income tax rate is materially affected by the tax rates that apply to our foreign
earnings. As of December 31, 2015, $129.1 million of earnings had been indefinitely reinvested outside the U.S.,
primarily in active non-U.S. business operations. We do not intend to repatriate these earnings to fund U.S.
operations and, accordingly, we do not provide for U.S. federal income and foreign withholding tax on these
earnings.
Deferred tax assets. Deferred tax assets arise because of temporary differences between the financial reporting
and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards. We
evaluate the recoverability of these future tax deductions and credits by assessing the adequacy of future
expected taxable income from all sources, including reversal of taxable temporary differences, forecast operating
earnings and available tax planning strategies. As of December 31, 2015, we had a valuation allowance on state
tax credit carryforwards based on our assessment that it is more likely than not that the deferred tax asset will not
be realized.
Uncertain tax positions. We recognize tax benefits from uncertain tax positions only if it is more likely than not
that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of
the position. We file annual income tax returns in multiple taxing jurisdictions around the world and a number of
years may elapse before an uncertain tax position is audited by the relevant tax authorities and finally resolved.
We have established reserves to address potential exposures related to tax positions that could be challenged by
tax authorities. While it is often difficult to predict the final outcome or the timing of resolution of any particular
uncertain tax position, we believe that our reserves reflect the most likely outcome.
Our future effective tax rates could be adversely affected by earnings being lower than anticipated in countries
where we have lower statutory rates and higher than anticipated in countries where we have higher statutory
rates, by changes in the valuation of our deferred tax assets or liabilities, outcomes resulting from income tax
examinations, or by changes or interpretations in tax laws, regulations or accounting principles.
Goodwill and acquired intangible assets
When we acquire a business, we allocate the purchase price to the net tangible and identifiable intangible assets,
with the residual of the purchase price recorded as goodwill. The determination of the fair value of the intangible
assets acquired involves significant judgments and estimates. These judgments can include, but are not limited
to, the cash flows that an asset is expected to generate in the future, technology obsolescence, and the
appropriate weighted average cost of capital. Our estimate of the fair value of certain assets may differ materially
from that determined by others who use different assumptions or utilize different business models.
We perform an annual assessment of our goodwill during the fourth quarter to determine if any events or
circumstances exist, such as an adverse change in business climate or a decline in the overall industry demand,
that would indicate that it is more likely than not that the fair value of our single reporting unit would be reduced
below its carrying amount. If further testing is deemed necessary, we perform a two-step process. The first step
involves comparing the fair value of our reporting unit to its carrying value. The second step, if necessary,
measures the amount of impairment, if any, by comparing the carrying value of the goodwill to its implied fair
value. As of December 31, 2015, we determined that no impairment of the carrying value of goodwill was
required. See Note 4 to the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K.
Stock-based compensation
We measure and recognize stock-based compensation based on the fair value measurement for all stock-based
awards granted to employees and directors over the service period for awards expected to vest. See Note 6 to
the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K.
Determining the fair value of stock-based awards at the grant date requires judgment. The fair value of a
restricted stock unit is equivalent to the market price of our common stock on the measurement date. The
accounting grant date for employee restricted stock units with performance and market obligations is the date on
which the performance and market goals have been defined and a mutual understanding of the terms has been
reached. We use the Black-Scholes option-pricing model to determine the fair value of stock options, employee
stock purchase plan options, and restricted stock held by nonemployees. The determination of the grant date fair
44
value of options using an option-pricing model is affected by our common stock fair value as well as assumptions
regarding a number of other complex and subjective variables, which are estimated as follows:
• Fair Value of our Common Stock. Because our stock was not publicly traded prior to our IPO, the fair value of
our common stock underlying our stock options was determined by our board of directors, which intended all
options granted to be exercisable at a price per share not less than the per share fair value of our common
stock underlying those options on the date of grant. Upon completion of our IPO in July 2014, our Class A
common stock was valued by reference to its publicly traded price.
• Expected Term. Since we have undergone significant operational and structural changes, our historical
exercise data do not provide a reasonable basis upon which to estimate expected term. As a result, we used
the simplified method allowed under SEC guidance.
• Volatility. As we do not have a significant trading history for our common stock, the expected stock price
volatility for our common stock was estimated by taking the average historic price volatility for industry peers
based on daily price observations over a period equivalent to the expected term.
• Risk-Free Rate. The risk-free interest rate is based on the yields of U.S. Treasury securities with maturities
similar to the expected term.
• Dividend Yield. Our expected dividend yield is zero as we do not anticipate paying any recurring cash
dividends in the foreseeable future.
The estimation of awards that will ultimately vest requires judgment, and to the extent actual results or updated
estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the
period estimates are revised.
Recent accounting pronouncements
Refer to “Recent Accounting Pronouncements” in Note 2 to Consolidated Financial Statements included in Part II,
Item 8 of this Annual Report on Form 10-K.
Non-GAAP Financial Measures
In addition to the measures presented in our consolidated financial statements, we use the following non-GAAP
financial metrics to evaluate our business, measure our performance, develop financial forecasts, and make
strategic decisions.
Adjusted EBITDA
The following table presents a reconciliation of net income to adjusted EBITDA:
Three months ended
December 31,
Year ended December 31,
(in thousands)
Net income (loss)
2015
2014
2015
2014
$
(34,451 ) $ 122,260 $
36,131 $ 128,088 $
Income tax expense (benefit)
(6,521)
50,313
16,454
52,887
Interest (income) expense, net
Depreciation and amortization
POP display amortization
Stock-based compensation
Adjusted EBITDA
$
234
5,038
1,029
5,176
(126)
9,596
4,114
18,120
(9,268 ) $ 202,854 $ 179,309 $ 293,380 $ 133,726 $
18,023
71,399
16,829
80,680
19,256
17,945
28,981
4,820
2013
60,578 $
30,751
6,018
12,034
13,458
10,887
2012
2011
32,262 $
24,612
20,948
14,179
346
3,975
8,601
9,156
(12)
1,517
3,602
8,975
75,288 $
52,873
45
Non-GAAP Net Income (Loss) and Earnings Per Share
The following table presents a reconciliation of net income to non-GAAP net income:
Three months ended
December 31,
Year ended December 31,
(in thousands)
Net income (loss)
Stock-based compensation
Acquisition-related costs
Income tax adjustments
2015
2014
2015
$
(34,451) $
122,260 $
36,131 $
18,120
1,545
3,390
19,256
297
3,085
80,680
5,370
(10,617)
Non-GAAP net income (loss)
$
(11,396) $
144,898 $
111,564 $
2014
128,088 $
71,399
1,133
(11,707)
188,913 $
2013
60,578
10,887
1,106
(3,745)
68,826
The following table presents a reconciliation of the shares used in the calculation of non-GAAP diluted earnings
per share:
(in thousands)
Three months ended
December 31,
2015
2014
GAAP shares for diluted net income (loss) per share
137,086
146,723
Add: preferred shares conversion
Add: initial public offering shares
—
—
—
—
Non-GAAP shares for diluted net income (loss) per share
137,086
146,723
Non-GAAP diluted net income (loss) per share
$
(0.08) $
0.99 $
Year ended December 31,
2015
146,486
—
—
146,486
0.76 $
2014
2013
123,630
15,136
4,414
98,941
30,523
8,900
143,180
138,364
1.32 $
0.50
We use the non-GAAP financial measures of adjusted EBITDA, non-GAAP net income, and non-GAAP earnings
per share to help us understand and evaluate our core operating performance and trends, to prepare and approve
our annual budget, and to develop short-term and long-term operational plans. We believe that these measures
provide useful information to investors and others in understanding and evaluating our operating results in the
same manner as our management and board of directors.
These non-GAAP financial measures should not be considered in isolation from, or as an alternative to, measures
prepared in accordance with GAAP, and are not based on any comprehensive set of accounting rules or
principles. These non-GAAP financial measures have limitations in that they do not reflect all of the amounts
associated with our results of operations as determined in accordance with GAAP. Some of these limitations are:
• These non-GAAP financial measures exclude certain recurring, non-cash charges such as stock-based
compensation and amortization of acquired intangible assets;
• adjusted EBITDA does not does not reflect tax payments that reduce cash available to us;
• adjusted EBITDA excludes depreciation and amortization and, although these are non-cash charges, the
assets, including POP displays, being depreciated and amortized often will have to be replaced in the
future, and adjusted EBITDA does not reflect any cash requirements for such replacements; and
• other companies may calculate these non-GAAP financial measures differently than we do, limiting their
usefulness as comparative measures.
Because of these limitations, you should consider adjusted EBITDA, non-GAAP net income, and non-GAAP
diluted earnings per share alongside other financial performance measures, including our financial results
presented in accordance with GAAP.
46
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks in the ordinary course of our business. These risks primarily include foreign
currency and interest rate risks as follows:
Foreign currency risk
To date, a substantial majority of our product sales and inventory purchases have been denominated in U.S.
dollars. We therefore have had insignificant foreign currency risk associated with these two activities. The
functional currency of all of our entities is the U.S. dollar. Our operations outside of the United States incur a
majority of their operating expenses in foreign currencies, principally the Euro and the Hong Kong Dollar. Our
results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency
exchange rates. However, we believe that the exposure to foreign currency fluctuation from operating expenses is
immaterial at this time as the related costs do not constitute a significant portion of our total expenses. As we
grow our operations, or if foreign currency held in our U.S. dollar functional currency entities increases, our
exposure to foreign currency risk could become more significant. To date, we have not entered into any material
foreign currency exchange contracts. For assets and liabilities denominated in other currencies, we do not believe
that the effects of a 10% shift in exchange rates between those currencies and the U.S. dollar would have a
material effect on our results of operations from such a shift.
Interest rate risk
Our exposure to market risk for changes in interest rates primarily relates to our cash and cash equivalents and
marketable securities. Our cash equivalents and marketable securities are comprised primarily of money market
funds, U.S. treasury securities, U.S. agency securities, commercial paper and corporate debt securities.
The primary objectives of our investment activities are to preserve principal and provide liquidity without
significantly increasing risk. Our cash and cash equivalents are held for working capital purposes. We do not enter
into investments for trading or speculative purposes. Due to the relatively short-term nature of our investment
portfolio, we do not believe that an immediate 10% increase in interest rates would have a material effect on the
fair value of our investment portfolio.
47
Item 8. Financial Statements and Supplementary Data
GoPro, Inc.
Index to consolidated financial statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity
(Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page(s)
49
50
51
52
53
54
The supplementary financial information required by this Item 8, is included in Part II, Item 7 under the caption
"Quarterly Results of Operations," which is incorporated herein by reference.
48
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of GoPro, Inc.
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of
operations, of redeemable convertible preferred stock and stockholders’ equity (deficit) and of cash flows present
fairly, in all material respects, the financial position of GoPro, Inc. and its subsidiaries at December 31, 2015 and
December 31, 2014, and the results of their operations and their cash flows for each of the three years in the
period ended December 31, 2015 in conformity with accounting principles generally accepted in the United States
of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
The Company's management is responsible for these financial statements, for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of internal control over financial
reporting, included in Management's Report on Internal Control Over Financial Reporting appearing under Item
9A. Our responsibility is to express opinions on these financial statements and on the Company's internal control
over financial reporting based on our audits (which was an integrated audit in 2015). We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement and whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial statements included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall financial statement presentation.
Our audit of internal control over financial reporting included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such
other procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
As discussed in Note 2 to the financial statements, the Company changed the manner in which it accounts for
deferred taxes in 2015.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of
the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
San Jose, California
February 29, 2016
49
GoPro, Inc.
Consolidated Balance Sheets
(in thousands, except par values)
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Accounts receivable, net
Inventory
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Intangible assets, net
Goodwill
Other long-term assets
Total assets
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
Accrued liabilities
Deferred revenue
Total current liabilities
Long-term taxes payable
Other long-term liabilities
Total liabilities
Commitments, contingencies and guarantees (Note 10)
Stockholders’ equity:
Preferred stock, $0.0001 par value, 5,000 shares authorized; none issued
Common stock and additional paid-in capital, $0.0001 par value, 500,000 Class A
shares authorized,100,596 and 52,091 shares issued and outstanding,
respectively; 150,000 Class B shares authorized, 36,005 and 77,023 shares
issued and outstanding, respectively
Treasury stock, at cost, 1,545 shares and none, respectively
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
December 31,
2015
December 31,
2014
$
$
$
$
279,672 $
194,386
145,692
188,232
25,261
833,243
70,050
31,027
57,095
111,561
1,102,976 $
89,989 $
192,446
12,742
295,177
21,770
13,996
330,943
319,929
102,327
183,992
153,026
63,769
823,043
41,556
2,937
14,095
36,060
917,691
126,240
118,507
14,022
258,769
13,266
4,452
276,487
—
—
663,311
(35,613)
144,335
772,033
1,102,976 $
533,000
—
108,204
641,204
917,691
The accompanying notes are an integral part of these consolidated financial statements.
50
GoPro, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
Revenue
Cost of revenue
Gross profit
Operating expenses:
Research and development
Sales and marketing
General and administrative
Total operating expenses
Operating income
Other expense, net
Income before income taxes
Income tax expense
Net income
Less: net income allocable to participating securities
Net income attributable to common stockholders—basic
Add: net income allocable to dilutive participating securities
Net income attributable to common stockholders—diluted
Net income per share attributable to common stockholders:
Basic
Diluted
Weighted-average shares used to compute net income per share
attributable to common stockholders:
Basic
Diluted
$
$
$
$
$
$
Year ended December 31,
2015
1,619,971 $
946,757
673,214
2014
1,394,205 $
766,970
627,235
241,694
268,939
107,833
618,466
54,748
(2,163)
52,585
16,454
36,131 $
—
36,131 $
—
36,131 $
151,852
194,377
93,971
440,200
187,035
(6,060)
180,975
52,887
128,088 $
(16,512)
111,576 $
2,277
113,853 $
2013
985,737
623,953
361,784
73,737
157,771
31,573
263,081
98,703
(7,374)
91,329
30,751
60,578
(16,727)
43,851
2,309
46,160
0.27 $
0.25 $
1.07 $
0.92 $
0.54
0.47
134,595
146,486
104,453
123,630
81,018
98,941
The accompanying notes are an integral part of these consolidated financial statements.
51
GoPro, Inc.
Consolidated Statements of Redeemable Convertible Preferred Stock and
Stockholders’ Equity (Deficit)
Redeemable
convertible
preferred stock
Common stock and
additional paid-in
capital
Treasury
stock
(in thousands)
Shares
Amount
Shares
Amount
Amount
Balances at December 31, 2012
30,523 $
77,138
80,714 $
479 $
Accretion of preferred stock issuance costs
Exercise of stock options and vesting of restricted stock
and early exercise stock options
Stock-based compensation expense
Retirement of common stock
Issuance of common stock for acquisition
Excess tax benefit from stock-based compensation
Net income
—
—
—
—
—
—
—
60
—
—
—
—
—
—
—
(60)
613
1,148
—
10,887
(15)
108
—
—
—
1,741
323
—
Balances at December 31, 2013
30,523
77,198
81,420
14,518
Issuance of common stock upon public offerings, net of
offering costs
Conversion of preferred stock to common stock upon
—
—
10,188
286,247
initial public offering, net of issuance cost accretion
(30,523)
(77,198)
30,523
77,198
Common stock issued under employee benefit plans,
net of shares withheld for tax
Retirement of common stock
Stock-based compensation expense
Excess tax benefit from stock-based compensation
Net income
Balances at December 31, 2014
Common stock issued under employee benefit plans,
net of shares withheld for tax
Taxes paid related to net share settlement of equity
awards
Retirement of common stock
Repurchase of outstanding common stock
Stock-based compensation expense
Excess tax benefit from stock-based compensation
Net income
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8,414
7,681
(1,430)
(1,177)
—
—
—
71,399
77,134
—
— 129,115
533,000
—
—
14,249
36,413
— (13,943)
— (5,218)
—
—
—
—
(1,545)
—
—
—
—
—
80,583
27,258
—
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(35,613)
—
—
—
Retained
earnings
(accumulated
deficit)
Stockholders’
equity
(deficit)
(80,220) $
(79,741)
—
—
—
(242)
—
—
60,578
(19,884)
—
—
—
—
—
—
128,088
108,204
—
—
—
—
—
—
36,131
(60)
1,148
10,887
(242)
1,741
323
60,578
(5,366)
286,247
77,198
7,681
(1,177)
71,399
77,134
128,088
641,204
36,413
(13,943)
—
(35,613)
80,583
27,258
36,131
Balances at December 31, 2015
— $
— 136,601 $ 663,311 $
(35,613) $
144,335 $
772,033
The accompanying notes are an integral part of these consolidated financial statements.
52
GoPro, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Stock-based compensation
Excess tax benefit from stock-based compensation
Deferred income taxes
Accretion on investments
Other
Changes in operating assets and liabilities:
Accounts receivable, net
Inventory
Prepaid expenses and other assets
Accounts payable and other liabilities
Deferred revenue
Net cash provided by operating activities
Investing activities:
Purchases of property and equipment, net
Purchases of marketable securities
Maturities of marketable securities
Sales of marketable securities
Acquisitions, net of cash acquired
Net cash used in investing activities
Financing activities:
Proceeds from issuance of common stock, net
Repurchases of outstanding Class A common stock
Excess tax benefit from stock-based compensation
Payment of deferred acquisition-related consideration
Payment of debt issuance costs and deferred public offering costs
Proceeds from issuance of debt
Repayment of debt
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplementary cash flow disclosure:
Interest paid in cash
Income taxes paid (refunded) in cash
Non-cash investing and financing activities:
Conversion of preferred stock to common stock, net of issuance cost accretion
Purchases of property and equipment included in accounts payable and accrued
liabilities
Reclass of deferred public offering costs to additional paid-in capital
Year ended December 31,
2015
2014
2013
$
36,131 $
128,088
$
60,578
28,981
80,680
(29,348)
(11,468)
3,001
2,426
38,313
(35,005)
(23,281)
68,461
(1,280)
157,611
(51,245)
(220,055)
94,680
30,048
(65,405)
(211,977)
22,833
(35,613)
29,348
—
(903)
—
—
15,665
(1,556)
(40,257)
319,929
17,945
71,399
(77,134)
(16,920)
—
1,865
(61,323)
(41,033)
(30,317)
98,354
5,998
96,922
(27,210)
(103,827)
1,083
—
(3,950)
(133,904)
300,097
—
77,134
(2,000)
(5,730)
—
(114,000)
255,501
—
218,519
101,410
12,034
10,887
(323)
(8,129)
—
1,224
(42,453)
(51,583)
(15,355)
135,197
400
102,477
(18,325)
—
—
—
(2,912)
(21,237)
527
—
323
—
(1,165)
30,000
(46,000)
(16,315)
—
64,925
36,485
$
$
$
$
$
$
279,672 $
319,929
$
101,410
— $
(1,093) $
1,853
37,283
$
$
— $
77,198
$
5,153 $
— $
2,474
7,722
$
$
4,904
2,831
—
2,937
—
The accompanying notes are an integral part of these consolidated financial statements.
53
GoPro, Inc.
Notes to Consolidated Financial Statements
1. Business overview
GoPro, Inc. (GoPro or the Company) makes mountable and wearable cameras (capture devices) and
accessories. The Company’s products are sold globally through retailers, wholesale distributors and on the
Company’s website. The Company's global corporate headquarters are located in San Mateo, California.
2. Summary of significant accounting policies
Basis of presentation. The accompanying consolidated financial statements have been prepared in accordance
with U.S. generally accepted accounting principles (GAAP). The Company's fiscal year ends on December 31,
and its fiscal quarters end on March 31, June 30, and September 30.
Principles of consolidation. These consolidated financial statements include all the accounts of the Company
and its wholly-owned subsidiaries. Unless otherwise specified, references to the Company are references to
GoPro, Inc. and its consolidated subsidiaries. All intercompany balances and transactions have been eliminated
in consolidation.
Use of estimates. The preparation of financial statements in accordance with GAAP requires management to
make estimates and assumptions that affect the amounts reported and disclosed in the Company’s consolidated
financial statements and accompanying notes. The Company bases its estimates and assumptions on historical
experience and on various other factors that it believes to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results could differ materially from management's estimates. To the extent
there are material differences between the estimates and the actual results, future results of operations could be
affected.
Comprehensive income. For all periods presented, comprehensive income approximated net income.
Therefore, the consolidated statements of comprehensive income have been omitted.
Prior period reclassifications. Reclassifications of certain prior period amounts in the consolidated financial
statements have been made to conform to the current period presentation.
Cash equivalents and marketable securities. Cash equivalents primarily consist of investments in money
market funds with maturities of three months or less from the date of purchase. Marketable securities consist of
commercial paper, U.S. treasury securities, U.S. agency securities, and corporate debt securities, and are
classified as available-for-sale securities. As the Company views these securities as available to support current
operations, it has classified all available-for-sale securities as current assets. Available-for-sale securities are
carried at fair value with unrealized gains and losses, if any, included in stockholders' equity. As of December 31,
2015, the Company's marketable securities were recorded at their amortized cost which approximated fair value.
Unrealized losses are charged against other income (expense), net, for declines in fair value below the cost of an
individual investment that is deemed to be other than temporary. The Company did not identify any marketable
securities as other-than-temporarily impaired for the periods presented. The Company determines realized gains
or losses on sale of marketable securities on a specific identification method, and records such gains or losses as
other income (expense), net.
Accounts receivable and allowance for doubtful accounts. Accounts receivable are stated at invoice value
less estimated allowances for returns and doubtful accounts. The Company records allowances based upon its
assessment of various factors, such as: historical experience, credit quality of its customers, age of the accounts
receivable balances, geographic related risks, economic conditions and other factors that may affect a customer’s
ability to pay. The allowance for doubtful accounts as of December 31, 2015 and 2014 was $1.4 million and $1.3
million, respectively.
54
GoPro, Inc.
Notes to Consolidated Financial Statements
Inventory. Inventory consists of finished goods and component parts, which are purchased directly or from
contract manufacturers. Inventory is stated at the lower of cost or market on a first-in, first-out basis. The
Company writes down its inventory for estimated obsolescence or excess inventory equal to the difference
between the cost of inventory and estimated market value. The Company’s assessment of market value is based
upon assumptions around market conditions and estimated future demand for its products within a specified time
horizon, generally 12 months. Adjustments to reduce inventory to net realizable value are recognized in cost of
revenue in the current period.
Point of purchase (POP) displays. The Company provides retailers with POP displays, generally free of
charge, in order to facilitate the marketing of the Company’s products within retail stores. The POP displays
contain a display that broadcasts video images taken by GoPro cameras with product placement available for
cameras and accessories. POP display costs, less any fees charged, are capitalized as long-term assets and
charged to sales and marketing expense over the expected period of benefit, which generally ranges from 24 to
36 months. POP amortization was $16.8 million, $18.0 million and $13.5 million in 2015, 2014 and 2013,
respectively.
Property and equipment, net. Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful life of the assets, ranging from one to ten years. Leasehold
improvements are amortized over the shorter of the lease term or their expected useful life. Property and
equipment pending installation, configuration or qualification are classified as construction in progress. Costs of
maintenance and repairs that do not improve or extend the lives of the respective assets are expensed as
incurred.
Fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the reporting date. The Company
estimates and categorizes the fair value of its financial assets by applying the following hierarchy established by
the FASB, which prioritizes the inputs to valuation techniques used to measure fair value:
Level 1
Level 2
Level 3
Valuations based on quoted prices in active markets for identical assets or liabilities that the
Company has the ability to directly access.
Valuations based on quoted prices for similar assets or liabilities; valuations for interest-bearing
securities based on non-daily quoted prices in active markets; quoted prices in markets that are
not active; or other inputs that are observable or can be corroborated by observable data for
substantially the full term of the assets or liabilities.
Valuations based on inputs that are supported by little or no market activity and that are significant
to the fair value of the assets or liabilities.
A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is
significant to the fair value measurement. The fair value of Level 2 financial instruments is obtained from an
independent pricing service, which may use quoted market prices for identical or comparable instruments or
model driven valuations using observable market data or inputs corroborated by observable market data.
Leases. The Company leases its office space and facilities under cancelable and non-cancelable operating
leases. For leases that contain rent escalation or rent concession provisions, the Company recognizes rent
expense on a straight-line basis over the term of the lease. The Company does not assume renewals in its
determination of the lease term unless the renewals are deemed to be reasonably assured at lease inception.
Leasehold improvements are included in property and equipment, net.
55
GoPro, Inc.
Notes to Consolidated Financial Statements
Goodwill and other intangible assets. Goodwill represents the excess of the purchase price over the fair value
of the net assets acquired in a business combination. Acquired intangible assets other than goodwill are
amortized over their useful lives unless the lives are determined to be indefinite. For intangible assets acquired in
a business combination, the estimated fair values of the assets received are used to establish their recorded
values. Valuation techniques consistent with the market approach, income approach and/or cost approach are
used to measure fair value.
Impairment of goodwill and long-lived assets. The Company performs an annual assessment of its goodwill
during the fourth quarter of each calendar year and in interim periods if certain events occur to determine if any
events or circumstances exist, such as an adverse change in business climate or a decline in the overall industry
demand, that would indicate it is more likely than not that the fair value of its single reporting unit is less than its
carrying value. If further testing is deemed necessary, a two-step approach is applied. The first step involves
comparing the fair value of the reporting unit with its carrying value. The second step, if necessary, measures the
amount of impairment, if any, by comparing the carrying value of the goodwill to its implied fair value. Other
indefinite-lived intangible assets are assessed for impairment at least annually. If their value carrying value
exceeds the estimated fair value, the difference is recorded as an impairment.
Long-lived assets, such as property and equipment and intangible assets subject to amortization, are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset
group may not be recoverable. Recoverability of assets to be held and used is measured by comparing the
carrying amount to the estimated future undiscounted cash flows expected to be generated by the asset group. If
it is determined that an asset group is not recoverable, an impairment charge is recognized for the amount by
which the carrying amount of the asset group exceeds its fair value.
There was no material impairment of goodwill, indefinite-lived intangible assets or other long-lived assets for any
periods presented.
Warranty. The Company records a liability for estimated product warranty costs at the time product revenue is
recognized. The Company's standard warranty obligation to its end-users generally provides a 12-month warranty
coverage on all of its products except in the European Union where the Company provides a two-year warranty.
The Company's estimate of costs to service its warranty obligations is based on its historical experience of repair
and replacement of the associated products and expectations of future conditions. The warranty obligation is
affected by product failure rates and the related use of materials, labor costs and freight incurred in correcting any
product failure.
Revenue recognition. Revenue is primarily comprised of product revenue, net of returns and sales incentives.
The Company derives substantially all of its revenue from the sale of capture devices and the related implied post
contract support (PCS). The Company recognizes revenue when persuasive evidence of an arrangement exists,
delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured. Evidence
of an arrangement consists of an order from its distributors, resellers, or online customers. The Company
considers delivery to have occurred once title and risk of loss has been transferred. For most of the Company's
revenue, these criteria are met at the time the product is shipped. For customers who purchase products directly
from the Company’s website, the Company defers revenue until delivery to the customer's address because the
Company retains a portion of the risk of loss on these sales during transit. Customer deposits are included in
accrued liabilities on the consolidated balance sheet and are recognized as revenue when all the revenue
recognition criteria are met.
56
GoPro, Inc.
Notes to Consolidated Financial Statements
The Company grants limited rights to return product for certain large retailers and distributors. The Company
records reductions to revenue and cost of sales for expected future product returns at the time of sale based on
analyses of historical return trends by customer class. Return trends are influenced by product life cycles, new
product introductions, market acceptance of products, product sell-through, the type of customer, seasonality, and
other factors. Return rates may fluctuate over time, but are sufficiently predictable to allow the Company to
estimate expected future product returns.
The Company has determined its sales of capture devices are multiple element arrangements that generally
include the following two units of accounting: a) the hardware component (camera and accessories) and the
embedded firmware essential to the functionality of the camera delivered at the time of sale, and b) the implied
right for the customer to receive PCS. PCS includes the right to receive, on a when and if available basis, future
unspecified firmware upgrades and features as well as bug fixes, email and telephone support. The Company
accounts for each element separately and allocates revenue based on their relative selling prices. The Company
uses a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) vendor-specific
objective evidence of fair value (VSOE), (ii) third-party evidence of selling price (TPE) and (iii) best estimate of the
selling price (BESP). The Company has neither VSOE nor TPE since the deliverables are not sold separately and
there are not comparable deliverables sold by other companies. BESP reflects the Company’s best estimates of
what the selling prices of elements would be if they were sold regularly on a stand-alone basis. The Company's
process for determining BESP considers multiple factors that may vary over time depending upon the unique facts
and circumstances related to each deliverable, including: the level of support provided to customers, estimated
costs to provide the Company's support, the amount of time and cost that is allocated to the Company's efforts to
develop the undelivered elements, and market trends in the pricing for similar offerings.
Revenue allocated to the delivered hardware and the related essential software is recognized at the time of sale
provided the conditions for recognition of revenue have been met. Revenue allocated to PCS is deferred and
recognized on a straight-line basis over the estimated term of the support period, which is estimated to be 15
months based on historical experience.
Sales incentives. The Company offers sales incentives through various programs, consisting primarily of
cooperative advertising and marketing development fund programs. The Company records cooperative
advertising and marketing development fund programs with customers as a reduction to revenue unless it
receives an identifiable benefit in exchange for credits claimed by the customer and can reasonably estimate the
fair value of the identifiable benefit received, in which case the Company will record it as a marketing expense.
Marketing development funds recorded as marketing expense were not material for the periods presented. In
addition, the Company offers price protection discounts to certain customers when new capture device models
are released or repriced and the customer has remaining inventory on hand. The Company calculates price
protection discounts in the period that the price reduction goes into effect, and they are recorded as a reduction of
revenue, based on the evaluation of inventory currently held by the customer subject to price protection.
Shipping costs. Amounts billed to customers for shipping and handling are classified as revenue and the
Company's related shipping and handling costs incurred are classified as cost of revenue.
Sales taxes. Sales taxes collected from customers and remitted to respective governmental authorities are
recorded as liabilities and not included in revenue.
Research and development. Research and development expense includes internal and external costs. Internal
costs include employee related expenses, equipment costs, depreciation expense and allocated facility costs.
External research and development expenses consist of costs associated with consultants, tooling and prototype
materials. Research and development expense is related to developing new products and services and the
designing of significant improvements to existing products. Research and development costs to establish the
technological feasibility of the Company’s internally developed software is expensed as incurred. To date, the
period between achieving technological feasibility and the release of internally developed software to be sold,
leased, or marketed has been short and development costs qualifying for capitalization have been insignificant.
57
GoPro, Inc.
Notes to Consolidated Financial Statements
Advertising costs. Advertising costs consist of costs associated with print, television and ecommerce media
advertisements and are expensed as incurred. The Company incurs promotional expenses resulting from
payments under event, resort and athlete sponsorship contracts. These sponsorship arrangements are
considered to be executory contracts and, as such, the costs are expensed as performance under the contract is
received. The costs associated with preparation of sponsorship activities, including the supply of GoPro products,
media team support, and activation fees are expensed as incurred. Prepayments made under sponsorship
agreements are included in prepaid expenses or other long-term assets depending on the period to which the
prepayment applies. Advertising costs were $64.7 million, $47.2 million and $55.5 million in 2015, 2014 and 2013,
respectively.
Stock-based compensation. The Company accounts for stock-based compensation in accordance with
accounting guidance that requires all stock-based awards granted to employees and directors to be measured at
fair value and recognized as an expense. The Company primarily issues restricted stock units. For service-based
awards, stock-based compensation is recognized on a straight-line basis over the requisite service period, net of
estimated forfeitures. For performance and market-based awards which also require a service period, the
Company uses graded vesting over the longer of the derived service period or when the performance or market
condition is satisfied.
The Company recognizes a benefit from stock-based compensation as additional paid-in capital if an excess tax
benefit is realized by following the with-and-without approach. The indirect effects of stock-based compensation
deductions are reflected in the income tax provision for purposes of measuring the excess tax benefit at
settlement of awards.
Foreign currency. The U.S. dollar is the functional currency of the Company's foreign subsidiaries. The
Company remeasures monetary assets or liabilities denominated in currencies other than the U.S. dollar using
exchange rates prevailing on the balance sheet date, and non-monetary assets and liabilities at historical rates.
Foreign currency remeasurement and transaction gains and losses are included in other expense, net and have
not been material for any periods presented.
Income taxes. The Company utilizes the asset and liability method for computing its income tax provision, under
which deferred tax assets and liabilities are recognized for the expected future consequences of temporary
differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates.
Management makes estimates, assumptions and judgments to determine the Company's provision for income
taxes, deferred tax assets and liabilities, and any valuation losses recorded against deferred tax assets. The
Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to
the extent the Company believes recovery is not likely, establishes a valuation allowance.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax
position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
The tax benefits recognized from such positions are then measured based on the largest benefit that has a
greater than 50% likelihood of being realized upon settlement. Interest and penalties related to unrecognized tax
benefits are recognized within income tax expense.
Segment information. The Company operates as one operating segment as it only reports financial information
on an aggregate and consolidated basis to its CEO, who is the Company’s chief operating decision maker.
58
GoPro, Inc.
Notes to Consolidated Financial Statements
Recent accounting pronouncements
Standard
Description
Standards that are not yet adopted
ASU 2014-09, Revenue from
Contracts with Customers
(Topic 606)
ASU 2015-16, Business
Combinations (Topic 805):
Simplifying the Accounting
for Measurement Period
Adjustments
This standard is based on principles that govern
the recognition of revenue at an amount to which
an entity expects to be entitled when products
and services are transferred to customers. In
August 2015, the FASB deferred the effective
date by one year while providing the option to
adopt the standard on the original effective date
of January 1, 2017. The standard may be
adopted either retrospectively
to each prior
reporting period presented or as a cumulative
effect adjustment as of the date of adoption.
Under the updated guidance, the acquirer in a
business combination is required to recognize
adjustments to provisional amounts that are
identified during the measurement period in the
reporting period in which the adjustment amounts
are determined. This new standard will be applied
to provisional
to adjustments
prospectively
amounts that occur after the effective date of this
update.
Date of
adoption
Effect on the financial
statements or other
significant matters
January 1,
2018
impact
The Company is currently
evaluating
the
the
adoption of this standard will
its consolidated
have on
statements and
financial
related disclosures.
January 1,
2016
The Company does not
believe the adoption of this
standard will have a material
impact to its consolidated
financial statements.
Standards that were adopted
ASU 2015-17, Income Taxes
(Topic 740): Balance Sheet
Classifications of Deferred
Taxes
This standard requires that deferred tax liabilities
and assets be classified as noncurrent in a
classified statement of financial position. The new
guidance becomes effective for the Company on
January 1, 2017, with early adoption permitted.
December
31, 2015
The Company early adopted
this standard, prospectively.
Adoption resulted in a $22.2
million reduction to current
assets and a corresponding
increase in other long-term
assets at December 31,
2015. Prior periods were not
adjusted. Adoption had no
impact on the Company’s
results of operations.
59
GoPro, Inc.
Notes to Consolidated Financial Statements
3. Fair value measurements
The Company’s assets that are measured at fair value on a recurring basis, by level, within the fair value
hierarchy are summarized as follows:
(in thousands)
Cash equivalents (1):
Money market funds
Corporate debt securities
Total cash equivalents
Marketable securities:
U.S. treasury securities
U.S. agency securities
Commercial paper
Corporate debt securities
Municipal securities
December 31, 2015
December 31, 2014
Level 1
Level 2
Total
Level 1
Level 2
Total
$
$
$
51,059 $
— $
51,059 $
—
—
—
51,059 $
— $
51,059 $
— $
— $
— $
—
—
—
—
14,451
2,197
165,825
11,913
14,451
2,197
165,825
11,913
80,968 $
—
80,968 $
1,994 $
—
—
—
—
1,994 $
— $
80,968
2,000
2,000
2,000 $
82,968
— $
7,020
2,497
90,816
—
1,994
7,020
2,497
90,816
—
100,333 $
102,327
Total marketable securities
$
— $
194,386 $
194,386 $
(1) Included in “cash and cash equivalents” in the accompanying consolidated balance sheets as of December 31, 2015 and 2014. Cash
balances were $228.6 million and $237.0 million as of December 31, 2015 and 2014, respectively.
For the periods presented, the Company had no financial assets or liabilities that were classified as Level 3, and
had no transfers of financial assets between levels.
The remaining contractual maturities of available-for-sale marketable securities as of the period-ends noted, are
as follows:
(in thousands)
Less than one year
Greater than one year but less than two years
Total
December 31,
2015
2014
$
$
122,199 $
72,187
194,386 $
58,764
43,563
102,327
At December 31, 2015 and 2014, the amortized cost of the Company's cash equivalents and marketable
securities approximated their fair value and there were no material unrealized gains/(losses) either individually or
in the aggregate.
60
GoPro, Inc.
Notes to Consolidated Financial Statements
4. Consolidated financial statement details
The following sections and tables provide details of selected balance sheet items.
Inventory
(in thousands)
Components
Finished goods
Total inventory
Prepaid expenses and other current assets
(in thousands)
Prepaid expenses
Prepaid income taxes
Tenant allowance receivable
Prepaid licenses
Current deferred tax assets
Other current assets
Prepaid expenses and other current assets
Property and equipment, net
(dollars in thousands)
Leasehold improvements
Production, engineering and other equipment
Tooling
Computers and software
Furniture and office equipment
Construction in progress
Tradeshow equipment and other
Gross property and equipment
Less: Accumulated depreciation and amortization
Property and equipment, net
December 31,
2015
2014
9,476 $
178,756
188,232 $
4,324
148,702
153,026
December 31,
2015
2014
6,132 $
4,696
4,249
2,818
—
7,366
25,261 $
3,905
26,504
—
2,053
24,218
7,089
63,769
December 31,
2015
December 31,
2014
40,841 $
25,174
19,537
14,581
11,389
4,632
4,136
120,290
(50,240)
70,050 $
22,787
8,755
16,159
9,731
6,150
3,944
3,830
71,356
(29,800)
41,556
$
$
$
$
$
$
Useful life
(in years)
3–10
4
1–2
2
3
2-5
Depreciation expense was $24.8 million, $16.8 million and $10.9 million in 2015, 2014 and 2013, respectively.
61
GoPro, Inc.
Notes to Consolidated Financial Statements
Acquisitions and acquired intangible assets and goodwill
In 2015, the Company completed acquisitions qualifying as business combinations for aggregate consideration of
$70.2 million, the substantial majority of which was cash consideration. These acquisitions were not material to
the Company's consolidated financial statements, either individually or in the aggregate, and therefore actual and
proforma disclosures under the applicable accounting guidance have not been presented.
The following table summarizes the allocation of the fair values of the assets acquired and liabilities assumed,
and the related useful lives, where applicable:
(in thousands)
Purchased technology
In-process research and development (IPR&D)
Net liabilities assumed
Deferred income tax liabilities
Net assets acquired
Goodwill
Total fair value consideration
Estimated
useful life
(in years)
4 - 6 years
$
$
Fair value
25,676
6,600
(353)
(4,676)
27,247
43,000
70,247
Goodwill is primarily attributable to expected synergies in the technologies that can be leveraged by the Company
in future product offerings related to device and software offerings. Goodwill is not expected to be deductible for
tax purposes. The carrying amount of goodwill was $57.1 million and $14.1 million as of December 31, 2015 and
2014, respectively. The increase in 2015 and 2014 was entirely attributable to goodwill acquired.
The following table summarizes the Company's acquired intangible assets:
(in thousands)
Purchased technology and other amortizable assets
IPR&D and other non-amortizable assets
Total intangible assets
(in thousands)
Purchased technology and other amortizable assets
Other non-amortizable assets
Total intangible assets
December 31, 2015
Gross
carrying value
Accumulated
amortization
Net carrying
value
$
$
32,952 $
6,615
39,567 $
(8,540) $
—
(8,540) $
24,412
6,615
31,027
Gross
carrying value
December 31, 2014
Accumulated
amortization
Net carrying
value
$
$
7,275 $
15
7,290 $
(4,353) $
—
(4,353) $
2,922
15
2,937
As of December 31, 2015, technological feasibility has not been established for IPR&D assets; they have no
alternative future use and, as such, continue to be accounted for as indefinite-lived intangible assets.
62
GoPro, Inc.
Notes to Consolidated Financial Statements
Amortization expense was $4.2 million, $1.1 million and $1.1 million in 2015, 2014 and 2013, respectively. At
December 31, 2015, the estimated amortization expense of existing intangible assets for future periods is as
follows:
(in thousands)
Year ending December 31,
2016
2017
2018
2019
2020
Thereafter
Other long-term assets
(in thousands)
POP displays
Long-term deferred tax assets
Income tax receivable
Deposits and other
Other long-term assets
Accrued liabilities
(in thousands)
Accrued payables
Excess purchase order commitments
Accrued sales incentive
Employee related liabilities
Warranty liability
Customer deposits
Income taxes payable
Other
Accrued liabilities
63
$
Total
5,956
5,172
4,780
4,269
3,365
870
$
24,412
December 31,
2015
2014
27,989 $
41,936
33,206
8,430
111,561 $
18,743
8,611
—
8,706
36,060
December 31,
2015
2014
64,831 $
38,477
29,298
26,491
10,400
8,877
7,536
6,536
192,446 $
56,617
447
9,635
28,959
6,025
4,903
2,732
9,189
118,507
$
$
$
$
GoPro, Inc.
Notes to Consolidated Financial Statements
5. Stockholders' equity (deficit) and redeemable convertible preferred stock
Initial public offering
In July 2014, the Company completed its IPO in which the Company issued and sold 8.9 million shares of Class A
common stock at a public offering price of $24.00 per share and the selling stockholders sold 11.6 million shares
of Class A common stock, including 2.7 million shares upon the underwriters' option to purchase additional
shares. The Company did not receive any proceeds from the sale of shares by the selling stockholders. The total
net proceeds received by the Company from the IPO were $200.8 million after deducting underwriting discounts
and commissions of $12.8 million and other offering expenses of approximately $6.2 million.
Follow-on offering
In November 2014, the Company completed a follow-on offering in which the Company issued and sold 1.3
million shares of Class A common stock at a public offering price of $75.00 per share and the selling stockholders
sold 10.6 million shares of Class A common stock, including 1.6 million shares upon the underwriters' option to
purchase additional shares. The Company did not receive any proceeds from the sale of shares by the selling
stockholders. The total net proceeds received by the Company from the follow-on offering were $93.2 million after
deducting underwriting discounts and commissions of $3.4 million and other offering expenses of approximately
$1.5 million.
Redeemable convertible preferred stock
Prior to the Company's IPO, the Company had 30.5 million of Series A redeemable convertible preferred stock
outstanding, which were convertible into shares of Class B common stock at a rate of 1-for-1. Concurrent with the
close of the IPO, those outstanding shares were converted into Class B common stock.
Preferred stock
Following the Company's IPO, the Company had 5.0 million shares of preferred stock authorized, none of which
was issued or outstanding at December 31, 2015 and 2014.
Common stock
Following the Company's IPO, the Company had two classes of authorized common stock: Class A common
stock with 500.0 million shares authorized and Class B common stock with 150.0 million shares authorized. As of
December 31, 2015, 100.6 million shares of Class A stock were issued and outstanding and 36.0 million shares of
Class B stock were issued and outstanding. The rights of the holders of Class A and Class B common stock are
identical, except with respect to voting power and conversion rights. Each share of Class A common stock is
entitled to one vote per share and each share of Class B common stock is entitled to ten votes per share. Each
share of Class B common stock is convertible at any time at the option of the stockholder into one share of Class
A common stock and has no expiration date. The Class B common stock is also convertible into Class A common
stock on the same basis upon any transfer, whether or not for value, except for “permitted transfers” as defined in
the Company’s restated certificate of incorporation. Each share of Class B common stock will convert
automatically into one share of Class A common stock upon the date when the outstanding shares of Class B
common stock represent less than 10% of the aggregate number of shares of common stock then outstanding. As
of December 31, 2015, the Class B stock continued to represent greater than 10% of the overall outstanding
shares.
64
GoPro, Inc.
Notes to Consolidated Financial Statements
The Company had the following shares of common stock reserved for issuance upon the exercise of equity
instruments as of December 31, 2015:
(in thousands)
Stock options outstanding
Restricted stock units outstanding
Common stock available for future grants
Total common stock shares reserved for issuance
Stock repurchase program
December 31,
2015
13,081
4,638
20,084
37,803
On September 30, 2015, the Company's board of directors authorized a program to repurchase up to $300.0
million of the Company's Class A common stock. The repurchase program, which expires in September 2016,
does not obligate the Company to acquire any specific number of shares and may be discontinued or extended at
any time by the board of directors. Share repurchases under the program may be made from time-to-time through
open market transactions, block trades, privately negotiated transactions or otherwise, including under plans
complying with both Rule 10b-18 and Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.
During the fourth quarter of 2015, under the program, the Company repurchased approximately 1.5 million shares
of its common stock at an average price of $23.05 per share, for an aggregate purchase price of
approximately $35.6 million. The Company currently intends to hold the repurchased shares as treasury stock.
CEO stock contributions
In 2015, the CEO contributed an aggregate 5.2 million shares of Class B common stock to the Company without
consideration per the terms of a Contribution Agreement dated December 28, 2011, and amended on May 11,
2015. Under the original Contribution Agreement, the CEO agreed to contribute back to the Company from time-
to-time the same number of shares of common stock as are issued to a certain Company employee upon the
exercise of certain stock options held by such employee. Pursuant to this agreement, the CEO contributed back
to the Company 0.5 million shares of Class B common stock from January 2015 through April 2015. In May 2015,
the CEO contributed back to the Company 4.7 million shares of Class B common stock pursuant to the amended
agreement, representing all of the then remaining shares subject to the contribution obligations. All of the shares
contributed by the CEO were retired during the year.
6. Employee benefit plans
Equity incentive plans
The Company has outstanding equity grants from its three stock-based employee compensation plans: the 2014
Equity Incentive Plan (2014 Plan), the 2010 Equity Incentive Plan (2010 Plan), and the 2014 Employee Stock
Purchase Plan (ESPP). In the second quarter of 2014, the Company terminated the authority to grant new
awards under the 2010 Plan and no new options or awards have been granted under the 2010 Plan since June
2014. Outstanding options and awards under the 2010 Plan continue to be subject to the terms and conditions of
the 2010 Plan.
The 2014 Plan serves as the successor to the 2010 Plan and provides for the granting of incentive and
nonqualified stock options, restricted stock awards (RSAs), restricted stock units (RSUs), stock appreciation
rights, stock bonus awards, and performance awards to qualified employees, non-employee directors, and
consultants. Options granted under the 2014 Plan generally expire within 10 years from the date of grant and
generally vest over four years and are exercisable for shares of the Company's Class A stock. Options with
performance or market-based conditions are generally subject to a required service period along with the
65
GoPro, Inc.
Notes to Consolidated Financial Statements
performance or market condition. RSUs granted under the 2014 Plan generally vest annually over a four year
period based upon continued service and are settled at vesting in shares of the Company's Class A common
stock.
The ESPP allows eligible employees to purchase shares of the Company's Class A common stock through payroll
deductions at a price equal to 85% of the lesser of the fair market values of the stock as of the first date or the
ending date of each six-month offering period. The 2014 Plan and the ESPP also provides for automatic annual
increases in the number of shares reserved for future issuance.
Employee retirement plan
The Company has a 401(k) defined contribution retirement plan (Retirement Plan) covering U.S. full-time
employees. The Retirement Plan provides for voluntary employee contributions from 1% to 86% of annual
compensation, subject to a maximum limit allowed by Internal Revenue Service guidelines. The Company
matches 100% of each employee’s contributions up to a maximum of 4% of the employee's eligible
compensation. The Company's matching contribution to the plan was $5.5 million and $2.7 million in 2015 and
2014, respectively.
Stock option activity
A summary of the Company’s stock option activity in 2015 and related information is as follows:
Options outstanding
(shares in thousands)
Shares
Weighted-
average
exercise price
Outstanding at December 31, 2014:
Granted
Exercised
Forfeited/Cancelled
Outstanding at December 31, 2015:
Exercisable at December 31, 2015
Vested and expected to vest at December 31, 2015
25,134 $
792
(12,375)
(470)
13,081 $
8,449 $
12,858 $
6.62
39.66
2.01
38.84
11.82
6.19
11.62
Weighted-
average
remaining
contractual
term
(in years)
Aggregate
intrinsic value
(in thousands)
7.09
$
1,425,339
6.70
5.89
6.67
$
$
$
108,846
103,696
108,681
The weighted average grant date fair values of all options granted and assumed were $18.40, $11.51 and $8.45
per share in 2015, 2014 and 2013, respectively. The total fair value of all options vested were $26.9 million, $16.0
million, and $5.2 million in 2015, 2014 and 2013, respectively.
The aggregate intrinsic value of the stock options outstanding as of December 31, 2015 was $108.8 million, which
represents the value of the Company's closing stock price on December 31, 2015 in excess of the weighted-
average exercise price multiplied by the number of options outstanding. The total intrinsic values of options
exercised were $633.6 million, $253.3 million and $4.6 million in 2015, 2014 and 2013, respectively.
At December 31, 2015, there was $50.2 million of unearned stock-based compensation expense related to
unvested options, which is expected to be amortized over a weighted average period of 2.2 years.
66
GoPro, Inc.
Notes to Consolidated Financial Statements
Restricted stock awards
A summary of the Company's RSA activity in 2015 is as follows:
Non-vested shares at December 31, 2014
Vested
Non-vested shares at December 31, 2015
Weighted-
average grant
date fair value
Aggregate
intrinsic value
(in thousands)
6.30 $
1,017
Shares
(in thousands)
17 $
(17)
—
The total fair value of all restricted stock and early exercised stock options subject to repurchase vested was zero,
$11.2 million and $6.1 million in 2015, 2014 and 2013, respectively. Early exercised stock options were fully
vested in 2014. At December 31, 2015, all RSAs were fully vested and there was no unearned stock-based
compensation remaining.
Restricted stock units
A summary of the Company’s RSU activity in 2015 and 2014 is as follows:
(shares in thousands)
Non-vested shares at December 31, 2013
Granted
Vested
Forfeited
Non-vested shares at December 31, 2014
Granted
Vested
Forfeited
Non-vested shares at December 31, 2015
Shares
Weighted-
average grant
date fair value
270 $
5,573
(1,533)
(3)
4,307 $
2,170
(1,735)
(104)
4,638 $
1.52
22.01
18.42
57.73
21.98
44.00
19.84
63.47
32.15
The total fair value of RSUs vested was $34.4 million in 2015 and $28.2 million in 2014. The intrinsic value of the
non-vested RSUs was $83.5 million as of December 31, 2015. There were no RSUs granted during 2013.
In June 2014, the Company granted an award of 4.5 million RSUs to the Company's CEO (CEO RSUs), which
included 1.5 million RSUs that vested immediately upon grant and 3.0 million RSUs that were subject to both a
market-based condition and a service condition. The market-based condition was achieved in January 2015.
Stock-based compensation expense related to the CEO RSUs was $29.4 million in 2015 and $38.3 million in
2014.
At December 31, 2015, there was $107.8 million of unearned stock-based compensation related to RSUs
(including $7.0 million related to the CEO RSUs), which is expected to be recognized over a weighted average
period of 2.5 years.
Employee stock purchase plan
In 2015, employees purchased an aggregate of 436,924 shares under the Company's ESPP at an average price
of $26.88 per share. At December 31, 2015, there was $0.6 million of unearned stock-based compensation
67
GoPro, Inc.
Notes to Consolidated Financial Statements
related to the ESPP, which is expected to be recognized over 0.1 years. Of the 5.0 million shares authorized for
issuance, 4.5 million shares were available for issuance at December 31, 2015.
The weighted-average fair value per share for purchase periods beginning in 2015 and 2014 were $15.76 and
$7.16, respectively. Cash proceeds from the issuance of shares under the ESPP were $11.7 million in 2015.
Fair value disclosures
The fair value of stock options granted and purchases under the Company's ESPP is estimated using the Black-
Scholes option pricing model. Expected term of stock options granted was estimated based on the simplified
method. Expected stock price volatility was estimated by taking the average historic price volatility for industry
peers based on daily price observations over a period equivalent to the expected term. Risk-free interest rate was
based on the yields of U.S. Treasury securities with maturities similar to the expected term. Dividend yield was
zero as the Company does not have any history of, nor plans to make, dividend payments.
The fair value of stock options granted was estimated as of the grant date using the following assumptions:
Volatility
Expected term (years)
Risk-free interest rate
Dividend yield
Year ended December 31,
2015
2014
2013
43%–54%
54%–56%
56%–60%
5.5–7.0
5.3–6.3
5.3–6.1
1.6%–2.0%
1.7%–2.0%
0.8%–2.4%
—%
—%
—%
The fair value of stock purchase rights granted under the ESPP was estimated using the following assumptions:
Volatility
Expected term (years)
Risk-free interest rate
Dividend yield
Year ended December 31,
2014
2015
39%–45%
0.5
0.1%–0.2%
—%
45.5%
0.6
0.1%
—%
During 2014, the Company used a Monte Carlo valuation model to calculate the fair value of the CEO RSUs
subject to a market condition based on the following assumptions: expected term of 10 years, expected volatility
of 50.9%, risk-free interest rate of 2.69%, and a grant date fair value of $18.40 for the underlying shares.
Stock-based compensation expense
The following table summarizes stock-based compensation included in the consolidated statements of operations:
(in thousands)
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total stock-based compensation expense, before income taxes
Total tax benefit recognized
$
1,492 $
18,024
13,762
47,402
80,680
(27,971)
Total stock-based compensation expense, net of income taxes
$
52,709 $
68
Year ended December 31,
2015
2014
2013
835 $
11,640
10,428
48,496
71,399
(19,471)
51,928 $
690
3,003
5,670
1,524
10,887
(1,104)
9,783
GoPro, Inc.
Notes to Consolidated Financial Statements
7. Net income per share attributable to common stockholders
Basic and diluted net income per common share is presented in conformity with the two-class method required for
participating securities. The Company considers shares issued upon the early exercise of options subject to
repurchase and non-vested restricted shares to be participating securities, because holders of such shares have
a non-forfeitable right to dividends. Additionally, prior to the Company's IPO and their conversion, the Company
considered its redeemable convertible preferred stock to be participating securities due to their non-cumulative
dividend rights.
Basic net income per share attributable to common stockholders is computed by dividing the net income
attributable to common stockholders by the weighted-average number of common shares outstanding during the
period. All participating securities are excluded from basic weighted average common shares outstanding. Diluted
net income per share attributable to common stockholders is computed by dividing the net income attributable to
common stockholders by the weighted-average number of common shares outstanding, including all potentially
dilutive common shares.
Undistributed earnings are allocated based on the contractual participation rights of Class A and Class B as if the
earnings for the year have been distributed. As the liquidation and dividend rights are identical, the undistributed
earnings are allocated on a proportionate basis. The computation of the diluted net income per share of Class A
common stock assumes the conversion of Class B common stock.
The following table presents the calculations of basic and diluted net income per share attributable to common
stockholders:
(in thousands, except per share data)
2015
2014
2013
Year ended December 31,
Numerator:
Allocation of net income
Class A
Class B
Class A Class B
$
24,559 $
11,572 $
16,647 $ 111,441 $
60,578
Less: net income allocable to participating securities
—
—
(2,147)
(14,365)
(16,727)
Net income attributable to common stockholders—basic
24,559
11,572
Add: net income allocable to dilutive participating securities
—
—
14,500
2,277
97,076
43,851
1,981
2,309
Reallocation of net income as a result of conversion of Class
B to Class A shares
Reallocation of net income to Class B shares
11,572
—
Net income attributable to common stockholders—diluted
$
36,131 $
97,076
—
1,974
13,546 $ 113,853 $ 101,294 $
2,237
—
—
—
46,160
Denominator:
Weighted-average common shares—basic
91,486
43,109
Conversion of Class B to Class A common stock outstanding
43,109
Effect of potentially dilutive shares
Weighted-average common shares—diluted
11,891
146,486
—
11,810
54,919
13,575
90,878
19,177
123,630
90,878
81,018
—
19,115
109,993
—
17,923
98,941
Net income per share attributable to common stockholders:
Basic
Diluted
$
$
0.27 $
0.27 $
0.25 $
0.25 $
1.07 $
0.92 $
1.07 $
0.92 $
0.54
0.47
69
GoPro, Inc.
Notes to Consolidated Financial Statements
The following potentially dilutive shares were not included in the calculation of diluted shares outstanding as the
effect would have been anti-dilutive:
(in thousands)
Redeemable convertible preferred stock
Stock options, ESPP shares, and RSUs
Unvested restricted stock awards
8. Income taxes
Income before income taxes consisted of the following:
(in thousands)
Domestic
Foreign
Income tax expense consisted of the following:
(in thousands)
Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Foreign
Total deferred
Income tax expense
Year ended December 31,
2014
2015
2013
—
2,680
1
2,681
15,136
360
425
15,921
30,523
1,409
380
32,312
Year ended December 31,
2015
2014
2013
$
$
13,562 $
39,023
52,585 $
114,937 $
66,038
180,975 $
57,251
34,078
91,329
Year ended December 31,
2015
2014
2013
$
18,548 $
3,007
6,539
28,094
(11,211)
(204)
(225)
(11,640)
$
16,454 $
55,846 $
6,075
8,219
70,140
(13,551)
(3,369)
(333)
(17,253)
52,887 $
28,856
1,634
8,058
38,548
(7,268)
(861)
332
(7,797)
30,751
Income tax expense for 2015 of $16.5 million decreased $36.4 million from 2014, primarily due to lower pre-tax
income.
As of December 31, 2015, undistributed earnings of $129.1 million of the Company’s foreign subsidiaries are
considered to be indefinitely reinvested and, accordingly, no provision for federal and state income taxes have
been provided thereon. The Company intends to reinvest these earnings indefinitely in its foreign subsidiaries. If
these earnings were distributed to the United States in the form of dividends or otherwise or if the shares of the
relevant foreign subsidiaries were sold or otherwise transferred the Company would be subject to additional U.S.
income taxes (subject to adjustment for foreign tax credits) and foreign withholding taxes. We do not intend to
repatriate these earnings to fund U.S. operations and, accordingly, we do not provide for U.S. federal income and
70
GoPro, Inc.
Notes to Consolidated Financial Statements
foreign withholding tax on these earnings. Determination of the amount of unrecognized deferred income tax
liability related to these earnings is not practical.
Income tax expense reconciles to the amount computed by applying the federal statutory rate of 35% to income
before income taxes as follows:
(in thousands, except percentage)
Reconciliation to statutory rate:
Tax at federal statutory rate
State taxes, net of federal benefit
Impact of foreign operations
Stock-based compensation
Tax credits
Change in valuation allowance
Other
Year ended December 31,
2015
2014
2013
$
%
$
%
$
%
$
18,405
1,454
6,434
2,390
(21,891)
8,555
1,107
35.0% $
2.8
12.2
4.5
(41.6)
16.3
2.1
63,341
4,911
(13,305)
8,050
(10,616)
—
506
35.0% $
2.7
(7.4)
4.4
(5.9)
—
0.4
31,965
2,344
(113)
2,982
(5,637)
—
(790)
$
16,454
31.3% $
52,887
29.2% $
30,751
35.0%
2.6
(0.1)
3.3
(6.2)
—
(0.9)
33.7%
The higher effective tax rate for 2015 compared to 2014 was due to higher U.S. taxable income and lower
international taxable income, which resulted from incurring a higher proportion of our 2015 operating expenses in
foreign jurisdictions. Additionally, the effective tax rate for 2015 was lower than the federal statutory rate of 35%
primarily due to benefits from research and development tax credits.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant
components of the Company’s deferred tax assets and liabilities were as follows:
(in thousands)
Deferred tax assets:
Net operating loss carryforwards
Tax credit carryforwards
Stock-based compensation
Allowance for returns
Accruals and reserves
Total deferred tax assets
Valuation allowance
Total deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Depreciation and amortization
Intangible assets
Total deferred tax liabilities
Net deferred tax assets
71
December 31,
2015
2014
339 $
9,372
19,096
8,812
20,398
58,017
(8,555)
49,462
(6,937)
(2,904)
(9,841)
39,621 $
—
2,347
9,950
9,466
14,484
36,247
—
36,247
(3,418)
—
(3,418)
32,829
$
$
GoPro, Inc.
Notes to Consolidated Financial Statements
Recognition of deferred tax assets is appropriate when realization of such assets is more likely than not. Based
upon the weight of available evidence, which includes the Company’s historical operating performance and the
U.S. cumulative net profits in prior periods and anticipated future earnings, the Company believes it is more likely
than not that deferred tax assets, other than California research credit carryforwards, will be realized.
The Company's valuation allowance increased by $8.6 million during the year ended December 31, 2015. The
change in the 2015 valuation allowance was primarily due to the addition of current year California research credit
carryforwards.
As of December 31, 2015, the Company’s federal and state net operating loss carryforwards for income tax
purposes were approximately $395.5 million and $249.2 million, and federal and state tax credit carryforwards
were approximately $24.2 million and $18.4 million, respectively. All of the Company's federal loss, federal credit
and state loss carryforwards and $3.9 million of the state tax credit carryforwards will be recorded to additional
paid-in capital when realized. If not utilized, federal loss, federal credit and state loss carryforwards will begin to
expire from 2019 to 2035, while the state tax credits may be carried forward indefinitely. If certain substantial
changes in the entity's ownership occur, there could be an annual limitation on the amount of the carryforwards
that can be utilized.
On December 18, 2015, The Consolidated Appropriations Act of 2016 was signed into law, which retroactively
reinstated and made permanent the federal research tax credit provisions from January 1, 2015 through
December 31, 2015. As a result, the Company recognized an income tax benefit of $13.7 million for federal
research credits during the fourth quarter of 2015.
In November 2015, the FASB issued ASU 2015-17 which simplifies the presentation of deferred income taxes by
requiring deferred tax assets and liabilities be classified as noncurrent on the balance sheet. The Company early-
adopted this standard as of December 31, 2015 on a prospective basis. The impact to the Company's
consolidated balance sheet at December 31, 2015 is a reclassification from current to non-current deferred tax
assets of $22.2 million.
Uncertain income tax positions
As of December 31, 2015, the Company’s total amount of gross unrecognized tax benefits was $36.3 million,
which represented an increase in unrecognized tax benefits of $19.7 million during 2015. If recognized, $31.0
million of these unrecognized income tax benefits (net of federal benefit) would be recorded as a reduction of
future income tax provision.
A reconciliation of the beginning and ending amount of the unrecognized income tax benefits during the tax
periods ending December 31, 2015, 2014 and 2013 are as follows:
(in thousands)
Gross balance at January 1
Gross increase related to current year tax positions
Gross increase related to prior year tax positions
Gross decrease related to prior year tax positions
2015
December 31,
2014
2013
$
$
16,558 $
19,948
108
(341)
36,273 $
9,898 $
6,401
259
—
16,558 $
4,439
5,280
179
—
9,898
The Company’s policy is to account for interest and penalties as income tax expense. As of December 31, 2015
and 2014, the Company had accrued interest and penalties of approximately $0.2 million and $0.2 million related
to unrecognized tax benefits. There were no accrued interest and penalties as of December 31, 2013.
It is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase within the
next 12 months. However, the range of the reasonably possible change cannot be reliably estimated.
72
GoPro, Inc.
Notes to Consolidated Financial Statements
The Company files income tax returns in the U.S. and non-U.S. jurisdictions. The Company is subject to U.S.
income tax examinations for calendar tax years ending 2011 through 2014, and foreign income tax examinations
from 2013 through 2014. The U.S. federal and U.S. state taxing authorities may choose to audit tax returns for tax
years beyond the statute of limitation period due to tax attribute carryforwards from prior years, making
adjustments only to carryforward attributes.
The Company is currently under examination by the Internal Revenue Service for the 2012 through 2014 tax
years and California Franchise Tax Board for the 2011 and 2012 tax years. At this time, the Company is not able
to estimate the potential impact that the examination may have on income tax expense. If the examinations are
resolved unfavorably, there is a possibility it may have a material negative impact on the Company's results of
operations.
9. Related parties
The Company has agreements for certain contract manufacturing and engineering services with a vendor
affiliated with one of the Company's investors. The Company made payments of $0.2 million, $12.2 million and
$3.6 million in 2015, 2014 and 2013, respectively, for services rendered. As of December 31, 2015 and 2014, the
Company had accounts payable associated with this vendor of zero and $0.1 million, respectively.
The Company incurs costs for company-related chartered aircraft fees for the use of the CEO’s private plane. The
Company made payments of $1.0 million and $0.5 million in 2015 and 2014, respectively. As of December 31,
2015 and 2014, the Company had accounts payable associated with this vendor of $0.1 million and $0.4 million,
respectively.
In May 2014, the Company amended the outstanding stock options granted to the former Chief Financial Officer
to facilitate the net exercise of those options and subsequently repurchased 41,154 shares of common stock from
the former Chief Financial Officer's estate at a purchase price of $18.40 per share.
In June 2014, the CEO purchased seven automobiles from the Company for a total purchase price of $0.3 million,
which was equal to the deemed fair value of the automobiles purchased. There have been no additional such
purchases in 2015.
In 2013, the Company entered into a three-year agreement, which was amended in August 2015, with a company
affiliated with the son of one of the members of the Company's board of directors to acquire certain naming rights
to a kart racing facility. As consideration for these naming rights, the Company would pay a total of $0.5
million over the three year period. As of December 31, 2015, the Company has made cumulative payments of
$0.5 million and has also provided 100 GoPro capture devices at no cost each year.
In the second quarter of 2013, the Company settled an outstanding legal matter with one of the CEO's family
members for $0.2 million and loaned one of its executive officers $0.2 million pursuant to a demand payment loan
that did not bear interest, which was fully repaid in March 2014.
See Notes 5 and 6 above for information regarding CEO RSUs and common stock contributed by the CEO back
to the Company.
73
GoPro, Inc.
Notes to Consolidated Financial Statements
10. Commitments, contingencies and guarantees
The following table summarizes the Company’s contractual commitments as of December 31, 2015:
(in thousands)
Operating leases(1)
Sponsorship commitments(2)
Other contractual commitments(3)
Capital equipment purchase
commitments(4)
Total
2016
2017
2018
2019
2020
$ 152,237 $ 16,597 $ 15,783 $ 19,582 $ 13,151 $ 16,602 $
19,186
4,574
9,889
3,153
3,986
1,421
5,086
5,086
—
2,591
—
—
2,720
—
—
—
—
—
Thereafter
70,522
—
—
—
Total contractual cash obligations
$ 181,083 $ 34,725 $ 21,190 $ 22,173 $ 15,871 $ 16,602 $
70,522
(1) The Company leases its facilities under long-term operating leases, which expire at various dates through 2027.
(2) The Company sponsors events, resorts and athletes as part of its marketing efforts. In many cases, the Company enters into multi-year
agreements with event organizers, resorts and athletes.
(3) The Company purchases software licenses related to its financial and IT systems which require payments over multiple years.
(4) The Company enters into contracts to acquire equipment for tooling and molds as part of its manufacturing operations. In addition, the
Company incurs purchase commitments related to the manufacturing of its point-of-purchase (POP) displays by third parties.
Rent expense was $12.2 million, $7.3 million and $3.9 million in 2015, 2014 and 2013, respectively.
Legal proceedings
From time to time, the Company is involved in legal proceedings in the ordinary course of business. The
Company believes that the outcome of any existing litigation, either individually or in the aggregate, will not have a
material impact on the results of operations, financial condition or cash flows of the Company.
Indemnifications
In the normal course of business, the Company enters into agreements that contain a variety of representations
and warranties and provide for general indemnification. The Company’s exposure under these agreements is
unknown because it involves claims that may be made against the Company in the future, but have not yet been
made. It is not possible to determine the maximum potential amount under these indemnification agreements due
to the Company’s limited history with indemnification claims and the unique facts and circumstances involved in
each particular agreement. As of December 31, 2015, the Company has not paid any claims or been required to
defend any action related to its indemnification obligations. However, the Company may record charges in the
future as a result of these indemnification obligations.
Product warranty
The following table summarizes the warranty liability activity:
(in thousands)
Beginning balances
Charged to cost of revenue
Settlements of warranty claims
Ending balances
Year ended December 31,
2015
2014
2013
$
$
6,405 $
25,377
(20,926)
10,856 $
3,870 $
10,268
(7,733)
6,405 $
1,937
7,380
(5,447)
3,870
At December 31, 2015, $10.4 million of the warranty liability was recorded as an element of accrued liabilities and
$0.5 million was recorded as an element of other long-term liabilities. As of December 31, 2014, $6.0 million of the
warranty liability was recorded as an element of accrued liabilities and $0.4 million was recorded as an element of
other long-term liabilities.
74
GoPro, Inc.
Notes to Consolidated Financial Statements
11. Concentrations of risk and geographic information
Customer concentration
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of
trade receivables. The Company believes that credit risk in its accounts receivable is mitigated by the Company’s
credit evaluation process, relatively short collection terms and dispersion of its customer base. The Company
generally does not require collateral and losses on trade receivables have historically been within management’s
expectations.
The Company had the following customers who represented 10% or more of its net accounts receivable balance
as of the dates indicated:
Customer A
Customer B
Customer C
December 31,
2015
December 31,
2014
40%
18%
*
17%
11%
14%
* Less than 10% of total accounts receivable for the period indicated
The following table summarizes the Company's accounts receivables sold, without recourse, and factoring fees
paid:
(in thousands)
Accounts receivable sold
Factoring fees
Year ended December 31,
2015
2014
2013
$
194,223 $
1,566
250,437 $
2,148
71,066
591
Customers with revenue greater than 10% of the Company's total revenue were as follows:
Customer D
Customer A
* Less than 10% of total revenue for the period indicated
Supplier concentration
Year ended December 31,
2015
14%
12%
2014
20%
*
2013
17%
*
The Company relies on third parties for the supply and manufacture of its capture devices, some of which are
sole-source suppliers. The Company believes that outsourcing manufacturing enables greater scale and
flexibility. As demand and product lines change, the Company periodically evaluates the need and advisability of
adding manufacturers to support its operations. In instances where a supply and manufacture agreement does
not exist or suppliers fail to perform their obligations, the Company may be unable to find alternative suppliers or
satisfactorily deliver its products to its customers on time, if at all. The Company also relies on third parties with
whom it outsources supply chain activities related to inventory warehousing, order fulfillment, distribution and
other direct sales logistics.
75
GoPro, Inc.
Notes to Consolidated Financial Statements
Geographic and other information
Revenue by geographic region, based on ship-to destinations, was as follows:
(in thousands)
Americas
Europe, Middle East and Africa (EMEA)
Asia and Pacific area countries (APAC)
Year ended December 31,
2014
2015
2013
$
$
868,772 $
535,260
215,939
1,619,971 $
890,352 $
371,197
132,656
1,394,205 $
557,285
322,226
106,226
985,737
Revenue in the United States, which is included in the Americas geographic region, was $769.2 million, $796.0
million and $498.5 million in 2015, 2014 and 2013, respectively. In 2014, the Company reclassified four countries
it had previously included in the APAC geographical region to be included in the EMEA geographical region. This
caused $19.3 million and $10.6 million of revenue to be reclassified from the APAC region to the EMEA region in
2014 and 2013, respectively. The Company does not disclose revenue by product category as it does not track
sales incentives and other revenue adjustments by product category to report such data.
As of December 31, 2015, 2014 and 2013, long-lived assets, which represent gross property and equipment,
located outside the United States, primarily in China, were $47.6 million, $25.4 million and $6.0 million,
respectively.
12. Subsequent events (unaudited)
On February 25, 2016, the Company entered into definitive agreements to acquire two privately-held companies
that offer mobile video editing applications. The aggregate purchase consideration includes cash consideration of
approximately $105 million as well as certain deferred consideration subject to specified future employment
conditions. The transactions are expected to close in the first half of 2016, subject to the satisfaction of customary
closing conditions.
76
Schedule II
GoPro, Inc.
VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 2015, 2014 and 2013
(in thousands)
Allowance for doubtful accounts
receivable:
Balance at
Beginning of
Year
Charges to
Revenue
Charges to
Expense
Deductions/
Write-offs
Balance at
End of Year
Year ended December 31, 2015
$
1,250 $
— $
682 $
Year ended December 31, 2014
Year ended December 31, 2013
Allowance for sales returns:
520
262
—
—
970
663
Year ended December 31, 2015
$
25,747 $
48,182 $
(47,649) $
Year ended December 31, 2014
Year ended December 31, 2013
14,352
9,077
39,011
24,156
(27,616)
(18,881)
(532 ) $
(240)
(405)
— $
—
—
1,400
1,250
520
26,280
25,747
14,352
Valuation allowance for deferred
tax assets:
Year ended December 31, 2015
$
— $
— $
8,555 $
— $
8,555
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act, that are designed to ensure that information required to be disclosed by a company in the reports
that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be disclosed by a company in the reports
that it files or submits under the Exchange Act is accumulated and communicated to the company’s management,
including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding
required disclosure.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated
the effectiveness of our disclosure controls and procedures as of December 31, 2015. Based on the evaluation of
our disclosure controls and procedures as of December 31, 2015, our Chief Executive Officer and Chief Financial
Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable
assurance level.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting
(as defined in Rule 13a-15(f) under the Exchange Act). Our management conducted an assessment of the
effectiveness of our internal control over financial reporting based on the criteria established in “Internal Control -
Integrated Framework” (2013) issued by the Committee of Sponsoring Organizations of the Treadway
77
Commission (COSO). Based on that assessment, our management has concluded that our internal control over
financial reporting was effective as of December 31, 2015. The effectiveness of the Company’s internal control
over financial reporting as of December 31, 2015 has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, as stated in their report which appears herein.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation
required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended
December 31, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including the CEO and CFO, recognizes that our disclosure controls and procedures or our
internal control over financial reporting cannot prevent or detect all possible instances of errors and all fraud. A
control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance
that the control system's objectives will be met. The design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative to their costs.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required for this Item is incorporated by reference from our Proxy Statement to be filed for our
2016 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2015.
Item 11. Executive Compensation
The information required for this Item is incorporated by reference from our Proxy Statement to be filed for our
2016 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2015.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required for this Item is incorporated by reference from our Proxy Statement to be filed for our
2016 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2015.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required for this Item is incorporated by reference from our Proxy Statement to be filed for our
2016 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2015.
Item 14. Principal Accounting Fees and Services
The information required for this Item is incorporated by reference from our Proxy Statement to be filed for our
2016 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2015.
78
Part IV
Item 15. Exhibits, Financial Statement Schedules
1. Financial Statements
The financial statements filed as part of this report are listed in the "Index to Financial Statements" under
Part II, Item 8 of this report.
2. Financial Statement Schedules
All schedules are omitted as the required information is inapplicable or the information is presented in the
Consolidated Financial Statements or Notes to Consolidated Financial Statements under Item 8.
3. Exhibits
The information required by this item is set forth on the exhibit index which follows the signature page of this
report.
79
Pursuant to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned,
thereunto duly authorized.
SIGNATURES
Dated: February 29, 2016
GoPro, Inc.
(Registrant)
By: /s/ Nicholas Woodman
Nicholas Woodman
Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby
constitutes and appoints Nicholas Woodman and Jack Lazar, and each of them, as his true and lawful attorneys-
in-fact, proxies and agents, each with full power of substitution, for him in any and all capacities, to sign any and
all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-
in-fact, proxies and agents full power and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully for all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact, proxies and agents, or their or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name
Title
Date
By:
/s/ Nicholas Woodman
Chief Executive Officer and Chairman
February 29, 2016
Nicholas Woodman
(Principal Executive Officer)
By:
/s/ Jack Lazar
Chief Financial Officer
February 29, 2016
Jack Lazar
(Principal Financial and Accounting Officer)
By:
/s/ Anthony Bates
President and Director
February 29, 2016
Anthony Bates
By:
/s/ Michael Marks
Director
February 29, 2016
Michael Marks
By:
/s/ Peter Gotcher
Director
February 29, 2016
Peter Gotcher
By:
/s/ Edward Gilhuly
Director
February 29, 2016
Edward Gilhuly
By:
/s/ Kenneth Goldman
Director
February 29, 2016
Kenneth Goldman
By:
/s/ Zander Lurie
Director
February 29, 2016
Zander Lurie
80
EXHIBIT INDEX
Exhibit
Number
3.01
3.02
4.01
4.02
10.01*
10.02*
10.03*
10.04*
10.05*
Exhibit Title
Form File No. Exhibit
Filing Date
Herewith
Incorporated by Reference
Filed
Restated Certificate of Incorporation of the
Registrant.
Amended and Restated Bylaws of the Registrant.
Form of Registrant’s Class A common stock
certificate.
Investors’ Rights Agreement, dated as of February
26, 2011, by and among the Registrant and certain
investors, as amended.
Form of Indemnity Agreement by and between the
Registrant and each of its directors and executive
officers.
2010 Equity Incentive Plan, as amended, and form
of stock option agreement and restricted stock unit
agreement.
2014 Equity Incentive Plan and forms thereunder.
2014 Employee Stock Purchase Plan and forms
thereunder.
Offer Letter to Nina Richardson from the
Registrant, dated February 8, 2013.
S-1
333-200038
3.01
November 10, 2014
S-1
333-200038
3.02
November 10, 2014
S-1
333-196083
4.01
May 19, 2014
S-1
333-196083
4.02
May 19, 2014
S-1
333-196083
10.01
May 19, 2014
S-1
333-196083
10.02
May 19, 2014
S-1
333-196083
10.03
June 11, 2014
S-1
333-196083
10.04
June 11, 2014
S-1
333-196083
10.05
May 19, 2014
10.06*
Offer Letter to Jack Lazar from the Registrant,
dated January 17, 2014.
S-1
333-196083
10.07
May 19, 2014
S-1
333-196083
10.08
May 19, 2014
S-1
333-200038
10.16
November 10, 2014
S-1
333-196083
10.09
May 19, 2014
S-1
333-196083
10.1
June 11, 2014
S-1
333-196083
10.11
May 19, 2014
S-1
333-196083
10.12
May 19, 2014
S-1
333-196083
10.14
May 19, 2014
S-1
333-196083
10.16
June 11, 2014
S-1
333-196083
10.18
June 11, 2014
10.07*
10.08*
10.09*
10.10*
10.11
10.12
10.13†
10.14*
10.15*
10.16
21.01
23.01
24.01
Offer Letter to Sharon Zezima from the Registrant,
dated August 23, 2013.
Amended and Restated Offer Letter to Anthony
Bates from the Registrant, effective as of October
23, 2014.
Form of Change in Control Severance Agreement.
Amended and Restated Change in Control
Severance Agreement dated June 8, 2014, by and
between Jack Lazar and the Registrant.
Contribution Agreement dated December 28, 2011
by and between Nicholas Woodman and the
Registrant.
Office Lease Agreement, dated as of November 1,
2011, by and between Locon San Mateo, LLC and
the Registrant, as amended, and other leases for
the Registrant’s headquarters.
Design, Manufacturing and Supply Agreement,
dated as of August 18, 2011, by and between
Chicony Electronics Co. Ltd. and the Registrant.
Employment Letter to Nicholas Woodman from the
Registrant, dated June 2, 2014.
Amended and Restated Change in Control
Severance Agreement dated June 8, 2014 by and
between Nina Richardson and the Registrant.
Seventh amendment to Office Lease Agreement,
by and between RAR2 - Clearview Business Park
Owner QRS, LLC and the Registrant, dated
November 23, 2015.
List of Subsidiaries
Consent of Independent Registered Public
Accounting Firm
Power of Attorney (included on the signature page
to this Annual Report on Form 10-K).
X
X
X
X
81
31.01
31.02
32.01‡
32.02‡
101.INS
101.SCH
101.CAL
101.LAB
101.PRE
101.DEF
Certification of Principal Executive Officer Required
Under Rule 13a-14(a) and 15d-14(a) of the
Securities Exchange Act of 1934, as amended.
Certification of Principal Financial Officer Required
Under Rule 13a-14(a) and 15d-14(a) of the
Securities Exchange Act of 1934, as amended.
Certification of the Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350
Certification of the Chief Financial Officer Pursuant
to 18 U.S.C. Section 1350
XBRL Instance Document
XBRL Taxonomy Extension Schema
XBRL Taxonomy Extension Calculation Linkbase
XBRL Taxonomy Extension Label Linkbase
XBRL Taxonomy Extension Presentation Linkbase
XBRL Taxonomy Extension Definition Linkbase
X
X
X
X
Indicates a management contract or compensatory plan.
*
Portions of this exhibit have been granted confidential treatment by the SEC.
†
‡
As contemplated by SEC Release No. 33-8212, these exhibits are furnished with this Annual Report on Form 10-K
and are not deemed filed with the SEC and are not incorporated by reference in any filing of GoPro, Inc. under the Securities
Act of 1933 or the Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general
incorporation language in such filings.
82
BOARD OF DIRECTORS
CORPORATE OFFICERS
Nicholas Woodman
Founder, Chief Executive Officer
and Chairman of the Board
GoPro, Inc.
Anthony Bates
President
GoPro, Inc.
Edward Gilhuly
Managing Member
Sageview Capital MGP, LLC
Kenneth Goldman
Chief Financial Officer
Yahoo!
Peter Gotcher
Board Member to Digital Media
Technology Companies
Alexander Lurie
Chief Executive Officer and Director
SurveyMonkey
Michael Marks
Founding Partner
Riverwood Capital GP Ltd.
CORPORATE INFORMATION
HEADQUARTERS
3000 Clearview Way
San Mateo, CA 94402
INTERNET ADDRESS
www.gopro.com
INVESTOR RELATIONS
Peter Salkowski
investor@gopro.com
Charles “CJ” Prober
Senior Vice President of
Software and Services
Jeff Ryan
Senior Vice President of People
Colin Born
Vice President of
Corporate Development
Ocean MacAdams
Vice President of Entertainment
Nicholas Woodman
Founder and Chief Executive Officer
Anthony Bates
President
Brian McGee
Chief Financial Officer
Sharon Zezima
General Counsel and Secretary
Fabrice Barbier
Senior Vice President of
Consumer Devices
George “Jeff” Brown
Senior Vice President of Communications
and Government Affairs
Jonathan Harris
Senior Vice President of Sales
Bryan Johnston
Senior Vice President of Marketing
Ronald LaValley
Senior Vice President of Operations
STOCK TRANSFER AGENT
AND REGISTRAR
American Stock Transfer
& Trust Company
6201 15th Avenue
Brooklyn, NY 11219
www.amstock.com
800-937-5449
info@amstock.com
STOCK EXCHANGE LISTING
Symbol – GPRO
NASDAQ Stock Market LLC
New York, NY
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
San Jose, CA
CORPORATE COUNSEL
Fenwick & West LLP
Mountain View, CA
ANNUAL MEETING
The 2016 Annual Meeting of
Stockholders of GoPro, Inc. will
be held on Monday, June 6, 2016
at 10:00 a.m. at:
virtualshareholdermeeting.com/GPRO2016