Proxy Statement
Annual Report
Fiscal Year 2019
To Our Shareholders:
I want to acknowledge that as of the print deadline for this letter, our world is changing as a result
of the many impacts of global COVID-19 pandemic. We’re determined to leverage these challenging
times to enhance our business through strategic shifts that we believe can yield long term benefits
— ultimately making us stronger. We’re also focused on the health and safety of our employees as
a priority. The crucible of crisis represents opportunity for those who embrace it for what it is. As a
company and as a team, we embrace it fully.
In 2019, GoPro successfully returned to revenue growth and full-year profitability. We achieved this
by starting the year with a strong HERO7 product lineup and the appropriate margin structure from
January 1, onward. Then we finished the year with a stronger HERO8 and MAX product lineup and
an even better margin profile. We combined this full-year product and margin performance with
diligent expense management to deliver a significant non-GAAP EPS improvement of $0.47 to $0.24
EPS for the year.
Additional highlights that contributed to our profitability were material growth of consumer direct
sales at GoPro.com, the growth of our high-margin PLUS subscription service, and our ahead-of-
the-curve move of U.S.-bound camera production to Guadalajara, Mexico.
When we step back and see how far we’ve come in the past few years, we are proud that GoPro
is now “fighting fit” as an organization. We’re committed to maintaining an efficient approach to
expenses as we aggressively pursue the many growth and profit expanding opportunities we
see ahead.
Innovation is alive and well at GoPro, and we cannot wait to show you what we’ve got on tap for
2020. Our plan is to maximize the profitability of our core hardware business by super-serving
our most engaged customers with high-end, higher ASP products, scaling our high-margin PLUS
subscription business and releasing a new GoPro app experience to address what we believe to be a
significant TAM and margin expanding opportunity. And again, we intend to do this while keeping
a tight rein on operating expenses.
We are also focused on scaling our direct-to-consumer capabilities to further improve gross margin
and profitability. This is an increasingly important initiative in 2020 and beyond.
Our progress over the past couple of years makes it clear—we are aligning the strength of our
business to the strength of our brand. And we understand that wowing our end users isn’t enough.
We must also wow you, our investors. It’s how we, as a management team, judge our performance.
We are committed to it.
With respect,
Nicholas Woodman
Founder, Chairman and Chief Executive Officer
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April 21, 2020
Dear Stockholders:
You are cordially invited to attend the 2020 Annual Meeting of Stockholders of GoPro, Inc., which will be held
virtually on Tuesday, June 2, 2020 at 10:00 a.m. (Pacific Time). The virtual Annual Meeting can be accessed by
visiting www.virtualshareholdermeeting.com/GPRO2020, where you will be able to listen to the meeting live,
submit questions and vote online. We believe that a virtual stockholder meeting provides greater access to those
who may want to attend and therefore have chosen this over an in-person meeting.
The matters expected to be acted upon at the virtual Annual Meeting are described in detail in the accompanying
Notice of Annual Meeting of Stockholders and Proxy Statement.
Your vote is important. Whether or not you plan to attend the meeting, please cast your vote as soon as possible
by Internet or telephone, or by completing and returning the enclosed proxy card in the postage-prepaid envelope
to ensure that your shares will be represented. Your vote by written proxy will ensure your representation at the
Annual Meeting regardless of whether you attend the virtual meeting or not. Returning the proxy does not deprive
you of your right to attend the meeting and to vote your shares at the virtual meeting.
We look forward to your attendance at our virtual Annual Meeting.
Sincerely,
Nicholas Woodman
Chief Executive Officer
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE STOCKHOLDER MEETING TO BE HELD ON JUNE 2, 2020 AT 10:00 A.M. (PACIFIC TIME):
THIS PROXY STATEMENT AND THE ANNUAL REPORT ARE AVAILABLE AT
www.proxyvote.com
GOPRO, INC.
3000 Clearview Way
San Mateo, California 94402
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the 2020 Annual Meeting of Stockholders of GoPro, Inc. will be held virtually on Tuesday,
June 2, 2020, at 10:00 a.m.
(Pacific Time). The virtual Annual Meeting can be accessed by visiting
www.virtualshareholdermeeting.com/GPRO2020, where you will be able to listen to the meeting live, submit questions and
vote online.
We are holding the meeting for the following purposes, which are more fully described in the accompanying proxy statement:
1. To elect nine directors, all of whom are currently serving on our board of directors, each to serve until the next annual
meeting of stockholders and until his or her successor has been elected and qualified, or until his or her earlier death,
resignation, or removal.
Nicholas Woodman
Tyrone Ahmad-Taylor
Kenneth Goldman
Peter Gotcher
James Lanzone
Alexander Lurie
Susan Lyne
Frederic Welts
Lauren Zalaznick
2. To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for
the year ending December 31, 2020.
3. To hold an advisory vote on the resolution to approve executive compensation.
In addition, stockholders may be asked to consider and vote upon such other business as may properly come before the
meeting or any adjournment or postponement of the meeting.
Only stockholders of record at the close of business on April 9, 2020 are entitled to notice of, and to vote at, the virtual meeting
and any adjournments or postponements thereof. For ten days prior to the meeting, a complete list of the stockholders entitled
to vote at the virtual meeting will be available for examination by any stockholder for any purpose germane to the meeting
during ordinary business hours at our headquarters.
Your vote as a GoPro, Inc. stockholder is very important. Each share of GoPro Class A common stock that you own represents
one vote and each share of GoPro Class B common stock that you own represents ten votes. For questions regarding your
stock ownership, contact your brokerage firm or other entity that holds your shares or, if you are a registered holder, our
transfer agent, American Stock Transfer & Trust Company, LLC, by calling (800) 937-5449, by writing to 6201 15th Avenue,
Brooklyn, New York 11219 or by e-mailing help@astfinancial.com.
By Order of the Board of Directors,
Nicholas Woodman
Chief Executive Officer
San Mateo, California
April 21, 2020
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE VIRTUAL ANNUAL MEETING, WE ENCOURAGE YOU TO VOTE
AND SUBMIT YOUR PROXY BY INTERNET, TELEPHONE OR BY MAIL. FOR ADDITIONAL INSTRUCTIONS ON
VOTING BY TELEPHONE OR THE INTERNET, PLEASE REFER TO YOUR PROXY CARD. TO VOTE AND SUBMIT
YOUR PROXY BY MAIL, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT
IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE VIRTUAL ANNUAL MEETING, YOU MAY REVOKE YOUR
PROXY AND VOTE VIA THE VIRTUAL MEETING WEBSITE. IF YOU HOLD YOUR SHARES THROUGH AN ACCOUNT
WITH A BROKERAGE FIRM, BANK OR OTHER NOMINEE, PLEASE FOLLOW THE INSTRUCTIONS YOU RECEIVE
FROM YOUR ACCOUNT MANAGER TO VOTE YOUR SHARES.
GOPRO, INC.
PROXY STATEMENT FOR THE 2020 ANNUAL MEETING OF STOCKHOLDERS
Table of Contents
INFORMATION ABOUT SOLICITATION AND VOTING ....................................................................................
INTERNET AVAILABILITY OF PROXY MATERIALS ........................................................................................
GENERAL INFORMATION ABOUT THE ANNUAL MEETING .........................................................................
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD; CORPORATE GOVERNANCE
STANDARDS AND DIRECTOR INDEPENDENCE ............................................................................................
Page
1
1
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6
NOMINATIONS PROCESS AND DIRECTOR QUALIFICATIONS .....................................................................
12
PROPOSAL NO. 1 ELECTION OF DIRECTORS ..............................................................................................
14
PROPOSAL NO. 2 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM ..........................................................................................................................................
PROPOSAL NO 3. ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
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24
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT .................................
25
EXECUTIVE OFFICERS
28
COMPENSATION DISCUSSION AND ANALYSIS ............................................................................................
29
REPORT OF THE COMPENSATION AND LEADERSHIP COMMITTEE ..........................................................
62
EQUITY COMPENSATION PLAN INFORMATION ............................................................................................
63
RELATED PARTY TRANSACTIONS .................................................................................................................
64
REPORT OF THE AUDIT COMMITTEE ............................................................................................................
65
ADDITIONAL INFORMATION ............................................................................................................................
66
OTHER MATTERS .............................................................................................................................................
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APPENDIX A: RECONCILIATION OF GAAP TO NON-GAAP MEASURE .......................................................
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GOPRO, INC.
3000 Clearview Way
San Mateo, California 94402
PROXY STATEMENT FOR THE 2020 ANNUAL MEETING OF STOCKHOLDERS
April 21, 2020
INFORMATION ABOUT SOLICITATION AND VOTING
The accompanying proxy is solicited on behalf of the board of directors of GoPro, Inc. (“GoPro”) for use at GoPro’s 2020
Annual Meeting of Stockholders to be held virtually on June 2, 2020, at 10:00 a.m. (Pacific Time) (“Annual Meeting”), and
any adjournment or postponement of the Annual Meeting. The Annual Meeting can be accessed by visiting
www.virtualshareholdermeeting.com/GPRO2020, where you will be able to listen to the meeting live, submit questions and
vote online. The Notice of Internet Availability of Proxy Materials and this proxy statement for the Annual Meeting (“Proxy
Statement”) and the accompanying form of proxy were first distributed and made available on the Internet to stockholders
on or about April 21, 2020. GoPro’s annual report on Form 10-K for the year ended December 31, 2019 filed on
February 14, 2020 (“Annual Report”) will be available with this Proxy Statement by following the instructions in the Notice
of Internet Availability of Proxy Materials.
INTERNET AVAILABILITY OF PROXY MATERIALS
In accordance with U.S. Securities and Exchange Commission (“SEC”) rules, we are using the Internet as our primary means
of furnishing proxy materials to stockholders. Consequently, most stockholders will not receive paper copies of our proxy
materials. We will instead send these stockholders a Notice of Internet Availability of Proxy Materials with instructions for
accessing the proxy materials, including our Proxy Statement and Annual Report, and voting via the Internet. The Notice of
Internet Availability of Proxy Materials also provides information on how stockholders may obtain paper copies of our proxy
materials if they so choose. We believe this rule makes the proxy distribution process more efficient and less costly and helps
in conserving natural resources.
GENERAL INFORMATION ABOUT THE ANNUAL MEETING
Purpose of the Annual Meeting
At the Annual Meeting, stockholders will act upon the proposals described in this Proxy Statement.
Record Date; Quorum
Only holders of record of our Class A common stock and Class B common stock at the close of business on April 9, 2020
(“Record Date”) will be entitled to vote at the Annual Meeting. At the close of business on the Record Date, we had 128,638,019
shares of Class A common stock and 28,887,835 shares of Class B common stock outstanding and entitled to vote.
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The holders of a majority of the voting power of the shares of our Class A common stock and Class B common stock (voting
together as a single class) entitled to vote at the Annual Meeting as of the Record Date must be present at the Annual Meeting
in order to hold the Annual Meeting and conduct business. This presence is called a quorum. Your shares are counted as
present at the Annual Meeting if you are present and vote online at the Annual Meeting or if you have properly submitted a
proxy.
Voting Rights; Required Vote
In deciding all matters at the Annual Meeting, each holder of shares of our common stock is entitled to one vote for each
share of Class A common stock held and ten votes for each share of Class B common stock held as of the close of business
on the Record Date. We do not have cumulative voting rights for the election of directors. You may vote all shares owned by
you as of the Record Date, including (i) shares held directly in your name as the stockholder of record, and (ii) shares held
for you as the beneficial owner in street name through a brokerage firm, bank, trustee, or other nominee.
Stockholder of Record: Shares Registered in Your Name. If, on the Record Date, your shares were registered directly in your
name with our transfer agent, American Stock Transfer & Trust Company, LLC, then you are considered the stockholder of
record with respect to those shares. As a stockholder of record, you may vote at the Annual Meeting or vote by telephone,
by Internet, or by filling out and returning the proxy card.
Beneficial Owner: Shares Registered in the Name of a Broker or Nominee. If, on the Record Date, your shares were held in
an account with a brokerage firm, bank, trustee or other nominee, then you are the beneficial owner of the shares held in
street name. As a beneficial owner, you have the right to direct your nominee on how to vote the shares held in your account,
and your nominee has enclosed or provided voting instructions for you to use in directing it on how to vote your shares.
However, the organization that holds your shares is the stockholder of record for purposes of voting at the Annual Meeting.
Because you are not the stockholder of record, you may not vote your shares at the Annual Meeting unless you request and
obtain a valid proxy from the organization that holds your shares giving you the right to vote the shares at the Annual Meeting.
• Proposal No. 1 – Election of Directors. Each director will be elected by a plurality of the votes cast, which
means that the nine individuals nominated for election to the board of directors at the Annual Meeting receiving
the highest number of “FOR” votes will be elected. You may either vote “FOR” one or any of the nominees or
“WITHHOLD” your vote with respect to one or any of the nominees.
• Proposal No. 2 – Ratification of Appointment of Independent Registered Accounting Firm. Ratification of
PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2020 will be obtained if
the number of votes cast “FOR” the proposal at the Annual Meeting exceeds the number of votes “AGAINST”
the proposal.
• Proposal No. 3 - Advisory Vote to Approve Executive Compensation. Approval, on a non-binding advisory
basis, of our executive compensation of our Named Executive Officers (“NEOs”), will be obtained if the number
of votes cast “FOR” the proposal at the Annual Meeting exceeds the number of votes “AGAINST” the proposal.
Broker non-votes occur when shares held by a broker for a beneficial owner are not voted either because (i) the broker did
not receive voting instructions from the beneficial owner or (ii) the broker lacked discretionary authority to vote the shares.
Abstentions occur when shares present at the Annual Meeting are marked “abstain.” A broker is entitled to vote shares held
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for a beneficial owner on “routine” matters, such as the ratification of PricewaterhouseCoopers LLP as our independent
registered public accounting firm for 2020, without instructions from the beneficial owner of those shares. On the other hand,
absent instructions from the beneficial owner of such shares, a broker is not entitled to vote shares held for a beneficial owner
on “non-routine” matters. All the other proposals presented at the Annual Meeting are non-routine matters. Broker non-
votes and abstentions are counted for purposes of determining whether a quorum is present but have no effect on the outcome
of the matters voted upon except where brokers can exercise discretion on “routine” matters. Accordingly, we encourage you
to provide voting instructions to your broker, whether or not you plan to attend the Annual Meeting.
Recommendations of the Board of Directors on Each of the Proposals Scheduled to be Voted on at the Annual
Meeting
The board of directors recommends that you vote “FOR” each of the directors named in this Proxy Statement (“Proposal
1”), “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting
firm for 2020 (“Proposal 2”) and “FOR” the approval of the compensation of our Named Executive Officers (“Proposal 3”).
None of the directors or executive officers has any substantial interest in any matter to be acted upon, other than elections
to office with respect to the directors so nominated.
Voting Instructions; Voting of Proxies
If you are a stockholder of record, you may:
•
vote via
the Annual Meeting website—any stockholder can attend
the Annual Meeting by visiting
www.virtualshareholdermeeting.com/GPRO2020, where stockholders may vote and submit questions during the
meeting. The Annual Meeting starts at 10:00 a.m. (Pacific Time) on June 2, 2020. Please have your 16-Digit Control
Number to join the Annual Meeting. Instructions on how to attend and participate via the Internet, including how to
demonstrate proof of stock ownership, are posted at www.proxyvote.com;
•
vote via telephone or Internet—in order to do so, please follow the instructions shown on your proxy card; or
•
vote by mail—complete, sign and date the proxy card enclosed herewith and return it before the Annual Meeting in
the envelope provided.
Votes submitted by telephone or Internet must be received by 11:59 p.m. (Eastern Time) on June 1, 2020. Submitting your
proxy, whether via the Internet, by telephone, or by mail, will not affect your right to vote in person should you decide to attend
the Annual Meeting. If you are not the stockholder of record, please refer to the voting instructions provided by your nominee
to direct your nominee on how to vote your shares. You may either vote “FOR” all of the nominees to the board of directors,
or you may “WITHHOLD” your vote from all nominees or any nominee you specify. For Proposals 2 and 3, you may vote
“FOR” or “AGAINST” or “ABSTAIN” from voting. Your vote is important. Whether or not you plan to attend the Annual Meeting,
we urge you to vote by proxy to ensure that your vote is counted.
All proxies will be voted in accordance with the instructions specified on the proxy card. If you sign a physical proxy card and
return it without instructions as to how your shares should be voted on a particular proposal at the Annual Meeting, your
shares will be voted in accordance with the recommendations of our board of directors stated above.
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If you do not vote and you hold your shares in street name, and your broker does not have discretionary power to vote your
shares, your shares may constitute “broker non-votes” (as described above) and will not be counted in determining the
number of shares necessary for approval of the proposals. However, shares that constitute broker non-votes will be counted
for the purpose of establishing a quorum for the Annual Meeting.
If you receive more than one proxy card, this is because your shares are registered in more than one name or are registered
in different accounts. To make certain all your shares are voted, please follow the instructions included on each proxy card
and vote each proxy card by telephone or the Internet. If voting by mail, please complete, sign and return each proxy card
to ensure that all your shares are voted.
Expenses of Soliciting Proxies
GoPro will pay the expenses of soliciting proxies. Following the original mailing of the soliciting materials, GoPro and its
agents, including directors, officers and other employees, without additional compensation, may solicit proxies by mail,
electronic mail, telephone, facsimile, by other similar means, or in person. Following the original mailing of the soliciting
materials, GoPro will request brokers, custodians, nominees and other record holders to forward copies of the soliciting
materials to persons for whom they hold shares and to request authority for the exercise of proxies. In such cases, GoPro,
upon the request of the record holders, will reimburse such holders for their reasonable expenses. If you choose to access
the proxy materials through the Internet, you are responsible for any Internet access charges you may incur.
Revocability of Proxies
A stockholder who has given a proxy may revoke it at any time before it is exercised at the Annual Meeting by:
•
delivering to the Corporate Secretary of GoPro (by any means) a written notice stating that the proxy is revoked;
•
signing and delivering a proxy bearing a later date;
•
voting again by telephone or Internet; or
•
attending and voting at the Annual Meeting (although attendance at the Annual Meeting will not, by itself, revoke a
proxy).
Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to revoke a
proxy, you must contact that firm to revoke any prior voting instructions.
Voting Results
Voting results will be tabulated and certified by the inspector of elections appointed for the Annual Meeting. The preliminary
voting results will be announced at the Annual Meeting. The final results will be tallied by the inspector of elections and filed
by GoPro (the "Company") with the Securities and Exchange Commission ("SEC") in a current report on Form 8-K within
four business days of the Annual Meeting.
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Information regarding our Virtual Meeting
You will be able to attend the Annual Meeting virtually at www.virtualshareholdermeeting.com/GPRO2020, where you will be
able to vote electronically and submit questions during the meeting.
You will be able submit a question during the Annual Meeting via our virtual stockholder meeting website,
www.virtualshareholdermeeting.com/GPRO2020. If your question is properly submitted during the relevant portion of the
meeting agenda, our Head of Corporate Communications will lead the Q&A session and a response to appropriate questions
will be provided during the live webcast. A webcast replay of the 2020 Annual Meeting, including the Q&A session, will also
be archived on www.virtualshareholdermeeting.com/GPRO2020.
If we experience technical difficulties during the virtual meeting (e.g., a temporary or prolonged power outage), our Chairman
will determine whether the meeting can be promptly reconvened (if the technical difficulty is temporary) or whether the meeting
will need to be reconvened on a later day (if the technical difficulty is more prolonged). In any situation, we will promptly notify
stockholders of the decision via www.virtualshareholdermeeting.com/GPRO2020.
If you encounter technical difficulties accessing our meeting or asking questions during the meeting, a support line will be
available on the login page of the virtual meeting website.
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BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD;
CORPORATE GOVERNANCE STANDARDS AND DIRECTOR INDEPENDENCE
GoPro is strongly committed to good corporate governance practices. These practices provide an important framework within
which our board of directors and management can pursue our strategic objectives for the benefit of our stockholders. Our
board of directors has adopted Corporate Governance Guidelines that set forth the role of our board of directors, director
independence standards, board structure and functions, director selection considerations, and other governance policies.
In addition, our board of directors has adopted written charters for its standing committees (audit, compensation and
leadership, and nominating and governance), as well as a Code of Business Conduct and Ethics that applies to all of our
employees, officers and directors, including those officers responsible for financial reporting. Our board of directors reviews
each of the Corporate Governance Guidelines, the committee charters, and the Code of Business Conduct and Ethics
annually and implements changes as appropriate. The Corporate Governance Guidelines, the committee charters, and the
Code of Business Conduct and Ethics, and any waivers or amendments to the Code of Business Conduct and Ethics, are
all available on our Investor Relations website (http://investor.gopro.com) in the “Corporate Governance” section.
Board Leadership Structure
Our Corporate Governance Guidelines provide that our board of directors may choose its chairperson in any way that it
considers to be in the best interests of our company. Our nominating and governance committee periodically considers the
leadership structure of our board of directors, including the separation of the chairperson and chief executive officer roles
and/or appointment of a lead independent director of our board of directors, and makes such recommendations to our board
of directors as our nominating and governance committee deems appropriate. Our Corporate Governance Guidelines also
provide that, when the positions of chairperson and chief executive officer are held by the same person, the independent
directors may designate a “lead independent director.” In cases in which the chairperson and chief executive officer are the
same person, the responsibilities of the lead independent director include: scheduling and preparing agendas for meetings
of the independent directors; serving as a liaison between the chief executive officer and the independent directors; being
available, under appropriate circumstances, for consultation and direct communication with stockholders; ensuring our board
of directors is fulfilling its oversight responsibilities in strategy, risk oversight and succession planning; and performing such
other functions and responsibilities as requested by our board of directors from time to time.
Currently, our board of directors believes that it is in the best interest of our company and our stockholders for our Chief
Executive Officer, Mr. Woodman, to serve as both Chief Executive Officer and Chairman given his knowledge of our company,
industry, and strategic vision. Because Mr. Woodman has served and continues to serve in both these roles, our board of
directors appointed Kenneth Goldman to serve as our lead independent director in April 2017. As lead independent director,
Mr. Goldman, presided over regularly scheduled meetings at which only our independent directors were present to foster
open and honest communication, served as a liaison between the Chairman and the independent directors, and performed
such additional duties as our board of directors may otherwise determine and delegate. Our board of directors believes that
its independence and oversight of management is maintained effectively through this leadership structure, the composition
of our board of directors and sound corporate governance policies and practices.
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Our Board of Directors’ Role in Risk Oversight
Our board of directors is primarily responsible for overseeing our risk management processes. Our board of directors, as a
whole, determines the appropriate level of risk for GoPro, assesses the specific risks that we face and reviews management’s
strategies for adequately mitigating and managing the identified risks, including but not limited to recent risks related to
COVID-19. Although our board of directors administers this risk management oversight function, the committees of our board
of directors support our board of directors in discharging its oversight duties and address risks inherent in their respective
areas. The audit committee reviews our major financial risk exposures and the steps management has taken to monitor and
control such exposures, including our procedures and related policies with respect to risk assessment and risk management.
The compensation and leadership committee reviews risks and exposures associated with compensation plans and programs,
including incentive plans. The nominating and corporate governance committee assists the board in fulfilling its oversight
responsibilities with respect to the management of risks associated with our overall governance practices and the leadership
structure of the board of directors (as described above under “Board Leadership Structure”). Our board of directors is kept
informed of each committee’s risk oversights and other activities via regular reports of the committee chairs to the full board
of directors.
We believe this division of responsibilities is an effective approach for addressing the risks we face and that our board
leadership structure supports this approach.
Director Independence
Our board of directors determines the independence of our directors by applying the applicable rules, regulations and listing
standards of The Nasdaq Global Select Market (“Nasdaq”) and applicable rules and regulations promulgated by the SEC.
The applicable rules, regulations and listing standards of Nasdaq provide that a director is independent only if the board of
directors affirmatively determines that the director does not have a relationship with the company which, in the opinion of the
board of directors, would interfere with the exercise of his or her independent judgment in carrying out the responsibilities of
a director. They also specify various relationships that preclude a determination of director independence. Such relationships
may include employment, commercial, accounting, family and other business, professional and personal relationships.
Applying these standards, our board of directors annually reviews the independence of our directors, taking into account all
relevant facts and circumstances. In its most recent review, our board of directors considered, among other things, the
relationships that each non-employee director has with our company and all other facts and circumstances our board of
directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each
non-employee director, any transactions involving non-employee directors described in “Related Party Transactions” and
any transactions or relationships not required to be disclosed in such section.
Our board of directors has determined that Messrs. Ahmad-Taylor, Goldman, Gotcher, Lanzone, Lurie and Welts, and Mses.
Lyne and Zalaznick, are “independent directors” as defined under the applicable rules, regulations and listing standards of
Nasdaq and applicable rules and regulations promulgated by the SEC. All members of our audit committee, compensation
and leadership committee and nominating and governance committee must be independent directors under the applicable
rules, regulations and listing standards of Nasdaq. Members of the audit committee also must satisfy a separate SEC
independence requirement, which provides that (i) they may not accept directly or indirectly any consulting, advisory or other
compensatory fee from GoPro or any of our subsidiaries other than their directors’ compensation, and (ii) they may not be
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an affiliated person of GoPro or any of our subsidiaries. Members of the compensation and leadership committee also must
satisfy a separate SEC independence requirement and a related Nasdaq listing standard with respect to their affiliation with
GoPro and any consulting, advisory or other fees they may have received from us. Our board of directors has determined
that all members of our audit committee, compensation and leadership committee and nominating and governance committee
are independent and satisfy the relevant SEC and Nasdaq independence requirements for such committees.
Board and Committee Meetings and Attendance
Our board of directors and its committees meet throughout the year on a set schedule, and hold special meetings and act
by written consent from time to time. During 2019, our board of directors met twelve times, including telephonic meetings,
the audit committee held five meetings, the compensation and leadership committee held eight meetings, and the nominating
and governance committee held four meetings. All of our directors attended at least 75% of the aggregate of the total number
of meetings held by our board of directors and of the total number of meetings held by all committees of our board of directors
on which such director served (during the period in which the director served).
Audit Committee
Our audit committee is comprised of Mr. Goldman, who serves as the chair, Mr. Gotcher, Mr. Lurie and Ms. Zalaznick. Ms.
Zalaznick will be rotating off the audit committee in early May 2020, but will continue as a member of the compensation and
leadership committee and as the chair of the nominating and governance committee. Our board of directors has determined
that each member of the audit committee meets the requirements for independence under the applicable rules, regulations
and listing standards of Nasdaq and applicable rules and regulations promulgated by the SEC. Each member of our audit
committee is financially literate. In addition, our board of directors has determined that Mr. Goldman is an audit committee
financial expert within the meaning of Item 407(d) of Regulation S-K of the Securities Act of 1933, as amended (“Securities
Act”).
All audit services to be provided to us and all permissible non-audit services, other than de minimis non-audit services, to
be provided to us by our independent registered public accounting firm will be approved in advance by our audit committee.
Our audit committee, among other things:
•
reviews the financial information which will be provided to stockholders and others;
•
reviews our system of internal controls by consulting with management, our internal compliance team and the
independent registered public accounting firm and monitors compliance with these processes;
•
appoints, retains and oversees the independence and performance of the independent registered public
accounting firm;
•
oversees our accounting and financial reporting processes and the audits of our financial statements;
•
pre-approves audit and permissible non-audit services provided by the independent registered public accounting
firm;
•
reviews and provides oversight regarding our policies with respect to risk assessment and risk management; and
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•
reviews related party transactions and proposed waivers of our Code of Business Conduct and Ethics.
Compensation and Leadership Committee
Our compensation and leadership committee (“CLC”) is comprised of Mr. Gotcher, who serves as the chair, Mses. Lyne and
Zalaznick and Mr. Welts. The Board plans to appoint Ms. Lyne as the chair of the CLC, effective as of the Annual Meeting.
Mr. Gotcher will continue serving as a member of the CLC. Our board of directors has determined that each member of our
compensation and leadership committee meets the requirements for independence under current Nasdaq and SEC rules,
regulations and listing standards. Each member of this committee is also a non-employee director, as defined pursuant to
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”), an outside director, as
defined pursuant to Section 162(m) and is “independent” as defined in Section 5605(a)(2) of the Nasdaq rules and Rule
10C-1 promulgated under the Exchange Act. The purpose of our compensation and leadership committee is to carry out the
responsibilities of our board of directors relating to compensation of our executive officers. Our compensation and leadership
committee, among other things:
•
reviews and determines the compensation of our Chief Executive Officer, executive officers and other executives
reporting to the Chief Executive Officer;
•
administers our equity incentive plans; and
•
establishes and reviews general policies relating to compensation and benefits of our employees.
The compensation and leadership committee engaged an independent executive compensation consulting firm, Compensia,
Inc. (“Compensia”), to evaluate our executive compensation program and practices and to provide advice and ongoing
assistance on executive compensation matters for 2019. Specifically, Compensia was engaged to:
•
provide compensation-related data for a peer group of companies to serve as a basis for assessing competitive
compensation practices;
•
review and assess our current director policies and practices, Chief Executive Officer and other executive officer
compensation policies and practices and equity profile relative to market practices (with director compensation review
done for the benefit of the nominating and governance committee, which per its charter has responsibility for director
compensation review and recommendation);
•
review and assess our current executive compensation program relative to market to identify any potential
changes or enhancements to be brought to the attention of the compensation and leadership committee; and
•
review market practices on employee stock purchase plans and other equity programs.
During 2019, Compensia worked directly with the compensation and leadership committee (and not on behalf of management)
to assist the committee in satisfying its responsibilities and undertook no projects for management without the committee’s
prior approval. The compensation and leadership committee has determined that none of the work performed by Compensia
during 2019 raised any conflicts of interest.
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Nominating and Governance Committee
The nominating and governance committee is comprised of Ms. Zalaznick, who serves as the chair, Messrs. Ahmad-Taylor
and Lanzone and Ms. Lyne. Our board of directors has determined that each member of our nominating and governance
committee meets the requirements for independence under current Nasdaq rules, regulations and listing standards. Our
nominating and governance committee, among other things:
•
identifies, evaluates and recommends nominees to our board of directors and committees of our board of directors;
•
conducts searches for appropriate directors;
•
evaluates the performance of our board of directors;
•
considers and makes recommendations to our board of directors regarding the composition of our board of directors
and its committees and related compensation (and was assisted in its 2019 director compensation review by
Compensia);
•
reviews developments in corporate governance practices;
•
evaluates the adequacy of our corporate governance practices and reporting; and
• makes recommendations to our board of directors concerning corporate governance matters.
Our Board Evaluation Process
The Board is committed to reviewing its performance through an annual evaluation process to continually enhance and
improve its performance. Through these evaluations, the nominating and governance committee oversees the assessment
of the Board’s processes, committees, meetings, planning, and overall effectiveness. The Chair of the nominating and
governance committee reviews the results and feedback provided by the directors and identifies action items stemming from
the assessment. Feedback on Board and committee effectiveness is provided to the full Board for discussion. Any findings
that require additional consideration are addressed at subsequent Board and committee meetings.
Compensation and Leadership Committee Interlocks and Insider Participation
None of the members of our compensation and leadership committee has at any time been one of our officers or employees.
None of our executive officers currently serves, or in the past has served, as a member of the board of directors or compensation
and leadership committee (or other board committee performing equivalent functions) of any entity that has one or more of
its executive officers serving on our board of directors or our compensation and leadership committee.
Board Attendance at Annual Stockholders’ Meeting
Our policy is to invite and encourage each member of our board of directors to be present at our annual meeting of stockholders.
All our current directors were present at our 2019 virtual annual meeting of stockholders held on June 4, 2019.
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Communication with Directors
Stockholders and interested parties who wish to communicate with our board of directors, non-management members of
our board of directors as a group, a committee of our board of directors or a specific member of our board of directors
(including our Chairman or lead independent director) may do so by letters addressed to the attention of our General Counsel.
All communications are reviewed by our General Counsel and provided to the members of our board of directors consistent
with a screening policy providing that unsolicited items, sales materials, abusive, threatening or otherwise inappropriate
materials and other routine items and items unrelated to the duties and responsibilities of our board of directors shall not be
relayed on to directors. Any communication that is not relayed is recorded in a log and made available to our board of directors.
The address for these communications is:
GoPro, Inc.
c/o General Counsel
3000 Clearview Way
San Mateo, California 94402
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NOMINATIONS PROCESS AND DIRECTOR QUALIFICATIONS
Nomination to the Board of Directors
Candidates for nomination to our board of directors are selected by our board of directors based on the recommendation of
the nominating and governance committee in accordance with the committee’s charter, our certificate of incorporation and
bylaws, our Corporate Governance Guidelines, and the criteria adopted by our board of directors regarding director candidate
qualifications. In recommending candidates for nomination, the nominating and governance committee considers candidates
recommended by directors, officers, employees, stockholders and others, using the same criteria to evaluate all candidates.
Evaluations of candidates generally involve a review of background materials, internal discussions and interviews with
selected candidates as appropriate and, in addition, the committee may engage consultants or third-party search firms to
assist it in identifying and evaluating potential nominees.
In 2019 no new candidates were considered for nomination.
Additional information regarding the process for properly submitting stockholder nominations for candidates for membership
on our board of directors is set forth below under “Additional Information – Stockholder Proposals to Be Presented at Next
Annual Meeting.”
Director Qualifications
With the goal of developing a diverse, experienced and highly qualified board of directors, the nominating and governance
committee is responsible for developing and recommending to our board of directors the desired qualifications, expertise
and characteristics of members of our board of directors, including qualifications that the committee believes must be met
by a committee-recommended nominee for membership on our board of directors and specific qualities or skills that the
committee believes are necessary for one or more of the members of our board of directors to possess.
Since the identification, evaluation and selection of qualified directors is a complex and subjective process that requires
consideration of many intangible factors, and will be significantly influenced by the particular needs of our board of directors
from time to time, our board of directors has not adopted a specific set of minimum qualifications, qualities or skills that are
necessary for a nominee to possess, other than those that are necessary to meet U.S. legal, regulatory and Nasdaq listing
requirements and the provisions of our certificate of incorporation, bylaws, Corporate Governance Guidelines, and charters
of the board committees. When considering nominees, our nominating and governance committee may take into consideration
many factors, including among other things, a candidate’s independence, integrity, diversity (inclusive of age, gender, ethnicity,
sexual orientation and gender identity, in accordance with the nominating and governance committee charter), skills,
knowledge about our business or industry, willingness and ability to devote adequate time and effort to the board of directors
responsibilities in the context of the existing composition, knowledge about other areas that are expected to contribute to
the board of directors’ overall effectiveness, and needs of the board of directors and its committees. Our board of directors
and nominating and governance committee believe that a diverse, experienced and highly qualified board of directors fosters
a robust, comprehensive and balanced decision-making process for the continued effective functioning of our board of
directors and success of the Company. Accordingly, through the nomination process, the nominating and governance
committee seeks to promote board membership that reflects a diversity of business experience, expertise, viewpoints,
personal backgrounds and characteristics that are expected to contribute to our board of directors’ overall effectiveness. The
brief biographical description of each director set forth in Proposal 1 below includes the primary individual experience,
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qualifications, attributes and skills of each of our directors that led to the conclusion that each director should serve as a
member of our board of directors at this time.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our board of directors currently consists of nine directors. All of our directors will stand for election at the Annual
Meeting to be held on June 2, 2020 and shall serve for a one-year term expiring at the 2021 Annual Meeting of
Stockholders, and until such director’s successor is duly elected and qualified or until such director’s earlier death,
resignation, or removal.
Shares represented by proxies will be voted “FOR” the election of each of the nine nominees named below, unless
the proxy is marked to “WITHOLD” authority to so vote. If any nominee for any reason is unable to serve or for good
cause will not serve, the proxies may be voted for such substitute nominee as the proxy holder might determine.
Each nominee has consented to being named in this Proxy Statement and to serve if elected.
Nominees to the Board of Directors
The nominees, their ages, occupations, and length of board service as of April 21, 2020 are provided in the table
below. Additional biographical descriptions of each nominee are set forth in the text below the table.
Name of Director/Nominee
Nicholas Woodman
Tyrone Ahmad-Taylor(2)
Kenneth Goldman(1) †
Peter Gotcher(1)(3)
James Lanzone(2)
Alexander Lurie(1)
Susan Lyne(2)(3)
Frederic Welts(3)
Lauren Zalaznick(1)(2)(3)
Age
44
52
70
60
49
46
68
67
57
Principal Occupation
Chief Executive Officer and Chairman, GoPro, Inc.
Vice President, Product Marketing, Facebook, Inc.
President, Hillspire LLC
Independent Investor
Executive in Residence, Benchmark Capital and Strategic Advisor,
ViacomCBS Corp.
Chief Executive Officer, SurveyMonkey, Inc.
President and Managing Partner, BBG Ventures LLC
President and Chief Operating Officer, Golden State Warriors
Media Executive
(1) Member of the audit committee. Ms. Zalaznick will be rotating off the audit committee in early May 2020.
Director
Since
2004
2018
2013
2014
2018
2016
2017
2017
2016
(2) Member of the nominating and governance committee
(3) Member of the compensation and leadership committee
†
Lead Independent Director
Nicholas Woodman founded GoPro and has served as our Chief Executive Officer and a member of the board of
directors since 2004, as Chairman since January 2014 and as President from 2004 until June 2014. Mr. Woodman
got his start in 1998 by founding an online gaming company, Funbug.com. When that venture failed in 2001, Mr.
Woodman planned an international surfing trip to look for inspiration. While preparing for that trip, Mr. Woodman
had the idea for a 35mm film-based wrist camera that could be worn during sports like surfing, enabling the user
to capture images while engaged in the sport. This idea became GoPro’s first product, the HERO Camera. In the
years that followed, Mr. Woodman, along with friends, family and employees, innovated on the HERO Camera
concept along with a wide array of mounting devices that make it easy to mount the camera to everything from
helmets to surfboards, vehicles and more. Mr. Woodman holds a B.A. in Visual Arts from the University of California,
San Diego. We believe Mr. Woodman’s experience as the founder of GoPro and his knowledge of our products and
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customers give him the experience and leadership capabilities that qualify him to serve as a member of our board
of directors.
Tyrone Ahmad-Taylor has served on our board of directors since June 2018. Since June 2017, Mr. Ahmad-Taylor
has been Vice President, Product Marketing of Facebook, Inc., an online social platform. Prior to his role at Facebook,
Mr. Ahmad-Taylor was CEO and President of THX Limited from November 2015 to May 2017. From March 2014
to July 2015, Mr. Ahmad-Taylor was Vice President, SmartTV Services of Samsung Electronics Company Limited
and Head, SmartTV Services of Samsung Electronics Company Limited from October 2012 to March 2014. Mr.
Ahmad-Taylor is currently an Advisory Board Member of Consumer Technology Association. We believe Mr. Ahmad-
Taylor is qualified to serve as a member of our board of directors based on his extensive executive experience in
the consumer products industry and his background in product development and marketing.
Kenneth Goldman has served on our board of directors since December 2013 and as lead independent director of
our board since April 2017. Since December 2018, Mr. Goldman has served on the board of directors at Sustainability
Accounting Standards Board (SASB) Foundation. Since September 2017, Mr. Goldman has served as the President
of Hillspire LLC, a wealth management service provider. From October 2012 to June 2017, Mr. Goldman served as
the Chief Financial Officer of Yahoo! Inc., an Internet commerce website, where he was responsible for Yahoo’s
global finance functions including financial planning and analysis, controllership, tax, treasury, and investor relations.
From September 2007 to October 2012, Mr. Goldman was the Senior Vice President, Finance and Administration
and Chief Financial Officer of Fortinet Inc., a provider of threat management technologies. From November 2006
to August 2007, Mr. Goldman served as Executive Vice President and Chief Financial Officer of Dexterra, Inc., a
mobile enterprise software company. From August 2000 until March 2006, Mr. Goldman served as Senior Vice
President of Finance and Administration and Chief Financial Officer of Siebel Systems, Inc., a supplier of customer
software solutions and services. Previously, Mr. Goldman has been the Chief Financial Officer of Sybase, Inc.
(acquired by SAP SE), Excite@Home, Cypress Semiconductor Corporation and VLSI Technology, Inc. (acquired
by Philips Electronics). Mr. Goldman currently serves on the board of directors of NXP Semiconductor N.V., TriNet,
Inc., Zuora, Inc., RingCentral and Sustainability Accounting Standards Board (SASB) Foundation, as well as the
Trustee Emeritus of Cornell University. Previously, Mr. Goldman served on the board of directors of Gigamon Inc.
and Infinera Corporation. From December 1999 to December 2003, Mr. Goldman served on the Financial Accounting
Standards Board’s (FASB’s) primary Advisory Council (FASAC). Mr. Goldman was appointed in January 2015 to a
three-year term to the Public Company Accounting Oversight Board’s (PCAOB) Standing Advisory Group (SAG),
an organization that provides advice on the need to formulate new accounting standards or change existing
standards. Mr. Goldman holds a B.S. in Electrical Engineering from Cornell University and an M.B.A. from Harvard
Business School. We believe Mr. Goldman is qualified to serve as a member of our board of directors based on his
experience on the boards of directors of numerous companies, his extensive executive experience, and his service
as a member of FASAC and SAG. He provides a high level of expertise and significant leadership experience in
the areas of finance, accounting, and audit oversight.
Peter Gotcher has served on our board of directors since June 2014. Mr. Gotcher is an independent private investor
focusing on investments in digital media technology companies. From September 1999 to June 2002, Mr. Gotcher
was a venture partner with Redpoint Ventures, a private investment firm. Prior to that, Mr. Gotcher was a venture
partner with Institutional Venture Partners, a private investment firm, from 1997 to 1999. Mr. Gotcher founded
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Digidesign, Inc., a manufacturer of digital audio workstations, and served as its President, Chief Executive Officer
and Chairman from 1984 until it was acquired by Avid Technology, a media software company, in 1995. He served
as the Executive Vice President of Avid Technology from 1995 to 1996. Mr. Gotcher currently serves on the board
of trustees of Santa Clara University and is the Chairman of the board of directors of Dolby Laboratories, Inc. Mr.
Gotcher holds a B.A. in English Literature from the University of California at Berkeley. We believe Mr. Gotcher is
qualified to serve as a member of our board of directors based on his broad understanding of the operational,
financial, and strategic issues facing public companies and his background providing guidance to companies in the
digital media industry.
James Lanzone has served on our board of directors since August 2018. He is currently an Executive-in-Residence
at venture capital firm Benchmark Capital, as well as Strategic Advisor at ViacomCBS Corp. From May 2016 to
December 2019, Mr. Lanzone served as Chief Digital Officer of CBS Corporation, a leading mass media company.
In addition, from January 2014 to December 2019, Mr. Lanzone was CEO of CBS Interactive, a top 10 consumer
Internet property with nearly 300 million users worldwide and a division of CBS Corporation. Previously, Mr. Lanzone
served as President of CBS Interactive from March 2011 to December 2013. From January 2009 to February 2011,
Mr. Lanzone was Founder and CEO of Clicker Media, Inc., an Internet video search engine and navigation guide,
which was acquired by CBS Corporation in March 2011. Mr. Lanzone is currently a member of the board of
Edmunds.com, Inc. and Newport Festivals Foundation. We believe Mr. Lanzone is qualified to serve as a member
of our board of directors based on his extensive executive experience and digital product and media expertise.
Alexander Lurie has served on our board of directors since February 2016. Since January 2016, Mr. Lurie has
served as the Chief Executive Officer of SurveyMonkey, Inc., a creator and publisher of online surveys, and he has
served as a member of the board of SurveyMonkey since 2009, including as Chairman of the Board from July 2015
to January 2016. Mr. Lurie served as GoPro’s Senior Vice President of Media from November 2014 until January
2016. From February 2013 to January 2014, Mr. Lurie served as Executive Vice President for Guggenheim Digital
Media, an internet media company. From April 2010 to August 2012, Mr. Lurie served as SVP, Strategic Development
at CBS Corporation, a mass media corporation. From February 2008 to April 2010, Mr. Lurie served as Chief
Financial Officer and Head of Business Development for CBS Interactive, a division of CBS Corporation. Mr. Lurie
came to CBS Interactive via its acquisition of CNET Networks, a technology information website, where he served
as Chief Financial Officer and head of Corporate Development from February 2006 to February 2008. Mr. Lurie
began his career in the investment banking group at JPMorgan where he led equity transactions and mergers and
acquisitions in the Internet sector. He holds a J.D. and M.B.A. degree from Emory University, and a B.A. in Political
Science from the University of Washington. We believe Mr. Lurie is qualified to serve as a member of our board of
directors based on his previous experience as an executive officer of GoPro, his operational and financial expertise
from his management experience, and his background in the digital media industry.
Susan Lyne has served on our board of directors since April 2017. Since September 2014, Ms. Lyne has been
President and Managing Partner of BBG Ventures, an investment fund focused on women-led tech startups. From
February 2013 to September 2014, Ms. Lyne was Chief Executive Officer of the AOL Brand Group where she
oversaw the content brands of AOL, Inc., a global media technology company, including TechCrunch, Engadget,
StyleList, Moviefone and MapQuest. From September 2008 to February 2013, she was Chief Executive Officer and
then Chair of Gilt Groupe, Inc., the innovative ecommerce company that pioneered flash sales in the United States.
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From 2004 to 2008, Ms. Lyne served as President and Chief Executive Officer of Martha Stewart Living Omnimedia,
Inc., a diversified media and merchandising company. From 1996 to 2004, Ms. Lyne held various positions at The
Walt Disney Company, a diversified worldwide entertainment company, including President of ABC Entertainment
where she oversaw the development of shows including Desperate Housewives, Grey’s Anatomy, and Lost. Ms.
Lyne is currently a director of Brit Media, Inc. and has previously served as a director of Gilt Groupe, Inc., AOL, Inc.,
Martha Stewart Living Omnimedia, Inc., Starz Entertainment Group, LLC and CIT Group, Inc. In addition, Ms. Lyne
is a member of the Rockefeller University Council and a member of the Council on Foreign Relations. We believe
Ms. Lyne is qualified to serve as a member of our board of directors based on her experience on the boards of
directors of other companies, her extensive executive experience and her background in the media and consumer
products industries.
Frederic Welts has served on our board of directors since October 2017. Since October 2011, Mr. Welts has served
as President and Chief Operating Officer of the Golden State Warriors. Prior to joining the Warriors, Mr. Welts spent
nine years with the Phoenix Suns serving the organization as President and Chief Executive Officer for the last two
seasons. Prior to joining the Suns, Mr. Welts enjoyed a successful 17-years (1982-1999) at the NBA league office
in New York, where he ascended through the ranks to eventually become the league's third-in-command as the
Executive Vice President, Chief Marketing Officer and President of NBA Properties. Mr. Welts currently serves as
a board member of the Bay Area Council and the Warriors Community Foundation. He is also a member of the
NBA’s Team Advisory Committee and Global Inclusion Council. In September 2018, Mr. Welts was inducted into
the Basketball Hall of Fame. Mr. Welts has been honored with multiple awards recognizing his significant
contributions to promoting diversity, inclusion and equality in sports and society, including the Anti-Defamation
League’s Torch of Liberty Award, the United States Tennis Association 2011 ICON Award, GLSEN’s (Gay, Lesbian
and Straight Education Network) Respect Award and GLAD’s (Gay & Lesbian Alliance Against Defamation)
Davidson/Valentini Award. We believe Mr. Welts is qualified to serve as a member of our board of directors based
on his extensive executive experience and marketing expertise.
Lauren Zalaznick has served on our board of directors since July 2016. Since January 2014, Ms. Zalaznick serves
as a board member and senior advisor to leading media, tech, and digital companies. She is currently a member
of the boards of directors of The RTL Group (since April 2018), The Nielsen Company (since April 2016) and GoPro
(since April 2016), and she is a board observer of Refinery29 (since November 2017). In addition, she is currently
a senior advisor to the Boston Consulting Group, as well as content and tech start-ups including Gimlet Media,
Business Insider, Atlas Obscura, Fatherly and LifePosts. From 2004 through December 2013, Ms. Zalaznick held
various roles of increasing responsibility within NBCUniversal, Inc. including Chairman, Entertainment & Digital
Networks and Integrated Media where she had responsibility for the Bravo, Oxygen, Style, Telemundo and Mun2
networks and ran its digital portfolio. She was Executive Vice President at NBCUniversal, Inc. until departing the
company in December 2013. Since July 2011, Ms. Zalaznick is a trustee emirita of the Corporation of Brown University
from which she graduated with a Bachelor of Arts magna cum laude and Phi Beta Kappa. We believe Ms. Zalaznick
is qualified to serve as a member of our board of directors based on her operational and management expertise
and her background in digital media and content strategy.
There are no family relationships among our current directors and officers.
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Non-Employee Director Compensation Arrangements
Only the non-employee Directors of the Company are compensated for service on the Board.
GoPro adopted a Director Compensation Policy at the time of our IPO in June 2014. The Director Compensation
Policy is intended to:
•
provide fair compensation commensurate with the work required to serve on our Board;
•
be aligned with compensation paid to directors at our peer group companies and reflect the size, scope
and complexity of GoPro;
•
align directors' interests with the interests of our stockholders; and
•
to be easily understood and communicated - both to the directors and to our stockholders.
Annual Review and Benchmarking
Each year our nominating and governance committee undertakes a full review of our then current Director
Compensation Policy. The nominating and governance committee engages Compensia to undertake an independent
assessment of the Director Compensation Policy and make recommendations to ensure compliance with the goals
listed above, director pay at comparable companies (including any revisions to our peer group) and sound
governance principles. The annual review typically begins early in the fiscal year, and the nominating and governance
committee makes its recommendations to the Board during Q2 regarding any revisions to the then current policy.
As a result of the 2019 review and recommendation, in April 2019 the Board approved changes to the Director
Compensation Policy to take effect beginning immediately after the June 2019 Annual Meeting. The changes
included an increase in the additional cash retainer for the chair for the compensation and leadership committee
from $18,500 to $20,000 and a change in the equity awards from a mix of stock options and time-based restricted
stock units ("RSUs") to 100% time-based RSUs. Both of these changes were made to align with the current majority
practice of other company's board compensation (including our peer group), more closely align board interests
with stockholder interests, and to the reflect the ever increasing role of the chair of the compensation and leadership
committee and bring that compensation more in line with our peer group.
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Components of 2019 Director Compensation
Annual Cash Retainers
Cash Retainer
Additional Cash Retainer for Lead Independent Director
Additional Cash Retainer for chair of audit committee
Additional Cash Retainer for audit committee member (other than chair)
Additional Cash Retainer for chair of compensation and leadership committee
Additional Cash Retainer for compensation and leadership committee member (other than chair)
Additional Cash Retainer for chair of nominating and governance committee
Additional Cash Retainer for nominating and governance committee member (other than chair)
Annual Equity Grant
$50,000.00
$20,000.00
$25,000.00
$12,500.00
$20,000.00
$10,000.00
$10,000.00
$5,000.00
Restricted Stock Units (RSUs)
$185,000.00
Form and Timing of Payments
All equity awards (whether to employees, consultants or non-employee directors) are granted under the terms and
conditions of one of our equity incentive compensation plans, which were adopted by the Board and approved by
stockholders. Prior to our IPO in June 2014, all equity awards were approved under and governed by the GoPro,
Inc. 2010 Equity Incentive Plan ("2010 Plan"). At the time of our IPO, the GoPro, Inc. 2014 Equity Incentive Plan
("2014 Plan") become active, and all equity grants following the date of IPO were awarded under and governed by
the 2014 Plan.
RSU awards to directors are made annually upon election to the Board at our Annual Meeting. Directors who are
appointed to our board of directors between Annual Meetings receive a pro-rated award of RSUs. The award value
is converted to RSUs using the grant date fair value computed in accordance with FASB ASC Topic 718, based on
a 3-month trailing average of our closing price. The RSUs vest as to 25% of the total RSUs granted in each quarter
following the date of grant with the final 25% to vest on the earlier of the next Annual Meeting or the one-year
anniversary of the date of grant, subject to continuous service on the board through each vesting date. The RSUs
will accelerate and vest in full in the event of a change in control of GoPro as defined in the 2014 Plan.
The Cash Retainers are paid quarterly in arrears.
Non-employee directors receive no other form of remuneration, perquisites or benefits, but are reimbursed for their
reasonable travel expenses incurred in attending board and committee meetings.
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Director Compensation
The following table provides information for 2019 concerning all compensation awarded to, earned by or paid to
each person who served as a non-employee director for some portion of 2019. Nicholas Woodman, our Chief
Executive Officer, is not included in the table below because he did not receive additional compensation for his
services as a director. His compensation as an employee is shown below in “Executive Compensation – 2019
Summary Compensation Table.”
Name
Tyrone Ahmad-Taylor
Kenneth Goldman
Peter Gotcher
James Lanzone
Alexander Lurie
Susan Lyne
Frederic Welts
Lauren Zalaznick
Fees Earned or
Paid in Cash
($)
Stock
Awards
($)(1)
Option Awards
($)(2)
Total
($)
54,522
95,486
81,750
54,522
50,000
65,000
60,000
82,500
175,051 (3)
175,051 (3)
175,051 (3)
175,051 (3)
175,051 (3)
175,051 (3)
175,051 (3)
175,051 (3)
—
—
—
—
—
—
—
—
229,573
270,537
256,801
229,573
225,051
240,051
235,051
257,551
(1)
The amounts reported in this column represent the aggregate grant date value of RSUs or option awards, as applicable, made to directors in
2019 computed in accordance with FASB ASC Topic 718.
(2) As noted above, in 2019 GoPro amended our Director Compensation Policy. Beginning with the 2019 Annual Meeting, board members no
longer receive annual stock option awards.
(3) On June 04, 2019, each non-employee member of our Board received an award of 28,510 RSUs which vested as to 25% of the shares subject
to the award in each quarter following the date of grant, with the final 25% to vest on June 02, 2020, the date of our Annual Meeting, subject
to the director’s continuous service on our board of directors on each vesting date. As of December 31, 2019 14,255 of the RSUs remained
unvested for each board member. In the event of a change in control (as defined under the Company’s 2014 Plan), these RSUs will accelerate
and become immediately vested.
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Our non-employee directors held option and RSU awards to acquire the following number of shares as
of December 31, 2019:
Name
Tyrone Ahmad-Taylor
Kenneth Goldman
Peter Gotcher
James Lanzone
Alexander Lurie
Susan Lyne
Frederic Welts
Lauren Zalaznick
Number of Shares
Underlying Outstanding Awards
Option Awards
RSU Awards
36,338
189,325 (1)
117,608 (2)
23,175
105,913
73,736
55,400
93,543
14,255
14,255
14,255
14,255
14,255
14,255
14,255
14,255
(1) Consists of options to purchase 95,000 shares of Class B common stock under an option award granted pursuant to our 2010 Plan and
94,325 shares of Class A common stock under option awards granted pursuant to our 2014 Plan.
(2) Consists of options to purchase 17,234 shares of Class B common stock under an option award granted pursuant to our 2010 Plan and
100,374 shares of Class A common stock under option awards granted pursuant to our 2014 Plan.
2020 Board Compensation
Due to the impact of the COVID-19 pandemic on our company, our non-employee directors have agreed to voluntarily
waive all cash compensation that would be paid to them for their services as directors for the remainder of the year
ending December 31, 2020.
OUR BOARD OF DIRECTORS RECOMMENDS
A VOTE “FOR” ELECTION OF EACH OF THE NOMINATED DIRECTORS
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PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our audit committee has re-appointed PricewaterhouseCoopers LLP as GoPro’s independent registered public accounting
firm to perform the audit of GoPro’s consolidated financial statements for the year ending December 31, 2020 and
recommends that stockholders vote for ratification of such selection. PricewaterhouseCoopers LLP has served as GoPro’s
independent registered public accounting firm since 2011. The audit committee continuously evaluates the independence
and effectiveness of PricewaterhouseCoopers LLP and its personnel, and the cost and quality of its audit and audit-related
services.
Although ratification by stockholders is not required by law, GoPro has determined that it is good practice to request ratification
of this selection by the stockholders. In the event that PricewaterhouseCoopers LLP is not ratified by our stockholders, the
audit committee will review its future selection of PricewaterhouseCoopers LLP as GoPro’s independent registered public
accounting firm.
PricewaterhouseCoopers LLP audited GoPro’s financial statements for the years ended 2019 and 2018. Representatives
of PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting, in which case, they will be given an
opportunity to make a statement at the Annual Meeting if they desire to do so, and will be available to respond to appropriate
questions.
Independent Registered Public Accounting Firm Fees and Services
We regularly review the services and fees from our independent registered public accounting firm. These services and fees
are also reviewed with our audit committee annually. In accordance with standard policy, PricewaterhouseCoopers LLP
periodically rotates the individuals who are responsible for GoPro’s audit. The following table shows the fees billed by
PricewaterhouseCoopers LLP for the years ended December 31, 2019 and 2018:
Fees Billed to GoPro
Audit fees(1)
Audit-related fees
Tax fees(2)
All other fees(3)
Total fees
2019
2018
2,510,700
$
—
206,300
2,700
2,719,700
$
2,635,700
—
201,800
2,700
2,840,200
$
$
(1)
(2)
(3)
“Audit fees” include fees for audit services primarily related to the audit of our annual financial statements and internal control over financial reporting;
the review of our quarterly financial statements; comfort letters, consents, and assistance with and review of documents filed with the SEC; and
audit services provided in connection with other statutory and regulatory filings.
“Tax fees” include fees for tax compliance, advice and planning. Tax advice fees encompass a variety of permissible tax services, including technical
tax advice related to federal, state and international income tax matters, transfer pricing, international tax structure planning, assistance with indirect
sales tax and assistance with tax audits.
“All other fees” include fees for products and services, namely software subscription fees.
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Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent
Registered Public Accounting Firm
Our audit committee's policy is to preapprove all audit and permissible non-audit services, other than de minimis non-audit
services, provided by the independent registered public accounting firm. These services may include audit services, audit-
related services, tax services and other services. Pre-approval is detailed as to the particular service or category of services
and is generally subject to a specific budget. The independent registered public accounting firm and management are
required to report periodically to the audit committee regarding the extent of services provided by the independent registered
public accounting firm in accordance with this pre-approval, and the fees for the services performed to date.
All services relating to the fees described in the table above were approved by our audit committee.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF PROPOSAL NO. 2
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General
PROPOSAL NO. 3
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
In accordance with the requirements of Section 14A of the Exchange Act (which was added by the Dodd-Frank Wall Street
Reform and Consumer Protection Act (the ‘‘Dodd-Frank Act’’)) and the related rules of the SEC, we are providing
stockholders an opportunity to approve the compensation of our NEOs as disclosed in this Proxy Statement in the
Compensation Discussion and Analysis section. While the results of the vote are non-binding and advisory in nature, the
board of directors intends to carefully consider the results of this vote.
In considering their vote, stockholders may wish to review with care the information on the company’s compensation
policies and decisions regarding the NEOs presented in the Compensation Discussion and Analysis section, as well as
the discussion regarding the compensation and leadership committee in the Compensation Discussion and Analysis
section entitled ‘‘Further Considerations for Setting Executive Compensation.’’
The company’s goal for its executive compensation program is to attract, motivate, and retain our executives who are
critical to our success. The company seeks to accomplish this goal in a way that rewards performance and is aligned with
its stockholders’ long-term interests. The company believes its executive compensation program has been instrumental in
helping the company achieve its business objectives.
Frequency of Stockholder Advisory Votes on Executive Compensation
At our 2015 annual meeting of stockholders, we asked our stockholders to express a preference for the frequency of an
advisory vote on the compensation of the NEOs (a ‘‘Say-on-Pay’’ vote). The proposal with respect to the frequency of our
Say-on-Pay votes is commonly known as a ‘‘Say-When-on-Pay’’ vote. At the 2017 annual meeting of stockholders, our
stockholders selected, on a non-binding advisory basis, three years as the frequency at which GoPro will hold a Say-on-
Pay vote. Based on these results, our board of directors has determined that we will conduct future Say-on-Pay votes
once every three years. This policy will remain in effect until the next Say-When-on-Pay vote, expected to be held at our
2021 annual meeting of stockholders.
Key Executive Compensation Policies and Practices
In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, we are asking
the stockholders to indicate their support for the compensation of our NEOs as described in this Proxy Statement. This
vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and
the philosophy, policies and practices described in this Proxy Statement. Accordingly, the board of directors requests the
stockholders vote on an advisory basis to approve the following resolution at the meeting:
RESOLVED, that the compensation paid to the company’s NEOs, as disclosed pursuant to Item 402 of Regulation S-K
including the Compensation Discussion and Analysis, compensation tables, and narrative discussion set forth in this
Proxy Statement, is hereby approved.
While the results of this advisory vote are not binding, the compensation and leadership committee, will consider the
outcome of the vote in deciding whether to take any action as a result of the vote and when making future compensation
decisions regarding NEOs. The compensation and leadership committee and the board of directors value the opinions of
our stockholders. Unless the board of directors modifies its determination on the frequency of future Say-on-Pay advisory
votes, the next Say-on-Pay advisory vote will be held at our 2023 annual meeting.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE ‘‘FOR’’ APPROVAL, ON A NON-BINDING BASIS, OF THE
RESOLUTION TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN
THIS PROXY STATEMENT.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of March
31, 2020, by:
•
each stockholder known by us to be the beneficial owner of more than 5% of our Class A common stock or Class
B common stock;
•
each of our directors;
•
each of our named executive officers (“NEOs”); and
•
all directors and executive officers as a group.
Percentage ownership of our common stock before this offering is based on 28,887,835 shares of our Class B common stock
and 128,638,019 shares of our Class A common stock outstanding on March 31, 2020. Beneficial ownership is determined
in accordance with the rules of the SEC and thus represents voting or investment power with respect to our securities. Unless
otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment
power with respect to all shares beneficially owned by them, subject to community property laws where applicable. Shares
of our Class A common stock and Class B common stock subject to options that are currently exercisable or exercisable
within 60 days of March 31, 2020 or RSUs and performance share units ("PSUs") that may be earned, vest and settle within
60 days of March 31, 2020 are deemed to be outstanding and to be beneficially owned by the person holding the options or
RSUs and PSUs for the purpose of computing the percentage ownership of that person but are not treated as outstanding
for the purpose of computing the percentage ownership of any other person.
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Table of Contents
Name of Beneficial Owner
Shares
%
Shares
%
Class A
Shares Beneficially Owned
Class B
Directors and Named Executive Officers:
Nicholas Woodman(2)
Tyrone Ahmad-Taylor(3)
Kenneth Goldman(4)
Peter Gotcher(5)
James Lanzone(6)
Alexander Lurie(7)
Susan Lyne(8)
Frederic Welts(9)
Lauren Zalaznick(10)
Brian McGee(11)
Eve Saltman(12)
Dean Jahnke(13)
Sandor Barna(14)
All executive officers and directors as a group (12
persons)(15)
5% Stockholders
Nicholas Woodman and Jill R. Woodman, as Co-
Trustees of the Woodman Family Trust under Trust
Agreement dated March 11, 2011(16)
BlackRock, Inc.(17)
The Vanguard Group - 23-1945930(18)
Prentice Capital Management(19)
JP Morgan Chase & Co.(20)
92,964
54,160
159,322
220,765
80,816
205,632
128,869
101,971
157,121
382,074
146,128
116,515
—
*
*
*
*
*
*
*
*
*
*
*
*
*
28,820,130
—
95,000
17,234
—
—
—
—
—
—
—
9,600
—
% of Total
Voting
Power(1)
69.05
*
*
*
*
*
*
*
*
*
*
*
*
99.77
*
*
*
*
*
*
*
*
*
*
*
*
1,846,337
1.42
28,941,964
99.77
69.36
—
*
23,720,830
82.11
56.82
8,609,036
11,019,801
12,668,519
6,374,110
6.69
8.57
9.85
4.96
—
—
—
—
*
*
*
*
2.06
2.64
3.03
1.53
*
Represents beneficial ownership of less than 1% of our outstanding shares of common stock of the designated class of security or less than 1% of
the Total Voting Power, as applicable.
Unless otherwise indicated, the address of each of the individuals and entities named below is c/o GoPro, Inc., 3000 Clearview Way, San Mateo,
California 94402.
(1) Percentage of total voting power represents voting power with respect to all shares of our Class A common stock and Class B common stock, as
a single class. The holders of our Class B common stock are entitled to ten votes per share, and holders of our Class A common stock are entitled
to one vote per share.
(2) Consists of (i) 23,720,830 shares of Class B common stock held by the Woodman Family Trust under Trust Agreement dated March 11, 2011 of
which Nicholas Woodman and Jill Woodman are co-trustees, (ii) 1,299,650 shares of Class B common stock held by Mr. Woodman's 2018 GRAT,
(iii) 1,299,650 shares of Class B common stock held by the 2018 GRAT for Mr. Woodman's spouse, (iv) 1,250,000 shares of Class B common
stock held by Mr. Woodman's 2019 GRAT, (v) 1,250,000 shares of Class B common stock held by the 2019 GRAT for Mr. Woodman's spouse, (vi)
67,727 shares of Class A common stock held by Mr. Woodman and (vii) 25,237 shares of Class A common stock subject to performance stock units
held by Mr. Woodman that may settle within 60 days of March 31, 2020. As a co-trustee, Mr. Woodman may be deemed to have shared voting and
investment power over the shares owned by the Woodman Family Trust. Mr. Woodman is the sole trustee of all four (4) GRATs.
(3) Consists of 17,822 shares of Class A common stock held by Mr. Ahmad-Taylor and (ii) 36,338 shares of Class A common stock subject to options
held by Mr. Ahmad-Taylor that are exercisable within 60 days of March 31, 2020.
(4) Consists of (i) 668 shares of Class A common stock held by Mr. Goldman, (ii) 64,329 shares of Class A common stock held in the Goldman-Valeriote
Family Trust, (iii) 94,325 shares of Class A common stock subject to options held by Mr. Goldman that are exercisable within 60 days of March 31,
2020, and (iv) 95,000 shares of Class B common stock subject to options held by Mr. Goldman that are exercisable within 60 days of March 31,
2020. Kenneth Goldman and Susan Valeriote are co-trustees and have shared voting and investment power over the shares owned by the Goldman-
Valeriote Family Trust.
(5) Consists of (i) 120,391 shares of Class A common stock held in the Peter and Marie-Helene Gotcher Family Trust, (ii) 100,374 shares of Class A
common stock subject to options held by Mr. Gotcher that are exercisable within 60 days of March 31, 2020, and (iii) 17,234 shares of Class B
common stock subject to options held by Mr. Gotcher that are exercisable within 60 days of March 31, 2020. Mr. Gotcher is the President of The
Peter and Marie-Helene Gotcher Family Trust.
(6) Consists of (i) 57,641 shares of Class A common stock held by Mr. Lanzone, and (ii) 23,175 shares of Class A common stock subject to options
held by Mr. Lanzone that are exercisable within 60 days of March 31, 2020.
(7) Consists of (i) 99,719 shares of Class A common stock held by the Lurie-Volgelsong Revocable Living Trust, and (ii) 105,913 shares of Class A
common stock subject to options held by Mr. Lurie that are exercisable within 60 days of March 31, 2020. Mr. Lurie and his spouse are co-trustees
of the Lurie-Volgelsong Revocable Living Trust.
(8) Consists of (i) 55,133 shares of Class A common stock held by Ms. Lyne, and (ii) 73,736 shares of Class A common stock subject to options held
by Ms. Lyne that are exercisable within 60 days of March 31, 2020.
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(9) Consists of (i) 46,571 shares of Class A common stock held by the Frederic K. Welts, Jr. Living Trust, and (ii) 55,400 shares of Class A common
stock subject to options held by Mr. Welts that are exercisable within 60 days of March 31, 2020. Mr. Welts is the sole trustee and beneficiary of the
Frederic K. Welts, Jr. Living Trust.
(10) Consists of (i) Consists of (i) 63,578 shares of Class A common stock held by Ms. Zalaznick and Phelim Dolan and (ii) 93,543 shares of Class A
common stock subject to options held by Ms. Zalaznick that are exercisable within 60 days of March 31, 2020.
(11) Consists of (i) 276 shares of Class A common stock held by Mr. McGee's spouse, and (ii) 5,858 shares of Class A common stock held by Mr. McGee,
(iii) 373,701 shares of Class A common stock subject to options held by Mr. McGee that are exercisable within 60 days of March 31, 2020, and (iv)
2,239 shares of Class A common stock subject to performance stock units held by Mr. McGee that may settle within 60 days of March 31, 2020.
(12) Consists of (i) 122,540 shares of Class A common stock subject to options held by Ms. Saltman that are exercisable within 60 days of March 30,
2020, (ii) 22,367 shares of Class A common stock subject to restricted stock units held by Ms. Saltman that may settle within 60 days of March
31, 2020, and (iii) 1,221 shares of Class A common stock subject to performance stock units held by Ms. Saltman that may settle within 60 days
of March 31, 2020.
(13) Consists of: (i) 71,699 shares of Class A common stock held by Mr. Jahnke, (ii) 43,391 shares of Class A common stock subject to subject to
options held by Mr. Jahnke that are exercisable within 60 days of March 31, 2020, (iii) 9,600 shares of Class B common stock subject to options
held by Mr. Jahnke that are exercisable within 60 days of March 31, 2020, and (iv) 1,425 shares of Class A common stock subject to
performance stock units held by Mr. Jahnke that may settle within 60 days of March 31, 2020.
(14) Mr. Barna terminated his employment with the Company on November 20, 2019. As of March 31, 2020, Mr. Barna no longer holds any Class A or
Class B common stock of the Company.
(15) Consists of (i) 671,412 shares of Class A common stock, (ii) 28,820,130 shares of Class B common stock, (iii) 1,122,436 shares of Class A common
stock subject to options that are exercisable within 60 days of March 31, 2020, (iv) 22,367 shares of Class A common stock subject to restricted
stock units that may settle within 60 days of March 31, 2020, (v) 30,122 shares of Class A common stock subject to performance stock units that
may settle within 60 days of March 31, 2020, and (vi) 121,834 shares of Class B common stock subject to options that are exercisable within 60
days of March 31, 2020.
(16) Consists of 23,720,830 shares of Class B common stock held by the Woodman Family Trust under Trust Agreement dated March 11, 2011 of which
Nicholas Woodman and Jill Woodman are co-trustees. As a co-trustee, Mr. Woodman may be deemed to have shared voting and investment power
over the shares owned by the Woodman Family Trust.
(17) Based on a Schedule 13G Amendment No. 3 filing made on February 5, 2020. Consists of 8,609,036 shares of Class A common stock held by
BlackRock, Inc. The address for BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.
(18) Based on a Schedule 13G Amendment No. 4 filing made on February 12, 2020. Consists of a total of 11,019,801 shares of Class A common stock
held by The Vanguard Group - 23-1945930. The address for The Vanguard Group - 23-1945930 is 100 Vanguard Blvd., Malvern, PA 19355.
(19) Based on a Schedule 13G Amendment No. 2 filing made on February 14, 2020. Consists of 12,668,519 shares of Class A common stock held by
Prentice Capital Management, LP. The address for Prentice Capital Management is 100 West Putnam Avenue-Slagle House, Greenwich, CT 06830.
(20) Based on a Schedule 13G filing made on January 31, 2020. Consists of 6,374,110 shares of Class A common stock held by JP Morgan Chase &
Co. The address for JP Morgan Chase & Co. is 383 Madison Avenue, New York NY 10179.
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EXECUTIVE OFFICERS
The names of our current executive officers, their ages as of March 31, 2020, and their positions are shown below.
Executive Officers
Nicholas Woodman
Brian McGee
Dean Jahnke
Eve Saltman
Age
44
60
46
55
Position(s)
Chief Executive Officer and Chairman
Executive Vice President, Chief Financial Officer and Chief Operating Officer
Vice President, Global Sales
Vice President, Corporate/Business Development, General Counsel and Secretary
Our board of directors chooses executive officers, who then serve at the board’s discretion. There is no family relationship
among any of our directors or executive officers.
For information regarding Mr. Woodman, please refer to “Proposal No. 1 – Election of Directors” discussed above.
Brian McGee has served as our Chief Financial Officer and Chief Operating Officer since February 2020. Mr. McGee had
served as the Company’s Chief Financial Officer since March 11, 2016. Mr. McGee served as our Vice President of Finance
from September 2015 to March 2016, and was responsible for financial planning, tax, treasury and risk management in that
role. From May 2011 to September 2015, Mr. McGee served in various positions at Qualcomm, most recently as the Vice
President, Business Operations. Prior to Qualcomm, Mr. McGee was at Atheros Communications from December 2009 to
May 2011 as the Vice President, General Manager Global Powerline Business. Prior to Atheros Communications, from
January 2007 to December 2009, Mr. McGee was the Senior Vice President, Chief Financial Officer and Treasurer, at Intellon,
a fabless semiconductor company that was acquired by Atheros Communications in December 2009. From 2003 to 2006,
Mr. McGee was Vice President Finance and Chief Financial Officer of Lexar, a maker of digital media storage. Mr. McGee
holds a B.S. in Finance from California Polytechnic State University and a Certificate in Management Accounting.
Eve Saltman has served as our Vice President, Corporate/Business Development, General Counsel and Secretary since
March 2018. Ms. Saltman served as our Vice President, Deputy General Counsel and Assistant Secretary from February
2017 to September 2017, our Deputy General Counsel and Assistant Secretary from July 2014 to February 2017, and our
Associate General Counsel and Assistant Secretary from January 2014 to July 2014. From September 2017 to March 2018,
Ms. Saltman served as General Counsel and Corporate Secretary of Asana, Inc., a collaborative work management application
company. Prior to joining GoPro in 2014, Ms. Saltman served as VP, General Counsel, and Corporate Secretary of OL2, Inc.
dba OnLive, a provider of cloud gaming services from September 2012 to January 2014 and VP, Legal, OnLive, Inc., from
September 2008 to August 2012. Since 2014, Ms. Saltman has also served as a director of Lexicon of Sustainability, Inc., a
non-profit organization. Ms. Saltman holds a J.D. from Georgetown Law School and a B.A. in History from Cornell University.
Dean Jahnke has served as GoPro’s Vice President, Global Sales since June 2018, Interim Head of Sales from March 2018
to June 2018, Senior Director of Sales – North America from April 2017 to March 2018, Director of Sales from February 2016
to March 2017, and Area Sales Manager from March 2014 to January 2016. Prior to joining GoPro, Mr. Jahnke served as
Senior Sales Manager of Western Digital from August 2008 to March 2014. Before that, Mr. Jahnke was Senior Merchant at
Best Buy from June 2000 to August 2008. Mr. Jahnke attended Minnesota State University, Mankato.
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Introduction
COMPENSATION DISCUSSION AND ANALYSIS
GoPro’s executive compensation programs, policies and practices (“ECPs”) are designed to reflect the three major
tenets of our executive compensation philosophy, namely to:
• Align executive compensation with the achievement of our business objectives and financial performance;
• Motivate our executive officers to take actions that enhance long-term stockholder value; and
• Enable us to attract, reward and retain our executive officers who contribute to our success.
We manage our ECPs, including compensation-related corporate governance standards, in a manner consistent with
our executive compensation philosophy. These ECPs are intended to drive performance and prohibit or minimize
behaviors that we do not believe serve our stockholders’ long-term interests.
Executive Compensation Best Practices
Compensation and Leadership Committee
Independence
Our board of directors maintains a compensation and leadership committee
comprised solely of independent directors.
Compensation and Leadership Committee
Advisor Independence
Annual Compensation Review
The compensation and leadership committee engages and retains its own
advisors. During 2019, the compensation and leadership committee engaged
an independent national compensation consulting firm to assist with its
responsibilities and such firm performed no additional consulting or other
services for GoPro.
The compensation and leadership committee annually reviews our executive
compensation philosophy and strategy, including reviewing the composition of
our compensation peer group used for appropriate comparative purposes.
Compensation-Related Risk Assessment We conduct annual evaluations of our compensation programs, policies, and
practices, including our ECPs, to ensure that they reflect an appropriate level
of risk-taking but do not encourage our employees to take excessive or
unnecessary risks that could have a material adverse impact on GoPro.
No Executive Perquisites
“Double-Trigger” Change in Control
Arrangements
Executive Severance Policy
We do not offer perquisites or other personal benefits to our executive officers,
including our Named Executive Officers, or NEOs, except in situations where
we believe it is appropriate to assist an individual in the performance of his or
her duties, to make our executive officers more efficient and effective, and for
recruitment and retention purposes. Our executive officers, including our NEOs,
participate in our health and welfare benefit programs on the same basis as all
our employees.
The change in control post-employment compensation arrangements for our
executive officers including our NEOs are based on a “double-trigger”
arrangement that provides for the receipt of payments and benefits only in the
event of (i) a change in control of our company and (ii) a qualifying termination
of employment. In addition, our arrangement with Mr. Woodman provides for
the receipt of payments and benefits in the event of a qualifying termination of
employment, including a termination of employment in connection with a change
in control of our company.
The Executive Severance Policy adopted in February 2019 is intended to
provide specified payments and benefits to certain executive officers (other
than the Chief Executive Officer), and other employees of the Company, in the
event of certain terminations of employment not involving a change in control
of the Company.
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Table of Contents
Reasonable Change in Control
Arrangements
Prohibition on Hedging and Pledging
Succession Planning
Retirement Programs
Compensation Recoupment Policy
The post-employment compensation arrangements for our management team,
including our NEOs, provide for amounts and multiples that are within market
norms.
Our management team, including our NEOs, and the members of our board of
directors, are prohibited from speculating in our equity securities, including the
use of short sales, or any equivalent transaction involving our equity securities
and from engaging in any hedging or pledging transactions with respect to our
equity securities.
Our board of directors reviews the risks associated with our most critical
executive positions on an annual basis so that we have an adequate succession
strategy, and we have plans in place for these critical positions.
Other than our Section 401(k) plan, which is generally available to all U.S.
employees, we do not offer defined benefit or contribution retirement plans or
arrangements or nonqualified deferred compensation plans or arrangements
for our management team, including our NEOs.
We maintain a compensation recoupment policy applicable to cash incentive-
based compensation awards paid to our executive officers. In the event of a
material restatement of financial results filed with the SEC, the policy permits
our board of directors, if the board determines it appropriate under the
circumstances, to seek recovery of all or any portion of the incentive awards
paid or awarded to an executive officer who is found to have engaged in fraud
or intentional or illegal conduct in excess of the awards that would have been
paid or awarded based on the restated financial results.
Stock Ownership Guidelines
We maintain a stock ownership policy for our Chief Executive Officer and non-
employee directors to align their interests with those of our stockholders.
This Compensation Discussion and Analysis (“CD&A”) is intended to assist our stockholders in understanding our
ECPs by presenting the following:
1. Elements of Our Executive Compensation Program sets forth our executive compensation philosophy and
describes the programs, policies and practices we apply and use to support achievement of our corporate
goals and performance objectives.
2. Further Considerations for Setting Executive Compensation discusses, among other things, the role of
our compensation and leadership committee, compensation consultants, compensation peer group, and the
impact of tax and accounting considerations.
3. Business Highlights for 2019 summarizes our business results that impacted our 2019 executive
compensation decisions.
4. Executive Compensation Decisions for 2019 explains the compensation decisions that were made for 2019
based on our corporate results.
5. Severance and Change in Control Arrangements discusses employment agreements and policies
associated with our current and departing executives.
This CD&A focuses on the material elements of compensation of our NEOs as of December 31, 2019:
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Table of Contents
• Nicholas Woodman, our Chief Executive Officer and Chairman of our board of directors;
• Brian McGee, our Executive Vice President, Chief Financial Officer since February 2, 2018; and since
February 3, 2020 our Executive Vice President, Chief Financial Officer and Chief Operating Officer;
• Dean Jahnke, our Vice President, Global Sales since June 2018; and
• Eve Saltman, our Vice President, Corporate/Business Development, General Counsel and Secretary, since
March 29, 2018.
In November 2019, our Chief Technology Officer, Sandor Barna, resigned from the Company effective November 20,
2019.
Elements of Our Executive Compensation Program
Compensation Philosophy and Guiding Principles
We have designed our ECPs to reward our executive officers, including our NEOs, at a level consistent with our overall
business strategy and financial performance and to provide remuneration sufficient to attract, retain, and motivate
them to exert their best efforts in the highly-competitive technology and consumer-oriented environments in which we
operate. We have also designed our ECPs to reward our executive officers, including our NEOs, for superior
performance. We believe that competitive compensation packages consisting of a combination of base salaries, annual
cash bonus opportunities, and long-term incentive opportunities in the form of equity awards that are earned over a
multi-year period, enable us to attract top talent, motivate effective short-term and long-term performance, and satisfy
our retention objectives. As an overarching objective, we seek to design each pay element to align the compensation
of our executive officers with our corporate performance and long-term value creation for our stockholders. That principle
has guided the design of both the annual and long-term incentive compensation of our executive officers.
The compensation and leadership committee reviews and analyzes market trends and the prevalence of various
compensation delivery vehicles and makes a determination whether to adjust the design and operation of our executive
compensation program it deems necessary and appropriate. While the compensation and leadership committee
considers all of these factors in its deliberations and places no formal emphasis on any one factor in its overall
compensation strategy, our annual Executive Bonus Plan does assign values to specific performance metrics.
The compensation and leadership committee will continue to evaluate our compensation philosophy and program
objectives as circumstances merit. At a minimum, we expect the compensation and leadership committee to review
executive compensation annually and update as deemed necessary and appropriate.
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Compensation Elements
The three primary elements of our executive compensation program are: (i) base salary, (ii) annual cash bonus
opportunities, and (iii) long-term incentive opportunities in the form of equity awards subject to multi-year vesting, in
each case as described below:
Compensation Element
What This Element Rewards
Purpose and Key Features of Element
Base salary
Individual
of
performance,
experience, expected future performance
and contributions.
level
Annual cash bonuses
of
Achievement
pre-established
corporate and individual performance
objectives (for 2019, focused on our
revenue growth and profitability, as well
as
and
management objectives).
contributions
individual
Long-term incentives/equity awards
Corporate and individual performance
that enhance
long-term stockholder
value. Vesting requirements promote
retention of highly-valued executive
officers.
level of
Provides competitive
fixed
compensation determined by the market
the
value of
qualifications,
and
performance expectations of each
executive officer and each position.
the position, and
experience
Motivate executive officers to achieve
during the fiscal year (i) short-term
financial and operational objectives, and
(ii) individual performance objectives.
Performance levels are established to
motivate our executive officers to achieve
or exceed performance objectives.
Annual (i) stock options and Restricted
Stock Units (“RSUs”) that vest over three
to four years, based on continued service,
and
(ii) Performance Stock Units
(“PSUs”) that are subject to both a
performance-based vesting condition (as
determined by the compensation and
leadership committee) and a service-
based vesting condition, each of which
risk” pay
provides a variable
opportunity. Because the ultimate value
of these equity awards is directly related
to the market price of our Class A common
stock, and the awards are vesting over an
extended period of time, they serve to
focus management on the creation and
maintenance of long-term stockholder
value and help us attract, retain, motivate,
and reward executive officers.
“at
Our executive officers also participate in the standard employee benefit plans available to most of our employees. In
addition, our executive officers are eligible for post-employment (severance and change in control) payments and
benefits under certain circumstances. Each of these compensation elements is discussed in detail below, including a
description of each particular element and how it fits into our overall executive compensation program and a discussion
of the amounts of compensation paid to our executive officers, including our NEOs, in 2019 under each of these
elements.
Base Salary
We believe that a competitive base salary is a necessary element of our executive compensation program, so that we
can attract and retain a stable and highly qualified management team. Base salaries for our executive officers are
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intended to be competitive with those received by other individuals in similar positions at the companies with which
we compete for talent, and to maintain internal parity across our executive officer team.
Generally we take into consideration peer market data provided by Compensia for the role we are looking to fill. We
establish the initial base salaries of our executive officers through arm’s-length negotiation at the time we hire the
individual executive officer, taking into account his or her position, qualifications, experience, and the base salaries of
our other executive officers. Thereafter, the compensation and leadership committee reviews the base salaries of our
executive officers, including our NEOs, at least annually.
Annual Cash Bonuses
Our executive officers, including our NEOs, are participants in our annual Executive Bonus Plan, pursuant to which
we generally use annual cash bonuses to motivate participants to achieve our short-term financial and operational
objectives while making progress towards our longer-term growth and other goals. Consistent with our executive
compensation philosophy, these annual bonuses are intended to help us to deliver a competitive target total direct
compensation opportunity to our executive officers. Annual cash bonuses for our executive officers are intended to be
competitive with those received by other individuals in similar positions at the companies with which we compete for
top talent, and to maintain internal parity across our executive team.
Bonus targets are determined by our compensation and leadership committee, subject to adjustment in certain
circumstances, such as mid-year changes in base salary and leaves of absence. Overall funding of the bonus pool is
generally determined by reference to corporate performance measures, but our compensation and leadership
committee can, at its discretion, adjust individual participants’ bonuses, based on each participant’s individual
performance. Individual performance goals for each participant are generally identified at the beginning of the year in
discussions with our Chief Executive Officer. These goals may be quantitative or qualitative in nature, depending on
the organizational priorities for a given year, and they typically focus on key departmental or operational objectives or
functions. Most of these goals are intended to provide a set of common objectives that facilitate collaborative
management and engagement, although participants could also be assigned individual objectives.
Long-Term Incentives/Equity Awards
We use long-term incentive compensation in the form of equity awards to motivate our executive officers, including
our NEOs, by providing them with the opportunity to build an equity interest in GoPro and to share in the potential
appreciation in the value of our Class A common stock.
Generally, in determining the size of the equity awards granted to our executive officers, including our NEOs, the
compensation and leadership committee takes into consideration the recommendations of our Chief Executive Officer
(except with respect to his own equity award), as well as the factors described in Compensation Setting Process,
below.. The compensation and leadership committee also considers the dilutive effect of our long-term incentive
compensation practices, and the overall impact that these equity awards, as well as awards to other employees, may
have on stockholder value.
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Annual equity awards are granted to our executive officers, including our NEOs, in the form of stock options, which
represent the right to purchase shares of our Class A common stock at a price equal to the fair market value of our
Class A common stock on the date of grant subject to time-based vesting; RSUs which represent the right to receive
shares of our Class A common stock subject to time-based vesting; and PSUs, which represent the right to receive
shares of our Class A common stock subject to both achievement of one or more performance metrics and time-based
vesting. The proportion and mix of long-term equity vehicles (time-based stock options, time-based RSUs, and
performance-based PSUs) is determined by the compensation and leadership committee each year (see “Executive
Compensation Decisions for 2019 – Long-Term Incentive Compensation” below). The compensation and leadership
committee evaluates equity vehicles annually to determine which form and mix of equity best aligns executive incentives
with the long-term interest of our stockholders. The compensation and leadership committee may also choose to utilize
other performance-based equity vehicles.
On February 18, 2020, the compensation and leadership committee granted additional PSUs with a grant date of
February 18, 2020 to Nicholas Woodman, Brian McGee, Dean Jahnke and Eve Saltman. These 2020 PSUs will be
earned and vest between 0% and 150% of a target number of shares based upon achievement of two metrics: (1) a
threshold profitability level to a maximum profitability level, and (2) a threshold subscription hurdle to a maximum
subscription hurdle. To the extent actually earned, the 2020 PSUs will be subject to time-based vesting, with one third
of the total number of shares earned under each 2020 PSU vesting on the initial vesting date of February 15, 2021
and an additional one-twelfth of the total number of earned shares under each 2020 PSU vesting quarterly thereafter,
for so long as the recipient remains in service to GoPro. If GoPro undergoes a change in control before the performance
measurement period has ended, then the revenue achievement metric will be adjusted to reflect the pre-closing period,
and the 2020 PSUs determined to be so earned pursuant to the adjusted metric will be subject to any remaining time-
based vesting, which will be governed by the change in control severance agreements.
Welfare and Health Benefits
We maintain a tax-qualified retirement plan under Section 401(k) of the Internal Revenue Code (the “Code”) for our
U.S. employees, including our executive officers, who satisfy certain eligibility requirements, including requirements
relating to age and length of service that provides them with an opportunity to save for retirement on a tax-advantaged
basis. We intend for this plan to qualify under Sections 401(a) and 501(a) of the Code so that contributions by employees
to the plan, and income earned on plan contributions, are not taxable to employees until distributed from the applicable
plan. Under the plan, pre-tax contributions are allocated to each participant’s individual account and are then invested
in selected investment alternatives according to the participants’ directions.
All participants’ interests in their deferrals are 100% vested when contributed to this plan. The Company matches
100% of the employee's personal contributions up to 4% of eligible compensation. In 2019, we made matching
contributions into the Section 401(k) plan for our employees, which are deductible when made by the Company.
Globally, we maintain retirement programs similar to a 401(k) for our non-US employees where applicable.
In addition, we provide other benefits to our executive officers, including our NEOs, on the same basis as all our full-
time employees. These benefits include health, dental and vision benefits, health and dependent care flexible spending
accounts, short-term and long-term disability insurance, accidental death and dismemberment insurance, basic life
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insurance coverage and discretionary time-off. We do not offer our employees a non-qualified deferred compensation
plan or a defined benefit pension or actuarial plan.
We design our employee benefits programs to be affordable and competitive in relation to the market, as well as
compliant with applicable laws and practices. We adjust our employee benefits programs as needed based upon
regular monitoring of applicable laws and practices, the competitive market and our employees’ needs.
Perquisites and Other Personal Benefits
Each year, every employee can request that the Company donate a HERO camera to a US 501(c)(3) charitable
organization on their behalf.
Currently, we do not view perquisites or other personal benefits as a component of our executive compensation program.
Accordingly, we do not provide perquisites to our executive officers, except in situations where we believe it is appropriate
to assist an individual in the performance of his or her duties, to make our executive officers more efficient and effective,
and for recruitment and retention purposes. During 2019, none of the NEOs received perquisites or other personal
benefits that were, in the aggregate, valued at $10,000 or more. In the future, we may provide perquisites or other
personal benefits to our executive officers where we believe it serves a sound business purpose. We do not expect
that any future perquisites or other personal benefits will be a significant aspect of our executive compensation program.
All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review
by the compensation and leadership committee.
Further Considerations for Setting Executive Compensation
Compensation-Setting Process
Role of the Compensation and Leadership Committee
The compensation and leadership committee is responsible for establishing our overall compensation philosophy and
reviewing and approving our executive compensation program, including the specific compensation of our executive
officers, including our NEOs. The compensation and leadership committee has the authority to retain special counsel
and other advisors, including compensation consultants, to assist in carrying out its responsibilities to determine the
compensation of our executive officers and, as noted previously, in 2019 retained an executive compensation consultant,
Compensia, Inc. (“Compensia”), as further discussed below. The compensation and leadership committee’s authority,
duties, and responsibilities are described in its charter, which is reviewed annually and revised and updated as
warranted. The charter is available on our website at http://investor.gopro.com.
In determining our overall compensation philosophy and approving the compensation of our executive officers, the
compensation and leadership committee is assisted by its compensation consultant, as well as our Chief Executive
Officer, our Chief People Officer (except with respect to their own compensation), and our executive compensation
staff to formulate recommendations with respect to specific compensation actions. The compensation and leadership
committee makes all final decisions regarding compensation for our executive officers, including base salary levels,
target annual cash bonus opportunities, actual cash bonus payments, and long-term incentive opportunities in the form
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of equity awards that are earned over a multi-year period. The compensation and leadership committee meets on a
regularly-scheduled basis and at other times as needed and periodically reviews compensation matters with the entire
board of directors.
Annually, the compensation and leadership committee reviews our executive compensation program, including any
incentive compensation plans and arrangements, to assess whether our compensation elements, actions and decisions
(i) are properly coordinated, (ii) are aligned with our vision, mission, values and corporate goals, (iii) provide appropriate
short-term and long-term incentives for our executive officers, (iv) achieve their intended purposes, and (v) are
competitive with the compensation of executives in comparable positions at the companies with which we compete
for executive talent. Following this assessment, the compensation and leadership committee may make any necessary
or appropriate modifications to our existing plans and arrangements or adopt new plans or arrangements.
The compensation and leadership committee also conducts an annual review of our executive compensation strategy
to ensure that it is appropriately aligned with our business strategy and achieving our desired objectives. Further, the
compensation and leadership committee reviews market trends and changes in competitive compensation practices,
as described below.
The factors to be considered by the compensation and leadership committee in determining the compensation of our
executive officers, including our NEOs, include:
•
the recommendations of our Chief Executive Officer (except with respect to his own compensation), with the
advice of our Chief People Officer;
•
our financial and other objective elements of corporate performance;
•
our corporate and individual achievements against one or more short-term and long-term performance
objectives;
•
the individual performance of each executive officer against his or her business objectives;
•
a review of the relevant competitive market analysis prepared by its compensation consultant (as described
below);
•
the expected future contribution of the individual executive officer;
•
historical compensation decisions we have made regarding our executive officers; and
•
internal pay equity based on the impact on our business and performance.
The compensation and leadership committee does not weigh these factors in any predetermined manner, nor does it
apply any formulas in making its decisions. The members of the compensation and leadership committee consider
this information in light of their individual experience, knowledge of GoPro, knowledge of each executive officer,
knowledge of the competitive market and business judgment in making their decisions regarding executive
compensation and our executive compensation program.
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As part of this process, the compensation and leadership committee evaluates the performance of our Chief Executive
Officer each year and makes all decisions regarding his base salary adjustments, target annual cash bonus
opportunities, actual cash bonus payments and long-term incentive opportunities in the form of equity awards that are
earned over a multi-year period. Our Chief Executive Officer is not present during any of the deliberations regarding
his compensation.
Role of our Chief Executive Officer
Our Chief Executive Officer works closely with the compensation and leadership committee in determining the
compensation of our other executive officers, including the other NEOs. Our Chief Executive Officer works with the
compensation and leadership committee to recommend the structure of the annual Executive Bonus Plan, to identify
and develop corporate and individual performance objectives for the annual Executive Bonus Plan, and to evaluate
actual performance against the selected measures.
At the beginning of each year, our Chief Executive Officer reviews the performance of our other executive officers,
including the other NEOs, for the previous year, and makes recommendations to the compensation and leadership
committee for each element of compensation. The compensation and leadership committee then reviews these
recommendations and considers the other factors described above and makes decisions as to the target compensation
of each executive officer (other than our Chief Executive Officer), as well as each individual compensation element.
While the compensation and leadership committee will consider our Chief Executive Officer’s recommendations, as
well as the competitive market analysis prepared by Compensia, these recommendations and market data serve as
only two of several factors that the compensation and leadership committee considers in making its decisions with
respect to the compensation of our executive officers. No executive officer participates in the determination of the
amounts or elements of his or her own compensation.
Role of Compensation Consultant
Pursuant to its charter, the compensation and leadership committee has the authority to engage its own legal counsel
and other advisors, including compensation consultants, as determined in its sole discretion, to assist in carrying out
its responsibilities. The compensation and leadership committee has the authority to make all determinations regarding
the engagement, fees and services of these advisors, and any such advisor reports directly to the compensation and
leadership committee.
Accordingly, the compensation and leadership committee has engaged Compensia to provide information, analysis,
and other assistance relating to our executive compensation program on an ongoing basis. The nature and scope of
the services provided to the compensation and leadership committee by Compensia in 2019 included the following:
•
researched, analyzed and developed a proposed compensation peer group;
•
provided advice with respect to compensation best practices, regulatory developments and market trends for
executive officers and members of our board of directors;
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•
conducted an analysis of long-term incentive equity practices currently used by our compensation peer group
and advised on the design of our long-term incentive plans;
•
conducted an analysis of the levels of overall compensation and each element of compensation for our
executive officers;
•
conducted an analysis of the levels of overall compensation and each element of compensation for the members
of our board of directors;
•
provided design advice on our annual Executive Bonus Plan; and
•
provided ad hoc advice and support throughout the year.
Representatives of Compensia attend all meetings of the compensation and leadership committee and communicate
with the compensation and leadership committee outside of meetings. Compensia reports to the compensation and
leadership committee rather than to management, although Compensia may meet with members of management,
including our Chief Executive Officer, our Chief People Officer, and members of our executive compensation staff, for
purposes of gathering information on proposals that management may make to the compensation and leadership
committee.
The compensation and leadership committee has assessed the independence of Compensia taking into account,
among other things, the various factors as set forth in Exchange Act Rule 10C-1 and the enhanced independence
standards and factors set forth in the applicable Nasdaq listing standards and has concluded that its relationship with
Compensia and their respective work on behalf of the compensation and leadership committee has not raised any
conflict of interest.
Compensation Peer Group
Given our unique history and business, market competitors and geographical location, the compensation and leadership
committee believes that the competitive market for executive talent includes publicly traded technology companies,
including Internet-based product and services companies. Accordingly, it develops a compensation peer group to
contain a carefully selected cross-section of public companies using factors described below, with revenues and market
capitalizations that are similar to ours and that may also compete in a similar market for executive talent.
Each year, in the fourth quarter, the Company reviews its standards and benchmarks for setting executive compensation
including our NEOs, for the upcoming fiscal year. One of the benchmarks we use is the peer group reference. In
October 2018, the compensation and leadership committee directed Compensia to formulate a group of peer companies
to be used as a reference for market positioning and for assessing competitive market practices in connection with
making 2019 executive compensation decisions. Compensia reviewed the pool of U.S.-based publicly traded
companies, taking into consideration our industry sector, the size of such companies (based on revenues and market
capitalization) relative to our size and growth rate, and the following additional factors:
•
the comparability of the company’s primary sales channels, including via the Internet;
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•
the company’s consumer products and/or business services focus;
•
the comparability of the company’s operating history;
•
the comparability of the company’s organizational complexities and growth attributes;
•
the stage of the company’s maturity curve (which increases its likelihood of attracting the type of executive
talent for whom we compete); and
•
the comparability of the company’s operational performance (for consistency with our strategy and future
performance expectations).
Following this review, Compensia recommended to the compensation and leadership committee a peer group of 20
information technology and consumer-oriented companies, which the compensation and leadership committee
subsequently approved. The selected companies had revenues ranging from $680 million to $2.8 billion and market
capitalizations ranging from $130 million to $3.7 billion, which were comparable peers at the time of selection. The
compensation and leadership committee reviewed the compensation data drawn from the compensation peer group
to develop a representation of the “competitive market” specifically tailored to GoPro with respect to current executive
compensation levels and related policies and practices. The compensation and leadership committee then evaluated
how its contemplated compensation actions and decisions compared to the competitive market.
The companies comprising the 2019 compensation peer group are as follows:
Acushnet Holdings
Callaway Golf
Crocs
Decker Outdoor
Eastman Kodak
Electronics For Imaging
Fitbit
Gogo
Groupon
iRobot
MoneyGram International
NETGEAR
Pandora Media
Plantronics
RH
Shutterfly
Stitch Fix
TiVo
Universal Electronics
Vista Outdoor
As an overarching objective, we seek to design each pay element to align the compensation of our management team
with our corporate performance and long-term value creation for our stockholders. That principle has guided the design
of both the annual and long-term incentive compensation of our executive officers. The compensation and leadership
committee does not believe that it is appropriate to make compensation decisions, whether regarding base salaries
or short-term or long-term incentive compensation, solely using benchmarking as guidance. The compensation and
leadership committee, however, does believe that information regarding the compensation practices at our
compensation peer group is useful in two respects. First, the compensation and leadership committee recognizes that
our compensation policies and practices must be competitive in the marketplace. Second, this information is useful in
assessing the reasonableness and appropriateness of individual executive compensation elements and of our overall
executive compensation packages.
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Other Compensation Policies
Compensation Recoupment Policy
We maintain a compensation recoupment policy applicable to cash incentive-based compensation awards paid to our
executive officers. In the event of a substantial restatement of financial results filed with the Securities and Exchange
Commission, the policy permits the board, if the board determines appropriate under the circumstances, and the
executive officer engaged in fraud or intentional illegal conduct that materially contributed to the restatement, to seek
recovery of all or any portion of the cash incentive awards paid or awarded to an executive officer in excess of the
awards that would have been paid or awarded based on the restated financial results.
In addition, pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, as applicable to all public companies, we may
be legally required to seek reimbursement from our Chief Executive Officer and Chief Financial Officer if, as a result
of their misconduct, we restate our financial results due to our material noncompliance with any financial reporting
requirements under the federal securities laws.
Equity Grant Policy
It is our policy to avoid the granting of equity awards close in time to the release of material non-public information,
and we have adopted a written equity grant policy to specify the timing of the effectiveness of our equity awards to
avoid such timing. This policy, which we review annually and update as necessary, provides the following guidelines
to be observed by the compensation and leadership committee and our board of directors in administering the grant
of equity awards under our equity compensation plans in 2019:
•
upon our IPO, when the 2014 Plan became effective, our board of directors delegated to the compensation
and leadership committee the express authority to administer our 2014 Plan, including the authority to grant
awards under the 2014 Plan;
•
our board of directors has delegated to the equity management committee (a committee consisting solely of
our Chief Executive Officer) the non-exclusive authority to grant equity awards under the 2014 Plan to
employees below the level of executive staff vice president where the awards fall within standard guidelines
approved by the compensation and leadership committee and subject to a limitation on the number of shares
of our common stock that may be granted in any year;
•
equity awards approved by the management committee will be periodically granted on the 15th day of February,
May, August or November;
•
all equity awards granted outside the equity management committee guidelines or to our employees at or
above the level of vice president who serve on the Company’s executive staff must be approved by the
compensation and leadership committee; and
•
all equity awards to the non-employee members of our board of directors will be granted automatically in
accordance with the terms of our Director Compensation Policy.
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Under our 2014 Plan, the exercise price of any option to purchase shares of our Class A common stock may not be
less than the fair market value (based on the market closing price) of our Class A common stock on the date of grant.
Stock Ownership Guidelines
The Company maintains a stock ownership policy to better align the interests of our Chief Executive Officer, our
President, and our non-employee directors with the interests of our stockholders. Pursuant to our policy, our Chief
Executive Officer is required to achieve ownership of our common stock valued at five times his annual base salary.
Our non-employee directors are required to achieve ownership of our common stock valued at five times the amount
of the annual retainer payable to directors within five years of joining the Board. The ownership levels of our directors
and our Chief Executive Officer as of March 31, 2020, are set forth in the beneficial ownership table section below,
and each of our directors and our Chief Executive Officer met the requirements of, and were in compliance with, our
stock ownership guidelines as of March 31, 2020.
Derivatives Trading and Hedging and Pledging Policies
We have adopted a policy prohibiting our employees, including our executive officers, and members of our board of
directors from speculating in our equity securities, including the use of short sales or any equivalent transaction involving
our equity securities. In addition, they may not engage in any other hedging, pledging or monetization transactions or
trading on margin and other similar or related arrangements, with respect to the securities that they hold. Finally, no
employee, including an executive officer, or member of our board of directors may acquire, sell, or trade in any interest
or position relating to the future price of our equity securities.
Rule 10b5-1 Sales Plans
From time to time, certain of our directors and executive officers have adopted written plans, known as Rule 10b5-1
plans, in which they have contracted with a broker to buy or sell shares of our common stock on a periodic basis.
Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or officer when
entering into the plan, without further direction from the director or officer. The director or officer may amend or terminate
the plan in some circumstances. The adoption, amendment, termination and certain other actions with respect to Rule
10b5-1 plans must comply with the terms of our Policy on Securities Trades by GoPro, Inc. Personnel and the GoPro,
Inc. Requirements for Trading Plans.
2017 Say on Pay Vote
We held a non-binding advisory stockholder vote on the compensation program for our named executive officers,
commonly referred to as a "say on pay" vote, at our 2017 Annual Meeting of Stockholders. Over 99.66% of the
voting power of shares voted at the 2017 Annual Meeting of Stockholders were cast in favor of our say on pay
proposal. Our then Compensation and Leadership Committee considered the result of this advisory vote to be an
endorsement of our compensation program, policies, and practices for our named executive officers. The
Compensation and Leadership Committee and the Nominating and Governance Committee will continue to
consider the outcome of our say on pay votes and our stockholder views when making compensation decisions for
our named executive officers, including the outcome of Proposal No. 3 (non-binding advisory vote on executive
compensation) at this Annual Meeting.
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Frequency of Say-on-Pay Advisory Vote
As previously reported, at our 2015 annual meeting of stockholders, our stockholders selected, on a non-binding
advisory basis, three years as the frequency at which we will hold a non-binding advisory vote to approve the
compensation to be paid by us to our NEOs. Based on these results, our board of directors has determined that we
will conduct future stockholder advisory votes regarding compensation awarded to our NEOs once every three years.
This policy will remain in effect until the next stockholder vote on the frequency of stockholder advisory votes on the
compensation of NEOs, expected to be held at our 2021 annual meeting of stockholders.
Tax and Accounting Considerations
Deductibility of Executive Compensation
Section 162(m) of the Tax Code generally disallows public companies a tax deduction for federal income tax purposes
of remuneration in excess of $1 million paid to certain executive officers.
Under the Tax Cuts and Jobs Act in December 2017, however, it repealed exceptions to the deductibility limit that were
previously available for “qualified performance-based compensation,” including stock option grants, effective for taxable
years after December 31, 2017. As a result, any compensation paid to certain of our executive officers in excess of
$1 million will be non-deductible unless it qualifies for transition relief afforded to compensation payable pursuant to
certain binding arrangements in effect on November 2, 2017, and which have not subsequently been materially modified.
Because of ongoing uncertainties in the interpretation and implementation of the changes to Section 162(m), however,
including the scope of the transition relief, we can offer no assurance of the deductibility of our compensatory
arrangements.
Accounting for Stock-Based Compensation
The compensation and leadership committee considers the potential accounting treatment in designing compensation
plans and arrangements for our executive officers and other employees. Chief among these is FASB ASC Topic 718,
the standard which governs the accounting treatment of stock-based compensation awards.
FASB ASC Topic 718 requires us to recognize the grant date fair value of all share-based payment awards to employees
in our financial statements, including grants of options to purchase shares of our Class A common stock as well as
RSUs and PSUs that may be settled for shares of our Class A common stock.
FASB ASC Topic 718 also requires us to recognize the compensation cost of our share-based payment awards in our
income statement over the period that an employee, including our executive officers, is required to render service in
exchange for the award (which, generally, will correspond to the award’s vesting schedule).
Compensation-Related Risks
Our board of directors is responsible for the oversight of our risk profile, including compensation-related risks. The
compensation and leadership committee monitors our compensation policies and practices as applied to our employees
to ensure that these policies and practices do not encourage excessive and unnecessary risk-taking. In October 2019,
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our compensation and leadership committee conducted a review of our compensation programs, including our executive
compensation program, and, based on this review, determined that the level of risk associated with these programs
is not reasonably likely to have a material adverse effect on the Company.
Business Highlights for 2019
2019 business highlights include the following:
•
In 2019, we released the HERO8 Black and MAX cameras which have redefined what's possible with a
GoPro camera. HERO8 Black reinvents the HERO camera with its lighter, sleeker design, with folding
mounting fingers, expansion mods and HyperSmooth 2.0. MAX is like having three cameras in one: a
maximum-stabilized single-lens HERO camera, a dual lens spherical camera and a high-performance
vlogging camera, with all modes benefiting from MAX HyperSmooth making MAX the most stabilized
camera at any price point in all of digital imaging.
•
In July, we combined the GoPro and Quik Apps into one mobile editing experience. We integrated the best
of the Quik video editing app into the GoPro app to create a single app experience for the GoPro user. As a
result, usage of the GoPro App’s automatic editing tools grew 400% year-over-year in the fourth quarter of
2019.
• Throughout 2019, we focused on expanding the value and awareness of our Plus offerings, which led to
69% year-over-year growth in paying Plus subscribers. Our efforts included the introduction and
international roll-out of new benefits for the Plus Subscriber, including unlimited cloud storage of original
quality videos and photos, no-questions asked damaged camera replacement, and discounts on GoPro
accessories.
• For the second consecutive year, we deepened the relationship with our global community by including
them in the launch of HERO8 Black and MAX with the Million Dollar Challenge, showcasing the passions
and talents of our community and rewarding 45 creators with an equal share of $1 million. We received
42,000 video submissions, an increase of 68% vs. last year’s Million Dollar Challenge.
• We achieved revenue growth and non-GAAP profitability for the year.
Other financial and operational highlights included the following:
• GoPro revenue for the full year 2019 was $1.195 billion, up 4% year-over-year.
• GoPro’s adjusted EBITDA for the full year 2019 was $72 million, a 230% increase year-over-year.
• We successfully completed the move of our U.S.-bound camera production to Guadalajara, Mexico.
•
In April, GoPro’s YouTube channel surpassed 2 billion cumulative views, and GoPro’s content achieved all-
time highs in 2019, with more than 2 million organic views per day across all channels in 2019, 737 million
organic, non-paid views in total, an increase of 29% year-over-year.
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• GoPro gained more than four million new social followers in 2019, growing its total following to 42.8 million
across all platforms.
2019 was a successful year in which we achieved both revenue growth and full year non-GAAP profitability with our
two new flagship cameras, HERO8 Black and MAX while continuing to grow our GoPro Plus subscription service. Due
to a late stage production delay we shifted HERO8 Black shipments from the third quarter to the fourth quarter of 2019,
resulting in a significant revenue shift between the quarters.
We are proud of the many product achievements described above which reflect our focus to obsessively serve on
delivering the products and services that delight our users, and which we believe will drive camera sales and improve
control over our financial results. We continue to focus on reducing operating expenses as we strive to bring value to
our stockholders and customers. Decisions related to base salaries, bonus payouts and equity awards for 2019 reflect
our product and service achievements and challenges we experienced in 2019.
Base Salary for Named Executive Officers
In February 2019, in connection with our 2018 results, the compensation and leadership committee reinstated Mr.
Woodman's base salary of $800,000 effective January 1, 2019. At the same meeting the compensation and
leadership committee reviewed Messrs. McGee, Barna, Jahnke and Ms. Saltman's base salaries based on an
analysis prepared by with Compensia regarding the competitive market, as well as performance as evaluated by
our Chief Executive Officer. At that time, the compensation and leadership committee approved a base salary of
$500,000 for Mr. McGee, $450,000 for Mr. Barna, $375,000 for Mr. Jahnke, and $375,000 for Ms. Saltman.
In October 2019, Mr. McGee's base salary was increased to $525,000 to reward his proven leadership and deep
understanding of our business.
The base salaries of our NEOs during 2019 are set forth in the “2019 Summary Compensation Table” below.
Annual Cash Bonuses for Named Executive Officers
In February 2019, the compensation and leadership committee awarded cash bonus opportunities to our executive
officers, including our NEOs. The compensation and leadership committee exercised its authority to select net revenue
and pre-tax profit (loss) weighted at 30% and 70% respectively, as the performance measures for the 2019 annual
cash bonus opportunities for our executive officers, and also established the related threshold and target performance
levels for each of these measures.
Under the 2019 Executive Bonus Plan, the performance measures involving our financial results could be determined
in accordance with GAAP, or such financial results could consist of non-GAAP financial measures, subject to adjustment
by the compensation and leadership committee for one-time items or unbudgeted or unexpected items when
determining whether the target levels for the performance measures had been met.
Individual payouts of between 0% and 130% of funded bonuses (with the aggregate individual payouts not to exceed
the overall funding level of the plan itself) would also reflect individual performance, based on a review of each executive
officer’s actual performance during the year, as ultimately determined by our compensation and leadership committee.
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Target Bonus Opportunities
For 2019, the target annual cash bonus opportunities for each of our NEOs under the 2019 Bonus Plan, expressed
as a percentage of his or her annual base salary, were as follows:
Named Executive Officer
Nicholas Woodman
Brian McGee(1)
Sandor Barna(2)
Dean Jahnke
Eve Saltman
Annual Base
Salary
($)
800,000
505,137
403,154
375,000
375,000
Target Bonus
Opportunity
(as a percentage
of base salary)
(%)
100
75
60
75
50
Target Bonus
Opportunity
($)
800,000
378,853
241,892
281,250
187,500
(1) Mr. McGee’s annual base salary for 2019 is the weighted average of his $500,000 annual base salary from January 1, 2019, to October
17, 2019, and his $525,000 annual base salary from October 18, 2019, to December 31, 2019. Mr. McGee’s annual target bonus opportunity
(in dollars) for 2019 reflects his target bonus opportunity (as a percentage of base salary) for 2019 multiplied by his weighted average base
salary over 2019.
(2) Mr. Barna’s annual base salary reflects the actual compensation he received during his 2019 employment, and Mr. Barna's actual target
bonus opportunity (expressed as a percentage of base salary), in each case, prior to the termination of his employment in November 2019.
However, Mr. Barna ceased to be eligible to receive any bonus upon the termination of his employment in November 2019.
The target annual cash bonus opportunities of our executive officers, including the NEOs, focused on our short-term
financial objectives as reflected in our annual operating plan while, at the same time, allowed for recognition of individual
contributions toward achievement of those objectives and the successful execution of each executive’s individual roles
and responsibilities. Target bonus opportunities differ among NEOs based on market data, position and level.
Corporate Performance Objectives
For purposes of the 2019 Executive Bonus Plan, the compensation and leadership committee selected net revenue
and pre-tax profit/loss as the corporate performance measures weighted at 30% and 70% respectively, each
corresponding to a plan funding level of between 25% and 150%, based on our actual performance between threshold,
target, and maximum levels. These metrics were chosen to prioritize our focus on top and bottom line growth. The
Executive Bonus Plan would have a funding level of 0% for actual performance below the threshold level, with the
average of the two component percentages (either a percentage between 25% and 150% or 0%) determining the plan
funding percentage of between 0% and 150%. The target levels for the 2019 corporate performance measures were
as follows:
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Corporate Performance Measure
Net Revenue
Pre-Tax Profit/Loss
2019 Target
Level
$1.227 billion
$48.6 million
Pre-Tax Profit/Loss was determined on a non-GAAP basis which
by excluding stock compensation expense, intangible charges, and
other one-time charges as appropriate but including bonus
expense (including bonus payments under this 2019 Executive
Bonus Plan).
The compensation and leadership committee believed these performance measures and weightings were appropriate
for our business in 2019, as they focused on maintaining our top line while growing our bottom line. The compensation
and leadership committee established target performance levels for each measure at levels that it believed to be
challenging, but attainable, through the successful execution of our annual operating plan.
The threshold and target levels of achievement for each corporate performance measure and their respective plan
funding percentages, with the actual plan funding percentage with respect to each measure to be determined
independently were as follows:
Company Performance Target (Bonus
Weighting)
Threshold
Target
Maximum
Net Revenue (1)
Pre-Tax Profit/Loss (1) (2)
Level of Attainment
$1.173 billion
$1.227 billion
$1.240 billion
Component Funding
25%
100%
150%
Level of Attainment
$15.0 million
$48.6 million
$53.5 million
Component Funding
25%
100%
150%
(1) Net revenue would be calculated by our finance department and verified by our executive management, subject to certification and final
approval by our compensation and leadership committee.
(2) Pre-tax profit/loss would be determined on a non-GAAP basis, which excludes stock compensation expenses, intangible charges, and other
one-time charges as appropriate but includes bonus expense (including bonus payments under this 2019 Executive Bonus Plan).
(3) Net profit would be determined on a non-GAAP basis, which excludes stock compensation expenses, intangible changes, and other one-
time charges as appropriate but includes non-GAAP taxes and bonus expense (including bonus payments under this 2019 Executive Bonus
Plan).
In the event actual performance results were between the threshold and target performance levels, the plan funding
percentage would be calculated using linear interpolation of the respective threshold and target percentages.
After the overall level of funding under the 2019 Executive Bonus Plan was determined (between 0% and 150%), our
compensation and leadership committee could then adjust individual payouts between 0% and 130% of funded levels,
provided that the aggregate bonus payouts under the plan could not exceed the overall level of funding of the plan
itself.
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Individual Performance
After the end of the year, our Chief Executive Officer evaluated each executive officer’s individual performance, based
on his assessment of the executive officer’s individual contributions to our executive team, formulated a recommended
total bonus payout under the 2019 Executive Bonus Plan, and then submitted these recommendations to the
compensation and leadership committee for review and approval.
2019 Performance Results and Bonus Decisions
In February 2020, the compensation and leadership committee determined that, based on actual 2019 performance
with respect to each corporate performance measure, weighted and combined payout results were at 68% of target
bonus opportunities, reflecting 54% achievement weighted at 30% of net revenue and 74% achievement weighted at
70% of pre-tax profit/loss target.
The compensation and leadership committee approved our Chief Executive Officer’s recommendations (without
exercise of the compensation and leadership committee’s authority to adjust individual bonus payouts in the
committee’s sole discretion) for a bonus payment aligned with our results of 68% of target bonus opportunity to
each of our NEOs. The payouts under the 2019 Executive Bonus Plan were as follows:
Named Executive Officer
Nicholas Woodman(1)
Brian McGee(1)
Dean Jahnke(1)
Eve Saltman(1)
Sandor Barna(2)
Target Annual Cash
Bonus Opportunity
($)
Actual Annual Cash
Bonus Payment
($)
Percentage of
Target Annual Cash
Bonus Opportunity
800,000
378,853
281,250
187,500
241,892
544,000
257,620
191,250
127,500
-
68.0
68.0
68.0
68.0
-
(1) Each NEO's annual target bonus opportunity (in dollars) for 2019 reflects his or her target bonus opportunity (as a percentage of base salary)
for 2019 multiplied by his or her weighted average base salary over 2019.
(2) Mr. Barna's actual bonus payment and percentage of target annual cash bonus opportunity for 2019 are listed as zero because he ceased to
be eligible to receive any bonus upon the termination of his employment in November 2019.
The annual cash bonuses paid to our NEOs for 2019 are also set forth in the “2019 Summary Compensation Table”
below, under the column “Non-Equity Incentive Plan Compensation.”
Long-Term Incentive Compensation
Equity Awards for Named Executive Officers
In 2019, the compensation and leadership committee directed Compensia to review the various long-term incentive
vehicles used by our peers and determined that designing a compensation plan using a mix of 25% stock options,
50% RSUs and 25% PSUs would be the best approach for us to attract and retain key talent in our industry and align
our executive officers’ interests with the long-term interests of our stockholders. The PSU award would vest only if
the committee determined that the "Revenue Hurdle” of $1,173,483,000 in net sales revenue for fiscal year 2019,
generated in accordance with GAAP, consistent with the methodology used for reporting on the Form 10-K, was
achieved. If the Revenue Hurdle was determined by the committee to not have been achieved, none of the shares
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under the PSU award would vest and the PSU award will permanently and immediately cancel in full without
consideration.
In May 2019, Messrs. Woodman, McGee, Jahnke and Barna and Ms. Saltman were awarded PSUs that may be settled
in shares of our Class A common stock. In addition, our NEOs other than our CEO were awarded stock options to
purchase shares of our Class A common stock and RSUs that may be settled in shares of our Class A common stock.
These awards were based on the competitive market for their respective roles, contributions in 2018 and expected
long-term contributions to GoPro.
The equity awards granted to our NEOs in 2019 are set forth in the “2019 Summary Compensation Table” and the
“2019 Grants of Plan-Based Awards Table” below.
2020 Compensation for our Chief Executive Officer
Due to the impacts of the COVID-19 pandemic on our company, Nicholas Woodman, our Chief Executive Officer,
volunteered to waive his salary for the remainder of the year ending December 31, 2020. Accordingly, Mr. Woodman
and GoPro entered into a waiver agreement (the “Waiver Agreement”), which included the foregoing request (the
"Salary Waiver"), and provided Mr. Woodman's salary would not be increased again without consent of GoPro, that
Mr. Woodman has no entitlement to or expectation of a reversal of the Salary Waiver or other gross-up or true-up of
or increase in his salary, and that Mr. Woodman waives “good reason” under his employment agreement in connection
with the Salary Waiver and the associated adverse effects on the level of Mr. Woodman’s participation in certain of
our company’s benefit plans.
Severance and Change in Control Arrangements
Employment Arrangements
We have entered into written employment offer letters to each of our executive officers, including our Chief Executive
Officer and our other NEOs. Each of these arrangements was approved on our behalf by our board of directors or the
compensation and leadership committee, as applicable. We believe that these arrangements were appropriate to
induce these individuals to forego other employment opportunities or leave their current employer for the uncertainty
of a demanding position in a new and unfamiliar organization.
In entering into these arrangements, our board of directors or the compensation and leadership committee, as
applicable, was aware that it would be necessary to recruit candidates with the requisite experience and skills to
manage a growing business in a dynamic and ever-changing environment. Accordingly, it recognized that it would
need to develop competitive compensation packages to attract qualified candidates in a highly-competitive labor market.
At the same time, our board of directors or the compensation and leadership committee, as applicable, was sensitive
to the need to integrate new executive officers into the executive compensation structure that it was seeking to develop,
balancing both competitive and internal equity considerations.
Each of these employment arrangements provides for “at will” employment and sets forth the initial or ongoing
compensation arrangements for the NEO, including an initial or ongoing base salary, a target annual cash bonus
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opportunity, and, in some instances, a recommendation for an equity award in the form of stock options, RSUs, or
PSUs.
For a summary of the material terms and conditions of the employment arrangements with each of our NEOs, see
“Employment, Severance and Change in Control Agreements” below.
Change in Control and Severance Policy
In January 2014, we adopted a Change in Control and Severance Policy, with payments and benefits triggered by a
qualifying termination of employment in the event of a change in control of the Company applicable to our executive
officers including our NEOs and certain other employees, pursuant to which each individual entered into a written
agreement governing such situations. We believe that the severance policy serves several objectives. First, it eliminates
the need to negotiate separation payments and benefits on a case-by-case basis. Second, it helps assure an executive
officer that his or her severance payments and benefits are comparable to those of other executive officers with similar
levels of responsibility and tenure. Further, it incentivizes for our executive officers to remain employed and focused
on their responsibilities during the pendency or negotiation of a change in control transaction, which we believe would
help to preserve our value and the potential benefit to be received by our stockholders in the transaction. Finally, the
Change in Control and Severance Policy is easier for us to administer than individually negotiated severance
agreements, as it requires less time and expense in negotiation or execution.
The agreements with our executive officers, including each of our NEOs (other than our Chief Executive Officer) require
us to provide certain payments and benefits upon a qualifying termination of employment, which includes a termination
of employment without cause or where the NEO resigns with good reason, within three months preceding or 12 months
following a change in control of our company. The receipt of these payments and benefits is contingent upon the NEO’s
execution, delivery, and non-revocation of a release and waiver of claims satisfactory to us following the separation
from service. In addition, for six months following termination of employment, and as a condition to the payments and
benefits, the NEO must cooperate with any transition efforts that we request and must not disparage us, or our directors,
officers, or employees. As noted in the following paragraph, Mr. Woodman, our Chief Executive Officer, is no longer
a party to these agreements.
We entered into an employment letter with Mr. Woodman in June 2014, the terms of which supersede in their entirety
the change in control and severance agreement he executed in January 2014. This employment letter sets forth the
post-employment compensation arrangements for Mr. Woodman in the event of a qualifying termination of employment
in connection with a change in control of GoPro.
For descriptions of the change in control severance arrangements with each of our NEOs, including an estimate of
the amount payable upon a qualifying termination of employment, see “Arrangement with Our Named Executive
Officers” below.
Executive Severance Policy
On February 13, 2019, as part of its annual compensation review process, our compensation and leadership committee
approved an Executive Severance Policy, to be immediately effective. Subject to executing a written agreement setting
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forth the terms and conditions of the Executive Severance Policy, participants thereunder include certain senior
leadership team members other than our Chief Executive Officer, as well as such other employees as our board or
the committee may designate. The committee designated the following NEOs as participants in the Executive
Severance Policy: Messrs. McGee, Barna, Jahnke and Ms. Saltman.
Under the Executive Severance Policy, if a participant undergoes a qualifying termination of employment (as defined
in the Executive Severance Policy) and executes an irrevocable general release of claims in favor of GoPro within 60
days following such qualifying termination of employment, we will provide the participant the following severance
payments and benefits (in addition to compensation and benefits earned by the participant but not yet paid through
the termination date):
• Cash Severance. We will pay the participant a cash lump sum equal to 12 months of the participant’s base
salary (less applicable deductions and withholding), as in effect immediately prior to the participant’s termination
by GoPro or, in the case of voluntary termination by the participant with good reason (as defined in the policy),
immediately prior to the occurrence of the event constituting good reason.
• COBRA Payments. Subject to the participant timely electing coverage in accordance with the requirements
of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), we will continue to
pay the employer portions of such insurance premiums for the participant and/or his or her eligible dependents,
as applicable, for up to 12 months following the participant’s termination. Such COBRA subsidies will cease,
however, if a participant becomes eligible for comparable group medical, dental and/or vision insurance
coverage under the plan(s) of a subsequent employer, or if the participant otherwise ceases to receive COBRA
coverage under our plan(s), before the end of the aforementioned 12-month period.
If the participant is or becomes eligible to receive any other cash severance payments and benefits from us
comparable to those described in the “Cash Severance” paragraph above, including under a “double-trigger”
arrangement in connection with a change in control of GoPro (such as under our Change in Control and Severance
Policy), the participant will receive the greater of the payments and benefits under the Executive Severance
Policy or under the other arrangement (such as the Change in Control and Severance Policy).
Finally, participants in the Executive Severance Policy are required to agree that, during the six-month period following
their cessation of employment, they will cooperate with us in every reasonable respect, use their best efforts to assist
us with the transition of their duties to their successors and not in any way or by any means disparage GoPro, the
members of our board or our officers and employees.
For descriptions of the severance arrangements with each of our NEOs, including an estimate of the amount
payable upon a qualifying termination of employment, see “Arrangements with Our Named Executive Officers”
below.
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2019 Summary Compensation Table
The following table provides information concerning compensation awarded to, earned by or paid to each of our NEOs
for 2019, 2018 and 2017.
Name and Principal Position
Nicholas Woodman,
Chief Executive Officer
Brian McGee,(6)
Executive Vice President,
Chief Financial Officer and
Chief Operating Officer
Dean Jahnke,(7)
Vice President Global Sales
Vice President, Corporate/
Business Development, General
Counsel and Secretary
Sandor Barna,(10)
former Senior Vice President,
Chief Technology Officer
Year
2019
2018(5)
2017
Salary
($)
800,000
1
800,000
Stock
Awards
($)(1)
4,157,196
—
—
Option
Awards
($)(2)
—
—
—
Non-Equity
Incentive Plan
Compensation
($)(3)
544,000
—
—
2019
505,137
1,106,347
361,027
257,620
2018
454,740
724,085
600,225
162,001
2017
394,808
472,000
468,885
2019
375,000
704,038
229,745
155,456
191,250
127,500
All Other
Compensation
($)
154
—
147
154
176
147
11,354
11,354
Total
($)
5,501,350
1
800,147
2,230,285
1,941,227
1,491,296
1,511,387
1,314,242
1,442,351
(4)
(4)
(4)
(4)
(4)
(8)
(8)
(9)
2018
265,575
499,237
567,901
63,312
46,326
2019
2018
392,769
704,038
229,745
—
11,354
1,337,906
417,041
460,778
381,961
109,206
37,474 (11)
1,406,460
Eve Saltman,
2019
375,000
603,464
196,924
(1) The amounts reported in this column represent the aggregate grant date fair value of the RSUs or PSUs, as applicable, made to each NEO
in 2019, 2018 and 2017 computed in accordance with FASB ASC Topic 718 and excluding the effect of estimated forfeitures. For 2018 and
2019, PSUs were included in in the mix of equity awards granted to our NEOs and are included in the "Stock Awards" column in the table
above, along with time-based RSUs. The performance metric selected for the PSUs in each year was based solely on the Company's
revenue for a single fiscal year (FY 2018 and FY 2019, respectively) and as such the PSUs were determined to be performance awards
under FASB ASC Topic 718.
The grant date fair value for both RSU and PSU awards was determined to be equal to the closing price of our Class A common stock on
the date of grant.
The number of PSUs that ultimately vest, if any, depends on whether the Company achieves certain levels of performance with respect to
the designated performance measures. The grant date fair values of the PSUs included in this column are based on payouts at target,
which we determined, in accordance with the applicable stock-based compensation accounting rules, to be the probable levels of
achievement of the performance goals related to those awards at the time of grant. The table below shows the grant date fair value of the
PSUs granted during fiscal 2019, assuming that: (i) our performance with respect to those performance measures will be at target levels
(i.e., probable performance); and (ii) our performance with respect to those performance measures will be at levels that would result in a
maximum payout.
Note that the amounts reported in this column reflect the accounting cost for these RSUs or PSUs, as applicable, and do not correspond to
the actual economic value that may be received by the NEO.
Name
Fiscal Year of Grant
Nicholas Woodman
Brian McGee
Dean Jahnke
Eve Saltman
Sandor Barna
2019
2019
2019
2019
2019
Grant Date Fair Value
(Target/Probable
Performance)
($)
Grant Date Fair Value
(Maximum
Performance)
($)
4,157,196
6,235,794
368,780
234,677
201,155
234,677
553,173
352,019
301,736
352,019
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(2)
(3)
The amounts reported in this column represent the aggregate grant date fair value of option awards made to each NEO in 2019, 2018 and
2017 computed in accordance with FASB ASC Topic 718 and excluding the effect of estimated forfeitures. The assumptions used in calculating
the grant date fair value of the option awards reported in the Option Awards column are set forth in Note 6 to the audited financial statements
included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 14, 2020. Note that the
amounts reported in this column reflect the accounting cost for these options and do not correspond to the actual economic value that may
be received by the NEO.
The amounts reported in this column represent the NEO’s annual cash bonus awards, which for 2019, 2018 and 2017, we awarded under the
2019 Executive Bonus Plan, the 2018 Executive Bonus Plan, and the 2017 Executive Bonus Plan, respectively, based on the compensation
and leadership committee’s determination of individual and overall company performance.
(4) Represents the value of corporate merchandise.
(5)
In January 2018, our CEO volunteered to forego salary and bonus for 2018 and entered into a waiver agreement for which he would receive
a nominal salary of $1 and no 2018 target cash bonus opportunity. In connection with our 2018 results, the compensation and leadership
committee reinstated Mr. Woodman's base salary and target opportunity effective January 1, 2019.
(6) Effective as of February 3, 2020, Mr. McGee was promoted to Executive Vice President, Chief Financial Officer and Chief Operating Officer.
(7) Mr. Jahnke was promoted to Vice President, Global Sales in June 2018 and designated by the Board as an executive officer on February 4,
2019.
(8) Represents $11,200 in matching 401(k) account contributions and $154 in value of corporate merchandise.
(9) Represents a $25,000 for a sign-on bonus, $9,650 for an additional spot bonus, $11,000 in matching 401(k) account contributions, $500 in
charitable contribution matching and $176 in value of corporate merchandise.
(10) Mr. Barna resigned as our Senior Vice President, Chief Technology Officer effective on November 20, 2019.
(11) Represents $16,646 for an additional spot bonus, $8,652 under the employee annual bonus plan, $11,000 in matching 401(k) account
contributions, $1,000 in charitable contribution matching and $176 in value of corporate merchandise.
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2019 Grants of Plan-Based Awards Table
The following table provides information concerning each grant of an award made in 2019 for each of our NEOs under
any plan. This information supplements the information about these awards set forth in the 2019 Summary
Compensation Table. All options and stock awards represented in the table below were granted pursuant to our 2014
Plan, unless otherwise noted.
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
Estimated Future Payouts Under
Equity Incentive Plan Awards
Name
Nicholas
Woodman
Brian
McGee(5)
Dean
Jahnke
Eve
Saltman
Sandor
Barna
Award
Type
Grant Date
Approval
Date
Threshold
($)(1)
Target
($)
Maximum
($)(2)
Threshold
(#)(3)
Target
(#)(3)
Maximum
(#)(3)
Cash
N/A
—
200,000
800,000
1,200,000
PSU(6)
05/15/2019
03/25/2019
—
—
—
137,656
550,622
825,933
Cash
N/A
—
94,713
378,853
568,280
—
—
—
PSU(6)
RSU(7)
05/15/2019
03/25/2019
05/15/2019
03/25/2019
Option(8)
05/15/2019
03/25/2019
—
—
—
—
—
—
—
—
—
Cash
N/A
—
70,313
281,250
421,875
PSU(6)
RSU(7)
05/15/2019
03/25/2019
05/15/2019
03/25/2019
Option(8)
05/15/2019
03/25/2019
—
—
—
—
—
—
Cash
N/A
—
46,875
187,500
281,250
PSU(6)
RSU(7)
05/15/2019
03/25/2019
05/15/2019
03/25/2019
Option(8)
05/15/2019
03/25/2019
—
—
—
—
—
—
Cash
N/A
—
60,473
241,892
362,838
12,211
48,845
73,268
—
—
—
—
—
—
—
—
—
7,771
31,083
46,625
—
—
—
—
—
—
—
—
—
6,661
26,643
39,965
—
—
—
—
—
—
—
—
—
PSU(6)
RSU(7)
05/15/2019
03/25/2019
05/15/2019
03/25/2019
Option(8)
05/15/2019
03/25/2019
—
—
—
—
—
—
—
—
—
7,771
31,083
46,625
—
—
—
—
—
—
All Other
Stock
Awards:
Number
of
Shares
or Stock
or Units
All Other
Option
Awards:
Number of
Securities
Underlying
Options
Exercise
Base
Price of
Option
Awards
($/Sh)
Grant
Date Fair
Value of
Stock
and
Option
Awards
($)(4)
—
—
—
97,691
—
—
—
62,167
—
—
53,286
—
—
—
62,167
—
—
—
—
— 4,157,196
—
—
—
—
368,780
737,567
95,819
7.55
361,027
—
—
—
—
—
—
—
234,677
469,361
60,976
7.55
229,745
—
—
—
—
201,155
—
402,309
52,265
7.55
196,924
—
—
—
—
—
—
—
234,677
469,361
—
60,976
7.55
229,745
(1) As set forth under the 2019 Executive Bonus Plan, the threshold amount represents corporate financial performance of (i) achievement of net
revenue at $1.17 billion and (ii) achievement of pre-tax profit/loss of $15 million, which, together, would result in an overall plan funding level
of 25% (and individual bonus payouts at 25% of annual target bonus opportunities for 2019, subject to adjustment by the compensation and
leadership committee).
(2) As set forth under the 2019 Executive Bonus Plan, the maximum amount represents corporate financial performance of (i) achievement of net
revenue at $1.24 billion and (ii) achievement of pre-tax profit/loss of $53 million, which, together, would result in an overall plan funding level
of 150% (and individual bonus payouts at 150% of annual target bonus opportunities for 2019, subject to adjustment by the compensation and
leadership committee).
(3)
(4)
The amounts in these columns represent the threshold, target, and maximum number of shares that may be earned and vest with respect to
performance-based restricted stock units granted during fiscal 2019.
The amounts reported in this column represent the aggregate grant date fair value of each award computed in accordance with FASB ASC
Topic 718. The grant date fair value for PSU awards was computed based on achievement of the PSU awards’ performance at 100% of the
target number of shares granted, which was the probable outcome of the performance conditions on the grant date. The grant date fair value
for both RSUs and PSUs was determined to be equal to the closing price of our Class A common stock on date of grant. The assumptions
used in calculating the grant date fair value of the option awards reported in the Option Awards column are set forth in Note 6 to the audited
financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 14,
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2020. Note that the amounts reported in this column reflect the accounting cost for these awards and do not correspond to the actual economic
value that may be received by the NEO.
(5) Mr. McGee’s estimated future payouts under the 2019 Executive Bonus Plan reflect his weighted-average base salary over 2019.
(6)
The PSUs granted on May 15, 2019, are scheduled to vest between February 15, 2020, and February 15, 2022, subject to the satisfaction
of the performance condition for the performance period beginning on January 01, 2019, and ending on December 31, 2019, as determined
by the compensation and leadership committee. If the Minimum (Threshold) Revenue Hurdle is determined by the compensation and
leadership committee not to have been achieved, none of the shares under the PSU awards will be earned or vest and the PSU awards will
be forfeited in their entirety for no value. If the Minimum (Threshold) Revenue Hurdle, Target Revenue Hurdle or Maximum Revenue Hurdle
are determined to by the compensation and leadership committee to have been achieved the PSUs earned will be determined according to
the following Revenue Hurdle Schedule.
Revenue Hurdle Schedule
% PSUs Granted that are Earned
Minimum (Threshold) Revenue Hurdle
Target Revenue Hurdle
Maximum Revenue Hurdle
25%
100%
150%
If the achievement against the Revenue Hurdles falls between the Minimum (Threshold) Revenue Hurdle and the Target Revenue Hurdle or
between the Target Revenue Hurdle and the Maximum Revenue Hurdle, the number of PSUs that will be earned and subject to the time-
based vesting will be determined by the compensation and leadership committee.
After the number of earned PSUs has been determined, 1/3rd of the earned PSUs will vest on the later of (x) February 15, 2020, or (y) the
date when the compensation and leadership committee determines the Revenue Hurdles achieved, and the remaining earned PSUs will
vest quarterly thereafter on the 15th of each of February, May, August and November, subject to the participant’s continued service to the
Company through each vesting date. Unearned and unvested PSUs may accelerate and become vested subject to the terms of the change
in control and severance agreement between the participant and the Company.
(7) One-fourth of the total RSUs granted vest on February 15, 2020, and an additional 1/4th will vest annually thereafter until the units are fully
vested, subject to the participant’s continued service to the Company through each vesting date. Unvested RSUs may accelerate and
become vested subject to the terms of the change in control and severance agreement between the participant and the Company.
(8) One-fourth of the total options granted vest on February 15, 2020, and an additional 1/48th will vest monthly thereafter until the options are
fully vested, subject to the participant’s continued service to the Company through each vesting date. Unvested options may accelerate and
become vested and exercisable subject to the terms of the change in control and severance agreement between the participant and the
Company.
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Outstanding Equity Awards at December 31, 2019 Table
The following table provides information concerning unexercised options, stock that has not vested and outstanding
equity incentive plan awards for each NEO as of December 31, 2019.
Option Awards
Stock Awards
Name
Nicholas
Woodman
Brian McGee
Dean Jahnke
Number of
Securities
Underlying
Unexercised
Options
Exercisable
Number of
Securities
Underlying
Options
Unexercisable
—
30,000(4)
83,183(6)
107,323(8)
92,337(10)
—
—
3,617(6)
6,313(8)
109,128(10)
0(12)
95,819(12)
Option
Exercise
Price
($)(1)
Option
Expiration
Date
—
—
28.54
10/14/2025
10.71
02/02/2026
9.44
5.74
7.55
02/14/2027
05/14/2028
05/14/2029
—
16.39
04/30/2024
9,600(13)
18,541(15)
0(12)
37,085(16)
60,976(12)
—
—
Eve Saltman
85,783(17)
110,295(17)
Sandor Barna(19)
0(12)
—
15,000(20)
25,208(21)
57,078(22)
56,089(10)
52,265(12)
—
—
—
—
—
5.83
7.55
—
5.58
7.55
—
08/14/2028
05/14/2029
—
04/14/2028
05/14/2029
—
28.54
10/14/2025
12.30
02/25/2026
8.69
5.74
12/14/2026
05/14/2028
Equity
Incentive
Plan
Awards:
Number
of
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)(2)
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value of
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)(2)
302,843
1,314,339
10,000
43,400
8,334
36,170
37,845
164,247
97,691
423,979
26,867
116,603
125
543
22,500
97,650
62,167
269,805
17,099
74,210
67,102
291,223
53,286
231,261
14,655
63,603
—
—
—
—
—
—
—
—
Award
Type
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Award
Type
PSU(3)
RSU(5)
RSU(7)
RSU(9)
RSU(11)
PSU(3)
RSU(14)
RSU(16)
RSU(11)
PSU(3)
RSU(18)
RSU(11)
PSU(3)
N/A
N/A
N/A
N/A
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
($)
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
(#)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1) Represents the fair market value of a share of our Class A or Class B common stock, as applicable. For options granted pre-IPO, market
value of our common stock was determined by our board of directors on the date of grant. For options granted after our IPO, market value
is the closing price of our Class A common stock on the date of grant. See Note 6 to the audited financial statements included in our Annual
Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 14, 2020, for a discussion of the valuation of
our Class A common stock.
(2)
The amounts in these columns represent shares of restricted stock units with service-based vesting requirements, including PSUs for which
the performance conditions have been satisfied but are subject to additional time-based service requirements. The PSUs for which the
performance conditions have been satisfied continue to be denoted as "PSUs" in these columns for reference. The share numbers and values
for the 2019 PSUs for which the performance conditions have been met reflect a downward adjustment to 55% of the original target shares
based on the goal metric certification by the compensation and leadership committee on February 18, 2020.
(3) After the number of earned PSUs was determined by the compensation and leadership committee on February 18, 2020, 1/3rd of the earned
PSUs vested on February 18, 2020, and the remaining earned PSUs will vest quarterly on the 15th of each of February, May, August and
November, until the PSUs are fully vested, subject to the participant’s continued service to the Company through each vesting date. Unvested
PSUs may accelerate and become vested subject to the terms of the change in control and severance agreement between the participant
and the Company.
(4) One-fourth of the total options granted vested on September 28, 2016, and an additional 1/48th vested monthly thereafter until the option
was fully vested.
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(5) One-fourth of the total RSUs granted vested on February 15, 2017, and an additional 1/4th will vest annually thereafter until the units are
fully vested, subject to Mr. McGee’s continued service to the Company through each vesting date. Unvested RSUs may accelerate and
become vested subject to the terms of the change in control and severance agreement between Mr. McGee and the Company.
(6) One-fourth of the total options granted vested on February 3, 2017, and an additional 1/48th will vest monthly thereafter until the options are
fully vested, subject to Mr. McGee’s continued service to the Company through each vesting date. Unvested options may accelerate and
become vested and exercisable subject to the terms of the change in control and severance agreement between Mr. McGee and the Company.
(7) One-sixth of the total RSUs granted vested on August 15, 2017, and an additional 1/6th will vest semi-annually thereafter until the units are
fully vested, subject to Mr. McGee’s continued service to the Company through each vesting date. Unvested RSUs may accelerate and
become vested subject to the terms of the change in control and severance agreement between Mr. McGee and the Company.
(8) One-sixth of the total options granted vested on August 15, 2017, and an additional 1/36th will vest monthly thereafter until the options are
fully vested, subject to Mr. McGee’s continued service to the Company through each vesting date. Unvested options may accelerate and
become vested and exercisable subject to the terms of the change in control and severance agreement between Mr. McGee and the Company.
(9) One-fourth of the total RSUs granted vested on February 15, 2019, and an additional 1/4th will vest annually thereafter until the units are
fully vested, subject to Mr. McGee’s continued service to the Company through each vesting date. Unvested RSUs may accelerate and
become vested subject to the terms of the change in control and severance agreement between Mr. McGee and the Company.
(10) One-fourth of the total options granted vested on February 15, 2019, and an additional 1/48th will vest monthly thereafter, until the options
are fully vested, subject to the participant’s continued service to the Company through each vesting date. Unvested options may accelerate
and become vested and exercisable subject to the terms of the change in control and service agreement between the participant and the
Company.
(11) One-fourth of the total RSUs granted will vest February 15, 2020, and an additional 1/4th will vest annually thereafter until the units are full
vested, subject to the participant’s continued service to the Company through each vesting date. Unvested RSUs may accelerate and become
vested subject to the terms of the change in control and severance agreement between the participant and the Company.
(12) One-fourth of the total options granted will vest on February 15, 2020, and an additional 1/48th will vest monthly thereafter, until the options
are fully vested, subject to the participant’s continued service to the Company through each vesting date. Unvested options may accelerate
and become vested and exercisable subject to the terms of the change in control and service agreement between the participant and the
Company.
(13) One-fourth of the total options granted vested on March 31, 2015, and an additional 1/48th vested monthly thereafter until the option was
fully vested. Mr. Jahnke received this stock option award on May 01, 2014, prior to our IPO under the 2010 Plan. All options under the 2010
Plan entitle the option holder to conduct a cash exercise and request that out Class B common stock be issued to settle the exercise. Any
other exercise type, and a cash exercise absent such a request, would be settled in our Class A common stock.
(14) One-fourth of the total RSUs granted vested on August 15, 2017, and an additional 1/4th will vest annually thereafter until the units are full
vested, subject to Mr. Jahnke’s continued service to the Company through each vesting date. Unvested RSUs may accelerate and become
vested subject to the terms of the change in control and severance agreement between Mr. Jahnke and the Company.
(15) One-fourth of the total options granted vested on August 15, 2019, and an additional 1/48th will vest monthly thereafter until the options are
fully vested, subject to Mr. Jahnke’s continued service to the Company through each vesting date. Unvested options may accelerate and
become vested and exercisable subject to the terms of the change in control and severance agreement between Mr. Jahnke and the Company.
(16) One-sixth of the total RSUs granted vested on August 15, 2018, and an additional 1/6th will vest semi-annually thereafter until the units are
full vested, subject to Mr. Jahnke’s continued service to the Company through each vesting date. Unvested RSUs may accelerate and become
vested subject to the terms of the change in control and severance agreement between Mr. Jahnke and the Company.
(17) One-fourth of the total options granted vested on March 29, 2019, and an additional 1/48th will vest monthly thereafter until the options are
fully vested, subject to Ms. Saltman’s continued service to the Company through each vesting date. Unvested options may accelerate and
become vested subject to the terms of the change in control and severance agreement between Ms. Saltman and the Company.
(18) One-fourth of the total RSUs granted vested on April 15, 2019, and an additional 1/4th will vest annually thereafter until the units are full
vested, subject to Ms. Saltman’s continued service to the Company through each vesting date. Unvested RSUs may accelerate and become
vested subject to the terms of the change in control and severance agreement between Ms. Saltman and the Company.
(19) Mr. Barna resigned as our Senior Vice President, Chief Technology Officer effective on November 20, 2019. All unvested stock options, RSUs
and PSUs were forfeited at termination of employment. Vested, outstanding stock options have the standard 3-month post-termination of
employment grace period in which to be exercised; if not exercised, the vested, outstanding stock options will be cancelled on February 20.
2020.
(20) One-fourth of the total options granted vested on September 22, 2016, and an additional 1/48th will vest monthly thereafter until the options
are fully vested, subject to Mr. Barna’s continued service to the Company through each vesting date. Unvested options may accelerate and
become vested and exercisable subject to the terms of the change in control and severance agreement between Mr. Barna and the Company.
(21) One-fourth of the total options granted vested on February 26, 2017, and an additional 1/48th will vest monthly thereafter until the options
are fully vested, subject to Mr. Barna’s continued service to the Company through each vesting date. Unvested options may accelerate and
become vested and exercisable subject to the terms of the change in control and severance agreement between Mr. Barna and the Company.
(22) One-fourth of the total options granted vested on June 15, 2017, and an additional 1/24th vested monthly thereafter until the option was fully
vested.
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Option Exercises and Stock Vested Table
The following table provides information concerning the exercise of options and the vesting of RSUs and PSUs in 2019
for each NEO as of December 31, 2019. No options were exercised in 2019. No PSUs vested in 2019. Value realized
on vesting of RSUs is based on the fair market value of our Class A common stock on the vesting date multiplied by
the number of shares vested and does not necessarily reflect the proceeds received by the NEO.
Name
Nicholas Woodman
Brian McGee
Dean Jahnke
Eve Saltman
Sandor Barna
Option Awards
Stock Awards
Number of
Shares
Acquired on
Exercise
—
—
—
—
—
Value Realized
on Exercise
($)
Number of
Shares
Acquired on
Vesting
Value Realized
on Vesting
($)
—
—
—
—
—
—
43,030
23,825
22,367
36,189
—
232,263
121,620
149,859
188,922
Change in Control Arrangements with our Named Executive Officers
Arrangements with Mr. Woodman
Under his employment letter dated June 2, 2014, Mr. Woodman is eligible to receive severance payments and benefits
upon a qualifying termination of employment, including a termination of employment in connection with a change in
control of our company.
If Mr. Woodman’s employment is terminated by us for any reason other than cause or he resigns for good reason prior
to a change in control of GoPro, he will be eligible to receive:
•
a single lump sum payment equal to the sum of 12 months of his then-current base salary and target bonus
(assuming a 150% achievement threshold);
•
an additional payment equal to the pro-rata portion of his actual target bonus for the year of his termination
of employment; and
•
continuation of COBRA benefits for 12 months following his termination of employment (or if applicable law
requires otherwise, a lump sum payment equal to that amount).
If Mr. Woodman’s employment is terminated by us for any reason other than cause or he resigns for good reason
within 24 months following a change in control of GoPro, he will be eligible to receive:
•
a single lump sum payment equal to the sum of 24 months of his then-current base salary and target bonus
(assuming a 150% achievement threshold);
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•
an additional payment equal to the pro-rata portion of his actual target bonus for the year of his termination
of employment;
•
full accelerated vesting of all the shares of our common stock subject to his then-outstanding and unvested
equity awards, if any; and
•
continuation of benefits under COBRA for 18 months following his termination of employment (or if
applicable law requires otherwise, a lump sum payment equal to that amount).
These payments and benefits are conditioned on Mr. Woodman’s execution and delivery of an irrevocable release to
us within the 60 days following his termination of employment.
Further, if we undergo a change in control, any payments that would be “parachute payments” within the meaning of
Section 280G of the Code will be reduced so that Mr. Woodman retains, on an after-tax basis, the greatest amount of
these payments.
In connection with Mr. Woodman’s Salary Waiver, we entered into the Waiver Agreement with Mr. Woodman,
as discussed above under “2020 Compensation for our Chief Executive Officer.”
Arrangements with Mr. McGee
In September 2015, we entered into an employment offer letter with Mr. McGee. Among other things, this letter provided
that, subject to the approval of the board of directors, Mr. McGee would be granted an option to purchase 30,000
shares of our Class A common stock, which would vest as to 25% of the shares subject to the option on the first
anniversary of his commencement of employment and thereafter in equal monthly installments over an additional 36
months, subject to his continuous service as of each vesting date. The letter also provided that, subject to the approval
of the board of directors, Mr. McGee would be granted 15,000 RSUs to vest in four equal annual installments of 25%,
each measured from the date of grant, subject to his continuous service as of each vesting date.
Under his change in control and severance agreement dated September 28, 2015, in the event that we terminate his
employment for any reason other than cause or he voluntarily resigns his employment for good reason within the three-
month period preceding or the 12-month period following a change in control of GoPro, Mr. McGee is eligible to receive
severance payments and benefits as follows:
•
12 months of his then-current base salary;
•
100% of his target annual bonus;
•
$3,000 per month for 12 months in lieu of employee benefits; and
•
all of the shares of our common stock subject to each then-outstanding and unvested equity award held by
Mr. McGee, including awards that would otherwise only vest upon satisfaction of performance criteria, will
accelerate and become vested and exercisable in full immediately prior to his separation from service.
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Further, if we undergo a change in control, any payments that would be “parachute payments” within the meaning of
Section 280G of the Code will be reduced so that Mr. McGee retains, on an after-tax basis, the greatest amount of
these payments.
Arrangements with Mr. Jahnke
In March 2014, we entered into an employment offer letter with Mr. Jahnke. Among other things, this letter provided
that, subject to the approval of the board of directors, Mr. Jahnke would be granted an option to purchase 9,600 shares
of our Class B common stock, which would vest as to 25% of the shares subject to the option on the first anniversary
of his commencement of employment and thereafter in equal monthly installments over an additional 36 months,
subject to his continuous service as of each vesting date.
Under his change in control and severance agreement dated July 31, 2018, in the event that we terminate his
employment for any reason other than cause or he voluntarily resigns his employment for good reason within the three-
month period preceding or the 12-month period following a change in control of GoPro, Mr. Jahnke is eligible to receive
severance payments and benefits as follows:
•
12 months of his then-current base salary;
•
100% of his target annual bonus;
•
$3,000 per month for 12 months in lieu of employee benefits; and
•
all of the shares of our common stock subject to each then-outstanding and unvested equity award held by
Mr. Jahnke, including awards that would otherwise only vest upon satisfaction of performance criteria, will
accelerate and become vested and exercisable in full immediately prior to his separation from service.
Further, if we undergo a change in control, any payments that would be “parachute payments” within the meaning of
Section 280G of the Code will be reduced so that Mr. Jahnke retains, on an after-tax basis, the greatest amount of
these payments.
Arrangements with Ms. Saltman
In March 2018, we entered into an employment offer letter with Ms. Saltman. Among other things, this letter provided
that, subject to the approval of the board of directors, Ms. Saltman would be granted an option to purchase 196,078
shares of our Class A common stock, which would vest as to 25% of the shares subject to the option on the first
anniversary of her commencement of employment and thereafter in equal monthly installments over 36 months
thereafter, subject to her continuous employment as of each vesting date. The letter also provided that, subject to the
approval of the board of directors, Ms. Saltman would be granted 89,469 RSUs to vest in four equal annual installments
of 25%, each measured from the date of grant, subject to her continuous service as of each vesting date.
Under her change in control and severance agreement dated March 29, 2018, in the event that we terminate her
employment for any reason other than cause or she voluntarily resigns her employment for good reason within the
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Table of Contents
three-month period preceding or the 12-month period following a change in control of GoPro, Ms. Saltman would be
eligible to receive severance payments and benefits as follows:
•
12 months of her then-current base salary;
•
100% of her target annual bonus;
•
$3,000 per month for 12 months in lieu of employee benefits; and
•
all of the shares of our common stock subject to each then-outstanding and unvested equity award held by
Ms. Saltman, including awards that would otherwise only vest upon satisfaction of performance criteria, would
accelerate and become vested and exercisable in full immediately prior to her separation from service.
Further, if we undergo a change in control, any payments that would be “parachute payments” within the meaning of
Section 280G of the Code would be reduced so that Ms. Saltman would retain, on an after-tax basis, the greatest
amount of these payments.
Arrangements with Mr. Barna
Mr. Barna resigned as our Senior Vice President, Chief Technology Officer effective on November 20, 2019. Mr. Barna
did not receive any benefits or payments in connection with his departure.
Estimated Payments and Benefits as of December 31, 2019
The following table sets forth the estimated payments and benefits that would be received by each of the NEOs upon
a change in control of GoPro, upon a termination of employment without cause or following a resignation for good
reason under our Executive Severance Policy, or in the event of a termination of employment without cause or following
a resignation for good reason in connection with a change in control in GoPro under our Change in Control and
Severance Policy. This table reflects amounts payable to each NEO assuming that his or her employment was
terminated on December 31, 2019, and the change in control of the Company also occurred on that date. The closing
market price per share of our Class A common stock on December 31, 2019, was $4.34.
Change in Control
Termination of Employment
No Change in Control
Termination of Employment
Change in Control
Accelerated
Vesting of
Equity
Awards
($)(1)
Excise
Tax
Payment
($)
Total
($)
Severance
Payment
($)
Medical
Benefits
Continuation
($)
Accelerated
Vesting of
Equity
Awards
($)(1)
Total
($)
Severance
Payment
($)
Medical
Benefits
Continuation
($)
Accelerate
d Vesting
of Equity
Awards
($)(1)
Excise
Tax
Payment
($)
Total
($)
—
—
—
—
—
—
—
—
—
—
—
—
1,600,000
34,470 (2)
— 1,634,468
3,200,000
51,705 (2)
1,314,339
— 4,566,042
918,750
656,250
562,500
—
36,000
36,000
36,000
—
—
954,750
918,750
36,000
784,399
— 1,739,149
692,250
656,250
36,000
442,208
1,134,458
598,500
562,500
36,000
586,087
— 1,184,587
—
—
—
—
—
—
—
—
Named
Executive
Officer
Nicholas
Woodman
Brian
McGee
Dean
Jahnke
Eve
Saltman
Sandor
Barna
(1)
The value of the accelerated vesting of outstanding and unvested equity awards has been calculated based on the closing market price of
our Class A common stock on Nasdaq on December 31, 2019, which was $4.34 per share, less, if applicable, the exercise price of each
outstanding and unvested stock option. PSUs subject to accelerated vesting upon a qualifying termination of 100% of eligible unvested
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shares reflect a downward adjustment to 55% of the original target shares based on the goal metric certification by the compensation and
leadership committee on February 18, 2020. .
(2)
This amount is cost of COBRA continuation based on Mr. Woodman's 2019 medical, dental and vision benefits costs.
CEO Pay Ratio
The annual total compensation of Mr. Woodman for 2019, as reported in the 2019 Summary Compensation Table,
was $5,501,350. The annual total compensation of our median employee for 2019 was $160,222. Based on this
information, for 2019, the ratio of the annual total compensation of Mr. Woodman to that of our median employee was
approximately 34.3 to 1.
Calculation Methodology
We identified the employee with compensation at the median of the compensation of all our employees (the “median
employee”) by considering our employee population as of December 31, 2018 (the “employee population
determination date”). As permitted by Item 402(u) of Regulation S-K, we are continuing to use this median employee
for calculation of the CEO pay ratio with respect to the year ended December 31, 2019. There has been no change
in our employee population or employee compensation arrangements since December 31, 2018 that we reasonably
believe would significantly affect our pay ratio disclosure for the year ended December 31, 2019.
We considered all individuals (excluding our Chief Executive Officer) who were employed by us on a worldwide basis
(including our consolidated subsidiaries) on the employee population determination date, whether employed on a full-
time, part-time, seasonal or temporary basis, including employees on a partial-year leave of absence. The compensation
measure used for purposes of identifying the median employee was based on earned salary or wages in 2019. In the
case of foreign employees, total direct compensation also included “13th month pay” and any holiday allowance that
was statutorily required to be paid as we view such compensation to be akin to earned salary or wages, and all amounts
were converted to U.S. dollars using exchange rates in effect on the employee population determination date, without
making any cost of living adjustments for employees outside of the United States. We also annualized the cash
compensation of any permanent employees that were not employed by us for all of 2019. We believe our methodology
represents a consistently applied compensation measure that strikes a balance in terms of administrative burden while
consistently treating the primary compensation components for our worldwide employee population.
After identifying our median employee, in calculating the annual total compensation of such employee, we used the
same methodology we use to calculate the amount reported for our NEOs in the “Total” column of the 2019
Summary Compensation Table.
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REPORT OF THE COMPENSATION AND LEADERSHIP COMMITTEE
This report of the compensation and leadership committee is required by the SEC and, in accordance with the SEC’s rules,
will not be deemed to be part of or incorporated by reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act or under the Exchange Act, except to the extent that we specifically
incorporate this information by reference, and will not otherwise be deemed “soliciting material” or “filed” under either the
Securities Act or the Exchange Act.
Our compensation and leadership committee has reviewed and discussed the “Compensation Discussion and Analysis”
required by Item 402(b) of Regulation S-K with management and based on such review and discussions, the compensation
and leadership committee recommended to our board of directors that the “Compensation Discussion and Analysis” be
included in this Proxy Statement and incorporated by reference into our Annual Report on Form 10-K for the year ended
December 31, 2019.
Submitted by the Compensation and Leadership Committee
Peter Gotcher, Chair
Susan Lyne
Frederic Welts
Lauren Zalaznick
Table of Contents
EQUITY COMPENSATION PLAN INFORMATION
The following table presents information as of December 31, 2019, with respect to compensation plans under which shares
of our Class A common stock or Class B common stock may be issued.
Number of
Securities
to be Issued
Upon
Exercise
of Outstanding
Options,
Warrants
and Rights(1)
(a)
12,971,187
— (4)
12,971,187
Weighted-Average
Exercise Price
of Outstanding
Options, Warrants
and Right
($)(2)
(b)
10.1564
—
10.1564
Number of Securities
Remaining Available
for Future
Issuance Under
Equity Compensation
Plans
(Excluding
Securities)
Reflected in
Column(a))
(c)
25,324,966(3)
—
25,324,966
Plan Category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
(1)
(2)
(3)
Includes our 2010 Plan, grants assumed under the Sparrow Acquisition Plan (“SAP Plan”), and our 2014 Plan. Excludes purchase rights accruing
under our 2014 Employee Stock Purchase Plan.
The weighted-average exercise price does not reflect the shares that will be issued in connection with the settlement of RSUs or PSUs, because
these award types have no exercise price.
There are no shares of common stock available for issuance under our 2010 Plan or under the SAP Plan, but those plans will continue to govern
the terms of options or awards granted thereunder. Any shares of Class B common stock that are subject to outstanding awards under the 2010
Plan that are issuable upon the exercise of stock options that expire or become unexercisable for any reason without having been exercised in full
will generally be available for future grant and issuance as shares of Class A common stock under our 2014 Plan. In addition, the number of shares
reserved for issuance under our 2014 Plan increased automatically by 5,068,787 on January 01, 2020 and will increase automatically on the first
day of January of each of 2021 through 2024 by the number of shares equal to 3% of the total outstanding shares of our common stock (which
includes outstanding shares of our Class A common stock, outstanding shares of our Class B common stock, outstanding stock options and
outstanding RSUs and PSUs) as of the immediately preceding December 31 or a lower number approved by our board of directors. There are
7,427,516 shares of Class A common stock available for issuance under the 2014 Employee Stock Purchase Plan. The number of shares reserved
for issuance under our 2014 Employee Stock Purchase Plan increased automatically by 1,689,595 on January 01, 2020 and will increase
automatically on the first day of January of each year during the term of the 2014 Employee Stock Purchase Plan by the number of shares equal
to 1% of the total outstanding shares of our common stock (which includes outstanding shares of our Class A common stock, outstanding shares
of our Class B common stock, outstanding stock options and outstanding RSUs and PSUs) as of the immediately preceding December 31 or a
lower number approved by our board of directors.
(4) Excludes outstanding 4,282 RSUs that were assumed as part of an acquisition. In connection with the acquisition, GoPro has only assumed the
outstanding RSUs, but not the plan itself, and therefore, no further awards may be granted under the acquired-company plan.
Table of Contents
RELATED PARTY TRANSACTIONS
In addition to the executive officer and director compensation arrangements discussed above under “Executive
Compensation” and “Proposal No. 1 – Election of Directors – Director Compensation,” respectively, since January 1, 2019,
we were a party to the following transactions in which:
• we have been or are to be a participant;
•
the amount involved exceeds $120,000; and
•
any of our directors, executive officers or holders of more than 5% of our capital stock, or any immediate family
member of or person sharing the household with any of these individuals, had or will have a direct or indirect material
interest.
Offer Letters and Change In Control Agreements
We have entered into offer letters and change in control severance agreements with our executive officers that, among other
things, provide for severance and change in control benefits. See “Executive Compensation – Employment, Severance and
Change in Control Agreements” for information about these agreements.
Indemnification of Directors and Officers
We have entered into indemnification agreements with each of our directors and executive officers. These indemnification
agreements and our restated certificate of incorporation and amended and restated bylaws provide for indemnification of
each of our directors and executive officers to the fullest extent permitted by Delaware law.
Review, Approval or Ratification of Transactions with Related Parties
Our Corporate Governance Guidelines and our Related Party Transactions policy requires that any transaction with a related
party that must be reported under applicable rules of the SEC (other than compensation-related matters), must be reviewed
and approved or ratified by our audit committee (other than transactions that are subject to review by our board of directors
as a whole or any other committee of our board of directors). In approving or rejecting any such proposal, our audit committee
will consider the relevant and available facts and circumstances, including, but not limited to, the extent of the related person’s
interest in the transactions, the material facts of the proposed transaction, including the proposed aggregate value of such
transaction and whether the proposed transaction is on terms no less favorable than terms generally available to an unaffiliated
third-party under the same or similar circumstances.
Other Transactions
As discussed above under 2020 Compensation for Chief Executive Officer, on April 15, 2020, at the request of Mr. Woodman,
the Company announced Mr. Woodman entered into a Waiver Agreement, pursuant to which the Company and Mr. Woodman
agreed that Mr. Woodman would waive his salary for the remainder of the year ending December 31, 2020.
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Table of Contents
REPORT OF THE AUDIT COMMITTEE
The information contained in the following report of our audit committee is not considered to be “soliciting material,” “filed”
or incorporated by reference in any past or future filing by us under the Securities Exchange Act of 1934 or the Securities
Act of 1933 unless and only to the extent that we specifically incorporate it by reference.
The audit committee of our board of directors is composed of three independent outside directors. The audit committee has
reviewed and discussed with our management and PricewaterhouseCoopers LLP our audited financial statements for the
year ended December 31, 2019. The audit committee has also discussed with PricewaterhouseCoopers LLP the matters
required to be discussed pursuant to AS No. 1301 “Communications with Audit Committees” as adopted by the Public
Company Accounting Oversight Board.
The audit committee has received and reviewed the written disclosures and the letter from PricewaterhouseCoopers LLP
required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent
accountant’s communications with
the audit committee concerning
independence, and has discussed with
PricewaterhouseCoopers LLP its independence from GoPro.
Based on the review and discussions referred to above, the audit committee recommended to the board of directors that the
audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2019, for filing
with the Securities and Exchange Commission.
Submitted by the Audit Committee
Kenneth Goldman, Chair
Peter Gotcher
Lauren Zalaznick
65
Table of Contents
Stockholder Proposals to be Presented at Next Annual Meeting
ADDITIONAL INFORMATION
Our bylaws provide that, for stockholder nominations to the board or other proposals to be considered at an annual meeting,
the stockholder must give timely notice thereof in writing to the Secretary at GoPro, Inc., 3000 Clearview Way, San Mateo,
California 94402, Attn: Secretary.
To be timely for the 2021 Annual Stockholder’s Meeting, a stockholder’s notice must be delivered to or mailed and received
by our Secretary at our principal executive offices not earlier than 5:00 p.m. (Pacific Time) on February 17, 2021 and not
later than 5:00 p.m. (Pacific Time) on March 19, 2021. A stockholder’s notice to the Secretary must set forth each matter the
stockholder proposes to bring before the annual meeting and the information required by our bylaws.
Stockholder proposals submitted pursuant to Rule 14a-8 under the Exchange Act and intended to be presented at our 2021
Annual Meeting must be received by the Secretary no later than December 22, 2020 in order to be considered for inclusion
in our proxy materials for that annual meeting.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, executive officers and any persons who own more than 10% of
our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Such persons are
required by SEC regulation to furnish us with copies of all Section 16(a) forms that they file. Based solely on its review of
the copies of such forms furnished to us and written representations from the directors and executive officers, we believe
that all Section 16(a) filing requirements were timely met in 2019.
Available Information
GoPro will mail without charge, upon written request, a copy of GoPro’s Annual Report, including the financial statements
and list of exhibits, and any exhibit specifically requested. Requests should be sent to:
GoPro, Inc.
3000 Clearview Way
San Mateo, California 94402
Attn: Investor Relations
“Householding” — Stockholders Sharing the Same Last Name and Address
The SEC has adopted rules that permit companies and intermediaries (such as brokers) to implement a delivery procedure
called “householding.” Under this procedure, multiple stockholders who reside at the same address may receive a single
copy of our Annual Report and proxy materials, including the Notice of Internet Availability, unless the affected stockholder
has provided contrary instructions. This procedure reduces printing costs and postage fees and helps protect the environment
as well.
This year, a number of brokers with account holders who are GoPro stockholders will be “householding” our Annual Report
and proxy materials, including the Notice of Internet Availability. A single Notice of Internet Availability and, if applicable, a
single set of Annual Report and other proxy materials will be delivered to multiple stockholders sharing an address unless
66
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contrary instructions have been received from the affected stockholders. Once you have received notice from your broker
that it will be “householding” communications to your address, “householding” will continue until you are notified otherwise
or until you revoke your consent. Stockholders may revoke their consent at any time by contacting Broadridge Financial
Solutions by calling 1-866-540-7095 or writing to: Broadridge House Holding Department, 51 Mercedes Way, Edgewood,
NY 11717.
Upon written or oral request, GoPro will promptly deliver a separate copy of the Notice of Internet Availability and, if applicable,
Annual Report and other proxy materials to any stockholder at a shared address to which a single copy of any of those
documents was delivered. To receive a separate copy of the Notice of Internet Availability and, if applicable, Annual Report
and other proxy materials, you may write GoPro’s Investor Relations department at 3000 Clearview Way, San Mateo, California
94402, Attn: Investor Relations.
Any stockholders who share the same address and currently receive multiple copies of GoPro’s Notice of Internet Availability
or Annual Report and other proxy materials who wish to receive only one copy in the future can contact their bank, broker
or other holder of record to request information about householding or GoPro’s Investor Relations department at the address
or telephone number listed above.
OTHER MATTERS
The board of directors does not presently intend to bring any other business before the Annual Meeting and, so far as is
known to the board of directors, no matters are to be brought before the Annual Meeting except as specified in the Notice
of Annual Meeting of Stockholders. As to any business that may arise and properly come before the Annual Meeting, however,
it is intended that proxies, in the form enclosed, will be voted in respect thereof in accordance with the judgment of the persons
voting such proxies.
67
Table of Contents
APPENDIX A
Reconciliation of GAAP to Non-GAAP Measure
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, point of purchase (POP) display amortization, stock-based
compensation, impairment charges, and restructuring and other costs. We use non-GAAP financial measures 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. Our management uses, and believes that investors benefit from
referring to these non-GAAP financial measures in assessing our operating results. These non-GAAP financial measures
should not be considered in isolation from, or as an alternative to, the measures prepared in accordance with GAAP, and
are not based on any comprehensive set of accounting rules or principles.
(in thousands)
GAAP net loss
Income tax benefit
Interest expense
Depreciation and amortization
POP display amortization
Stock-based compensation
Restructuring costs
Adjusted EBITDA
Year ended December 31, 2019
(14,642)
$
(4,428)
17,872
26,268
7,504
37,188
2,196
71,958
$
A- 1
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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, 2019
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
(State or other jurisdiction of incorporation or organization)
77-0629474
(I.R.S. Employer Identification No.)
3000 Clearview Way
San Mateo, California
(Address of principal executive offices)
94402
(Zip Code)
(Registrant’s telephone number, including area code)
(650) 332-7600
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Class A Common Stock
Trading Symbol(s)
GPRO
Name of each exchange on which registered
NASDAQ Global Select Market
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
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
No
Securities registered pursuant to section 12(g) of the Act: None
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.
No
Yes
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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, 2019, the last business day of the registrant’s
most recently completed second fiscal quarter, was approximately $677,709,000 based upon the closing price reported for such date on The Nasdaq
Global Select Market.
As of January 31, 2020, 127,099,096 and 28,896,866 shares of Class A and Class B common stock were outstanding, respectively.
Portions of the registrant’s definitive proxy statement for its 2020 Annual Meeting of Stockholders (the “Proxy Statement”), to be filed within 120 days
of the registrant’s fiscal year ended December 31, 2019, are incorporated by reference in Part II and Part III of this Annual Report on Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
1
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.
2
GoPro, Inc.
Index
PART I
PART II
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for the Company’s Common Shares, Related Shareholders 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
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
PART III
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
PART IV
Form 10-K Summary
Signatures
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
Page
4
11
37
37
38
38
38
40
42
58
59
92
92
93
93
93
93
93
94
95
96
3
PART I
Special note regarding forward-looking statements
This Annual Report on Form 10-K of GoPro, Inc. (GoPro or we or the Company) includes forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than
statements of historical fact, including statements regarding guidance, industry prospects, product and marketing
plans, or future results of operations or financial position, made in this Annual Report on Form 10-K are forward-
looking. To identify forward-looking statements, we use words such as “expect,” “anticipate,” “believe,” “may,”
“will,” “estimate,” “intend,” “target,” “goal,” “plan,” “likely,” “potentially,” or variations of such words and similar
expressions. 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. Forward-looking statements include plans to
expand and improve 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,
and other sections of this Annual Report on Form 10-K including but not limited to Item 1A Risk Factors. Readers
are strongly encouraged to consider the foregoing when evaluating any forward-looking statements concerning
the Company. The Company does not undertake any obligation to update any forward-looking statements in this
Annual Report on Form 10-K to reflect future events or developments.
Item 1. Business
Overview
GoPro helps its consumers capture and share their experiences in immersive and exciting ways. Our cameras,
mountable and wearable accessories, and subscription services have generated substantially all of our revenue.
We sell our products globally through retailers, distributors and on gopro.com.
Our product offerings include the following:
• HERO8 Black is our flagship camera launched in the Fall of 2019, featuring enhanced HyperSmooth 2.0
image stabilization, TimeWarp Video 2.0, built-in mounting, live streaming, cloud connectivity, voice control,
improved audio and touch display. HyperSmooth 2.0 image stabilization includes dramatically improved pitch
axis stabilization, a new Boost mode for absolute maximum stabilization, and powerful in-app horizon leveling
that provides gimbal-like stability. TimeWarp Video 2.0 automatically applies a high-speed, ‘magic-carpet-ride’
effect to videos, while live streaming enables users to share content in real time to Facebook, Twitch,
YouTube, Vimeo and other social media platforms. Our HERO8 Black camera is powered by GoPro’s custom
designed GP1 processor and is the most powerful and performance featured GoPro camera to date. We also
introduced three new accessories for the HERO8 Black camera, called Mods, which enables users to
transform their HERO8 Black camera into a production powerhouse. The Media Mod delivers shotgun-mic
performance with an integrated directional microphone, the Light Mod illuminates a scene and the Display
Mod allows users to perfectly frame themselves during self-capture. We also continue to offer our HERO7
Black and HERO7 Silver cameras which were launched in the Fall of 2018. Our cameras are compatible with
our ecosystem of mountable and wearable accessories, and feature automatic uploading capabilities for
photos and videos to GoPro Plus, our subscription service.
• MAX is our newest 360-degree waterproof camera launched in the Fall of 2019, featuring MAX HyperSmooth
image stabilization, 360-degree MAX TimeWarp Video, MAX SuperView, PowerPano, built-in mounting, high-
quality audio, live streaming, voice control and a front facing touch display. MAX HyperSmooth provides the
highest performance video stabilization yet, while MAX SuperView provides the widest field of view ever from
a GoPro camera. PowerPano allows users to capture a 6.2mp, 270-degree panoramic photo with the push of
a button and creates an artifact-free shot of action or movement. Our MAX camera features six built-in
microphones that allows users to capture immersive 360-degree audio, directional audio for vlogging and the
best stereo sound ever from a GoPro.
4
• GoPro Plus is our subscription service that provides a camera protection plan and enables subscribers to
easily access, edit and share content. GoPro Plus includes unlimited cloud storage supporting source video
and photo quality, as well as discounts on accessories, camera replacement and damage protection. Our
HERO5 Black and newer cameras can automatically upload photos and videos to a subscriber’s GoPro Plus
account at the highest possible quality.
• GoPro App is a mobile app that seamlessly uploads a user’s GoPro photos and video clips to a smartphone.
Our GoPro app now incorporates a video editing solution, which includes an improved multi-clip workflow that
enables the GoPro app to better identify meaningful moments in users footage, and suggest story
compilations of photos and videos. In addition, the GoPro app allows users to mix and match filters for a
highly-customizable editing experience and offers an expanded library of soundtracks and support.
We also offer a full ecosystem of mountable and wearable accessories. See Products for additional information.
We believe our investments in hardware, cloud and mobile solutions have yielded a solid foundational experience
for consumers that we will continue to build upon in 2020.
Our strategy
Helping our consumers capture and share their experiences in immersive and exciting ways is at the core of our
business. We are committed to developing solutions that create an easy, seamless experience for consumers to
capture, create and share engaging personal content. When consumers use our products and services, they often
generate and share content that increases awareness for GoPro, driving a virtuous cycle and a self-reinforcing
demand for our products. We believe revenue growth will be driven by the introduction of new cameras,
accessories, subscription offerings and GoPro app monetization. We believe new or improved camera features
drive a replacement cycle among existing users and attract new users. Additionally, our goal to expand our total
addressable market will be through the monetization of a new GoPro app experience that we believe addresses
widespread pain points that anyone with a smartphone or GoPro faces. Key components of our 2020 strategy and
beyond include the following:
Strengthen our Core Business. We plan to focus on our target consumers, identify new consumer segments,
and deliver high-value, high-margin products to strengthen our core business. Our continued commitment and
investment in consumer research and analytics is fundamental to our strategy, and will help us design better
products and services for our consumers. We believe that extending GoPro’s brand and products will solve
problems for a broader set of consumers. We plan to further leverage analytics and integrate a deeper
understanding of our most important consumer segments and new consumer segments across the business to
optimize the next generation of our products and go-to-market strategies. Additionally, we will seek to leverage our
brand strength and product expertise to drive a hardware upgrade cycle for our consumers, opportunistically enter
complementary new device categories, and continue to develop cameras.
Maximize our Direct Business. We see an opportunity to increase our direct business, which includes
gopro.com, and direct to retailer sales, which are typically higher gross margin sales than our distribution
business. As gopro.com represents a growing percentage of our direct business and revenue, we also expect to
grow our gross margins. We will focus on scaling our direct business to improve the customer experience on
gopro.com and within our retail channel, and as a result, we expect these efforts will also allow us to improve our
operating results.
Grow Digital Service and Subscription Offerings. We plan to maximize the experience for GoPro camera
owners and extend our software solutions to smartphone owners, thereby expanding our total addressable
market. We believe eliminating the pain points involved in managing content, and producing and sharing
immersive experiences delivers on the promise of the GoPro experience for our target consumer. Our HERO5
and newer cameras, GoPro Plus, and apps work together to enable an ecosystem that allows users to capture,
edit and share experiences, and easily back-up content in the cloud. In 2019, we continued to advance and
simplify the mobile experience for our consumers, incorporating a video editing solution into the GoPro app for a
simplified one-app experience, and intend to continue to scale the relevance and functionality of the GoPro app to
appeal to not just GoPro camera owners but to smartphone owners as well.
5
Improve Efficiency and Reliability. We will continue to focus on strengthening our operational excellence to
ensure reliability and predictability. We expect to operate at a similar operating expense level in 2020 from 2019,
with a focus on awareness, demand generation, our future roadmap, and a continued commitment to insights and
analytics to better manage and improve the predictability of our business. Our future success will depend, in part,
upon our ability to manage our operating expenses effectively. Since the fourth quarter of 2016, we implemented
three company-wide restructurings of our business resulting in a reduction in our global workforce, the elimination
of several high-cost initiatives (including the closure of our aerial products business) and the consolidation of
certain leased office facilities, in order to focus our resources on our cameras and accessories, cloud and service
businesses. (See Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations
for information regarding restructuring charges in 2019, 2018 and 2017.)
Empower our People: Deepen our Talent Development, Culture and Commitment. In every area of our
company, we aspire to retain employees committed to growing GoPro through great ideas and innovation. We
plan to do this by leveraging our strong brand recognition, unique culture, competitive compensation and benefits,
and our strong commitment to our Diversity, Inclusion and Belonging initiative. GoPro’s culture has been central to
our ability to attract top talent. The hallmark of the GoPro employment brand is a closely-knit community, referred
to as the GoPro Family, who work collaboratively in a lively workplace and are supported by competitive
compensation and benefits, growth opportunities and engaging programs to support professional development.
Products
Cameras. We offer a good-better-best camera line-up that includes our cloud connected HERO7 Silver, HERO7
Black and HERO8 Black cameras. We also offer MAX, our newest waterproof 360-degree camera. HERO7 Silver,
HERO7 Black, HERO8 Black and MAX cameras are durable, waterproof (without a housing), come with select
mounting accessories, and have built-in Wi-Fi and Bluetooth providing connectivity with a mobile device to enable
remote control, content viewing, editing and sharing functionality. Our HERO8 Black and HERO7 Black cameras
can shoot video in 4K at 60 frames per second, while our HERO7 Silver camera can shoot video in 4K at 30
frames per second. MAX captures video in 360-degrees at 6K resolution and stitches to 5.6K. All of our current
cameras feature multi-language voice and contextual control, electronic image stabilization, a simplified user
experience, and the ability to auto-upload photos and videos to GoPro Plus via Wi-Fi for easy access and editing
with our app. HERO8 Black, HERO7 Black, HERO7 Silver and MAX also feature GPS and additional sensors that
capture location, elevation, speed and G-force loads.
Mounts and accessories. We offer a wide range of mounts and accessories, either bundled with a camera or
sold separately, that enhance the functionality and versatility of our products, and enable our consumers to
capture their experiences during a variety of activities or moments from different viewpoints. Our equipment-
based mounts include three Mods which allows users to transform their HERO8 Black camera into a production
powerhouse. The Media Mod delivers shotgun-mic performance with an integrated directional microphone, the
Light Mod illuminates a scene and the Display Mod allows users to perfectly frame themselves during self-
capture. Other equipment-based mounts include helmet, handlebar, roll bar and tripod mounts. Our 3-way mount
is a 3-in-1 mount that can be used as a camera grip, extension arm or tripod, and our floating mounts such as the
Handler, and Bite Mount + Floaty, allow our cameras to float in water. We also enable consumers to wear mounts
on their bodies with the use of our magnetic swivel clip, wrist housing, chest harness and head strap. Additionally,
we offer colored camera sleeves, spare batteries, dive filters and charging accessories and cables to connect our
GoPro cameras to computers, laptops and television monitors. Our accessories expand the features, versatility
and convenience of our cameras.
Applications. We offer mobile and desktop applications to all consumers at no charge that provide a complete
media workflow for downloading, editing, multi-clip story creation, and sharing content on the fly using a
smartphone or desktop. Additionally, the GoPro applications seamlessly integrate a user’s GoPro into the media
workflow by allowing remote control of the camera using a smartphone for camera content capture and offload.
Using a GoPro MAX or Fusion, the GoPro applications enable creating, editing and sharing 360-degree camera
content and enables users to re-frame the 360-degree camera content to save traditional fixed-perspective
videos. The GoPro app now incorporates a video editing solution to better identify meaningful moments in users
footage and suggest story compilations of photos and videos. In addition, the GoPro app allows users to mix and
6
match filters for a highly-customizable editing experience and offers an expanded library of soundtracks and
support.
Services. GoPro Plus is a subscription service that offers a range of benefits to our consumers, including
damage protection, camera replacement, on-the-go access to a user’s photos and videos, storage of unlimited
photos and videos, editing and sharing capabilities using a smartphone and the GoPro app, an expanded library
of soundtracks, premium support, and exclusive discounts on mounts and accessories. We had more than
334,000 paying subscribers as of January 31, 2020. Revenue earned to date from GoPro Plus was not material to
our results.
Seasonality
Historically, we have experienced our highest levels of revenue in the fourth quarter of the year, coinciding with
the holiday shopping season, particularly in the United States and Europe. While we aim to reduce the impact of
fourth quarter seasonality on full year performance, timely and effective product introductions and forecasting,
whether just prior to the holiday season or otherwise, are critical to our operations and financial performance.
Segment information and geographic data
We operate as one reportable segment. Financial information about geographic areas is presented in Note 10
Concentrations of risk and geographic information, to the Notes to Consolidated Financial Statements of this
Annual Report on Form 10-K.
Backlog
We do not believe that backlog information is material or 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.
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. We strive to remain a market leader by consistently
introducing innovative products, software and services that offer optimal performance 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. We also benefit from input received from our in-house production team, our sponsored athletes and
our brand advocates that regularly travel the world capturing content using our products. We believe leveraging
this input will help refine our existing products and influence future products that give us a competitive advantage.
Our engineering team supports the development of cameras, related mounts and accessories, firmware and
software. Our hardware engineering team is responsible for developing technologies to support the concepts
developed by our product team. These core technologies include GoPro’s custom designed GP1 processor, which
allows cameras to perform advanced image computation and provides unparalleled image quality and next-level
image stabilization, 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. Our hardware engineering team
also integrates these innovations and firmware into our product designs and develops our cameras, mounts and
accessories.
Our software engineering team develops applications that enhance the functionality of our products and facilitate
the management, editing, sharing and viewing of content. These applications are being developed for mobile,
desktop and web-based platforms. Our core technologies include rendering engines to enable smooth video
playback and editing, algorithms for moment identification, automatic story creation as well as cloud-based media
storage, analysis and playback.
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Manufacturing, logistics and fulfillment
Our products are designed and developed in the United States, France, China and Romania, and a significant
majority of our manufacturing is outsourced to contract manufacturers located in China, Mexico, Japan and
Malaysia. In 2019, we moved most of our United States bound camera production from China to Mexico, a
change catalyzed by tariff-related concerns. We believe that using outsourced manufacturing enables greater
scale and flexibility than establishing our own manufacturing facilities. Several key strategic parts are purchased
from suppliers by us and then consigned to our manufacturers, while the vast majority of parts are procured
directly by our contract manufacturers. Our strategic commodities team manages the pricing and supply of the
key components of our cameras, including digital signal processors, sensors and lenses, and we leverage their
expertise 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 facilities in China and Mexico for final pack-out of our finished products. These finished
products are shipped to fulfillment centers in California, Kentucky, Netherlands, Hong Kong and Singapore that
deliver our products to our customers.
Sales channels and customers
We offer our products in over 30,000 retail outlets and in over 100 countries through our direct sales channel and
indirectly through our distribution channel. In 2019 and 2018, our direct sales accounted for 46% and 48% of our
revenue, respectively, of which, revenue from gopro.com represented 23% and 16% of our direct sales revenue,
respectively, and our distributors accounted for 54% and 52% of our revenue, respectively.
Direct sales
We sell directly to most of our retailers in the United States, some of our retailers in Europe and to consumers
worldwide through our e-commerce channel.
Independent specialty retailers. We use a network of location-based independent manufacturer representatives
to sell our products to independent specialty retailers in the United States focused on sports and consumer
activity capture markets. Our representatives provide highly personalized service to these retailers, including in-
store merchandising, taking orders and providing clinics to educate retail sales personnel about GoPro products
and services. We also have an internal, regionally focused sales team that provides a secondary level of service
to both the independent specialty retailers and manufacturer representatives. 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, Wal-Mart, Inc., Dixons Carphone and Fnac. We support these retailers with a dedicated and
experienced sales management team that we believe enables us to reduce channel conflict.
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 motorsports. In the
United States, we sell directly to these mid-market retailers through our experienced sales teams assigned to
particular accounts and regions.
E-commerce channel. We sell our full line of products to consumers worldwide through our online store at
gopro.com, which we market through online and offline advertising. Sales through gopro.com were more than
10% of our total revenue for 2019 and less than 10% of our total revenue for 2018 and 2017.
Distribution
We sell to over 55 distributors who resell our products to retailers in international and domestic markets. 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.
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In-store merchandising
Our in-store merchandising strategy focuses on our iconic GoPro-branded, video-enabled point of purchase
(POP) merchandising displays that are located in nearly all retail outlets where our products are sold. These
displays showcase GoPro videos and present our product ecosystem in a customer-friendly manner. Our larger
retailers help us represent a broader range of GoPro products due to their in-store deployment of our larger and
custom POP displays. We have been successful working with our retailers to further expand the footprint of our
POP displays within existing stores. As of December 31, 2019 and 2018, we had approximately 29,000 POP
displays in retail outlets worldwide.
Marketing and advertising
Our marketing and advertising programs are focused on engaging consumers by exposing them to compelling
GoPro content and educating them about new hardware features as well as the power of our solutions for
software editing (mobile and desktop applications) and content management (GoPro Plus). 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.
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, TikTok, Twitter, Vimeo and YouTube. In 2019, we gained 4.3 million new followers to our social
accounts for a lifetime total of 42.8 million followers. Of the 4.3 million new followers on our social accounts, 2.4
million were on Instagram, resulting in a lifetime total of 19.1 million on Instagram. To date, we have reached 1.4
billion views of content tagged #GoPro on TikTok and more than 2.4 billion views on GoPro’s YouTube channel.
We also integrate user-generated content and GoPro originally produced content into advertising campaigns
across various platforms including 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. We continue to believe GoPro content remains a significant asset
that builds awareness for our brand and products.
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.
Competition
The market for cameras 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 brand reputation.
We compete against established, well-known camera manufacturers such as Canon Inc. and Nikon Corporation,
as well as large, diversified electronics companies such as, Samsung Electronics Co. and Sony Corporation and
specialty companies such as Garmin Ltd., the Ricoh Company, Ltd., Shenzhen Arashi Vision Co., Ltd. and SZ DJI
Technology Co., 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 within our camera and 360-degree camera product
offerings at attractive consumer price points, including our HyperSmooth 2.0 which provides pitch axis
stabilization, in-app horizon leveling that provides a gimbal-like effect, super high-resolution video capability, voice
control features, and for our 360 experience, OverCapture, which allows a MAX user to capture content from
every angle. We also provide users with a suite of free mobile and desktop 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
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current and potential competitors.
Smartphones and tablets with photo and video functionality have significantly displaced the market for traditional
camera sales, and the makers of those devices also have mobile and other content editing applications and
storage for content captured with those devices. Our GoPro app, GoPro Plus service and Quik desktop editing
application may not be as compelling a solution as those offered by other companies, such as Apple, Inc. and
Google, although the GoPro app supports content from other platforms including content from iOS and Android.
Also, it is possible that, in the future, the manufacturers of such devices, such as Apple, Google and Samsung,
may continue to design their products for use in a range of conditions, including challenging physical
environments and waterproof capabilities, or develop products with features similar to ours. In addition, new
companies may emerge and offer competitive products directly in our category.
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” and the GoPro logos, 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 innovations that help our consumers capture, create and share their content using our
cameras, mounts, accessories and software. Our patents cover areas that include physical structures, image
processing, operational firmware and software, post-processing software, distribution software, mount and
accessory structures, as well as the ornamental aspects of our hardware and software products. As of
December 31, 2019, we had approximately 682 issued patents and 441 patent applications pending in the United
States, and 314 corresponding issued patents and 193 patent applications pending in foreign countries. Our
issued United States patents will expire approximately between 2022 and 2041 and our issued foreign patents will
expire approximately between 2024 and 2039. 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.
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, 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 in
agreements 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, 2019, we had 926 employees. None of our employees are currently covered by a collective
bargaining agreement, and we have experienced no work stoppages.
Corporate and available 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 (855) 636-3578. 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.” Our Class B common
stock is not listed nor traded on any stock exchange.
We have registered and applied to register a number of trademarks with the United States Patent and Trademark
Office and the trademark offices of other countries including “GOPRO,” “HERO” and the GoPro logos. 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.
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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. 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. The risk factors below do not identify all risks that we face;
our operations could also be affected by factors that are not presently known to us or that we currently consider to
be immaterial to our operations. In that event, the trading price of our shares may decline, and you may lose part
or all of your investment.
Risks related to our business and industry
We may not be able to achieve revenue growth or profitability in the future, and if revenue growth or
profitability is achieved, we may not be able to sustain it.
Our historical results should not be considered as indicative of our future performance. For example, our annual
revenue growth has been flat beginning in 2016, 2017 and 2018 with annual revenues of $1.185 billion, $1.180
billion and $1.148 billion, respectively, and moderate growth in 2019 with annual revenue of $1.195 billion. In
future periods, we could experience declines in revenue, or revenue could remain flat or grow more slowly than
we expect, which could have a material negative effect on our future operating results.
We also incurred operating losses of $2.3 million, $94.0 million and $163.5 million for the full year 2019, 2018 and
2017, respectively. Lower levels of revenue or higher levels of operating expense in future periods may result in
additional losses or limited profitability. Since the fourth quarter of 2016, we implemented three company-wide
restructurings of our business resulting in a reduction in our global workforce and the elimination of certain open
positions, consolidation of certain leased office facilities, as well as the elimination of several high-cost initiatives,
including the closure of our aerial products business, in order to focus our resources on cameras and
accessories, cloud and services businesses. We may not realize further cost savings from these previous actions.
We may continue to 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.
Our future 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 on
continuing to reach and expand our core community of users, followers and fans, and then utilizing that energized
community as brand ambassadors to an extended community. We believe that in order to expand our market, we
must provide both innovative and easy-to-use products, as well as intuitive and easy-to-use software tools that
enable effortless editing and sharing of content, with the smartphone central to the GoPro experience. While we
believe our software and subscription services will increase our total addressable market, we cannot be certain
that these efforts will be successful. We may not be able to expand our market through this strategy on a timely
basis, or at all, and we may not be successful in providing tools that our users adopt or believe are easy to use.
We plan to further build upon our integrated storytelling solutions, such as the GoPro app, HERO8 Black camera,
MAX and GoPro Plus subscription solution in future periods, and our investments in these products and solutions,
including marketing and advertising expenses, may not successfully drive increases in sales of our products and
our users may not adopt our new offerings. If we are not successful in broadening our user base to reach more of
our core customers with our integrated solutions, our future revenue growth will be negatively affected, and we
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may not recognize benefits from our investments in the various components of our storytelling solutions, and the
marketing, sales and advertising costs to promote our solution.
Our growth also depends on expanding our market with new capture perspectives with our 360-degree camera,
MAX, which is a resource-intensive initiative in a highly competitive market, and by adding versatility to our
products with expansion mods for HERO8 Black. While we are investing resources, including software
development, sales and marketing, to reach these expanded and new consumer markets, we cannot be 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. For example, we
made significant investments in the aerial market, but decided in the first quarter of 2018 to close our aerial
business in light of difficult market and regulatory conditions, and margin challenges.
To remain competitive and stimulate consumer demand, we must effectively manage product
introductions, product transitions, product pricing and marketing.
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 and services to maintain or increase our
revenue. The markets for our products and services are characterized by intense competition, evolving
distribution models, disruptive technology developments, short product life cycles, customer price sensitivity and
frequent product introductions.
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, effective forecasting and
management of product demand, purchase commitments and inventory levels, availability of products in
appropriate quantities to meet anticipated demand, ability to obtain timely and adequate delivery of components
for our new products from third-party suppliers, management of any changes in major component suppliers,
management of manufacturing and supply costs, management of risks associated with new product production
ramp-up issues, and the risk that new products may have quality issues or other defects or bugs in the early
stages of introduction including testing of new parts and features. With respect to management and supply costs,
we may be impacted by heightened demand for specialty memory, components and batteries that are not
supported by our manufacturing partners. Such supply shortages may affect our ability to manage appropriate
supply levels of our products and pricing pressures may negatively affect our gross margins.
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. For
example, in 2017, the introduction of the HERO6 Black camera at $499, while keeping the price point of the
HERO5 Black camera at $399, negatively affected consumer demand for HERO5 Black, and we ultimately
reduced the price of HERO5 Black to increase channel sell through rates. The HERO5 Black price adjustment
had a cascading effect that resulted in price reductions for HERO5 Session and ultimately HERO6 Black
cameras. Reduced product margins resulting from lower price point products may decrease the number of
retailers willing to offer and promote our product lineup. Failure to manage and complete product transitions
effectively or in a timely manner could harm our brand and lead to, among other things, lower revenue, excess
prior generation product inventory, or a deficit of new product inventory and reduced profitability. For example, as
a result of reducing the price of our HERO5 Black cameras in December 2017 and HERO6 Black cameras in
January 2018, we incurred price protection and marketing development funds charges which resulted in a
reduction in our revenue, gross margins and operating profits.
Additionally, our brand and product marketing efforts are critical to stimulating consumer demand. We market our
products globally through a range of advertising and promotional programs and campaigns, including social
media. If we do not successfully market our products or plan the right promotions for the right products at the right
time, the lack of success or increased costs of promotional programs could have an adverse effect on our
business, financial condition and results of operations.
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We depend on sales of our cameras, mounts and accessories for substantially all of our revenue, and any
decrease in the sales or change in sales mix of these products could harm our business.
We expect to derive the 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 including variable tariff rates, competition or otherwise, or our inability to increase sales of higher price
point 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. In particular, a decline in the price or unit demand
of our HERO camera line or MAX camera, or our inability to increase sales of these products, could materially
harm our business and operating results. Further, any delays or issues with our new product launches could have
a material adverse effect on our business, financial condition and results of operations. For example, due to a late
stage production delay, we shifted the launch of the GoPro HERO8 Black camera from Q3 2019 to Q4 2019
resulting in a material shift of revenue from Q3 2019 to Q4 2019. This product delay shortened the timeframe for
holiday season sales and resulted in overall lower 2019 financial performance compared to our expectations.
While we have developed and released products and services to add to our offerings, we may not be successful
in achieving future revenue growth driven by newly released products and services. For example, we promoted
GoPro Plus, our subscription service in connection with our HERO8, HERO7 and MAX camera lineup, to allow
consumers to auto upload content to the cloud and make edits within the GoPro app editing solution. If all the
components of the storytelling solutions do not work together seamlessly or our users do not adopt them, they
may not drive camera sales and our operating results could be adversely affected. In addition, we have been and
will continue to expend resources to further innovate and deliver editing and sharing software solutions. If the
software does not function as expected or users do not adopt our solution, sales of our MAX camera may be
negatively affected. We cannot be assured that our investments in the development of software-related products
and services will result in either increased revenue or profit. Changes in product mix may harm our financial
results. If there is a shift in consumer demand from our higher-priced to lower-priced cameras without a
corresponding increase in units sold, our revenues and gross profit could decrease and losses could result.
As a result, our future growth and financial performance may continue to depend heavily on our ability to develop
and sell enhanced versions of our cameras, mounts and accessories. If we fail to deliver product enhancements,
new releases or new products and services that appeal to consumers, our future financial condition, operating
results and cash flows will be materially affected. Product introductions may not always be successful and could
be costly to develop and exit if ultimately unsuccessful. For example, we invested significant resources in
development, marketing and support for the launch of our Karma drone, which we subsequently determined faced
margin challenges and other obstacles, and we exited the aerial business in 2018.
We rely on third-party suppliers, some of which are sole-source suppliers, to provide components for our
products which may lead to supply shortages, long lead times for components, and supply changes, any
of which could disrupt our supply chain and may increase our costs.
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.
Some of the key components used to manufacture our products come from a limited or single source of supply, or
by a supplier that could potentially become a competitor. Our contract manufacturers generally purchase these
components on our behalf from approved suppliers. We are subject to the risk of shortages and long lead times in
the supply of these components and the risk that our suppliers discontinue or modify components used in our
products. In addition, the lead times associated with certain components are lengthy and preclude rapid changes
in quantities and delivery schedules. We have in the past experienced and may in the future experience
component shortages, and the availability of these components may be unpredictable.
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 not to meet our needs as they allocate components to other customers. Developing suitable alternate
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sources of supply for these components may be time-consuming, difficult and costly, and we may not be able to
source these components on terms that are acceptable to us, or at all, which may adversely affect our ability to
meet our development requirements or to fill our orders in a timely or cost-effective manner. 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, 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, for our camera designs, we incorporate image processors, sensors, lens, batteries and memory
solutions that critically impact the performance of our products. These components have unique performance
profiles, and, as a result, it is not commercially practical to support multiple sources for these components for our
products. For example, we incorporate the GP1 image signal processor from Socionext, Inc. in MAX as well as
our HERO8 and HERO7 Black cameras and rely on Socionext as the primary supplier of our processors. If other
suppliers of image processors become more advanced in performance or more competitive in cost, we may be
placed at a disadvantage and not be able to continue improving our product performance as quickly or as
competitively as planned. We do not currently have alternative suppliers for several key components. In addition,
our products also require passive components such as resistors and multi-layer ceramic capacitors which may
experience supply shortages and lengthening lead-times within the consumer electronics industry and may impact
our supply chain. In the event that any of our key suppliers are unable to supply the components that we need to
produce our products to meet anticipated customer demand, our business would be materially and adversely
affected.
If we are unable to anticipate consumer preferences and successfully develop desirable products and
solutions, we may not be able to maintain or increase our revenue and achieve profitability.
Our success depends on our ability to identify and originate product trends as well as to anticipate, gauge 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 and lead times for our products may make it more difficult for
us to respond rapidly to new or changing product or consumer preferences. Additionally, our products are
discretionary items for consumers subject to changing preferences. The overall market for consumer electronics is
highly competitive and consumers may choose to spend their dollars on products or devices offered by our
competitors or other consumer electronics companies instead of on GoPro products, which may adversely affect
our sales. 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 or adopted 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 cameras, editing applications and other products and services. Our research
and development expenses were $142.9 million, $167.3 million and $229.3 million for 2019, 2018 and 2017,
respectively. We expect that our research and development expenses will continue to be substantial in 2020, and
increase compared to 2019 as we develop innovative technologies. While we expect research and development
to increase year-over-year, our budgets are constrained in 2020 and may require us to forego investment in
certain products or features which might have been successful had we invested in them, and we may not choose
the right features, products, or services to update or enhance. 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 affected. 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 any additional costs.
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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. New entrants also enter our category from time-to-
time. These market factors could result in a loss of our market share and a decrease in our revenue and
profitability.
The market for cameras is highly competitive. Further, competition has intensified as new market entrants and
existing competitors have introduced new products and more competitive offerings into our markets. Increased
competition, tariffs, and changing consumer preferences may result in pricing pressures, 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. and Nikon Corporation,
as well as large, diversified electronics companies such as Samsung Electronics Co. and Sony Corporation, and
specialty companies such as Garmin Ltd., the Ricoh Company, Ltd., Shenzhen Arashi Vision Co., Ltd. and SZ DJI
Technology Co., Ltd. Many of our 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. Additionally, 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 or vertically integrated business units; 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. Further, new companies may emerge and offer
competitive products directly in our category. 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.
Moreover, smartphones and tablets with photo and video functionality have significantly displaced the market for
traditional cameras, and the makers of those devices also have mobile and other content editing applications and
storage for content captured with those devices. We continue to focus on the value proposition of the GoPro
mobile application by introducing new features and benefits that we believe will enable customers to edit and
share their content easily. The GoPro app, GoPro desktop editing solution and the GoPro Plus subscription
service may not be as compelling of a solution as those offered by other companies, such as Apple, Adobe or
Google, although the GoPro application supports content from other platforms including content from iOS and
Android. Manufacturers of smartphones and tablets, such as Apple, Google and Samsung may continue to design
their products for use in a range of conditions, including challenging physical environments and waterproof
capabilities, or develop products with features similar to ours.
If the e-commerce technology systems that give our consumers the ability to shop with us online do not
function effectively, our operating results, as well as our ability to grow our digital e-commerce business
globally, could be materially adversely affected.
Our sales through gopro.com represent an increasing percentage of our revenue and we are focused on
continuing to accelerate the growth of our e-commerce sales. Revenue from gopro.com represented more than
10% of revenue in the fourth quarter and full year 2019. Additionally, we expect to continue to increase sales
through gopro.com as well as further converting portions of our distributors’ business into direct sales. Should we
continue to pursue this strategy on a larger scale, it could create significant disruptions to our distribution channel
and the associated revenue. As we continue to convert distribution to direct sales, we might not be successful in
the transition to increase e-commerce sales or direct to retail sales. Additionally, 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.
Any failure to provide effective, reliable, user-friendly e-commerce platforms that offer a wide assortment of
merchandise with rapid delivery options and that continually meet the changing expectations of online shoppers
could place us at a competitive disadvantage, result in the loss of e-commerce and other sales, harm our
reputation with consumers, have a material adverse impact on the growth of our e-commerce business globally
and could have a material adverse impact on our business and results of operations.
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Any system interruptions or delays to our e-commerce business 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 our ability to maintain an 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 technology systems that
operate gopro.com and related support systems, such as system failures, viruses, cyberattacks, computer
hackers and similar disruptions. If we or our designated third-party contractors are unable to maintain and
upgrade gopro.com, or if we encounter system interruptions or delays, our operating results could be adversely
affected.
Our gross margins can vary significantly depending on multiple factors, which can result in unanticipated
fluctuations in our operating results.
Our gross margins can vary due to consumer demand, competition, product pricing, product lifecycle, product
mix, new product introductions, commodity, supply chain and logistics costs, currency exchange rates, trade
policy and tariffs, and the complexity and functionality of new product innovations and other factors. For example,
our gross margin was 34.6%, 31.5% and 32.6% for 2019, 2018 and 2017, respectively. In particular, if we are not
able to introduce new products in a timely manner at the product cost we expect, or if consumer demand for our
products is less than we anticipate, or if there are product pricing, marketing and other initiatives by our
competitors to which we need to react or that are initiated by us to drive sales that lower our margins, then our
overall gross margin will be less than we project. For example, due to a late stage production delay, we shifted the
launch of the GoPro HERO8 Black camera from Q3 2019 to Q4 2019, resulting in a material shift of revenue from
Q3 2019 to Q4 2019 and a corresponding impact on our gross margin.
As we innovate with new products, we may have lower gross margins that do not deliver a sufficient return on
investment. In addition, depending on competition or consumer preferences, we may face higher up-front
investments in development to compete or market our products, and increased inventory write-offs. If we are
unable to offset these potentially lower margins by enhancing the margins in our product categories, our
profitability may be adversely affected.
The impact of these factors on gross margins can create unanticipated fluctuations in our operating results, which
may cause volatility in the price of our shares.
We depend on key personnel to operate and grow our business. If we are unable to retain, attract and
integrate qualified personnel, our ability to develop and successfully grow and operate 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.
Since the fourth quarter of 2016, we implemented three global reductions-in-force and restructuring actions to
reduce our operating expenses. These changes, and any future changes, in our operations and management
team could be disruptive to our operations. Our restructuring actions and any future restructuring actions could
have an adverse effect on our business as a result of decreases in employee morale and the failure to meet
operational targets due to the loss of employees. If key employees leave, we may not be able to fully integrate
new personnel or replicate the prior working relationships, and our operations could suffer.
Qualified individuals are in high demand, and we may incur significant costs to attract and retain them. While we
utilize competitive salary, bonus and long-term incentive packages to recruit new employees, 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. We have from time to time experienced, and we expect to continue to experience, difficulty in hiring
and retaining highly skilled employees with appropriate qualifications. In addition, job candidates and existing
employees often consider the value of the equity awards they receive in connection with their employment.
Fluctuations in the price of our Class A common stock may make it more difficult or costly to use equity
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compensation to motivate, incentivize and retain our employees. For example, during 2019, our closing stock
price ranged from a high of $7.55 in the second quarter to a low of $3.38 in the fourth quarter. 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.
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
revenue in the fourth quarter of each year due to demand related to the holiday season, and in some years,
including 2018, demand associated with the launch of new products heading into the holiday season. Fourth
quarter revenue comprised 44%, 33% and 28% of our 2019, 2018 and 2017 revenue, respectively. Given the
strong seasonal nature of our sales, appropriate forecasting is critical to our operations. We anticipate that this
seasonal impact is likely to continue and any shortfalls in expected fourth quarter revenue, due to macroeconomic
conditions, product release patterns, a decline in the effectiveness of our promotional activities, product mix,
charges incurred against new products to support promotional activities, pricing pressures, supply chain
disruptions, or for any other reason, could cause our annual results of operations to suffer significantly. For
example, due to a late stage production delay, our launch timing shifted for our HERO8 Black camera from Q3
2019 to Q4 2019 resulting in a material shift of revenue between Q3 2019 to Q4 2019. This product delay
shortened the timeframe for holiday season sales and resulted in overall lower 2019 financial performance
compared to our expectations.
In addition, we typically experience lower revenue in the first half of the year. For example, revenue of $535.1
million for the first half of 2019 decreased by $128.2 million, or 19%, compared to revenue of $663.3 million in the
last half of 2018. First half revenue comprised 45%, 42% and 44% of our annual 2019, 2018 and 2017 revenue,
respectively.
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.
Furthermore, our customers may adjust their purchasing habits as a result of external events such as tariff
avoidance or tariff impact that could result in a lower predictability of revenue. Accordingly, in the event of revenue
shortfalls, we are generally unable to mitigate a negative impact on operating margins in the short term.
Changes to trade agreements, trade policies, tariffs and import/export regulations may have an adverse
effect on our business and results of operations.
The United States and other countries in which our products are produced or sold internationally have imposed
and may impose additional quotas, duties, tariffs, or other restrictions or regulations, or may adversely adjust
prevailing quota, duty, tariff levels, or export or other licensing requirements. Countries impose, modify and
remove tariffs and other trade restrictions in response to a diverse array of factors, including global and national
economic and political conditions, which make it impossible for us to predict future developments regarding tariffs
and other trade restrictions. Trade restrictions, including tariffs, quotas, embargoes, safeguards, and customs
restrictions, could increase the cost or reduce the supply of products available to us or may require us to modify
our supply chain organization or other current business practices, any of which could harm our business, financial
condition and results of operations. We are dependent on international trade agreements and regulations. If the
United States were to withdraw from or materially modify certain international trade agreements, our business and
operating results could be materially and adversely affected.
We do not have internal manufacturing capabilities and rely on several contract manufacturers, including
component vendors, located in China and Mexico to manufacture our products. Our contract manufacturer
locations expose us to risks associated with doing business globally, including risks related to changes in tariffs or
other export and import restrictions, and increased security costs. Additionally, the current United States
administration continues to signal that it may continue to alter global trade agreements and terms. For example,
the United States imposed additional tariffs on imports from China and continues to potentially impose other
restrictions on exports from China to the United States. The Office of the United States Trade Representative
(USTR) recently identified certain Chinese imported goods for additional tariffs to address China’s trade policies
and practices. Any announcement by the USTR to impose tariffs on GoPro cameras could have a material
17
adverse effect on our United States bound production, business and results of our United States operations. If
these duties are imposed on our cameras, we may be required to raise our prices, which may result in the loss of
customers and harm our business and results of operations. Sales of our products in China are material to our
business and represent a significant portion of our revenue. This revenue stream from China is at risk in the event
China imposes retaliatory tariffs impacting in-bound sales of our products or imposes any other export restrictions
on our products.
Beginning in the second half of 2019, we shifted most of our United States bound camera production from China
to Mexico. Shifting United States bound camera production to Mexico may not be successful due to the timing of
implementing changes such as recreating a new supply chain and identifying substitute components in new
manufacturing locations, and we may not be successful in reducing our costs, or off-setting the impact of tariffs
due to other potential tariffs. Additionally, we may not succeed at lowering potential tariff rates on United States
bound production manufactured in Mexico due to the ongoing negotiations and congressional confirmation of the
United States Mexico Canada Agreement and compliance with that Agreement. We continue to monitor
manufacturing capabilities outside of China to mitigate risks of additional tariffs, duties or other restrictions on our
products and may decide to transition more manufacturing outside of China.
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. To the extent we discontinue the manufacturing
and sales of any products or services, we must manage the inventory liquidation, supplier commitments and
customer expectations. For example, in 2018, we exited the aerial business, but still had inventory of our Karma
drone, which we sold throughout 2018. Also, in the fourth quarter of 2017, we recorded product charges of $5
million for excess purchase order commitments, excess inventory, and obsolete tooling, relating to the end-of-life
of our former entry-level HERO product, slower than anticipated overall demand, and for excess inventory relating
to the end-of-life of our REMO accessory.
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 forecasted 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 and consumer confidence. If we do not accurately forecast customer demand for our products, we may
in future periods be unable to meet consumer, 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.
If we fail to manage our operating expenses effectively, our financial performance may suffer.
Our success will depend in part upon our ability to manage our operating expenses, including but not limited to
our cash management, effectively. We incurred significant operating losses in 2018 and 2017 and, as of
December 31, 2019, we had an accumulated deficit of $583.7 million. Beginning in the fourth quarter of 2016
through the first quarter of 2018, we implemented three global reductions-in-force and other restructuring actions
to reduce our operating expenses. Although we plan to seek to operate efficiently and to manage our costs
effectively, we may not realize the cost savings expected from these actions.
We will need to continue to improve our operational, financial and management controls, reporting processes and
procedures, and financial and business information systems. We are also investing in areas we believe will grow
revenue and our operating expenses might increase as a result of these investments. If we are unable to operate
efficiently and manage our costs, we may continue to incur significant losses in the future and may not be able to
maintain or achieve profitability.
In the future, in response to unfavorable market conditions or consumer demand, we may again need to
strategically realign our resources, adjust our product line and/or enact price reductions in order to stimulate
demand, and implement additional restructurings and workforce reductions. For example, in the fourth quarter of
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2017 and first quarter of 2018, we reduced the pricing on our entire camera product line to increase consumer
demand, closed our aerial products business due to unfavorable market conditions, and implemented a workforce
reduction. Any such actions may result in the recording of charges including inventory-related write-offs, 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.
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 financing on favorable terms, or at all. For
example, our current credit facility contains restrictive covenants relating to our capital raising activities and other
financial and operational matters, and any debt financing obtained by us in the future could involve further
restrictive covenants, which may make it more difficult for us to obtain additional capital and to pursue business
opportunities, including potential acquisitions. Further, even if we are able to obtain additional financing, we may
be required to use such proceeds to repay a portion of our debt. 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. If we are unable to obtain adequate financing under our credit facility, or alternative sources, when we
require it, our ability to grow or support our business and to respond to business challenges could be significantly
limited. 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.
Data protection breaches and cyberattacks could disrupt our products, services, internal operations, or
information technology systems, and any such disruption could reduce our expected revenue, increase
our expenses, damage our reputation, and cause our stock price to decline significantly.
Our products, services and operating systems may contain unknown security vulnerabilities. For example, the
firmware and software that are installed on our products may be susceptible to hacking or misuse. In addition, we
offer a comprehensive online cloud management service, GoPro Plus, which can be paired with our cameras. If
malicious actors compromise the GoPro Plus service, or if customer confidential information stored in the Plus
service is accessed without authorization, our business will be harmed.
In operating GoPro Plus, we rely on third-party providers for a number of critical aspects for GoPro Plus services,
including web hosting services, billing and payment processing and consequently, we do not maintain direct
control over the security or stability of the associated systems. If we or any of our third-party providers are unable
to successfully prevent breaches of security relating to our operating systems, products, services, or user private
information, including user videos and user personal identification information, or if third-party systems which we
rely upon to operate fail for other reasons, we may need to spend increasing amounts of time and effort in this
area. As a result, we could incur substantial expenses, our brand and reputation could suffer and our business,
results of operations and financial condition could be materially adversely affected.
Interruptions with the cloud-based systems that we use in our operations, provided by an affiliate of
Amazon.com, Inc. (Amazon), may materially adversely affect our business, results of operations and
financial condition.
We host the GoPro app, GoPro Plus, GoPro Awards, our website account sign up, and login and firmware
upgrades for our cameras using Amazon Web Services (AWS) data centers, a provider of cloud infrastructure
services, and may in the future use other third-party cloud-based systems in our operations. Accordingly, our
operations depend on protecting the virtual cloud infrastructure hosted in AWS by maintaining its configuration,
architecture, features, and interconnection specifications, as well as the information stored in these virtual data
centers and which third-party internet service providers transmit. Any incident affecting their infrastructure that
may be caused by human error, fire, flood, severe storm, earthquake, or other natural disasters, cyberattacks,
terrorist or other attacks, and other similar events beyond our control could negatively affect the GoPro Plus
service. A prolonged AWS service disruption affecting our GoPro Plus service for any of the foregoing reasons
would negatively impact our ability to serve our consumers and could damage our reputation with current and
potential consumers, expose us to liability, cause us to lose consumers, or otherwise harm our business. We may
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also incur significant costs for using alternative equipment or taking other actions in preparation for, or in reaction
to, events that damage the AWS services we use. Further, if we were to make updates to GoPro Plus that were
not compatible with the configuration, architecture, features, and interconnection specifications of the third-party
platform, our service could be disrupted.
In the event that our AWS service agreements are terminated, or there is a lapse of service, elimination of AWS
services or features that we use, interruption of internet service provider connectivity, or damage to such facilities,
we could experience interruptions in access to GoPro Plus as well as significant delays and additional expense in
arranging or creating new facilities and services and/or re-architecting our solutions for deployment on a different
cloud infrastructure service provider, which could materially adversely affect our business, results of operations
and financial condition.
The reputation of our services may be damaged, and we may face significant direct or indirect costs,
decreased revenue and operating margins if our services contain significant defects or fail to perform as
intended.
The GoPro Plus and GoPro app platforms are complex and may not always perform as intended due to outages
of our systems or defects affecting our services. System outages could be disruptive to our business and damage
the reputation of our services and result in potential loss of revenue. Significant defects affecting our services may
be found following the introduction of new software or enhancements to existing software or in software
implementations in varied information technology environments. Internal quality assurance testing and end-user
testing may reveal service performance issues or desirable feature enhancements that could lead us to reallocate
service development resources or postpone the release of new versions of our software. The reallocation of
resources or any postponement could cause delays in the development and release of future enhancements to
our currently available software, damage the reputation of our services in the marketplace and result in potential
loss of revenue. Although we attempt to resolve all errors that we believe would be considered serious by our
partners and customers, the software powering our services is not error-free. Undetected errors or performance
problems may be discovered in the future, and known errors that we consider minor may be considered serious
by our channel partners and consumers. System disruptions and defects in our services could result in lost
revenue, delays in customer deployment, or legal claims and could be detrimental to our reputation.
An economic downturn or economic uncertainty in our key United States and international markets, as
well as fluctuations in currency exchange rates may adversely affect consumer discretionary spending
and demand for our products.
Factors affecting the level of consumer spending include general market conditions, macroeconomic conditions,
tax rates, fluctuations in foreign exchange rates and interest rates, and other factors such as consumer
confidence, the availability and cost of consumer credit, and levels of unemployment. Additionally, Brexit has
created economic and political uncertainty, including volatility in global financial markets and the value of foreign
currencies. The impact of Brexit depends on the terms of the United Kingdom’s withdrawal from the European
Union and such impact may not be fully realized for several years or more. The majority of our sales occur in U.S.
dollars and an increase in the value of the dollar against the Euro and other currencies could increase the real
cost to consumers of our products in those markets outside the United States. For example, in countries where
we sell in local currency, we are subject to exchange rate fluctuations that create inherent risks for us and may
cause us to adjust pricing which may make our products more or less favorable to the consumer. If global
economic conditions are volatile or if economic conditions deteriorate, consumers may delay or reduce purchases
of our products resulting in consumer demand for our products that may not reach our sales targets.
Strengthening of the U.S. dollar and/or weakness in the economies of Euro zone countries could adversely impact
sales of our products in the European region, which would have a material negative impact on our future
operating results. Our sensitivity to economic cycles and any related fluctuation in consumer demand could
adversely affect our business, financial condition and operating results.
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 United States 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 United States export
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controls, and exports of our products must be made in compliance with various economic and trade sanctions
laws. Furthermore, United States export control laws and economic sanctions prohibit the provision of products
and services to countries, governments and persons targeted by United States sanctions. Even though we take
precautions to prevent our products from being provided to targets of United States sanctions, our products,
including our firmware updates, could be provided to those targets or provided by our customers. 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.
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 international business operations account for a significant portion of our revenue and operating
expenses and are subject to challenges and risks.
Revenue from outside the United States comprised 64%, 65% and 58% of our revenue in 2019, 2018 and 2017,
respectively, and we expect international revenue to continue to be significant in the future. Further, we currently
have foreign operations in Australia, China, France, Germany, Hong Kong, Japan, Netherlands, Philippines,
Romania, United Kingdom and a number of other countries in Europe and Asia. 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 environmental, packaging and
labeling;
• adverse tax effects and foreign exchange controls making it difficult to repatriate earnings and cash;
• changes to the taxation of undistributed foreign earnings;
•
the effect of foreign currency exchange rates and interest rates, including any fluctuations caused by
uncertainties relating to the U.K. leaving the European Union (“Brexit”);
• political, economic instability, or social unrest in a specific country or region in which we operate, including, for
example, the effects of “Brexit,” which could have an adverse impact on our operations in that location;
• organized crime activity, including those in Mexico;
•
terrorist activities and natural disasters;
• quarantines or other disruptions to our operations resulting from future pandemics or other widespread public
health problems;
•
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.
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Security breaches and other disruptions including cyberattacks could expose us to liability, damage our
brand and reputation, compromise our ability to conduct business, require use to incur significant costs
or otherwise adversely affect our financial results.
In the ordinary course of our business, we electronically maintain sensitive data, including intellectual property,
our proprietary business information and that of our customers and suppliers, and some personally identifiable
information of our customers and employees, in our facilities and on our networks. Through GoPro Plus, users
may store video and image files, including any telemetry or metadata that the user has chosen to associate with
those files in the cloud. In our e-commerce services, we process, store and transmit consumer data. We also
collect user data through certain marketing activities. For all of the foregoing internal and customer or consumer
facing data and content collection, we collect and store that information in our or our third-party providers’
electronic systems. These systems may be targets of attacks, such as viruses, malware or phishing attempts by
cyber criminals or other wrongdoers seeking to steal our users’ content or data, or our customer’s information for
financial gain or to harm our business operations or reputation.
Any security breach, unauthorized access or usage, virus or similar breach or disruption of our systems or
software could result in the loss of confidential information, costly investigations, remediation efforts and costly
notification to affected consumers. If such content were accessed by unauthorized third parties or deleted
inadvertently by us or third parties, our brand and reputation could be adversely affected. Cyberattacks could also
adversely affect our operating results, consume internal resources, and result in litigation or potential liability for
us and otherwise harm our business. Further, we are subject to general consumer regulations and laws, as well
as regulations and laws specifically related to security and privacy of consumer data or content. In the event of an
incident affecting the security of consumer data or content, regulators may open an investigation or pursue fines
or penalties for non-compliance with these laws, or private plaintiffs may sue us, resulting in additional costs and
reputational harm to our business.
Any significant cybersecurity incidents or 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 process transactions, manage our supply chain and
inventory, ship goods on a timely basis, maintain cost-efficient operations, complete timely and accurate financial
reporting, operate gopro.com and respond to customer inquiries.
Our information systems and those of third parties we use in our operations are vulnerable to cybersecurity risk,
including cyberattacks such as distributed denial of service (DDoS) attacks, computer viruses, physical or
electronic break-ins that damage operating systems, and similar disruptions. Additionally, 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 physical, technical and administrative safeguards to protect
our systems. To date, unauthorized users have not had a material effect on our systems; however, there can be
no assurance that attacks will not be successful in the future. In addition, our information systems must be
constantly updated, patched and upgraded to protect against known vulnerabilities and optimize performance.
Material disruptions or slowdown of our systems, including a disruption or slowdown could occur if we are unable
to successfully update, patch and upgrade our systems.
System disruptions, failures and slowdowns, whether caused by cyberattacks, update failures or other causes,
could affect our financial systems and operations. This 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.
The information systems used by our third-party service providers are vulnerable to these risks as well. In
particular, we are heavily reliant on SaaS enterprise resource planning systems to conduct our order and
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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 affect 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.
As we expand our operations, we expect to utilize additional systems and service providers that may also be
essential to managing our business. 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. While we conduct reasonable diligence on
our service providers, we may not always be able to control the quality of the systems and services we receive
from these providers, which could impair our ability to maintain appropriate internal control over financial reporting
and complete timely and accurate financial reporting, and may affect our business, operating results and financial
condition.
We are subject to governmental regulation and other legal obligations, particularly related to privacy, data
protection and information security, and our actual or perceived failure to comply with such obligations
could adversely affect our business and operating results.
Personal privacy, data protection and information security are significant issues in the United States and the other
jurisdictions where we offer our products and services. The regulatory framework for privacy and security issues
worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Our handling of data is
subject to a variety of laws and regulations, including regulation by various government agencies, including the
United States Federal Trade Commission (FTC) and various state, local and foreign bodies and agencies.
The United States federal and various state and foreign governments have adopted or proposed limitations on the
collection, distribution, use and storage of personal information of individuals, including end-customers and
employees. In the United States, the FTC and many state attorneys general are applying federal and state
consumer protection laws to the online collection, use and dissemination of data. Additionally, many foreign
countries and governmental bodies, including in Australia, the European Union, India, Japan and numerous other
jurisdictions in which we operate or conduct our business, have laws and regulations concerning the collection
and use of personal information obtained from their residents or by businesses operating within their jurisdiction.
These laws and regulations often are more restrictive than those in the United States. Such laws and regulations
may require companies to implement new privacy and security policies, permit individuals to access, correct and
delete personal information stored or maintained by such companies, inform individuals of security breaches that
affect their personal information, and, in some cases, obtain individuals’ consent to use personal information for
certain purposes.
We also expect that there will continue to be new proposed laws, regulations and industry standards concerning
privacy, data protection and information security in the United States, the European Union and other jurisdictions,
and we cannot yet determine the impact of such future laws, regulations and standards may have on our
business. We expect that existing laws, regulations and standards may be interpreted differently in the future. For
example, in January 2020, the California Consumer Privacy Act (CCPA) took effect, which provides new data
privacy rights for consumers in California and new operational requirements for companies doing business in
California. Compliance with the new obligations imposed by the CCPA depends in part on how particular
regulators interpret and apply them. If we fail to comply with the CCPA or if regulators assert that we have failed to
comply with the CCPA, we may be subject to certain fines or other penalties. Also, there remains significant
uncertainty surrounding the regulatory framework for the future of personal data transfers from the European
Union to the United States with regulations such as the recently adopted General Data Protection Regulation
(GDPR) which imposes more stringent EU data protection requirements, provides an enforcement authority, and
imposes large penalties for noncompliance. Compliance with the new obligations imposed by the GDPR depends
in part on how particular regulators interpret and apply them. If we fail to comply with the GDPR or if regulators
assert that we have failed to comply with the GDPR, we may be subject to fines of up to 4% of our worldwide
annual revenue. Future laws, regulations, standards and other obligations, including the adoption of the GDPR
and the CCPA, as well as changes in the interpretation of existing laws, regulations, standards and other
23
obligations could impair our ability to collect, use or disclose information relating to individuals, which could
decrease demand for our products, require us to restrict our business operations, increase our costs and impair
our ability to maintain and grow our customer base and increase our revenue.
Although we are working to comply with those federal, state and foreign laws and regulations, industry standards,
contractual obligations and other legal obligations that apply to us, those laws, regulations, standards and
obligations are evolving and may be modified, interpreted and applied in an inconsistent manner from one
jurisdiction to another, and may conflict with one another, other requirements or legal obligations, our practices or
the features of our products. As such, we cannot assure ongoing compliance with all such laws or regulations,
industry standards, contractual obligations and other legal obligations. Any failure or perceived failure by us to
comply with federal, state or foreign laws or regulations, industry standards, contractual obligations or other legal
obligations, or any actual or suspected security incident, whether or not resulting in unauthorized access to, or
acquisition, release or transfer of personal information or other data, may result in governmental enforcement
actions and prosecutions, private litigation, fines and penalties or adverse publicity and could cause our
customers to lose trust in us, which could have an adverse effect on our reputation and business. Any inability to
adequately address privacy and security concerns, even if unfounded, or comply with applicable laws,
regulations, policies, industry standards, contractual obligations or other legal obligations could result in additional
cost and liability to us, damage our reputation, inhibit sales, and adversely affect our business and operating
results.
We may grow our business in part through acquisitions, joint ventures, investments and partnerships,
which could require significant management attention, disrupt our business, dilute stockholder value and
adversely affect our operating results.
We have completed several acquisitions and may evaluate additional acquisitions of, or strategic investments in,
other companies, products or technologies that we believe are complementary to our business. For example, in
the first half of 2016, we acquired two mobile editing application companies for aggregate cash consideration of
approximately $104 million. We also may enter into relationships with other businesses in order to expand the
distribution of our product offerings, which could involve joint ventures, strategic alliances and partnerships.
Negotiating these transactions can be time-consuming, difficult and expensive, and our ability to close these
transactions may be subject to third-party or government approvals, which are beyond our control. Consequently,
we can make no assurance that these transactions, once undertaken and announced, will close.
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 encounter difficulties assimilating or integrating the businesses, technologies, products, personnel,
or operations of acquired companies, particularly if the key personnel of the acquired business choose not to work
for us, or we have difficulty retaining the customers of any acquired business, 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 affect our business, financial condition, operating results and cash flows. In addition, our original
estimates and assumptions used in assessing any transaction may be inaccurate, including estimates of
accounting charges. We have recorded significant goodwill and intangible assets in connection with our
acquisitions, and in the future, if our acquisitions do not yield expected revenue, we may be required to take
material impairment charges that could adversely affect our results of operations.
We may have to pay cash, incur debt or issue equity securities to enter into any such acquisition, joint venture,
strategic alliances or partnership, which could affect our financial condition or the value of our capital stock. The
sale of equity to finance any such transaction 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, or require the
consent of the lenders under our credit agreements, that would impede our ability to manage our operations. In
addition, our future operating results may be affected by performance earnouts or contingent payments. For
example, for our 2016 acquisitions, deferred cash and stock compensation was payable to certain continuing
employees subject to meeting specified future employment conditions. Furthermore, acquisitions may require
large one-time charges and can result in increased debt or contingent liabilities, adverse tax consequences,
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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 affect our future results of
operations. We cannot assure investors that the anticipated benefits of any acquisition or investment will be
realized.
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,”
“HERO,” and the GoPro logos. The GoPro brand is integral to the growth of our business and expansion into new
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 services, 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 affect our brand, business and operating results. Maintaining and enhancing our brand also
requires substantial financial investments, although there is no guarantee that these investments will increase
sales of our products or positively affect our operating results.
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.
We depend upon effective sales channels, including direct to consumer business through gopro.com, 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, specialty retailers, and gopro.com, and we
reach certain United States markets through distributors. In international markets, we primarily sell through
distributors who in turn sell to local retailers; however, we also have direct sales relationships with certain
customers and sell directly to consumers through gopro.com.
We depend on retailers to provide adequate and attractive space for our products and POP displays in their
stores and acquiesce to our policies. 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
reduce the space for our products and POP displays in their stores or locate them in less than premium
positioning, or choose not to carry some or all of our products or 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. If our retailers do not acquiesce to our policies, we may refuse to ship our products and 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 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 revenue.
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 affect their profitability, and in turn, affect their ability to buy
future products from us. For example, the Brexit referendum vote in the U.K. caused significant short-term
volatility in global stock markets as well as currency exchange rate fluctuations.
We have converted portions of our distributors’ business into direct sales, and increased sales through
gopro.com, and if we were to do this on a larger scale, it could create significant disruptions to our distribution
channel and the associated revenue. As we continue to convert distribution to direct sales, we might not be
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successful in that transition. Additionally, 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 42% of our revenue for
2019 and 48% of our revenue for 2018 and 2017. One retailer accounted for 11%, 13% and 15% of our revenue
for 2019, 2018 and 2017, respectively. The loss of a small number of our large customers, or the reduction in
business with one or more of our large customers, could have a significant adverse effect on our operating
results. In addition, we may choose to temporarily or permanently stop shipping product to customers who do not
follow the policies and guidelines in our sales agreements, which could have a material negative effect on our
revenues and operating results. Our sales agreements with these large customers do not require them to
purchase any meaningful amount of our products annually and we grant limited rights to return product to some of
these large customers.
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 and logistics operators 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, cyber-
attacks, or floods, fires or other natural disasters near our distribution centers, or port shutdowns or other
transportation-related interruptions, including security breaches, along our distribution routes. Additionally, we use
one primary supplier for the third-party distribution and if this supplier were to experience financial difficulties,
cyber-attacks, or other types of interruption it could adversely affect our business.
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 cameras, except in the European Union, or EU, where we
provide a two-year warranty on all of our cameras. For certain mounts and accessories, where permitted, we
provide a lifetime warranty. 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 confidence and 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. Based on our historical experience
with our camera products, we have an established methodology for estimating warranty liabilities with respect to
cameras and accessories.
We offer GoPro Plus, our subscription offering, which has a camera replacement benefit as part of the monthly or
yearly subscription, which is available in the United States and internationally. Accidental damage coverage,
extended warranties and other camera replacement benefits are regulated in the United States on a state level
and are treated differently by each state. Additionally, outside the United States, regulations for camera
replacement benefits vary from country to country. Changes in interpretation of the insurance regulations or other
laws and regulations concerning extended warranties, accidental damage coverage or camera replacement
benefits on a federal, state, local or international level may cause us to incur costs or have additional regulatory
requirements to meet in the future in order to continue to offer GoPro Plus in compliance with any similar laws
adopted in other jurisdictions. Our failure to comply with past, present and future similar laws could result in
26
reduced sales of our products, reputational damage, penalties and other sanctions, which could harm our
business and financial condition.
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 cameras, drones and their associated mounts and accessories 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 or death. 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 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 or harm to all or
a subset of our users or should otherwise be restricted to protect consumers, 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 services,
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, maintain and protect 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 sufficient intellectual property rights in all countries where
unauthorized third-party copying or use of our proprietary technology occurs and the scope of our intellectual
property might be more limited in certain 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. 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, third-party 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, seek to cancel our trademark registrations, register domain names that mimic or
incorporate our marks, or otherwise infringe upon or harm our trademark rights. Although we police our trademark
rights carefully, there can be no assurance that we are aware of all third-party uses or that we will prevail in
enforcing our rights in all such instances. Any of these negative outcomes could affect the strength, value and
effectiveness of our brand, as well as our ability to market our products. We have also registered domain names
for websites, or URLs, that we use in our business, such as gopro.com, as well as social media handles. If we are
unable to protect our domain names or social media handles, our brand, business, and operating results could be
adversely affected. Domain names or social media handles similar to ours have already been registered in the
United States and elsewhere, and we may not be able to prevent third parties from acquiring and using domain
names or social media handles that infringe, are similar to, or otherwise decrease the value of, our trademarks. In
addition, we might not be able to, or may choose not to, acquire or maintain trademark registrations, domain
names, social media handles or other related rights in certain jurisdictions.
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.
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Third parties, including competitors and non-practicing entities, have brought intellectual property infringement
claims against us, including the matter described in Item 3 Legal Proceedings. We expect to continue to receive
such intellectual property claims in the future. While we will defend ourselves vigorously against any such existing
and future legal proceedings, we may not prevail against all 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. Further, an adverse ruling in an intellectual property infringement proceeding 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 some of our intellectual property. The occurrence of any of these
events may materially and adversely affect our business, financial condition, operating results or cash flows.
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 user-generated content or acquire rights to use and distribute music, athlete and celebrity
names and likenesses or other content for our original productions or third-party 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 or owners 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 user and distributor of content, we face potential liability for rights of publicity and
privacy, as well as copyright, or trademark infringement or other claims based on the nature and content of
materials that we distribute. If we are found to violate such third-party rights, then our business may suffer.
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 rely on several contract manufacturers, located primarily
in China and Mexico 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. We also rely on a number of supply chain partners to whom we
outsource activities related to inventory warehousing, order fulfillment, distribution and other direct sales logistics.
Our supply chain partners are located in China, Czech Republic, Hong Kong, Mexico, Netherlands, Singapore
and a number of other countries in Europe and the Asia Pacific region. Our manufacturers and supply chain
partners may experience disruptions in their operations due to equipment breakdowns, adding lines in a different
country, labor strikes or shortages, transportation security vulnerabilities, natural disasters, component or material
shortages, cyber-attacks, 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
affecting our ability to meet our demand forecast. Therefore, if we fail to manage our relationship with our
manufacturers and supply chain partners 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.
For example, in the first quarter of 2018, we decided to end the life of our REMO accessory due to issues related
to battery performance.
We do not control our contract manufacturers or suppliers, including their labor, environmental or other practices.
Environmental regulations or changes in the supply, demand or available sources of natural resources may affect
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the availability and cost of goods and services necessary to run our business. 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.
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 United States Foreign Corrupt Practices Act, the
United Kingdom 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 United States
Foreign Corrupt Practices Act, or FCPA, the United Kingdom Bribery Act 2010, or the U.K. Bribery Act, and similar
anti-bribery and anti-corruption laws in other jurisdictions generally prohibit United States based companies and
their intermediaries from making improper payments to non-United States officials for the purpose of obtaining or
retaining business, directing business to another, or securing an advantage. In addition, United States 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, United States 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 anti-corruption 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. While we have compliance programs,
they may not be effective to prevent violations from occurring and employees may engage in prohibited conduct
nonetheless. If we are found to be in violation of the FCPA, the U.K. Bribery Act or other anti-bribery or anti-
corruption 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.
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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.
We are subject to income taxes in the United States and various jurisdictions outside the United States. Our
effective tax rate could fluctuate due to changes in the mix of earnings and losses in countries with differing
statutory tax rates. 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. Our tax expense could also be affected by changes in non-deductible expenses,
changes in excess tax benefits related to exercises and vesting of stock-based expense, and the applicability of
withholding taxes.
Due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change.
Our future effective tax rate could be unfavorably affected by changes in the tax rates in jurisdictions where our
income is earned, by changes in, or our interpretation, of tax rules and regulations in the jurisdictions in which we
do business, by unanticipated decreases in the amounts of jurisdictional earnings, or by changes in the valuation
of our deferred tax assets and liabilities. The United States, the European Commission, countries in the European
Union, Australia, and other countries where we do business have been considering changes in relevant tax,
accounting and other laws, regulations and interpretations, including changes to tax laws applicable to corporate
multinationals. These potential changes could adversely affect our effective tax rates or result in other costs to us.
In addition, we are subject to the examination of our income tax returns by the United States Internal Revenue
Service (IRS) and other domestic and foreign tax authorities. These tax examinations are expected to focus on
our intercompany transfer pricing practices as well as other matters. We regularly assess the likelihood of
outcomes resulting from these examinations to determine the adequacy of our provision for income taxes and
other taxes and have reserved for adjustments that may result from the current examinations. We cannot provide
assurance that the final determination of any of these examinations will not have an adverse effect on our
operating results and financial position.
If we are unable to maintain effective internal control in the future, we may not be able to produce timely
and accurate financial statements, which could adversely affect 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 control 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 place significant demands on our financial and operational resources, as well as IT
systems.
While we have determined that our internal control over financial reporting was effective as of December 31,
2019, 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. Due to 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 are unable to assert that our internal control over financial reporting is 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
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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 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.
Our reported financial results may be negatively impacted by the changes in the accounting principles
generally accepted in the United States.
Generally accepted accounting principles in the United States are subject to interpretation by the Financial
Accounting Standards Board (FASB), the SEC and various bodies formed to promulgate and interpret appropriate
accounting principles. A change in these principles or interpretations could have a significant effect on our
reported financial results, and may even affect the reporting of transactions completed before the announcement
or effectiveness of a change. Other companies in our industry may apply these accounting principles differently
than we do, which may affect the comparability of our consolidated financial statements. For example, in February
2016, the Financial Accounting Standards Board issued Accounting Standards Update No. 2016-02 (Topic 842),
Leases, which requires operating leases to be recognized on the balance sheet as a lease liability and
corresponding right-of-use asset. Topic 842 was applied using a modified retrospective approach and was
effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods
within those fiscal years. Early adoption was permitted. See Note 1 Summary of business and significant
accounting policies, to the Notes to Consolidated Financial Statements of this Annual Report on Form 10-K for a
discussion on recent accounting standards.
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 2019 Annual Report for the year ended December 31,
2019 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 estimates and assumptions
made by management include those related to revenue recognition (including sales incentives, sales returns and
implied post contract support), stock-based compensation, inventory valuation, product warranty liabilities, the
valuation and useful lives of long-lived assets (property and equipment, operating lease right-of-use assets,
intangible assets and goodwill) and income taxes.
Catastrophic events or political instability could disrupt and cause harm to our business.
Our headquarters are located in the San Francisco Bay Area of California, an area susceptible to earthquakes. A
major earthquake or other natural disaster, fire, threat of fire, act of terrorism, public health issues 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 China, Hong Kong, Japan, Mexico, Netherlands,
Singapore, Taiwan and the United States. Political instability, public health issues or other catastrophic events in
31
any of those countries could adversely affect our business in the future, our financial condition and operating
results.
If we fail to comply with environmental regulations and conflict minerals disclosures, our business,
financial condition, operating results and reputation could be adversely affected.
We are subject to various federal, state, local and international environmental laws and regulations including laws
regulating the manufacture, import, use, discharge and disposal of hazardous materials, labeling and notice
requirements relating to potential consumer exposure to certain chemicals, and laws relating to the collection of
and recycling of electrical and electronic equipment and their packaging.
We are also subject to the SEC’s conflict minerals rule which 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. We have and will continue
to incur costs associated with complying with the rule, such as costs related to sourcing of certain minerals (or
derivatives thereof), 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.
Although we have policies and procedures in place requiring our contract manufacturers and major component
suppliers to comply with applicable federal, state, local and international requirements, we cannot confirm 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.
Changes in interpretation of any federal, state, local or international regulation may cause us to incur costs or
have additional regulatory requirements to meet in the future in order to comply, 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 effect on our results of operations or cash flows and, although we cannot predict the
future effect 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.
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
closing stock price has ranged from $3.38 to $93.85 per share through December 31, 2019. 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 offered by us or our competitors; changes in our business lines and product lineup; 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;
sales and purchases of any Class A common stock issued upon conversion of our convertible senior notes or in
connection with the prepaid forward contract entered into in connection with such convertible senior notes, and
general economic conditions. These factors, as well as the volatility of our Class A common stock, could also
affect the price of our convertible senior notes.
32
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 affects 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 subject to past shareholder
class action lawsuits as well as derivative lawsuits and may continue to be a target for such litigation in the future.
Securities litigation against us could result in substantial costs and liability and divert our management’s attention
from other business concerns, which could harm our business. See Legal Proceedings.
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 effect 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 we cannot predict the effect our dual class structure may have on our stock price or our business.
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 69.5% of the voting power of our
outstanding capital stock as of December 31, 2019 with Mr. Woodman, our Chairman and CEO, holding
approximately 69.3% 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 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.
In addition, we cannot predict whether our dual class structure, combined with the concentrated control by Mr.
Woodman, will result in a lower or more volatile market price of our Class A common stock or in adverse publicity
or other adverse consequences. For example, certain index providers have announced restrictions on including
companies with multiple-class share structures in certain of their indexes. In July 2017, FTSE Russell announced
that it plans to require new constituents of its indexes to have greater than 5% of the company’s voting rights in
the hands of public stockholders, and S&P Dow Jones announced that it will no longer admit companies with
multiple-class share structures to certain of its indexes. Because of our dual class structure, we may be excluded
from these indexes and we cannot assure you that other stock indexes will not take similar actions. Given the
sustained flow of investment funds into passive strategies that seek to track certain indexes, exclusion from stock
indexes would likely preclude investment by many of these funds and could make our Class A common stock less
attractive to other investors. As a result, the market price of our Class A common stock could be adversely
affected.
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
33
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 or our chief executive officer;
• when no shares of our Class B common stock are outstanding, only the chairman of our board of directors,
our chief executive officer 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.
Risks related to our convertible senior notes
We have indebtedness in the form of convertible senior notes.
In April 2017, we completed an offering of $175.0 million aggregate principal amount of 3.50% convertible senior
Notes due 2022 (Notes). As a result of this Notes offering, we incurred $175.0 million principal amount of
indebtedness, the principal amount of which we may be required to pay at maturity in 2022. Holders of the Notes
will have the right to require us to repurchase their Notes upon the occurrence of a fundamental change at a
purchase price equal to 100% of the principal amount of the Notes to be purchased, plus accrued and unpaid
interest, if any. In addition, the indenture for the Notes provides that we are required to repay amounts due under
the indenture in the event that there is an event of default for the Notes that results in the principal, premium, if
any, and interest, if any, becoming due prior to Maturity Date for the Notes. There can be no assurance that we
will be able to repay this indebtedness when due, or that we will be able to refinance this indebtedness on
acceptable terms or at all. In addition, this indebtedness could, among other things:
•
•
•
heighten our vulnerability to adverse general economic conditions and heightened competitive pressures;
require us to dedicate a larger portion of our cash flow from operations to interest payments, limiting the
availability of cash for other purposes;
limit our flexibility in planning for, or reacting to, changes in our business and industry; and
34
•
impair our ability to obtain additional financing in the future for working capital, capital expenditures,
acquisitions, general corporate purposes or other purposes.
In addition, our ability to purchase the Notes or repay prior to maturity any accelerated amounts under the Notes
upon an event of default or pay cash upon conversions of the Notes may be limited by law, by regulatory authority
or by agreements governing our indebtedness outstanding at the time, including our credit facility. Our credit
facility restricts our ability to repurchase the Notes for cash or repay prior to maturity any accelerated amounts
under the Notes upon an event of default or pay cash upon conversion of the Notes to the extent that on the date
of such repurchase, repayment or conversion, as the case may be, after giving pro forma effect to such payment,
our remaining borrowing capacity pursuant to such credit facility falls below (i) to the extent that our fixed charge
coverage ratio is at least to 1.0, the greater of (A) $37.5 million and (B) 15% of the lesser of the aggregate
commitments under such credit facility and the aggregate borrowing base then in effect or (ii) to the extent that
our fixed charge coverage ratio is less than 1.0 to 1.0, the greater of (A) $50.0 million and (B) 20% of the lesser of
the aggregate commitments under such credit facility and the aggregate borrowing base then in effect. Any of our
future indebtedness may contain similar restrictions. Our failure to repurchase Notes at a time when the
repurchase is required by the indenture (whether upon a fundamental change or otherwise under the indenture)
or pay cash payable on future conversions of the Notes as required by the indenture would constitute a default
under the indenture. A default under the indenture or the fundamental change itself could also lead to a default
under agreements governing our existing or future indebtedness, including our credit facility. If the repayment of
the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have
sufficient funds to repay the indebtedness, repurchase the Notes or make cash payments upon conversions
thereof.
Our credit facility imposes restrictions on us that may adversely affect our ability to operate our business.
Our credit facility contains 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. In addition, our credit facility contains, and the agreements
governing the Notes will contain, a cross-default provision whereby a default under one agreement would likely
result in cross defaults under agreements covering other borrowings. For example, the occurrence of a default
with respect to any indebtedness or any failure to repay debt when due in an amount in excess of $25 million
would cause a cross default under the indenture governing the Notes, as well as under our credit facility. The
occurrence of a default under any of these borrowing arrangements would permit the holders of the Notes or the
lenders under our credit facility to declare all amounts outstanding under those borrowing arrangements to be
immediately due and payable. If the note holders or the trustee under the indenture governing the Notes or the
lenders under our credit facility accelerate the repayment of borrowings, we cannot assure you that we will have
sufficient assets to repay those borrowings.
Conversion of the Notes will, to the extent we deliver shares upon conversion of such Notes, dilute the
ownership interest of existing stockholders, including holders who had previously converted their Notes,
or may otherwise depress our stock price.
The conversion of some or all of the Notes will dilute the ownership interests of existing stockholders to the extent
we deliver shares upon conversion of any of the Notes. Any sales in the public market of the common stock
issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition,
the existence of the Notes may encourage short selling by market participants because the conversion of the
Notes could be used to satisfy short positions, or anticipated conversion of the Notes into shares of our common
stock could depress our stock price.
The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition
and operating results.
In the event the conditional conversion feature of the Notes is triggered, holders of the Notes will be entitled to
convert the Notes at any time during specified periods at their option. If one or more holders elect to convert their
Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other
than cash in lieu of any fractional share), we would be required to settle a portion or all of our conversion
obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders of
35
the Notes do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify
all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would
result in a material reduction of our net working capital.
The accounting method for convertible debt securities that may be settled in cash, such as the Notes,
may have a material effect on our reported financial results.
Under GAAP, an entity must separately account for the debt component and the embedded conversion option of
convertible debt instruments that may be settled entirely or partially in cash upon conversion, such as the Notes
we are offering, in a manner that reflects the issuer’s economic interest cost. The effect of the accounting
treatment for such instruments is that the value of such embedded conversion option would be treated as original
issue discount for purposes of accounting for the debt component of the Notes, and that original issue discount is
amortized into interest expense over the term of the Notes using an effective yield method. As a result, we will
initially be required to record a greater amount of non-cash interest expense because of the amortization of the
original issue discount to the Notes’ face amount over the term of the Notes and because of the amortization of
the debt issuance costs.
Accordingly, we will report lower net income (or greater net loss) in our financial results because of the recognition
of both the current period’s amortization of the debt discount and the Notes’ coupon interest, which could
adversely affect our reported or future financial results, the trading price of our common stock and the trading
price of the Notes.
In addition, convertible debt instruments (such as the Notes) that may be settled entirely or partly in cash are
currently accounted for utilizing the if-converted method, the effect of which is that conversion will not be assumed
for purposes of computing diluted income (loss) per share if the effect would be antidilutive. Under the if-converted
method, for diluted income (loss) per share purposes, convertible debt is antidilutive whenever its interest, net of
tax and nondiscretionary adjustments, per common share obtainable on conversion exceeds basic income (loss)
per share. Dilutive securities that are issued during a period and dilutive convertible securities for which
conversion options lapse, or for which related debt is extinguished during a period, will be included in the
denominator of diluted income (loss) per share for the period that they were outstanding. Likewise, dilutive
convertible securities converted during a period will be included in the denominator for the period prior to actual
conversion. Moreover, interest charges applicable to the convertible debt will be added back to the numerator. We
cannot be sure that the accounting standards in the future will continue to permit the use of the if-converted
method. If we are unable to use the if-converted method in accounting for the shares issuable upon conversion of
the Notes, then our diluted income (loss) per share would be adversely affected.
In addition, if the conditional conversion feature of the Notes is triggered, even if holders do not elect to convert
their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding
principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our
net working capital.
The prepaid forward may affect the value of the Notes and our common stock and may result in
unexpected market activity in the Notes and/or our common stock.
In connection with the issuance of the Notes, we entered into a prepaid forward with a forward counterparty. The
prepaid forward is intended to facilitate privately negotiated derivative transactions by which investors in the
Notes will be able to hedge their investment. In connection with establishing its initial hedge of the prepaid
forward, the forward counterparty (or its affiliate) entered into or expects to enter into one or more derivative
transactions with respect to our Class A common stock with purchasers of the Notes concurrently with or after
the offering of the Notes. The prepaid forward is intended to reduce the dilution to our stockholders from the
issuance of our Class A common stock (if any) upon conversion of the Notes and to allow certain investors to
establish short positions that generally correspond to commercially reasonable initial hedges of their investment
in the Notes. In addition, the forward counterparty (or its affiliate) may modify its hedge position by entering into
or unwinding one or more derivative transactions with respect to our Class A common stock and/or purchasing or
selling our Class A common stock or other securities of ours in secondary market transactions at any time,
including following the offering of the Notes and immediately prior to or shortly after April 15, 2022, the Maturity
Date of the Notes (and are likely to unwind their derivative transactions and/or purchase or sell our Class A
36
common stock in connection with any conversion or repurchase of the Notes, in connection with the purchase or
sale of Notes by certain investors and/or in the event that sufficient borrow of our Class A common stock
becomes available). These activities could also cause or avoid an increase or a decrease in the market price of
our Class A common stock or the Notes.
The prepaid forward initially facilitated privately negotiated derivative transactions relating to our Class A
common stock, including derivative transactions by which investors in the Notes established short positions
relating to our Class A common stock to hedge their investments in the Notes concurrently with, or shortly after,
the placement of the Notes. Neither we nor the forward counterparty control how such investors may use such
derivative transactions. In addition, such investors may enter into other transactions in connection with such
derivative transactions, including the purchase or sale of our Class A common stock, at any time. As a result, the
existence of the prepaid forward, such derivative transactions, and any related market activity could cause more
sales of our Class A common stock over the term of the prepaid forward than there would have otherwise been
had we not entered into the prepaid forward. Such sales could potentially affect the market price of our Class A
common stock and/or the Notes.
The fundamental change repurchase feature of the Notes may delay or prevent an otherwise beneficial
attempt to take over our company.
The terms of the Notes require us to repurchase the Notes in the event of a fundamental change. A takeover of
our company would trigger an option of the holders of the Notes to require us to repurchase the Notes. In
addition, if a make-whole fundamental change occurs prior to the Maturity Date of the Notes, we will in some
cases be required to increase the conversion rate for a holder that elects to convert its Notes in connection with
such make-whole fundamental change. Furthermore, the indenture for the Notes prohibits us from engaging in
certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under
the Notes. These and other provisions of the indenture may have the effect of delaying or preventing a takeover
of our company.
We are subject to counterparty risk with respect to the prepaid forward.
We will be subject to the risk that the forward counterparty might default under the prepaid forward. Our exposure
to the credit risk of the forward counterparty will not be secured by any collateral. Global economic conditions
have in the recent past resulted in, and may again result in, the actual or perceived failure or financial difficulties
of many financial institutions. If the forward counterparty becomes subject to insolvency proceedings, we will
become an unsecured creditor in those proceedings, with a claim equal to our exposure at that time under our
transactions with the forward counterparty. Our exposure will depend on many factors, but, generally, an increase
in our exposure will be correlated to an increase in the market price of our common stock. In addition, upon a
default by the forward counterparty, we may suffer more dilution than we currently anticipate with respect to our
Class A common stock. We can provide no assurances as to the financial stability or viability of the forward
counterparty to the prepaid forward.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
As of December 31, 2019, we leased office facilities around the world totaling approximately 370,000 square feet,
including approximately 198,000 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 9 Commitments, contingencies and guarantees, to the Notes to Consolidated
Financial Statements of this Annual Report on Form 10-K for more information about our lease commitments.
37
Item 3. Legal Proceedings
On February 13, 2018 and February 27, 2018, two purported shareholder derivative lawsuits (the Consolidated
Federal Derivative Actions) were filed in the United States District Court for the Northern District of California
against certain of GoPro’s current and former directors and executive officers and naming the Company as a
nominal defendant. The Consolidated Federal Derivative Actions are based on allegations similar to those in two
now-resolved shareholder class actions - one filed in 2016 which was settled and received final approval of the
Court on September 20, 2019, and the other filed in 2018 which had final judgment entered in favor of defendants
on June 24, 2019, following the Court’s granting of defendants’ motion to dismiss. The Consolidated Federal
Derivative Actions assert causes of action against the individual defendants for breach of fiduciary duty, and for
making false and misleading statements about the Company’s business, operations and prospects in violation of
Sections 10(b) and 14(a) of the Securities Exchange Act of 1934. The plaintiffs seek corporate reforms,
disgorgement of profits from stock sales, and fees and costs. The Consolidated Federal Derivative Actions are
currently stayed.
Different shareholders filed two similar purported shareholder derivative actions on October 30, 2018 and
November 7, 2018 in the Delaware Court of Chancery (the Consolidated Delaware Derivative Actions).
Defendants’ motion to dismiss the Consolidated Delaware Derivative Actions is pending.
Other shareholders filed similar purported shareholder derivative actions on December 26, 2018, February 15,
2019, and January 27, 2020 in the Delaware Court of Chancery. Those actions are either stayed or defendants’
time to respond to the complaint has not yet passed.
On January 5, 2015, Contour LLC filed a complaint against the Company in federal court in Utah alleging, among
other things, patent infringement in relation to certain GoPro cameras. On November 30, 2015, Contour
dismissed the Utah action. On November 30, 2015, Contour IP Holdings LLC (“CIPH”), a non-practicing entity re-
filed a similar complaint in Delaware seeking unspecified damages. GoPro filed an inter partes review (IPR) at the
US Patent and Trademark Office. The case was transferred to the Northern District of California in July 2017 and
was stayed in favor of the IPR proceedings, most recently on December 12, 2018. Upon conclusion of the IPRs,
the District Court lifted the stay on October 1, 2019. On October 8, 2019, the court entered a schedule for the
remainder of the case, with trial currently scheduled to begin on August 31, 2020. We believe that this matter
lacks merit and we intend to vigorously defend against CIPH.
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. 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 effect on our business, financial condition, results of operations or cash flows.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for the Company’s Common Shares, Related Shareholder Matters and Issuer Purchases of
Equity Securities
Market Information. Our Class A common stock is listed on The Nasdaq Global Select Market under the symbol
“GPRO.” Our Class B common stock is not listed nor traded on any stock exchange.
Holders. As of January 31, 2020, there were 145 holders of record of our Class A common stock and 32 holders
of record of our Class B common stock.
Dividends. We have not declared or paid any cash dividends on our capital stock and do not currently intend to
pay any cash dividends on our Class A or Class B common stock in the foreseeable future.
38
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 2020 Annual Meeting of Stockholders within 120 days after the
end of our fiscal year ended December 31, 2019.
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 December 31, 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, 2019. Note that historic stock price performance is not intended to
be indicative of future stock price performance.
Sales of unregistered securities. During the period covered by this Annual Report on Form 10-K, we have not
sold any equity securities that were not registered under the Securities Act of 1933, as amended.
Issuer purchases of equity securities. No shares of our Class A or Class B common stock were purchased
during the fourth quarter of 2019.
39
Item 6. Selected Consolidated Financial Data
The information set forth below for the five years ended December 31, 2019 is not necessarily indicative of results
of future operations, and should be read 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.
(dollars in thousands, except per share
amounts)
Consolidated statements of operations data:
Revenue
Gross profit
Gross margin
Operating income (loss)
Net income (loss)
Net income (loss) per share:
Basic
Diluted
Other financial information:
Adjusted EBITDA (2)
Non-GAAP net income (loss) (3)
Non-GAAP diluted income (loss) per share
$
$
$
$
$
$
$
Year ended December 31,
2019
2018 (1)
2017 (1)
2016 (1)
2015 (1)
$1,194,651
$1,148,337
$1,179,741
$1,185,481
$1,619,971
$ 412,789
$ 361,434
$ 384,530
$ 461,920
$ 673,214
34.6%
31.5%
32.6%
39.0%
41.6%
(2,333)
$
(93,962)
$ (163,460)
$ (372,969)
(14,642)
$ (109,034)
$ (182,873)
$ (419,003)
$
$
$
$
54,748
36,131
0.27
0.25
(1.32)
(1.32)
$
$
(3.01)
(3.01)
(31,368)
$ (192,807)
$ 179,309
(95,867)
$ (201,247)
$ 111,564
(0.69)
$
(1.44)
$
0.76
(0.10)
(0.10)
71,958
35,255
0.24
$
$
$
$
$
(0.78)
(0.78)
21,778
(31,909)
(0.23)
$
$
$
$
$
(1)
The Company adopted Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) on January 1, 2019, and adopted ASU
2014-09, Revenue from Contracts with Customers (Topic 606), and ASU 2016-16 Income Taxes - Intra-Entity Transfers of Assets Other
Than Inventory on January 1, 2018. Prior periods were not adjusted for the adoption of these standards.
(2) 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, point of purchase (POP) display amortization, stock-based compensation, impairment charges
and restructuring costs.
(3) We define non-GAAP net income as net income (loss) adjusted to exclude stock-based compensation, acquisition-related costs,
restructuring costs, non-cash interest expense, gain on sale and license of intellectual property and income tax adjustments. Acquisition-
related costs include the amortization of acquired intangible assets and impairment write-downs (if applicable), as well as third-party
transaction costs for legal and other professional services.
See Non-GAAP Financial Measures in Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations for additional information and a reconciliation of net income (loss) to Adjusted EBITDA, net
income (loss) to non-GAAP net income (loss), and shares used in the calculation of non-GAAP diluted income
(loss) per share.
40
(in thousands)
Consolidated balance sheet data:
Cash, cash equivalents and marketable
securities
Inventory
Working capital
Total assets
Total indebtedness
Total stockholders’ equity
2019
2018 (1)
As of December 31,
2017 (1)
2016 (1)
2015 (1)
$
165,148
$
197,512
$
247,390
$
217,953
$
474,058
144,236
208,925
792,803
148,810
233,529
116,458
174,574
698,359
138,992
212,112
150,551
203,156
850,246
130,048
298,705
167,192
157,074
922,640
—
188,232
538,066
1,102,976
—
446,945
772,033
(1)
The Company adopted Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) on January 1, 2019, and adopted ASU
2014-09, Revenue from Contracts with Customers (Topic 606), and ASU 2016-16 Income Taxes - Intra-Entity Transfers of Assets Other
Than Inventory on January 1, 2018. Prior periods were not adjusted for the adoption of these standards.
41
GoPro, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
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. This 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 2019 to 2018 is presented below. An
analysis of our financial results comparing 2018 to 2017 can be found under “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in Part II, Item 7 in our Annual Report on Form 10-
K for the fiscal year ended December 31, 2018, filed with the SEC on February 15, 2019, which is available
free of charge on the SEC’s website at www.sec.gov and our Investor Relations website at https://
investor.gopro.com.
•
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 our contractual obligations, including expected payment schedule
and indemnifications as of December 31, 2019.
• Critical Accounting Policies and Estimates. Accounting estimates that we believe are important to
understanding the assumptions and judgments incorporated in our reported financial results and forecasts.
• Non-GAAP Financial Measures. A reconciliation and discussion of our GAAP to non-GAAP financial
measures.
Overview
GoPro helps its consumers capture and share their experiences in immersive and exciting ways. We are
committed to developing solutions that create an easy, seamless experience for consumers to capture, create,
and share engaging personal content. When consumers use our products and services, they often generate and
share content that organically increases awareness for GoPro, driving a virtuous cycle and a self-reinforcing
demand for our products. We believe revenue growth may be driven by the introduction of new cameras,
accessories, subscription offerings and GoPro app monetization. We believe new camera features drive a
replacement cycle among existing users and attract new users, expanding our total addressable market. Our
investments in image stabilization, mobile app editing and sharing solutions, modular accessories, auto-upload
capabilities, local language user-interfaces and voice recognition in more than 12 languages drive the expansion
of our global market.
In 2019, we began shipping our HERO8 Black flagship camera which features enhanced HyperSmooth 2.0 image
stabilization, TimeWarp Video 2.0, built-in mounting, live streaming, cloud connectivity, voice control, improved
audio and a touch display. HyperSmooth 2.0 includes dramatically improved pitch axis stabilization, a new Boost
mode for absolute maximum stabilization, and powerful in-app horizon leveling that provides gimbal-like stability.
TimeWarp Video 2.0 automatically applies a high-speed, ‘magic-carpet-ride’ effect to videos, while live streaming
enables users to share content in real time on social media platforms. We also introduced three new accessories
for the HERO8 Black camera, called Mods, which enables users to transform their HERO8 Black camera into a
production powerhouse. The Media Mod delivers shotgun-mic performance with an integrated directional
microphone, the Light Mod illuminates a scene and the Display Mod allows users to perfectly frame themselves
during self-capture. We also began shipping our newest 360-degree waterproof camera, MAX, in 2019. Our MAX
42
GoPro, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
camera features MAX HyperSmooth image stabilization, 360-degree MAX TimeWarp Video, MAX SuperView,
PowerPano, built-in mounting, high-quality audio, live streaming, voice control and a front facing touch display.
MAX HyperSmooth provides the highest performance video stabilization yet, while MAX SuperView provides the
widest view ever from a GoPro camera. PowerPano allows users to capture a 6.2mp, 270-degree panoramic
photo with the push of one button and creates an artifact-free shot of action or movement. Our MAX camera
features six built-in microphones that allow users to capture immersive 360-degree audio, directional audio for
vlogging and the best stereo sound ever from a GoPro. Our HERO8 Black, MAX and HERO7 line of cameras are
compatible with our ecosystem of mountable and wearable accessories, and feature automatic uploading
capabilities for photos and videos to GoPro Plus, our subscription service that provides a camera protection plan,
discounts on GoPro accessories and enables subscribers to easily access, edit, store and share their content.
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.
(units and dollars in thousands,
except per share amounts)
Revenue
Camera units shipped (1)
Gross margin (2)
Operating expenses
Net income (loss)
Diluted net income (loss) per
share
Cash provided by (used in)
operations
Other financial information:
Adjusted EBITDA (3)
Non-GAAP net income (loss) (4)
Non-GAAP income (loss) per
share
Q4 2019
Q4 2018
% Change
FY 2019
FY 2018
% Change
4 %
(2)%
$
528,345
$
377,378
40 % $ 1,194,651
$ 1,148,337
1,857
38.2%
105,725
95,820
0.65
88,251
112,092
102,498
0.70
$
$
$
$
$
$
$
$
$
$
$
$
$
$
1,413
31 %
37.7%
50 bps
4,260
34.6%
4,337
31.5%
310 bps
109,150
31,671
(3)% $
415,122
$
455,396
203 % $
(14,642)
$ (109,034)
(9)%
(87)%
0.22
195 % $
(0.10)
48,413
82 % $
(24,444)
58,807
42,356
91 % $
142 % $
71,958
35,255
0.30
133 % $
0.24
$
$
$
$
$
(0.78)
(87)%
(42,434)
(42)%
21,778
(31,909)
230 %
(210)%
(0.23)
(204)%
(1) Represents the number of camera units that are shipped during a reporting period, including camera units that are shipped with drones,
net of any returns. Camera units shipped does not include drones sold without a camera, mounts or accessories.
(2) One basis point (bps) is equal to 1/100th of 1%.
(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, point of purchase (POP) display amortization, stock-based compensation, impairment charges,
and restructuring and other costs.
(4) We define non-GAAP net income (loss) as net income (loss) adjusted to exclude stock-based compensation, acquisition-related costs,
restructuring and other costs, non-cash interest expense, gain on sale and license of intellectual property and income tax adjustments.
Acquisition-related costs include the amortization of acquired intangible assets and impairment write-downs (if applicable), as well as
third-party transaction costs for legal and other professional services.
Reconciliations of non-GAAP adjusted measures to the most directly comparable GAAP measures are presented
under Non-GAAP Financial Measures.
43
GoPro, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Full year and fourth quarter 2019 financial performance
Revenue for 2019 was up 4% year-over-year at $1.195 billion, compared to $1.148 billion in 2018. Excluding
Karma, revenue for 2019 increased 7% year-over-year. Gross margin for 2019 was 34.6%, up from 31.5% in
2018. The year-over-year margin improvement was primarily due to a favorable sales mix and lower average
camera costs in 2019, partially offset by United States tariffs and one-time costs related to the production delay of
HERO8 Black. We shipped 4.3 million camera units in 2019, a 2% decrease from 2018. However, our average
selling price for 2019 increased 6% year-over-year to $280 (defined as total revenue divided by camera units
shipped). Excluding Karma, our 2019 average selling price increased 8% year-over-year.
Revenue for the fourth quarter of 2019 was $528.3 million, a 40% increase year-over-year from $377.4 million in
the same period of 2018. In addition, the gross margin percentage for the fourth quarter of 2019 was 38.2%, up
from 37.7% in the same period of 2018. Revenue and gross margin in the fourth quarter of 2019 were positively
impacted by the launch of the MAX and HERO8 Black cameras in the fourth quarter of 2019 compared to the
launch of the HERO7 line of cameras in the third quarter of 2018. Camera units shipped in the fourth quarter of
2019 was 1.9 million units, compared to 1.4 million units in the same period of 2018. Our fourth quarter of 2019
average selling price (defined as total revenue divided by camera units shipped) increased to $285, a 7%
increase year-over-year.
Our full year 2019 and fourth quarter of 2019 operating expenses decreased 9% and 3%, respectively, primarily
attributable to our continued focus on cost management and the financial benefits recognized from our
restructuring actions.
We returned to profitability on a GAAP and non-GAAP basis in the fourth quarter 2019 with net income of $95.8
million and $102.5 million, respectively. In addition, for 2019, our GAAP net loss improved year-over-year by
$94.4 million to a net loss of $14.6 million and we returned to profitability on a non-GAAP basis with net income of
$35.3 million. 2019 adjusted EBITDA improved to $72.0 million from $21.8 million in 2018.
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 operate our business and improve our results of operations.
Driving profitability through improved efficiency, lower costs and better execution. We incurred operating losses
in 2019, 2018 and 2017, however, our restructuring actions have significantly reduced our operating expenses
in 2019 and 2018 resulting in a flatter, more efficient global organization that has allowed for improved
communication and better alignment amongst our functional teams. If we are unable to generate adequate
revenue growth, or continue to manage our expenses, we may incur significant losses in the future and may not
be able to achieve profitability.
Investing in research and development and enhancing our customer experience. Our performance is significantly
dependent on the investments we make in research and development, including our ability to attract and retain
highly skilled and experienced research and development personnel. We expect the timing of new product
releases to continue to have a significant impact on our revenue and we must continually develop and introduce
innovative new cameras, mobile applications and other new offerings. We plan to further build upon our integrated
mobile and cloud-based storytelling solutions, and subscription offerings. Our investments, including those for
marketing and advertising, may not successfully drive increased revenue and our customers may not accept our
new offerings. If we fail to innovate and enhance our brand, our products, our integrated storytelling solutions, the
value proposition of our subscriptions, our market position and revenue will be adversely affected. Further, we
have incurred substantial research and development expenses and if our efforts are not successful, we may not
recover the value of these investments.
Growing our total addressable market globally. We continue to believe that international markets represent a
significant growth opportunity for GoPro. While the total market for digital cameras has continued to decline as
smartphone and tablet camera quality has improved, we continue to believe that our consumers’ differentiated
use of GoPro cameras, our integrated storytelling solutions, our continued innovation of product features desired
by our users, and our brand, all help support our business from many of the negative trends facing this category.
44
GoPro, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
However, we expect that the markets in which we conduct our business will remain highly competitive as we face
new product introductions from competitors. We will continue to increase our global presence through the active
promotion of our brand, the creation and cultivation of regional strategic and marketing partnerships, the
expansion of localized products in international markets with region-specific marketing, and an investment focus
on the biggest opportunities.
Our growth also depends on expanding our total addressable market with our subscription service, GoPro Plus,
and capture solutions, including MAX, which faces intense competition. If we are not successful in penetrating
additional markets, we might not be able to grow revenue and we may not recognize benefits from our investment
in new areas.
Marketing the improved GoPro experience to our extended community. We intend to continue investing
resources in our marketing, advertising and brand management efforts. Historically, our growth has largely been
fueled by the adoption of our products by people looking to self-capture images of themselves participating in
exciting physical activities. Our future growth depends on continuing to reach, expand and re-engage with this
core user base. We believe that consumers in our core user base in many markets are not familiar with our brand
and products and believe there is an opportunity for GoPro to expand awareness through a range of advertising
and promotional programs and campaigns, including through social media. In addition, we may look to expand
our user base to include a broader group of consumers. 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.
Seasonality. Historically, we have experienced the highest levels of revenue in the fourth quarter of the year,
coinciding with the holiday shopping season, particularly in the United States and Europe. While we have
implemented operational changes aimed at reducing the impact of fourth quarter seasonality on full year
performance, 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, sales incentives (including price
protection), and subscription services. Revenue is derived from the sale of our cameras and accessories directly
to retailers, through our network of domestic and international distributors, and through gopro.com. See Critical
Accounting Policies and Estimates and Note 1 Summary of business and significant accounting policies, to the
Notes to Consolidated Financial Statements of this Annual Report on Form 10-K for information regarding
revenue recognition.
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 and
equipment depreciation, excess and obsolete inventory write-downs, amortization of acquired developed
technology, license fees, tariffs and certain allocated costs related to our manufacturing team, 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, and allocated facilities, restructuring,
depreciation and other supporting overhead expenses associated with the development of our product and
service offerings.
Sales and marketing. Our sales and marketing expense consists primarily of advertising and marketing
promotions of our products and services, and personnel-related costs, including salaries, stock-based
compensation and employee benefits. Sales and marketing expense also includes point of purchase (POP)
display expenses and related amortization, sales commissions, trade show and event costs, sponsorship costs,
45
GoPro, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
consulting and contractor expenses, and allocated facilities, restructuring, depreciation and other supporting
overhead expenses.
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, restructuring, depreciation and other
supporting overhead expenses.
Results of Operations
The following table sets forth the components of our consolidated statements of operations for each of the periods
presented, and each component as a percentage of revenue:
(dollars in thousands)
2019
2018
2017
Year ended December 31,
$
1,194,651
100 % $
1,148,337
100 % $
1,179,741
100 %
Revenue
Cost of revenue
Gross profit
Operating expenses:
Research and development
Sales and marketing
General and administrative
Total operating expenses
Operating loss
Other income (expense):
Interest expense
Other income, net
Total other expense, net
Loss before income taxes
Income tax (benefit) expense
Net loss
$
781,862
412,789
142,894
206,431
65,797
415,122
(2,333)
(19,229)
2,492
(16,737)
(19,070)
(4,428)
(14,642)
65
35
12
17
6
35
—
(2)
—
(2)
(2)
(1)
786,903
361,434
167,296
222,096
66,004
455,396
69
31
15
19
6
40
795,211
384,530
229,265
236,581
82,144
547,990
67
33
19
20
7
46
(93,962)
(9)
(163,460)
(13)
(18,683)
4,970
(13,713)
(107,675)
1,359
(1)
—
(1)
(10)
—
(13,660)
733
(12,927)
(176,387)
6,486
(1)
—
(1)
(14)
1
(1)% $
(109,034)
(10)% $
(182,873)
(15)%
46
GoPro, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Revenue
(camera units and dollars in thousands,
Year ended December 31,
2019 vs 2018
2018 vs 2017
except average selling price)
2019
2018
2017
% Change
% Change
Camera units shipped
Average selling price
Direct channel
Percentage of revenue
Distribution channel
Percentage of revenue
Total revenue
Americas
Percentage of revenue
Europe, Middle East and Africa (EMEA)
Percentage of revenue
Asia and Pacific (APAC)
Percentage of revenue
Total revenue
4,260
280
548,322
45.9%
646,329
$
$
$
4,337
265
551,095
48.0%
597,242
$
$
$
4,303
274
634,888
53.8%
544,853
54.1%
52.0%
46.2%
$
$
$
$ 1,194,651
$ 1,148,337
$ 1,179,741
$
$
$
523,975
43.9%
359,187
30.0%
311,489
$
$
$
494,797
43.1%
366,438
31.9%
287,102
$
$
$
582,917
49.4%
333,454
28.3%
263,370
26.1%
25.0%
22.3%
(2)%
1 %
6
(1)
8
4 %
6 %
(2)
8
(3)
(13)
10
(3)%
(15)%
10
9
$ 1,194,651
$ 1,148,337
$ 1,179,741
4 %
(3)%
2019 Compared to 2018. Revenue for 2019 was up 4% year-over-year at $1.195 billion, compared to $1.148
billion in 2018, despite a $28.6 million decrease in Karma drone and drone accessory revenue, as we exited the
drone business in 2018. Excluding Karma, revenue for 2019 increased 7% year-over-year. We shipped 4.3 million
camera units in 2019, a 2% decrease from 2018. Our average selling price for 2019 increased 6% year-over-year
to $280, primarily due to a shift of cameras sold equal to or greater than $300, which represented 90% of our
camera revenue mix. Excluding Karma, our 2019 average selling price increased 8% year-over-year. Average
selling price is defined as total revenue divided by camera units shipped. Year-over-year, revenue by channel has
slightly shifted from direct to distribution and revenue by geography has slightly shifted from EMEA to APAC
primarily due to increasing our advertising and marketing efforts in APAC and an increase in demand for our
cameras in APAC. Revenue from gopro.com is included as a component of our direct channel, and represented
10%, 8% and 7% of total revenue for 2019, 2018 and 2017, respectively.
Cost of revenue and gross margin
(dollars in thousands)
Cost of revenue
Stock-based compensation
Acquisition-related costs
Restructuring costs
Total cost of revenue
Gross margin
Year ended December 31,
2019 vs 2018
2018 vs 2017
2019
2018
2017
% Change
% Change
$
772,088
$
772,136
$
786,657
— %
(2)%
1,902
7,818
54
1,954
11,434
1,379
1,935
5,985
634
(3)
(32)
(96)
1
91
118
$
781,862
$
786,903
$
795,211
(1)%
(1)%
34.6%
31.5%
32.6%
310 bps
(110) bps
2019 Compared to 2018. Gross margin of 34.6% in 2019 increased from 31.5% in 2018, or 310 bps, reflecting a
favorable product sales mix, 271 bps, and lower average camera costs, 131 bps, partially offset by slightly higher
operational expenses, (71) bps, and higher sales incentives, (70) bps.
47
GoPro, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Research and development
(dollars in thousands)
Research and development
Stock-based compensation
Acquisition-related costs
Restructuring costs
Year ended December 31,
2019 vs 2018
2018 vs 2017
2019
2018
2017
% Change
% Change
$
125,142
$
134,866
$
191,182
(7)%
(29)%
17,167
—
585
19,636
—
12,794
24,963
3,028
10,092
(13)
—
(95)
(21)
(100)
27
Total research and development
$
142,894
$
167,296
$
229,265
(15)%
(27)%
Percentage of revenue
12.0%
14.6%
19.4%
2019 Compared to 2018. The year-over-year decrease of $24.4 million, or 15%, in total research and
development expense in 2019 compared to 2018 reflected a $12.2 million decrease in restructuring costs, a $5.6
million decrease in depreciation and other supporting overhead expenses, a $3.9 million decrease in cash-based
personnel-related costs and a $2.5 million decrease in stock-based compensation.
Sales and marketing
(dollars in thousands)
Sales and marketing
Stock-based compensation
Restructuring costs
Total sales and marketing
Percentage of revenue
Year ended December 31,
2019 vs 2018
2018 vs 2017
2019
2018
2017
% Change
% Change
$
198,074
$
207,346
$
219,036
8,043
314
9,459
5,291
10,498
7,047
$
206,431
$
222,096
$
236,581
17.3%
19.3%
20.1%
(4)%
(15)
(94)
(7)%
(5)%
(10)
(25)
(6)%
2019 Compared to 2018. The year-over-year decrease of $15.7 million, or 7%, in total sales and marketing
expenses in 2019 compared to 2018 reflected an $8.8 million decrease in overall advertising and marketing
expenses, a $5.0 million decrease in restructuring costs, a $3.9 million decrease in allocated facilities,
depreciation and other supporting overhead expenses, and a $1.4 million decrease in stock-based compensation,
partially offset by a $3.0 million increase in app marketplace and credit card processing fees, and a $0.6 million
increase in travel related expenses.
General and administrative
(dollars in thousands)
General and administrative
Stock-based compensation
Acquisition-related costs
Restructuring costs
Year ended December 31,
2019 vs 2018
2018 vs 2017
2019
2018
2017
% Change
% Change
$
55,220
$
52,865
$
10,076
—
501
9,838
22
3,279
65,788
13,859
(22)
2,519
4 %
2
(100)
(85)
(20)%
(29)
(200)
30
Total general and administrative
$
65,797
$
66,004
$
82,144
— %
(20)%
Percentage of revenue
5.5%
5.7%
7.0%
2019 Compared to 2018. Total general and administrative expenses were slightly down in 2019 compared to
2018 primarily due to a $2.8 million decrease in restructuring costs partially offset by a $2.7 million increase in
allocated facilities and other supporting overhead expenses.
Restructuring costs
First quarter 2018 restructuring plan. On January 2, 2018, we approved a restructuring plan to further reduce
future operating expenses and better align resources around our long-term business strategy. The restructuring
48
GoPro, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
provided for a reduction of our workforce of approximately 18%, the closure of our aerial group and the
consolidation of certain leased office facilities. Under the first quarter 2018 restructuring plan, we recorded
restructuring charges of $17.8 million, including $14.1 million related to severance and $3.7 million related to
accelerated depreciation and other charges, which primarily relate to exiting office spaces and the closure of our
aerial products business.
First quarter 2017 restructuring plan. On March 15, 2017, we approved a restructuring plan that provided for a
reduction of our workforce by approximately 17% and the consolidation of certain leased office facilities. Under
the first quarter 2017 restructuring plan, we recorded restructuring charges of $23.1 million, including $10.3 million
related to severance and $12.8 million related to accelerated depreciation and other charges. The actions
associated with the first quarter 2017 restructuring plan were substantially completed by the fourth quarter of
2017.
Fourth quarter 2016 restructuring plan. On November 29, 2016, we approved a restructuring plan that provided
for a reduction in our workforce of approximately 15%, the closure of our entertainment group and the
consolidation of certain leased office facilities. Under the fourth quarter 2016 restructuring plan, we recorded
restructuring charges of $40.0 million, including $36.8 million related to severance and $3.2 million related to
accelerated depreciation and other charges, which primarily pertain to exiting office spaces. The actions
associated with the fourth quarter 2016 restructuring plan were substantially completed by March 31, 2017.
See Note 11 Restructuring charges, to the Notes to Consolidated Financial Statements.
Other income (expense)
(dollars in thousands)
Interest expense
Other income, net
Total other expense, net
Year ended December 31,
2019 vs 2018
2018 vs 2017
2019
2018
2017
% Change
% Change
$
$
(19,229) $
(18,683) $
(13,660)
2,492
4,970
733
(16,737) $
(13,713) $
(12,927)
3%
(50)
22%
37%
578
6%
2019 Compared to 2018. Total other expense, net, increased $3.0 million in 2019 compared to 2018, primarily
due to a $5.0 million gain on the sale and license of intellectual property recognized in 2018, which did not recur
in 2019, partially offset by a $2.4 million increase in net foreign exchange rate-based transaction gains.
Income taxes
(dollars in thousands)
Income tax (benefit) expense
Effective tax rate
Year ended December 31,
2019 vs 2018
2018 vs 2017
2019
2018
2017
% Change
% Change
$
(4,428)
$
1,359
$
6,486
(426)%
(79)%
23.2%
(1.3)%
(3.7)%
2019 Compared to 2018. We recorded an income tax benefit of $4.4 million in 2019 on a pre-tax net loss of $19.1
million, which resulted in an effective tax rate of 23.2%. Our income tax benefit was primarily related to an overall
decrease in losses before income taxes, a benefit from the reversal of previously accrued tax provision on
uncertain tax positions that were no longer necessary due to the expiration of the statute of limitations and
settlements with certain taxing jurisdictions, partially offset by the valuation allowance on United States federal
and state net deferred tax assets and a shortfall tax impact from stock-based compensation. Our 2018 negative
effective tax rate of 1.3% resulted primarily from a benefit related to the conclusion of an IRS audit and a benefit
related to the set up and current year activity of disregarded entities (foreign branches) for United States tax
purposes, partially offset by the valuation allowance on United States federal and state net deferred tax assets
and a shortfall tax impact from stock-based compensation.
See Note 8 Income taxes, to the Notes to Consolidated Financial Statements for additional information.
49
GoPro, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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, 2019.
(dollars in thousands, except
per share amounts)
Dec. 31,
2019
Sept. 30,
2019
June 30,
2019
March 31,
2019
Dec. 31,
2018
Sept. 30,
2018
June 30,
2018
March 31,
2018
Revenue
Gross profit
Operating expenses (1)
Net income (loss)
$ 528,345
$ 131,169
$ 292,429
$ 242,708
$ 377,378
$ 285,936
$ 282,677
$ 202,346
201,825
105,725
28,432
99,630
102,185
109,132
80,347
100,635
142,117
109,150
91,032
83,369
44,916
112,386
114,205
119,655
$
95,820
$ (74,810) $ (11,287) $ (24,365) $
31,671
$ (27,089) $ (37,269) $ (76,347)
Three months ended
Net income (loss) per share:
Basic
Diluted
$
$
0.65
0.65
$
$
(0.51) $
(0.08) $
(0.17) $
(0.51) $
(0.08) $
(0.17) $
0.22
0.22
$
$
(0.19) $
(0.27) $
(0.19) $
(0.27) $
(0.55)
(0.55)
(1)
Included in operating expenses were restructuring charges of $1.7 million for the quarter ended June 30, 2019, $4.0 million for the
quarter ended September 30, 2018, and $16.7 million for the quarter ended March 31, 2018.
Liquidity and Capital Resources
The following table presents selected financial information as of December 31, 2019 and 2018:
(dollars in thousands)
Cash and cash equivalents
Marketable securities
Total cash, cash equivalents and marketable securities
Percentage of total assets
December 31, 2019
December 31, 2018
$
$
150,301
14,847
165,148
$
$
21%
152,095
45,417
197,512
28%
Our primary source of cash is receipts from sales of our products and services. Other sources of cash are from
proceeds from employee participation in the employee stock purchase plan, the exercise of employee stock
options, tax refunds and facility subleases. The primary uses of cash are for inventory procurement, payroll-
related expenses, general operating expenses, including advertising, marketing and office rent, purchases of
property and equipment and other costs of revenue.
As of December 31, 2019, our cash, cash equivalents and marketable securities of $165.1 million reflected a
decrease of $32.4 million, or 16.4%, compared to December 31, 2018. The change was primarily due to an
increase in accounts receivable driven by the timing of sales in the fourth quarter and an increase in inventory due
to our production delay, partially offset by positive operating cash (net loss of $14.6 million, offset by non-cash
expenses of $78.0 million). As of December 31, 2019, $23.9 million of cash was held by our foreign subsidiaries.
Convertible Notes
In April 2017, we issued $175.0 million aggregate principal amount of 3.50% Convertible Senior Notes in a private
placement to purchasers for resale to qualified institutional buyers. The Notes mature on April 15, 2022, unless
earlier repurchased or converted into shares of Class A common stock subject to certain conditions. The Notes
are convertible into cash, shares of the Class A common stock, or a combination thereof, at our election, at an
initial conversion rate of 94.0071 shares of common stock per $1,000 principal amount of the Notes, which is
equivalent to an initial conversion price of approximately $10.64 per share of common stock, subject to
adjustment. We pay interest on the Notes semi-annually in arrears on April 15 and October 15 of each year.
Proceeds received from the issuance of the Notes were allocated between a liability component (long-term debt)
and an equity component (additional paid-in capital). The fair value of the liability component was measured using
rates determined for similar debt instruments without a conversion feature.
In connection with the Notes offering, we entered into a prepaid forward stock repurchase transaction agreement
50
GoPro, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Prepaid Forward) with a financial institution. Pursuant to the Prepaid Forward, we used approximately $78.0
million of the proceeds from the offering of the Notes to pay the prepayment amount. The aggregate number of
shares of our Class A common stock underlying the Prepaid Forward is approximately 9.2 million shares. The
expiration date for the Prepaid Forward is April 15, 2022, although it may be settled earlier in whole or in part.
Upon settlement of the Prepaid Forward, at expiration or upon any early settlement, the forward counterparty will
deliver to us the number of shares of Class A common stock underlying the Prepaid Forward or the portion thereof
being settled early. The shares purchased under the Prepaid Forward were treated as treasury stock on the
consolidated balance sheet (and not outstanding for purposes of the calculation of basic and diluted income (loss)
per share), but remain outstanding for corporate law purposes, including for purposes of any future stockholders’
votes, until the forward counterparty delivers the shares underlying the Prepaid Forward to us. The net proceeds
from the Convertible Senior Notes offering of approximately $91 million were used for general corporate
purposes.
Liquidity
We believe, based on our most current projections, that our cash, cash equivalents and marketable securities,
and amounts available under our credit facility, will be sufficient to address our working capital needs, capital
expenditures, outstanding commitments and other liquidity requirements for 12 months from the issuance of these
financial statements.
• We expect that operating expenses and inventory purchases will constitute a material use of our cash
balances. We intend to continue to manage our operating activities in line with our existing cash and available
financial resources.
•
In March 2016, we entered into a credit agreement with a syndicate of banks that provided for a secured
revolving credit facility under which we could borrow up to an aggregate of $250.0 million. Our credit facility
terminates in March 2021. (See Note 4 Financing Arrangements, in the Notes to Consolidated Financial
Statements for additional information.)
• We have completed acquisitions in the past and we may 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.
In the future, we may require additional funding to respond to business opportunities, challenges or unforeseen
circumstances. If we are unable to obtain adequate financing under our credit facility, or other sources, when we
require it, our ability to grow or support our business and to respond to business challenges could be significantly
limited. 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.
Summary of Cash Flow
The following table summarizes our cash flows for the periods indicated:
(in thousands)
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Cash flows from operating activities
Year ended December 31,
2019 vs 2018
2018 vs 2017
2019
2018
2017
% Change
% Change
$
$
$
(24,444) $
(42,434) $
(36,853)
22,771
$
(6,235) $
(43,097)
(1,044) $
(1,481) $
88,594
(42)%
(465)%
(30)%
15 %
(86)%
(102)%
Cash used in operating activities of $24.4 million was primarily attributable to a net cash outflow of $87.8 million
from changes in operating assets and liabilities and a net loss of $14.6 million, offset by non-cash expenses of
$78.0 million. Cash outflows related to operating assets and liabilities consisted primarily of a $71.3 million
increase in accounts receivable and a $27.8 million increase in inventory, partially offset by a $7.5 million
51
GoPro, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
decrease in prepaid expenses and other assets, and a $3.2 million increase in accounts payable and other
liabilities.
Cash flows from investing activities
Our primary investing activities consisted of purchases, maturities and sales of marketable securities, and
purchases of property and equipment. Cash provided by investing activities was $22.8 million resulting from
maturities and sales of marketable securities of $74.8 million, partially offset by purchases of marketable
securities of $43.6 million and net purchases of property and equipment of $8.3 million.
Cash flows from financing activities
Our primary financing activities consisted of the issuance of equity securities under our common stock plans.
Cash used in financing activities was $1.0 million resulting from $6.6 million in tax payments for net RSU
settlements, partially offset by $5.6 million received from stock purchases made through our employee stock
purchase plan and employee stock option exercises.
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.
Contractual Obligations
As of December 31, 2019, our total undiscounted future expected payment obligations under our agreements with
terms longer than one year were approximately $303.6 million, including $175.0 million for our Convertible Senior
Notes, $88.8 million for operating leases, $3.2 million for sponsorship agreements and $36.6 million for other
multi-year agreements. See Note 4 Financing Arrangements, for a discussion regarding our Convertible Senior
Notes and Note 9 Commitments, contingencies and guarantees, for a discussion regarding facility leases and
other contractual commitments in the Notes to Consolidated Financial Statements.
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 1 Summary of business and significant accounting policies, 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. 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.
52
GoPro, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Revenue recognition
We derive substantially all of our revenue from the sale of cameras, mounts and accessories, and subscription
services. We recognize revenue when control of the promised goods or services is transferred to customers, in an
amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The
transaction price we expect to be entitled to is primarily comprised of product revenue, net of returns and variable
consideration, including sales incentives provided to customers.
For most of our revenue, revenue is recognized at the time the product is delivered and when collection is
deemed probable. For the Company’s subscription services, revenue is recognized on a ratable basis over the
subscription term, with payments received in advanced of services being rendered recorded in deferred revenue.
For customers who purchase products directly from gopro.com, we retain a portion of the risk of loss on these
sales during transit, which are accounted for as fulfillment costs.
Our standard terms and conditions 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 and other factors. An estimated return liability along with a right to recover assets are recorded for
future product 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
may fluctuate over time, but are sufficiently predictable to 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 camera sales contain multiple performance obligations that generally include the following three separate
obligations: a) a hardware component (camera and/or accessories) and the embedded firmware essential to the
functionality of the hardware delivered at the time of sale, b) the implicit right to our downloadable free apps and
software solutions, and c) the implied right for the customer to receive post contract support after the initial sale
(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, and email and telephone support. Judgment is required to properly identify the
accounting units of multiple performance obligations and to determine the manner in which revenue should be
allocated among the obligations. We allocate the transaction price to PCS based on a cost-plus method. The
transaction price is allocated to the remaining performance obligations on a residual value method. Our process
to allocate the transaction price 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
transaction price among the performance obligations will not affect the amount of total revenue ultimately
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.
We provide our customers with sales incentives through various programs, including cooperative advertising,
price protection, marketing development funds and other incentives. Sales incentives are considered to be
variable consideration, which we estimate and record as a reduction to revenue at the date of sale. Sales
incentives are influenced by historical experience, product sell-through and other factors. Actual sales incentives
and their impact on reported revenue could differ from our estimates.
Inventory valuation
Inventory consists of finished goods and component parts, and is stated at the lower of cost or net realizable
value on a first-in, first-out basis. Our inventory balances were $144.2 million and $116.5 million as of
December 31, 2019 and 2018, 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 or 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.
53
GoPro, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Warranty
We generally provide a 12-month warranty coverage on all of our products except in the EU where we provide a
24-month warranty. The Company also offers extended warranty programs for a fee. Our standard 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 United States federal statutory rate, primarily due to changes in our valuation allowance, the effect of
non-United States operations, deductible and non-deductible stock-based compensation expense, state taxes,
federal research and development tax credits and other adjustments. Our effective tax rate was 23.2%, a negative
1.3% and a negative 3.7% in 2019, 2018 and 2017, respectively. The calculation of our 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.
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 more likely outcome.
Our future effective tax rates could be adversely affected if actual earnings are different than our estimates, 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, 2019, we determined that no impairment of the carrying value of goodwill was
required.
Recent Accounting Pronouncements
Refer to Recent Accounting Pronouncements in Note 1 Summary of business and significant accounting policies,
to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
54
GoPro, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Non-GAAP Financial Measures
We report net income (loss) and diluted net income (loss) per share in accordance with United States generally
accepted accounting principles (GAAP) and on a non-GAAP basis. Additionally, we report non-GAAP adjusted
EBITDA. We use non-GAAP financial measures 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. Our management uses, and believes that investors benefit from referring to these non-GAAP
financial measures in assessing our operating results. These non-GAAP financial measures should not be
considered in isolation from, or as an alternative to, the measures prepared in accordance with GAAP, and are not
based on any comprehensive set of accounting rules or principles. We believe that these non-GAAP measures,
when read in conjunction with our GAAP financials, provide useful information to investors by facilitating:
•
•
•
the comparability of our on-going operating results over the periods presented;
the ability to identify trends in our underlying business; and
the comparison of our operating results against analyst financial models and operating results of other public
companies that supplement their GAAP results with non-GAAP financial measures.
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:
•
•
•
•
•
•
•
adjusted EBITDA 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
property and equipment being depreciated and amortized often will have to be replaced in the future, and
adjusted EBITDA does not reflect any cash capital expenditure requirements for such replacements;
adjusted EBITDA excludes the amortization of POP display assets because it is a non-cash charge, and is
treated similarly to depreciation of property and equipment and amortization of acquired intangible assets;
adjusted EBITDA and non-GAAP net income (loss) exclude the impairment of intangible assets because it is
a non-cash charge that is inconsistent in amount and frequency;
adjusted EBITDA and non-GAAP net income (loss) exclude restructuring and other related costs which
primarily include severance-related costs, stock-based compensation expenses, facilities consolidation
charges recorded in connection with restructuring actions announced in the fourth quarter of 2016, first
quarter of 2017 and first quarter of 2018, and the related ongoing operating lease cost of those facilities
recorded under ASC 842. These expenses do not reflect expected future operating expenses and do not
contribute to a meaningful evaluation of current operating performance or comparisons to the operating
performance in other periods;
adjusted EBITDA and non-GAAP net income (loss) exclude stock-based compensation expense related to
equity awards granted primarily to our workforce. We exclude stock-based compensation expense because
we believe that the non-GAAP financial measures excluding this item provide meaningful supplemental
information regarding operational performance. In particular, we note that companies calculate stock-based
compensation expense for the variety of award types that they employ using different valuation
methodologies and subjective assumptions. These non-cash charges are not factored into our internal
evaluation of net income (loss) as we believe their inclusion would hinder our ability to assess core
operational performance;
non-GAAP net income (loss) excludes acquisition-related costs including the amortization of acquired
intangible assets (primarily consisting of acquired technology), the impairment of acquired intangible assets (if
applicable), as well as third-party transaction costs incurred for legal and other professional services. These
costs are not factored into our evaluation of potential acquisitions, or of our performance after completion of
the acquisitions, because these costs are not related to our core operating performance or reflective of
ongoing operating results in the period, and the frequency and amount of such costs are inconsistent and
vary significantly based on the timing and magnitude of our acquisition transactions and the maturities of the
businesses being acquired. Although we exclude the amortization of acquired intangible assets from our non-
55
GoPro, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
•
•
•
GAAP net income (loss), management believes that it is important for investors to understand that such
intangible assets were recorded as part of purchase accounting and contribute to revenue generation;
non-GAAP net income (loss) excludes non-cash interest expense. In connection with the issuance of the
Convertible Senior Notes in April 2017, we are required to recognize non-cash interest expense in
accordance with the authoritative accounting guidance for convertible debt that may be settled in cash;
non-GAAP net income (loss) excludes a gain on the sale and license of intellectual property. This gain is not
related to our core operating performance or reflective of ongoing operating results in the period, and the
frequency and amount of such gains are inconsistent;
non-GAAP net income (loss) includes income tax adjustments. We utilize a cash-based non-GAAP tax
expense approach (based upon expected annual cash payments for income taxes) for evaluating operating
performance as well as for planning and forecasting purposes. This non-GAAP tax approach eliminates the
effects of period specific items, which can vary in size and frequency and does not necessarily reflect our
long-term operations. Historically, we computed a non-GAAP tax rate based on non-GAAP pre-tax income on
a quarterly basis, which considered the income tax effects of the adjustments above; and
•
other companies may calculate these non-GAAP financial measures differently than we do, limiting their
usefulness as comparative measures.
The following tables present a reconciliation of net income (loss) to adjusted EBITDA:
(in thousands)
Net income
Income tax (benefit) expense
Interest expense, net
Depreciation and amortization
POP display amortization
Stock-based compensation
Restructuring and other costs
Adjusted EBITDA
(in thousands)
Net income (loss)
Income tax (benefit) expense
Interest expense
Depreciation and amortization
POP display amortization
Stock-based compensation
Impairment of intangible assets
Restructuring costs
Adjusted EBITDA
Three months ended December 31,
2019
2018
$
95,820
$
(3,928)
5,032
6,445
1,666
7,028
29
31,671
1,655
4,470
7,290
2,788
9,716
1,217
$
112,092
$
58,807
Year ended December 31,
2019
2018
2017
2016
2015
$
(14,642) $
(109,034) $
(182,873) $
(419,003) $
(4,428)
17,872
26,268
7,504
37,188
—
2,196
1,359
17,278
35,063
13,482
40,887
—
6,486
12,804
41,478
19,190
51,255
—
22,743
20,292
43,829
1,401
41,639
19,623
69,527
7,088
43,089
36,131
16,454
234
28,981
16,829
80,680
—
—
$
71,958
$
21,778
$
(31,368) $
(192,807) $
179,309
56
GoPro, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following tables present a reconciliation of net income (loss) to non-GAAP net income (loss):
(in thousands, except per share data)
Net income
Stock-based compensation
Acquisition-related costs
Restructuring and other costs
Non-cash interest expense
Gain on sale and license of intellectual property
Income tax adjustments
Non-GAAP net income
GAAP diluted net income per share
Non-GAAP diluted net income per share
Shares for diluted net income per share
(in thousands)
Net income (loss)
Stock-based compensation
Acquisition-related costs
Restructuring costs
Non-cash interest expense
Gain on sale and license of intellectual
property
Income tax adjustments (1)
Non-GAAP net income (loss)
GAAP diluted net income (loss) per share
Non-GAAP diluted net income (loss) per
share
GAAP shares for diluted net income (loss)
$
$
$
Three months ended December 31,
2019
2018
$
95,820
$
31,671
7,028
1,864
29
2,354
—
(4,597)
102,498
$
0.65
0.70
$
$
$
$
$
9,716
2,101
1,217
2,124
(5,000)
527
42,356
0.22
0.30
147,052
143,401
Year ended December 31,
2019
2018
2017
2016
2015
$
(14,642) $
(109,034) $
(182,873) $
(419,003) $
37,188
7,818
2,196
8,987
—
(6,292)
40,887
11,456
22,743
8,112
(5,000)
(1,073)
51,255
8,991
20,292
5,345
—
1,123
69,527
17,346
43,089
—
—
36,131
80,680
5,370
—
—
—
87,794
(10,617)
35,255
$
(31,909) $
(95,867) $
(201,247) $
111,564
(0.10) $
(0.78) $
(1.32) $
(3.01) $
0.24
$
(0.23) $
(0.69) $
(1.44) $
0.25
0.76
per share
144,891
139,495
138,056
139,425
146,486
Add: effect of dilutive shares
1,580
—
—
—
—
Non-GAAP shares for diluted net income
(loss) per share
146,471
139,495
138,056
139,425
146,486
(1) Beginning in the first quarter of 2017, we implemented a cash-based non-GAAP expense approach (based upon expected annual cash
payments for income taxes) for evaluating operating performance as well as for planning and forecasting purposes. This non-GAAP
approach eliminates the effects of period specific items, which can vary in size and frequency and does not necessarily reflect our long-
term operations. Historically, we computed a non-GAAP tax rate based on non-GAAP pre-tax income on a quarterly basis, which
considered the income tax effects of the adjustments above.
57
GoPro, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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, the 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 hold foreign denominated cash balances and incur a majority of their operating expenses in foreign
currencies, principally the Euro, British Pound, Australian Dollar, Japanese Yen and Chinese Yuan. 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
expand our operations, if foreign currency exchange rates become volatile, or if foreign currency held in our
foreign 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, commercial paper, U.S. treasury securities 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% shift in interest rates would have a material effect on the fair value of
our investment portfolio.
The fair value of our Senior Convertible Notes is subject to interest rate risk, market risk and other factors due to
the convertible feature. The fair value of the Notes will generally increase as interest rates fall and decrease as
interest rates rise. In addition, the fair value of the Notes will generally increase as our Class A common stock
price increases and will generally decrease as the common stock price declines. The interest and market value
changes affect the fair value of the Notes but do not impact our financial position, cash flows or results of
operations due to the fixed nature of the debt obligation.
58
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 Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Financial Statement Schedule for the years ended December 31, 2019, 2018 and 2017: Schedule II -
Valuation and Qualifying Accounts
Page
60
62
63
64
65
67
91
The supplementary financial information required by this Item 8, is included in Part II, Item 7 under the caption
Results of Operations, which is incorporated herein by reference.
59
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of GoPro, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of GoPro, Inc. and its subsidiaries (the
“Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations, of
stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2019,
including the related notes and financial statement schedule listed in the accompanying index (collectively
referred to as the “consolidated financial statements”). We also have audited the Company's internal control over
financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2019 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, 2019, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the COSO.
Changes in Accounting Principles
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it
accounts for leases in 2019 and the manner in which it accounts for revenue from contracts with customers and
the manner in which it accounts for the tax consequences of intra-entity asset transfers in 2018.
Basis for Opinions
The Company's management is responsible for these consolidated 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 the Company’s consolidated financial statements and
on the Company's internal control over financial reporting based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are
free of material misstatement, whether due to error or fraud, and whether effective internal control over financial
reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. 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.
60
Definition and Limitations of Internal Control over Financial Reporting
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.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that (i)
relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters does not
alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Sales Incentives
As described in Notes 1 and 3 to the consolidated financial statements, the Company offers sales incentives
through various programs, including cooperative advertising, price protection, marketing development funds and
other incentives. The Company has accrued $39 million of sales incentives as of December 31, 2019. Sales
incentives are considered to be variable consideration, which management estimates and records as a reduction
to revenue at the date of sale. Management estimates sales incentives based on historical experience, product
sell-through and other factors.
The principal considerations for our determination that performing procedures relating to sales incentives is a
critical audit matter are that the estimate involves significant judgment by management in determining the
estimated sales incentives. This in turn led to significant audit effort in performing audit procedures relating to
management’s estimate, which is based on historical experience, product sell-through and other factors and a
high degree of auditor judgment and subjectivity in evaluating audit evidence obtained related to the estimate.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming
our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness
of controls relating to the completeness, accuracy, and valuation of estimated sales incentives. These procedures
also included, among others, evaluating management’s process for developing the estimate, evaluating the
completeness and accuracy of management’s assumptions against approved sales incentive plans, customer
sales incentive spending details, and estimated future demand, and testing subsequent events to compare certain
transactions occurring after December 31, 2019 against the accrued sales incentives as of December 31, 2019.
/s/ PricewaterhouseCoopers LLP
San Jose, California
February 14, 2020
We have served as the Company’s auditor since 2011.
61
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
Operating lease right-of-use assets
Intangible assets, net
Goodwill
Other long-term assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Short-term operating lease liabilities
Deferred revenue
Total current liabilities
Long-term taxes payable
Long-term debt
Long-term operating lease liabilities
Other long-term liabilities
Total liabilities
Commitments, contingencies and guarantees (Note 9)
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, 117,922 and 105,170 shares issued and
outstanding, respectively; 150,000 Class B shares authorized, 28,897
and 35,897 shares issued and outstanding, respectively
Treasury stock, at cost, 10,710 and 10,710 shares, respectively
Accumulated deficit
Total stockholders’ equity
December 31, 2019
December 31, 2018
$
$
$
$
$
$
150,301
14,847
200,634
144,236
25,958
535,976
36,539
53,121
5,247
146,459
15,461
792,803
160,695
141,790
9,099
15,467
327,051
13,726
148,810
62,961
6,726
559,274
152,095
45,417
129,216
116,458
30,887
474,073
46,567
—
13,065
146,459
18,195
698,359
148,478
135,892
—
15,129
299,499
19,553
138,992
—
28,203
486,247
—
—
930,875
(113,613)
(583,733)
233,529
894,755
(113,613)
(569,030)
212,112
698,359
Total liabilities and stockholders’ equity
$
792,803
$
The accompanying notes are an integral part of these consolidated financial statements.
62
GoPro, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
2019
2018
2017
Year ended December 31,
Revenue
Cost of revenue
Gross profit
Operating expenses:
Research and development
Sales and marketing
General and administrative
Total operating expenses
Operating loss
Other income (expense):
Interest expense
Other income, net
Total other expense, net
Loss before income taxes
Income tax (benefit) expense
Net loss
Basic and diluted net loss per share
$
1,194,651
$
1,148,337
$
1,179,741
781,862
412,789
142,894
206,431
65,797
415,122
786,903
361,434
167,296
222,096
66,004
455,396
795,211
384,530
229,265
236,581
82,144
547,990
(2,333)
(93,962)
(163,460)
(19,229)
2,492
(16,737)
(19,070)
(4,428)
(18,683)
4,970
(13,713)
(107,675)
1,359
(13,660)
733
(12,927)
(176,387)
6,486
(14,642) $
(109,034) $
(182,873)
(0.10) $
(0.78) $
(1.32)
$
$
Weighted-average number of shares outstanding, basic and
diluted
144,891
139,495
138,056
The accompanying notes are an integral part of these consolidated financial statements.
63
GoPro, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands)
Common stock and
additional paid-in capital
Shares
Amount
Treasury
stock
Amount
Accumulated
deficit
Stockholders’
equity
Balances at December 31, 2016
141,359 $
757,226
$
(35,613) $
(274,668) $
446,945
Common stock issued under employee benefit plans, net of
shares withheld for tax
Taxes paid related to net share settlements
Stock-based compensation expense
Repurchase of common stock under Prepaid Forward
contract
Issuance of Convertible Note
Cumulative effect of adoption of new accounting standard
Net loss
4,807
—
—
9,732
(12,118)
54,037
—
—
—
(9,166)
(1)
(78,000)
—
—
—
45,211
365
—
—
—
—
Balances at December 31, 2017
137,000
854,452
(113,613)
Common stock issued under employee benefit plans, net of
shares withheld for tax
Taxes paid related to net share settlements
Stock-based compensation expense
Cumulative effect of adoption of new accounting standard
Net loss
4,067
—
—
—
—
5,099
(6,650)
41,854
—
—
—
—
—
—
—
—
—
—
—
—
15,407
(182,873)
(442,134)
—
—
—
(17,862)
9,732
(12,118)
54,037
(78,001)
45,211
15,772
(182,873)
298,705
5,099
(6,650)
41,854
(17,862)
(109,034)
(109,034)
Balances at December 31, 2018
141,067
894,755
(113,613)
(569,030)
212,112
Common stock issued under employee benefit plans, net of
shares withheld for tax
Taxes paid related to net share settlements
Stock-based compensation expense (Note 6)
Cumulative effect of adoption of new accounting standard
(Note 1)
Net loss
5,751
—
—
—
—
5,553
(6,618)
37,185
—
—
—
—
—
—
—
—
—
—
5,553
(6,618)
37,185
(61)
(61)
(14,642)
(14,642)
Balances at December 31, 2019
146,818 $
930,875
$
(113,613) $
(583,733) $
233,529
The accompanying notes are an integral part of these consolidated financial statements.
64
GoPro, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating
Year ended December 31,
2019
2018
2017
$
(14,642) $
(109,034) $
(182,873)
activities:
Depreciation and amortization
Non-cash operating lease cost
Stock-based compensation
Deferred income taxes
Non-cash restructuring charges
Non-cash interest expense
Gain on sale and license of intellectual property
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 used in operating activities
Investing activities:
Purchases of property and equipment, net
Purchases of marketable securities
Maturities of marketable securities
Sale of marketable securities
Proceeds from the sale and license of intellectual property
Net cash provided by (used in) investing activities
Financing activities:
Proceeds from issuance of common stock
Taxes paid related to net share settlement of equity awards
Proceeds from issuance of convertible senior notes
Prepayment of forward stock repurchase transaction
Payment of deferred acquisition-related consideration
Payment of debt issuance costs
Proceeds from borrowings
Repayment of borrowings
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
26,268
6,990
37,188
(32)
(199)
8,987
—
(1,182)
(71,269)
(27,778)
7,486
3,210
529
(24,444)
(8,348)
(43,636)
56,888
17,867
—
22,771
5,574
(6,618)
—
—
—
—
20,000
(20,000)
(1,044)
923
(1,794)
152,095
35,063
—
40,887
(389)
6,282
8,112
(5,000)
1,696
(16,460)
34,093
35,390
(70,400)
(2,674)
(42,434)
(11,004)
(57,731)
57,500
—
5,000
(6,235)
5,169
(6,650)
—
—
—
—
—
—
(1,481)
(259)
(50,409)
202,504
Cash and cash equivalents at end of period
$
150,301
$
152,095
$
Supplementary cash flow disclosure:
65
41,478
—
51,255
(2,527)
7,315
5,345
—
4,094
52,278
16,641
9,303
(44,411)
5,249
(36,853)
(24,061)
(52,318)
21,659
11,623
—
(43,097)
9,751
(12,118)
175,000
(78,000)
(75)
(5,964)
—
—
88,594
1,746
10,390
192,114
202,504
Cash paid for interest
Cash paid (refunded) for income taxes, net
Non-cash investing and financing activities:
Purchases of property and equipment included in accounts
payable and accrued liabilities
$
$
$
6,179
176
$
$
6,125
$
(32,090) $
3,114
8,370
316
$
223
$
5,785
The accompanying notes are an integral part of these consolidated financial statements.
66
GoPro, Inc.
Notes to Consolidated Financial Statements
1. Summary of business and significant accounting policies
GoPro, Inc. and its subsidiaries (GoPro or the Company) helps its consumers capture and share their
experiences in immersive and exciting ways. The Company is committed to developing solutions that create an
easy, seamless experience for consumers to capture, create and share engaging personal content. To date, the
Company’s cameras, mountable and wearable accessories, and subscription services have generated
substantially all of its revenue. The Company sells its products globally through retailers, distributors and on
gopro.com. The Company’s global corporate headquarters are located in San Mateo, California.
Basis of presentation. The accompanying consolidated financial statements have been prepared in accordance
with United States 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. All intercompany balances and transactions have been eliminated in
consolidation.
Use of estimates. The preparation of consolidated 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. Significant estimates and assumptions
made by management include those related to revenue recognition (including sales incentives, sales returns and
implied post contract support), stock-based compensation, inventory valuation, product warranty liabilities, the
valuation and useful lives of long-lived assets (property and equipment, operating leases, intangible assets and
goodwill) and income taxes. 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 (loss). For all periods presented, comprehensive income (loss) approximated net
income (loss). Therefore, the consolidated statements of comprehensive income (loss) have been omitted.
Prior period reclassifications. Reclassifications of certain prior period amounts in the consolidated financial
statements, including a refinement in methodology for revenue by geography, 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 and corporate debt securities, and are classified as available-for-sale
securities. The Company views these securities as available to support current operations and 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. Unrealized losses are charged against other income,
net, for declines in fair value below the cost of an individual investment that is deemed to be other than temporary.
The Company has not identified any marketable securities as other-than-temporarily impaired for the periods
presented. The cost of securities sold is based upon a specific identification method.
Accounts receivable and allowance for doubtful accounts. Accounts receivable are stated at invoice value
less estimated allowances for doubtful accounts. Allowances are recorded based on the Company’s 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, 2019 and 2018 was $0.8 million and $0.5 million,
respectively.
Inventory. Inventory consists of finished goods and component parts, which are purchased directly from contract
manufacturers or from suppliers. Inventory is stated at the lower of cost or net realizable value 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 plus the estimated cost to sell. The
67
GoPro, Inc.
Notes to Consolidated Financial Statements
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.
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 along with product placement available
for cameras and accessories. POP display costs 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. Cash
outflows and amortization related to POP displays are classified as operating activities in the consolidated
statement of cash flows. Amortization was $7.5 million, $13.5 million and $19.2 million in 2019, 2018 and 2017,
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 nine 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:
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. Beginning January 1, 2019, operating leases are presented as operating lease right-of-use (ROU) assets,
short-term operating lease liabilities and long-term operating lease liabilities on the Company’s consolidated
balance sheets. ROU assets represent the Company’s right to control the use of an underlying asset for the lease
term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.
Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present
value of future lease payments. The Company determines its incremental borrowing rate based on the
approximate rate at which the Company would borrow, on a secured basis, to calculate the present value of future
lease payments. Lease expenses are recognized on a straight-line basis over the lease term. Certain leases
include an option to renew with terms that can extend the lease term from one to five years. The exercise of a
lease renewal option is at the Company’s sole discretion and is included in the lease term when the Company is
reasonably certain it will exercise the option.
Prior to January 1, 2019, the Company recognized leases under ASC 840, Leases, which had the following
differences from the current lease standard, ASC 842, Leases:
• Operating leases were previously not recorded on the Company’s consolidated balance sheets.
68
GoPro, Inc.
Notes to Consolidated Financial Statements
• The Company calculated a liability for future costs to be incurred under a lease for its remaining term
without economic benefit to the Company upon determination of a cease-use date. The fair value of the
liability was determined based on remaining lease payments, estimated sublease income and the effects
of any prepaid or deferred items recognized under the lease.
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 approaches 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 or more frequently if indicators of potential impairment 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. There was no
impairment of goodwill recorded for any periods presented. For the Company’s annual impairment testing in 2019,
the Company did not identify any indicators of potential impairment of its single reporting unit. Other indefinite-
lived intangible assets are assessed for impairment at least annually. If their 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 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 were no material impairments of long-lived
assets for any period 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 2-year warranty. The
Company also offers extended warranty programs for a fee. 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. The Company derives substantially all of its revenue from the sale of cameras, mounts
and accessories, the related implied post contract support to customers, and subscription services. The Company
recognizes revenue when control of the promised goods or services is transferred to customers, in an amount that
reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The
transaction price the Company expects to be entitled to is primarily comprised of product revenue, net of returns
and variable consideration, including sales incentives provided to customers. For most of the Company’s revenue,
revenue is recognized at the time products are delivered and when collection is considered probable. For the
Company’s subscription services, revenue is recognized on a ratable basis over the subscription term, with
payments received in advance of services being rendered recorded in deferred revenue. For customers who
purchase products directly from gopro.com, the Company retains a portion of the risk of loss on these sales
during transit, which are accounted for as fulfillment costs. The Company provides sales commissions to internal
and external sales representatives which are earned in the period in which revenue is recognized. As a result, the
Company expenses such costs as incurred under Accounting Standards Update (ASU) 2014-19 Revenue from
Contracts with Customers, which was adopted on January 1, 2018. Upon adoption, the Company’s accumulated
deficit increased by $2.9 million, of which, $4.9 million related to certain estimated sales incentives which would
have been recognized at the time product was shipped in the prior period, partially offset by $2.0 million related to
sales from gopro.com that had been shipped but not delivered as of December 31, 2017.
The Company's standard terms and conditions of sale for non-web based sales do not allow for product returns
other than under warranty. However, the Company grants limited rights of return, primarily to certain large
69
GoPro, Inc.
Notes to Consolidated Financial Statements
retailers. The Company reduces revenue and cost of sales for the estimated returns based on analyses of
historical return trends by customer class and other factors. An estimated return liability along with a right to
recover assets are recorded for future product 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 may fluctuate over time but are sufficiently predictable to allow the Company to
estimate expected future product returns.
The Company’s camera sales contain multiple performance obligations that generally include the following three
separate obligations: a) a hardware component (camera) and the embedded firmware essential to the
functionality of the hardware component delivered at the time of sale, b) the implicit right to the Company's
downloadable free apps and software solutions, and c) the implied right for the customer to receive support after
the initial sale (post contract support or PCS). The Company’s PCS includes the right to receive on a when and if
available basis, future unspecified firmware upgrades and features as well as bug fixes, and email and telephone
support. The Company allocates a portion of the transaction price to the PCS performance obligation based on a
cost-plus methodology. The transaction price is allocated to the remaining performance obligations on a residual
value methodology. The Company’s process to allocate the transaction price 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.
The transaction prices allocated to the delivered hardware, related embedded firmware and free software
solutions are recognized as revenue at the time of sale, provided the conditions for recognition of revenue have
been met. The transaction price allocated to PCS is deferred and recognized as revenue on a straight-line basis
over the estimated term of the support period, which is estimated to be 15 months based on historical experience.
Deferred revenue as of December 31, 2019 and 2018 also included immaterial amounts related to the Company’s
GoPro Care and GoPro Plus fee-based service offerings. The Company’s short-term and long-term deferred
revenue balances totaled $16.6 million and $16.1 million as of December 31, 2019 and 2018, respectively, and
the Company recognized $15.0 million and $17.3 million of related revenue during the year ended December 31,
2019 and 2018, respectively.
Prior to January 1, 2018, the Company recognized revenue under Accounting Standards Codification (ASC)
605, Revenue Recognition. ASC 605 is materially similar to ASC 606, Revenue from Contracts with Customers,
with the following differences:
• The Company recognized revenue when persuasive evidence of an arrangement existed, delivery had
occurred, the sales price was fixed and determinable and collectability was reasonably assured.
• The Company allocated the transaction price based on its best estimate of the selling price (BESP). The
Company’s process for determining BESP was materially the same as its’ current allocation of the
transaction price to each performance obligations.
• Sales incentives were recorded as a reduction to revenue in the period the incentives were offered to
customers ore the related revenue was recognized, whichever was later.
Additionally, the Company allocated the transaction price based on its best estimate of the selling price (BESP).
The Company’s process for determining BESP was materially the same as its’ current allocation of the transaction
price to each performance obligation. Lastly, sales incentives were recorded as a reduction to revenue in the
period the incentives were offered to customers or the related revenue was recognized, whichever was later.
Sales incentives. The Company offers sales incentives through various programs, including cooperative
advertising, price protection, marketing development funds and other incentives. Sales incentives are considered
to be variable consideration, which the Company estimates and records as a reduction to revenue at the date of
sale. The Company estimates sales incentives based on historical experience, product sell-through and other
factors.
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.
70
GoPro, Inc.
Notes to Consolidated Financial Statements
Sales taxes. Sales taxes collected from customers and remitted to respective governmental authorities are
recorded as liabilities and are not included in revenue.
Advertising costs. Advertising costs consist of costs associated with print, television and e-commerce 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 the 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 $67.3 million, $73.0 million and $61.3 million in 2019, 2018
and 2017, respectively.
Stock-based compensation. Stock-based awards granted to qualified employees, non-employee directors and
consultants are measured at fair value and recognized as an expense. The Company primarily issues restricted
stock units and accounts for forfeitures as they occur. For service-based awards, stock-based compensation is
recognized on a straight-line basis over the requisite service period. 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.
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 income, 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 allowance 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. On January 1, 2018,
the Company adopted ASU 2016-16 Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory which
required the Company to recognize the income tax consequence of intra-entity asset transfers when transfers
occur. Upon adoption, the net impact to equity was an increase in the accumulated deficit of $15.0 million. Prior to
January 1, 2018, the Company recognized the income tax consequence of intra-entity asset transfers when the
asset was sold to an outside party or otherwise recovered through use.
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 Chief Executive Officer, who is the Company’s chief operating
decision maker.
71
GoPro, Inc.
Notes to Consolidated Financial Statements
Recent accounting standards
Standard
Description
Standards that were adopted
Leases
ASU No.
2016-02,
2018-10,
2018-11,
2019-01, (ASC
842)
This standard replaces existing lease
guidance for lessees and requires
operating leases to be recognized on
the balance sheet. Under the new
standard, lessees recognize a lease
liability for the present value of future
lease payments and a corresponding
right-to-use asset.
Company’s
date of
adoption
Effect on the consolidated financial statements or other
significant matters
January 1,
2019
The new standard was applied using a modified
retrospective approach. Prior periods were not
retrospectively adjusted.
The Company completed its analysis of the impact of the
standard by reviewing its lease agreements to identify
changes resulting from applying the requirements of the
new standard. The Company elected to utilize a package
of practical expedients, which among other things,
allowed the Company to maintain its existing
classification of its current leases. The Company also
elected the hindsight practical expedient to determine a
reasonably certain lease term for existing leases.
Additionally, the Company made a policy election to
maintain its previous lease accounting for leases with an
initial term of 12 months or less. Furthermore, the
Company made the policy election to not separate non-
lease components from lease components. The
Company’s analysis of its lease agreements under the
new standard resulted in the recognition of lease
liabilities of $88.4 million and lease assets of $60.1
million on its consolidated balance sheet as of January 1,
2019. The new standard did not have a material impact
on the Company’s consolidated income statement and
consolidated statement of cash flows.
The cumulative effect of the changes made to the Company’s consolidated January 1, 2019 balance sheet for the
adoption of ASC 842, Leases were as follows:
(in thousands)
Operating lease right-of-use assets
Property and equipment, net (1)
Accrued expenses and other current liabilities (2)
Short-term operating lease liabilities
Long-term operating lease liabilities
Other long-term liabilities (2)
Accumulated deficit
Balance at
December 31, 2018
Adjustment due to
ASC 842
Balance at
January 1, 2019
$
— $
60,111
$
46,567
135,892
—
—
28,203
(569,030)
(57)
(4,332)
10,812
77,545
(23,900)
(61)
60,111
46,510
131,560
10,812
77,545
4,303
(569,091)
(1) Represents the reclassification of leasehold acquisition costs to operating lease right-of-use assets.
(2) Represents the reclassification of deferred rent, tenant incentives and accrued cease-use charges to operating lease right-of-use assets.
72
GoPro, Inc.
Notes to Consolidated Financial Statements
Standard
Description
Standards not yet adopted
Intangible -
Goodwill and
Other
ASU No. 2017-04
(Topic 350)
Financial
Instruments -
Credit Losses:
Measurement of
Credit Losses on
Financial
Instruments
ASU No. 2016-13
(Topic 326)
This standard simplifies the accounting
for goodwill and removes Step 2 of the
annual goodwill impairment test. Upon
adoption, goodwill impairment will be
determined based on the amount by
which a reporting unit’s carrying value
exceeds its fair value, not to exceed the
carrying amount of goodwill. Early
adoption is permitted for interim or annual
goodwill impairment tests performed on
testing dates after January 1, 2017, and
requires use of a prospective transition
method.
The standard changes the impairment
model for most financial assets and
replaces the existing incurred loss model
with a current expected credit loss
(CECL) model. The standard should be
applied on a modified retrospective
approach.
Expected
date of
adoption
January 1,
2020
Effect on the consolidated financial statements or
other significant matters
The Company does not expect that the adoption
of this standard will have a material impact on its
consolidated financial statements and related
disclosures.
January 1,
2020
The Company’s allowance for doubtful accounts
and valuation of available-for-sale securities are
subject to this standard. The Company has
finalized its analysis of adopting this standard and
concluded the standard will not have a material
impact on its consolidated financial statements
and related disclosures.
Although there are several other new accounting standards issued or proposed by the FASB, which the Company
has adopted or will adopt, as applicable, the Company does not believe any of these accounting pronouncements
has had or will have a material impact on its consolidated financial statements.
2. Fair value measurements
The Company’s assets that are measured at fair value on a recurring basis within the fair value hierarchy are
summarized as follows:
(in thousands)
Cash equivalents (1):
Money market funds
Commercial paper
Total cash equivalents
Marketable securities:
U.S. treasury securities
Commercial paper
Corporate debt securities
Total marketable securities
$
$
$
$
December 31, 2019
December 31, 2018
Level 1
Level 2
Total
Level 1
Level 2
Total
4,413
$
— $
4,413
$
10,901
$
— $
10,901
—
—
—
7,577
—
7,577
4,413
$
— $
4,413
$
18,478
$
— $
18,478
— $
—
—
— $
—
— $
—
— $
6,336
$
20,657
—
14,847
14,847
—
18,424
— $
14,847
$
14,847
$
20,657
$
24,760
$
6,336
20,657
18,424
45,417
(1)
Included in cash and cash equivalents in the accompanying consolidated balance sheets. Cash balances were $145.9 million and $133.6
million as of December 31, 2019 and 2018, respectively.
Cash equivalents and marketable securities are classified as Level 1 or Level 2 because the Company uses
quoted market prices or alternative pricing sources and models utilizing market observable inputs to determine
their fair value. The contractual maturities of available-for-sale marketable securities as of December 31, 2019
and 2018 were all less than one year in duration. At December 31, 2019 and 2018, the Company had no financial
assets or liabilities that were classified as Level 3, which are valued based on inputs supported by little or no
market activity.
73
GoPro, Inc.
Notes to Consolidated Financial Statements
At December 31, 2019 and December 31, 2018, the amortized cost of the Company’s cash equivalents and
marketable securities approximated their fair value and there were no material realized or unrealized gains or
losses, either individually or in the aggregate.
In April 2017, the Company issued $175.0 million principal amount of Convertible Senior Notes due 2022 (Notes)
(see Note 4 Financing Arrangements). The estimated fair value of the Notes is based on quoted market prices of
the Company’s instruments in markets that are not active and are classified as Level 2 within the fair value
hierarchy. The Company estimated the fair value of the Notes by evaluating quoted market prices and calculating
the upfront cash payment a market participant would require to assume these obligations. The calculated fair
value of the Notes of $170.0 million, is highly correlated to the Company’s stock price and as a result, significant
changes to the Company’s stock price will have a significant impact on the calculated fair value of the Notes.
For certain other financial assets and liabilities, including accounts receivable, accounts payable and other current
assets and liabilities, the carrying amounts approximate their fair value primarily due to the relatively short
maturity of these balances.
3. Consolidated financial statement details
The following sections and tables provide details of selected balance sheet items.
Inventory
(in thousands)
Components
Finished goods
Total inventory
Property and equipment, net
(in thousands)
Leasehold improvements
Production, engineering and other equipment
Tooling
Computers and software
Furniture and office equipment
Tradeshow equipment and other
Construction in progress
Gross property and equipment
Less: Accumulated depreciation and amortization
December 31, 2019
December 31, 2018
$
$
20,370
$
123,866
144,236
$
19,205
97,253
116,458
Useful life
(in years)
December 31, 2019
December 31, 2018
1–9
1-4
1–2
2
3
2–5
$
50,736
$
45,649
19,216
21,719
10,846
7,009
45
155,220
(118,681)
66,198
43,019
17,808
20,865
14,969
7,009
80
169,948
(123,381)
46,567
Property and equipment, net
$
36,539
$
Depreciation expense was $18.5 million, $23.6 million and $32.4 million in 2019, 2018 and 2017, respectively. In
2017, the Company recorded accelerated depreciation charges in connection with its plans to vacate certain
leased office facilities as disclosed in Note 11 Restructuring charges.
74
GoPro, Inc.
Notes to Consolidated Financial Statements
Intangible assets
(in thousands)
Purchased technology
Domain name
Total intangible assets
(in thousands)
Purchased technology
Domain name
Total intangible assets
Useful life
(in months)
20-72
Useful life
(in months)
20-72
December 31, 2019
Gross carrying
value
Accumulated
amortization
Net carrying
value
$
$
50,501
$
(45,269) $
15
—
50,516
$
(45,269) $
5,232
15
5,247
December 31, 2018
Gross carrying
value
Accumulated
amortization
Net carrying
value
$
$
50,501
$
(37,451) $
15
—
50,516
$
(37,451) $
13,050
15
13,065
Amortization expense was $7.8 million, $11.4 million and $9.0 million in 2019, 2018 and 2017, respectively. At
December 31, 2019, expected amortization expense of intangible assets with definite lives for future periods was
as follows:
(in thousands)
Year ending December 31,
2020
2021
Other long-term assets
(in thousands)
Point of purchase (POP) displays
Long-term deferred tax assets
Deposits and other
Other long-term assets
Total
$
$
4,363
869
5,232
December 31, 2019
December 31, 2018
$
$
7,595
$
864
7,002
15,461
$
9,130
945
8,120
18,195
75
GoPro, Inc.
Notes to Consolidated Financial Statements
Accrued expenses and other current liabilities
(in thousands)
Accrued payables (1)
Accrued sales incentives
Employee related liabilities (1)
Return liability
Warranty liability
Inventory received
Customer deposits
Purchase order commitments
Income taxes payable
Other
December 31, 2019
December 31, 2018
$
42,153
$
39,120
20,494
14,854
9,899
5,737
2,063
1,710
1,166
4,594
34,696
40,918
19,775
13,100
9,604
5,061
3,105
2,015
1,948
5,670
Accrued expenses and other current liabilities
$
141,790
$
135,892
(1)
See Note 11 Restructuring charges for amounts associated with restructuring liabilities.
Product warranty
(in thousands)
Beginning balance
Charged to cost of revenue
Settlement of warranty claims
Warranty liability
Year ended December 31,
2019
2018
2017
$
$
10,971
$
10,373
$
16,933
(16,506)
24,725
(24,127)
11,398
$
10,971
$
11,945
20,139
(21,711)
10,373
At December 31, 2019 and 2018, $9.9 million and $9.6 million of the warranty liability was recorded as a
component of accrued expenses and other current liabilities, respectively, and $1.5 million and $1.4 million was
recorded as a component of other long-term liabilities, respectively.
4. Financing Arrangements
Credit Facility
In March 2016, the Company entered into a Credit Agreement (Credit Agreement) with certain banks which
provides for a secured revolving credit facility (Credit Facility) under which the Company may borrow up to an
aggregate amount of $250.0 million. The Company and its lenders may increase the total commitments under the
Credit Facility to up to an aggregate amount of $300.0 million, subject to certain conditions. The Credit Facility will
terminate and any outstanding borrowings become due and payable in March 2021.
The amount that may be borrowed under the Credit Facility is determined at periodic intervals and is based upon
the Company’s inventory and accounts receivable balances. Borrowed funds accrue interest based on an annual
rate of (a) London Interbank Offered Rate (LIBOR) or (b) the administrative agent’s base rate, plus an applicable
margin of between 1.50% and 2.00% for LIBOR rate loans, and between 0.50% and 1.00% for base rate loans.
The Company is required to pay a commitment fee on the unused portion of the Credit Facility of 0.25% or
0.375% per annum, based on the level of utilization of the Credit Facility. Amounts owed under the Credit
Agreement and related credit documents are guaranteed by GoPro, Inc. and its material subsidiaries. GoPro, Inc.
and its Netherlands subsidiary have also granted security interests in substantially all of their assets to
collateralize this obligation.
The Credit Agreement contains customary covenants, such as financial statement reporting requirements and
limiting the ability of the Company and its subsidiaries to pay dividends or incur debt, create liens and
encumbrances, make investments, and redeem or repurchase stock. The Company is required to maintain a
76
GoPro, Inc.
Notes to Consolidated Financial Statements
minimum fixed charge coverage ratio if and when the unborrowed availability under the Credit Facility is less than
the greater of $25.0 million or 10.0% of the borrowing base at such time. The Credit Agreement also contains
customary events of default, such as the failure to pay obligations when due, initiation of bankruptcy or insolvency
proceedings, or defaults on certain other indebtedness. Upon an event of default, the lenders may, subject to
customary cure rights, require the immediate payment of all amounts outstanding and foreclose on collateral.
At December 31, 2019 and 2018, the Company was in compliance with all financial covenants contained in the
Credit Agreement. As of December 31, 2019 and 2018, the Company had zero outstanding borrowings under the
Credit Agreement.
Convertible Notes
In April 2017, the Company issued $175.0 million aggregate principal amount of 3.50% Convertible Senior Notes
due 2022 (Notes). The Notes are senior, unsecured obligations of GoPro and mature on April 15, 2022 (Maturity
Date), unless earlier repurchased or converted into shares of Class A common stock under certain circumstances.
The Notes are convertible into cash, shares of the Company’s Class A common stock, or a combination thereof, at
the Company’s election, at an initial conversion rate of 94.0071 shares of Class A common stock per $1,000
principal amount of the Notes, which is equivalent to an initial conversion price of approximately $10.64 per share
of common stock, subject to adjustment. Based on current and projected liquidity, the Company has the intent and
ability to deliver cash up to the principal amount of the Notes then outstanding upon conversion. The Company
pays interest on the Notes semi-annually in arrears on April 15 and October 15 of each year.
The $175.0 million of proceeds received from the issuance of the Notes were allocated between long-term debt
(liability component) of $128.3 million and additional paid-in-capital (equity component) of $46.7 million on the
consolidated balance sheet. The fair value of the liability component was measured using rates determined for
similar debt instruments without a conversion feature. The carrying amount of the equity component, representing
the conversion option, was determined by deducting the fair value of the liability component from the aggregate
face value of the Notes. The liability component will be accreted up to the face value of the Notes of $175.0
million, which will result in additional non-cash interest expense being recognized in the consolidated statements
of operations through the Notes’ Maturity Date. The accretion of the Notes to par and debt issuance cost recorded
to long-term debt is amortized into interest expense over the term of the Note using an effective interest rate of
approximately 10.5%. The equity component will not be remeasured as long as it continues to meet the conditions
for equity classification.
The Company incurred approximately $5.7 million of issuance costs related to the issuance of the Notes, of which
$4.2 million and $1.5 million were recorded to long-term debt and additional paid-in capital, respectively. The $4.2
million of issuance costs recorded as long-term debt on the consolidated balance sheet are being amortized over
the five-year contractual term of the Notes using the effective interest method.
The Company may not redeem the Notes prior to the Maturity Date and no sinking fund is provided for the Notes.
The indenture includes customary terms and covenants, including certain events of default after which the Notes
may be due and payable immediately.
Holders have the option to convert the Notes in multiples of $1,000 principal amount at any time prior to January
15, 2022, but only in the following circumstances:
•
•
during any calendar quarter beginning after the calendar quarter ending on September 30, 2017, if the
last reported sale price of Class A common stock for at least 20 trading days (whether or not consecutive)
during the last 30 consecutive trading days of the immediately preceding fiscal quarter is greater than or
equal to 130% of the conversion price of the Notes on each applicable trading day;
during the five-business day period following any five consecutive trading day period in which the trading
price for the Notes is less than 98% of the product of the last reported sale price of Class A common stock
and the conversion rate for the Notes on each such trading day; or
•
upon the occurrence of specified corporate events.
At any time on or after January 15, 2022 until the second scheduled trading day immediately preceding the
Maturity Date of the Notes on April 15, 2022, a holder may convert its Notes, in multiples of $1,000 principal
77
GoPro, Inc.
Notes to Consolidated Financial Statements
amount. Holders of the Notes who convert their Notes in connection with a make-whole fundamental change (as
defined in the indenture) are, under certain circumstances, entitled to an increase in the conversion rate. In
addition, in the event of a fundamental change prior to the Maturity Date, holders will, subject to certain
conditions, have the right, at their option, to require the Company to repurchase for cash all or part of the Notes at
a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and
unpaid interest up to, but excluding, the repurchase date.
As of December 31, 2019 and 2018, the outstanding principal on the Notes was $175.0 million, the unamortized
debt discount was $24.3 million and $33.3 million, respectively, the unamortized debt issuance cost was $1.9
million and $2.7 million, respectively, and the net carrying amount of the liability component was $148.8 million
and $139.0 million, respectively, which was recorded as long-term debt within the consolidated balance sheets.
For the year ended December 31, 2019 and 2018 the Company recorded interest expense of $6.1 million for
contractual coupon interest, and $0.8 million for amortization of debt issuance costs. For the year ended
December 31, 2017, the Company recorded interest expense of $4.4 million for contractual coupon interest, and
$0.6 million for amortization of debt issuance costs. For the year ended December 31, 2019, 2018 and 2017, the
Company recorded $9.0 million, $8.1 million and $5.3 million, respectively, for amortization of the debt discount.
In connection with the offering, the Company entered into a prepaid forward stock repurchase transaction
(Prepaid Forward) with a financial institution (Forward Counterparty). Pursuant to the Prepaid Forward, the
Company used approximately $78.0 million of the net proceeds from the offering of the Notes to fund the Prepaid
Forward. The aggregate number of shares of the Company’s Class A common stock underlying the Prepaid
Forward was approximately 9.2 million. The expiration date for the Prepaid Forward is April 15, 2022, although it
may be settled earlier in whole or in part. Upon settlement of the Prepaid Forward, at expiration or upon any early
settlement, the Forward Counterparty will deliver to the Company the number of shares of Class A common stock
underlying the Prepaid Forward or the portion thereof being settled early. The shares purchased under the
Prepaid Forward are treated as treasury stock on the consolidated balance sheet (and not outstanding for
purposes of the calculation of basic and diluted income (loss) per share), but will remain outstanding for corporate
law purposes, including for purposes of any future stockholders’ votes, until the Forward Counterparty delivers the
shares underlying the Prepaid Forward to the Company. The Company’s Prepaid Forward hedge transaction
exposes the Company to credit risk to the extent that its counterparty may be unable to meet the terms of the
transaction. The Company mitigates this risk by limiting its counterparty to a major financial institution.
5. Stockholders’ equity
Common stock. The Company has two classes of authorized common stock: Class A common stock with 500
million shares authorized and Class B common stock with 150 million shares authorized. As of December 31,
2019, 117.9 million shares of Class A stock were issued and outstanding and 28.9 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, 2019, the Class B stock continued to represent greater than 10% of the overall outstanding shares.
78
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, 2019:
(in thousands)
Stock options outstanding
Restricted stock units outstanding
Performance stock units outstanding
Common stock available for future grants
Total common stock shares reserved for issuance
6. Employee benefit plans
December 31, 2019
3,963
8,225
788
32,358
45,334
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). 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 a 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 ten years from the date of grant and generally vest over one
to four years. RSUs granted under the 2014 Plan generally vest over two to four years based upon continued
service and are settled at vesting in shares of the Company’s Class A common stock. Performance stock units
(PSUs) granted under the 2014 Plan generally vest over three years based upon continued service and the
Company achieving certain revenue targets, and are settled at vesting in shares of the Company’s Class A
common stock. The Company accounts for forfeitures of stock-based payment awards in the period they occur.
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 value 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 provide for automatic annual
increases in the number of shares reserved for future issuance.
Employee retirement plan. The Company has a defined contribution retirement plan covering the United States
and other international full-time employees that provides for voluntary employee contributions from 1% to 100% 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 contributions to the plan were $4.0 million, $4.3 million and $5.5 million
in 2019, 2018 and 2017, respectively.
79
GoPro, Inc.
Notes to Consolidated Financial Statements
Stock options
A summary of the Company’s stock option activity is as follows:
Outstanding at December 31, 2018
Granted
Exercised
Forfeited/Cancelled
Outstanding at December 31, 2019
Vested and expected to vest at December 31, 2019
Exercisable at December 31, 2019
Shares
(in thousands)
Weighted-
average
exercise price
5,993
$
527
(2,158)
(399)
3,963
$
3,963
2,987
$
$
7.28
7.42
0.75
14.29
10.16
10.16
11.25
Weighted-
average
remaining
contractual
term (in
years)
Aggregate
intrinsic value
(in thousands)
5.44
$
7,897
6.35
$
6.35
5.56
$
$
374
374
370
The weighted-average grant date fair value of all options granted and assumed was $3.70, $2.95 and $4.06 per
share in 2019, 2018 and 2017, respectively. The total fair value of all options vested was $3.5 million, $6.1 million
and $19.5 million in 2019, 2018 and 2017, respectively. The aggregate intrinsic value of the stock options
outstanding as of December 31, 2019 represents the value of the Company’s closing stock price on the last
trading day of the year in excess of the exercise price multiplied by the number of options outstanding.
Restricted stock units
A summary of the Company’s RSU activity is as follows:
Non-vested shares at December 31, 2018
Granted
Vested
Forfeited
Non-vested shares at December 31, 2019
Shares
(in thousands)
Weighted-average
grant date fair value
7,217
$
6,104
(3,925)
(1,171)
8,225
$
8.15
5.70
8.90
7.25
6.11
The weighted-average grant date fair value of all RSUs granted was $5.70, $5.83 and $9.40 per share in 2019,
2018 and 2017, respectively. The total fair value of all RSUs vested was $34.9 million, $41.6 million and $57.7
million in 2019, 2018 and 2017, respectively.
Performance stock units
A summary of the Company’s PSU activity is as follows:
Non-vested shares at December 31, 2018
Granted
Forfeited
Non-vested shares at December 31, 2019
Shares
(in thousands)
Weighted-average
grant date fair value
$
300
819
(331)
788
$
5.76
7.51
5.93
7.51
The weighted-average grant date fair value of all PSUs granted was $7.51 and $5.76 in 2019 and 2018,
respectively. No PSUs vested in 2019 and 2018.
80
GoPro, Inc.
Notes to Consolidated Financial Statements
Employee stock purchase plan. In 2019, 2018 and 2017, the Company issued 958,000, 981,000 and 934,000
shares under its ESPP, respectively, at weighted-average prices of $4.13, $4.78 and $8.02, respectively.
Fair value disclosures. The Company measures compensation expense for all stock-based payment awards
based on the estimated fair values on the date of the grant. The fair value of RSUs and PSUs are determined
using the Company’s closing stock price on the date of grant. The Company recognizes compensation expense
for PSUs when it is probable that the vesting conditions will be met. 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 Company’s average historic volatility and if applicable, the historical 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,
2019
50%-52%
6.1
2018
51%
5.4-6.1
2017
44%-49%
5.3-5.8
1.5%-2.2%
2.7%-3.0%
1.8%-2.1%
—%
—%
—%
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,
2019
2018
2017
41%-54%
48%-53%
33%-36%
0.5
0.5
0.5
1.9%-2.5%
1.8%-2.2%
0.7%-1.2%
—%
—%
—%
Stock-based compensation expense. The following table summarizes stock-based compensation expense
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
Year ended December 31,
2019
2018
2017
$
$
1,902
$
1,954
$
17,167
8,043
10,076
19,636
9,459
9,838
37,188
$
40,887
$
1,935
24,963
10,498
13,859
51,255
The income tax benefit related to stock-based compensation expense was zero for 2019, 2018 and 2017 due to a
full valuation allowance on the Company’s United States net deferred tax assets (see Note 8 Income taxes).
At December 31, 2019, total unearned stock-based compensation of $45.4 million related to stock options, RSUs,
PSUs and ESPP shares is expected to be recognized over a weighted-average period of 2.1 years.
81
GoPro, Inc.
Notes to Consolidated Financial Statements
7. Net loss per share
The following table presents the calculations of basic and diluted net loss per share:
(in thousands, except per share data)
2019
2018
2017
Year ended December 31,
Numerator:
Net loss
Denominator:
$
(14,642) $
(109,034) $
(182,873)
Weighted-average common shares—basic and diluted for Class A
and Class B common stock
144,891
139,495
138,056
Basic and diluted net loss per share
$
(0.10) $
(0.78) $
(1.32)
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)
Anti-dilutive stock-based awards
Year ended December 31,
2019
2018
2017
13,039
15,356
19,022
The Company has the intent and ability to deliver cash up to the principal amount of the Notes subject to
conversion, based on the Company’s current and projected liquidity. As such, no shares associated with the Note
conversion were included in the Company’s weighted-average number of common shares outstanding for any
periods presented. The Company’s Notes mature on April 15, 2022, unless earlier repurchased or converted into
shares of Class A common stock under certain circumstances as described further in Note 4 Financing
Arrangements. The Notes are convertible into cash, shares of the Company’s Class A common stock, or a
combination thereof, at the Company’s election. While the Company has the intent and ability to deliver cash up to
the principal amount, the maximum number of shares issuable upon conversion of the Notes is 20.6 million
shares of Class A common stock. Additionally, the calculation of weighted-average shares outstanding for the year
ended December 31, 2019 and 2018 excludes approximately 9.2 million, and for the year ended December 31,
2017, excludes approximately 6.6 million shares, effectively repurchased and held in treasury stock on the
consolidated balance sheets as a result of the Prepaid Forward transaction entered into in connection with the
Note offering.
The rights of the holders of Class A common stock and Class B common stock are identical, except with respect
to voting and conversion. 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.
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. Class A common stock is not convertible into Class B common stock.
The computation of the diluted net loss per share of Class A common stock assumes the conversion of Class B
common stock.
82
GoPro, Inc.
Notes to Consolidated Financial Statements
8. Income taxes
Loss before income taxes consisted of the following:
(in thousands)
United States
Foreign
Income tax (benefit) expense consisted of the following:
Year ended December 31,
2019
2018
2017
$
$
(28,233) $
(110,318) $
(123,325)
9,163
2,643
(53,062)
(19,070) $
(107,675) $
(176,387)
Year ended December 31,
2019
2018
2017
$
(52) $
(2,821) $
48
(4,391)
(4,395)
—
(33)
(33)
175
4,394
1,748
248
(637)
(389)
$
(4,428) $
1,359
$
(1,857)
240
10,631
9,014
(248)
(2,280)
(2,528)
6,486
Year ended December 31,
2019
2018
2017
$
%
$
%
$
%
$
(4,005)
21.0% $ (22,612)
21.0 % $ (61,735)
35.0 %
4,717
—
(3,949)
1,731
1,872
—
—
(5,123)
305
24
(24.7)
42,772
(39.7)
(36,497)
—
20.7
(9.1)
(9.8)
—
—
26.8
(1.6)
(0.1)
23.2% $
—
3,285
10,974
(2,997)
(9,687)
(18,694)
(5,996)
3,786
528
1,359
—
(3.1)
(10.2)
2.8
9.0
17.4
5.6
(3.5)
(0.6)
(1.3)% $
73,423
34,039
12,001
(6,469)
—
—
(9,957)
—
1,681
6,486
20.7
(41.6)
(19.3)
(6.8)
3.7
—
—
5.6
—
(1.0)
(3.7)%
(in thousands)
Current
Federal
State
Foreign
Total current
Deferred
Federal
Foreign
Total deferred
Income tax (benefit) expense
(dollars in thousands)
Reconciliation to statutory rate
Tax at federal statutory rate
Change in valuation allowance
DTA rate change impact due to TCJA
Impact of foreign operations
Stock-based compensation
State income taxes, net of federal benefit
Impact of IRS audit
Restructuring adjustment
Tax credits
Permanent tax adjustments
Other
Income tax provision at effective tax rate
$
(4,428)
The effective tax rate of 23.2% for 2019 resulted from a benefit primarily related to an overall decrease in losses
before income taxes, a benefit from the reversal of a previously accrued tax provision on uncertain tax positions
that were no longer necessary due to the expiration of the statute of limitations and settlements with certain taxing
jurisdictions, partially offset by the valuation allowance on United States federal and state net deferred tax assets
and a shortfall tax impact from stock-based compensation. The negative effective tax rate of 1.3% for 2018
resulted from a benefit related to the conclusion of the IRS audit and a benefit related to the set up and the activity
of disregarded entities (foreign branches) for United States tax purposes, partially offset by the valuation
83
GoPro, Inc.
Notes to Consolidated Financial Statements
allowance on United States federal and state net deferred tax assets and a shortfall tax impact from stock-based
compensation. Overall, the provision for income taxes in each period has differed from the tax computed at the
United States federal statutory tax rates due to changes in the valuation allowance, the effect of non-United
States operations, deductible and non-deductible stock-based compensation expense, states income taxes,
United States research and development tax credits, and other adjustments.
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. The Company did
not have any significant deferred tax liabilities for the periods presented. Significant components of the
Company’s deferred tax assets were as follows:
(in thousands)
Deferred tax assets:
Net operating loss carryforwards
Tax credit carryforwards
Stock-based compensation
Allowance for returns
Intangible assets
Depreciation and amortization
Accruals and reserves
Total deferred tax assets
Valuation allowance
Year ended December 31,
2019
2018
$
163,832
$
75,624
5,710
4,150
5,384
—
23,857
278,557
(277,693)
166,281
70,189
6,414
3,147
4,591
609
20,975
272,206
(271,374)
832
Net deferred tax assets, net of valuation allowance
$
864
$
Recognition of deferred tax assets is appropriate when the realization of such assets is more likely than not.
Based upon the weight of available evidence, the Company believes it is not more likely than not that the United
States deferred tax assets will be realized. Accordingly, a valuation allowance has been established and
maintained against United States deferred tax assets. The remaining deferred tax asset balances at
December 31, 2019 reflect foreign deferred tax assets in each jurisdiction and are supported by taxable income or
in the case of acquired companies, by the future reversal of deferred tax liabilities. It is more likely than not that
the Company’s foreign deferred tax assets will be realized and thus, a valuation allowance is not required on its
foreign deferred tax assets. The Company will continue to assess the realizability of the deferred tax assets in
each of the applicable jurisdictions going forward. The Company’s valuation allowance increased by $6.3 million
to $277.7 million as of December 31, 2019, primarily due to a $5.0 million change in United States deferred tax
assets and a $1.6 million change due to the adoption of new accounting standards, partially offset by a $0.3
million change in other deferred tax assets.
As of December 31, 2019, the Company’s federal, California and other state net operating loss carryforwards for
income tax purposes were $635.2 million, $235.4 million and $230.5 million, net of reserves, respectively. Also,
the Company’s federal and California state tax credit carryforwards were $44.0 million and $40.0 million, net of
reserves, respectively. If not utilized, federal net operating losses that arose before 2018, federal credit and
California loss carryforwards will begin to expire from 2030 to 2038, while other state loss carryforwards will begin
to expire from 2020 to 2039. Federal net operating losses that arise after 2017 and all California tax credits will be
carried forward indefinitely.
Under the provisions of §382 of the Internal Revenue Code, a change of control may impose an annual limitation
on the amount of the Company’s net operating loss and tax credit carryforwards that can be used to reduce future
tax liabilities. Of the Company’s total $635.2 million federal net operating loss carryforwards, approximately $8.1
million was from one of the Company’s acquisitions in 2016. These acquired tax attributes are subject to an
annual limitation of $1.7 million per year for federal purposes and will begin to expire in the year 2034, if not
utilized.
84
GoPro, Inc.
Notes to Consolidated Financial Statements
Uncertain income tax positions. The Company had gross unrecognized tax benefits of $27.2 million, $32.6
million and $58.6 million, as of December 31, 2019, 2018 and 2017, respectively. For fiscal year 2019, 2018 and
2017, total unrecognized income tax benefits were $12.5 million, $17.3 million and $19.8 million, respectively, and
if recognized, would reduce income tax expense after considering the impact of the change in the valuation
allowance in the United States. A material portion of the Company’s gross unrecognized tax benefits, if
recognized, would increase the Company’s net operating loss carryforward, which would be offset by a full
valuation allowance based on present circumstances.
These unrecognized tax benefits relate primarily to unresolved matters with taxing authorities regarding the
Company’s transfer pricing positions and tax positions based on the Company’s interpretation of certain United
States trial and appellate court decisions, which remain subject to appeal and therefore could be overturned in
future periods. While it is often difficult to predict the final outcome or the timing of resolution of any particular
uncertain tax position, the Company believes that its reserves reflect the more likely outcome. The Company
believes, due to statute of limitations expiration, that within the next 12 months it is possible that up to $13.0
million of uncertain tax position could be released. It is also reasonably possible that additional uncertain tax
positions will be added. It is not reasonably possible at this time to quantify the net effect.
A reconciliation of the beginning and ending amount of gross unrecognized income tax benefits are as follows:
(in thousands)
Balance at January 1
Increase related to current year tax positions
Decrease related to tax rate change for current year tax positions
Increase related to prior year tax positions
Decrease related to prior year tax positions
Decrease related to tax rate change for prior year tax positions
Year ended December 31,
2019
2018
2017
$
32,556
$
58,584
$
250
—
—
(5,628)
—
483
—
445
(26,956)
—
$
27,178
$
32,556
$
56,909
20,002
(2,299)
—
(3,927)
(12,101)
58,584
The Company’s policy is to account for interest and penalties related to income tax liabilities within the provision
for income taxes. The balances of accrued interest and penalties recorded in the balance sheets and provision
were not material for any period presented.
The Company files income tax returns in the United States and in non-United States jurisdictions. As of
December 31, 2019, the Company continues to assert indefinite reinvestment to the extent of any foreign
withholding taxes on the undistributed earnings related to these foreign branches. Any foreign withholding tax on
these earnings is deemed not to be material.
9. Commitments, contingencies and guarantees
Facility Leases. The Company leases its facilities under long-term operating leases, which expire at various
dates through 2027.
The components of net lease cost, which were recorded in operating expenses, were as follows:
(in thousands)
Operating lease cost
Sublease income
Net lease cost
2019 (1)
Year ended December 31,
2018 (2)
2017 (2)
$
$
17,811
$
13,649
$
(656)
(765)
17,155
$
12,884
$
19,128
(677)
18,451
(1) Operating lease cost includes variable lease costs, which are immaterial.
(2) Represents rent expense and sublease income under ASC 840, Leases.
85
GoPro, Inc.
Notes to Consolidated Financial Statements
Supplemental cash flow information related to leases was as follows:
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
Right-of-use assets obtained in exchange for new operating lease liabilities
Supplemental balance sheet information related to leases was as follows:
Weighted-average remaining lease term (in years) - operating leases
Weighted-average discount rate - operating leases
Year ended
December 31, 2019
$
14,015
13,287
December 31, 2019
6.44
6.2%
As of December 31, 2019, maturities of operating lease liabilities under ASC 842, Leases, were as follows:
(in thousands)
2020
2021
2022
2023
2024
Thereafter
Total lease payments
Less: Imputed interest
Present value of lease liabilities
December 31, 2019
$
$
13,339
13,651
12,803
12,035
11,897
25,065
88,790
(16,722)
72,068
As of December 31, 2018, future minimum lease payments under ASC 840, Leases, were as follows:
(in thousands)
2019
2020
2021
2022
2023
Thereafter
Total lease payments
December 31, 2018
$
$
14,845
17,654
17,763
17,552
17,052
22,951
107,817
Other Commitments. In the ordinary course of business, the Company enters into multi-year agreements to
purchase sponsorships with event organizers, resorts and athletes as part of its marketing efforts; software
licenses related to its financial and IT systems; debt agreements; and various other contractual commitments. As
of December 31, 2019, future commitments were as follows:
(in thousands)
Sponsorship commitments
Total
2020
2021
2022
2023
2024
Thereafter
$
3,215
$
1,682
$
1,083
$
450
$
— $
— $
Other contractual commitments
Long-term debt (1)
36,614
22,006
12,867
1,741
175,000
—
— 175,000
—
—
—
—
Total contractual cash obligations
$ 214,829
$ 23,688
$ 13,950
$ 177,191
$
— $
— $
(1)
The Company's convertible senior notes are due April 2022. Refer to Note 4 Financing Arrangements.
86
—
—
—
—
GoPro, Inc.
Notes to Consolidated Financial Statements
Legal proceedings and investigations
On February 13, 2018 and February 27, 2018, two purported shareholder derivative lawsuits (the Consolidated
Federal Derivative Actions) were filed in the United States District Court for the Northern District of California
against certain of GoPro’s current and former directors and executive officers and naming the Company as a
nominal defendant. The Consolidated Federal Derivative Actions are based on allegations similar to those in two
now-resolved shareholder class actions - one filed in 2016 which was settled and received final approval of the
Court on September 20, 2019, and the other filed in 2018 which had final judgment entered in favor of defendants
on June 24, 2019, following the Court’s granting of defendants’ motion to dismiss. The Consolidated Federal
Derivative Actions assert causes of action against the individual defendants for breach of fiduciary duty, and for
making false and misleading statements about the Company’s business, operations and prospects in violation of
Sections 10(b) and 14(a) of the Securities Exchange Act of 1934. The plaintiffs seek corporate reforms,
disgorgement of profits from stock sales, and fees and costs. The Consolidated Federal Derivative Actions are
currently stayed.
Different shareholders filed two similar purported shareholder derivative actions on October 30, 2018 and
November 7, 2018 in the Delaware Court of Chancery (the Consolidated Delaware Derivative Actions).
Defendants’ motion to dismiss the Consolidated Delaware Derivative Actions is pending.
Other shareholders filed similar purported shareholder derivative actions on December 26, 2018, February 15,
2019, and January 27, 2020 in the Delaware Court of Chancery. Those actions are either stayed or defendants’
time to respond to the complaint has not yet passed.
On January 5, 2015, Contour LLC filed a complaint against the Company in federal court in Utah alleging, among
other things, patent infringement in relation to certain GoPro cameras sold after November 2014. On November
30, 2015, Contour dismissed the Utah action. On November 30, 2015, Contour IP Holdings LLC (“CIPH”), a non-
practicing entity re-filed a similar complaint in Delaware seeking unspecified damages. GoPro filed an inter partes
review (IPR) at the US Patent and Trademark Office. The case was transferred to the Northern District of
California in July 2017 and was stayed in favor of the IPR proceedings, most recently on December 12, 2018.
Upon conclusion of the IPRs, the District Court lifted the stay on October 1, 2019. On October 8, 2019, the court
entered a schedule for the remainder of the case, with trial currently scheduled to begin on August 31, 2020. We
believe that this matter lacks merit and we intend to vigorously defend against CIPH.
We regularly evaluate the associated developments of the legal proceedings described above, as well as other
legal proceedings that arise in the ordinary course of business. While litigation is inherently uncertain, based on
the currently available information, we are unable to determine a range of loss, and do not believe the ultimate
cost to resolve these matters will have a material adverse effect on our business, financial condition, cash flows or
results of operations.
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, 2019, the Company has not paid any
claims nor has it 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.
10. 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 for 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.
Customers who represented 10% or more of the Company’s net accounts receivable balance were as follows:
87
GoPro, Inc.
Notes to Consolidated Financial Statements
Customer A
Customer B
Customer C
December 31, 2019
December 31, 2018
15%
11%
*
*
11%
12%
* Less than 10% of net 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,
2019
2018
2017
$
120,728
$
126,220
$
178,300
1,509
1,639
1,630
Customers who represented 10% or more of the Company’s total revenue were as follows:
Customer A
Year ended December 31,
2019
11%
2018
13%
2017
15%
Supplier concentration. The Company relies on third parties for the supply and manufacture of its products,
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. In instances where an outsourcing agreement does not exist or these
third parties fail to perform their obligations, the Company may be unable to find alternative partners or
satisfactorily deliver its products to its customers on time.
Geographic information
Revenue by geographic region was as follows:
(in thousands)
Americas
Year ended December 31,
2019 vs 2018
2018 vs 2017
2019
2018
2017
% Change
% Change
$ 523,975
$ 494,797
$ 582,917
Europe, Middle East and Africa (EMEA)
359,187
366,438
333,454
Asia and Pacific (APAC)
Total revenue
311,489
287,102
263,370
$ 1,194,651
$ 1,148,337
$ 1,179,741
6%
(2)
8
4%
(15)%
10
9
(3)%
Revenue in the United States, which is included in the Americas geographic region, was $429.9 million, $401.1
million and $497.0 million for 2019, 2018 and 2017, respectively. No other individual country exceeded 10% of
total revenue for any period presented. 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, 2019 and 2018, long-lived assets, which represent net property and equipment, located
outside the United States, primarily in Hong Kong and Mainland China, were $11.0 million and $15.9 million,
respectively.
88
GoPro, Inc.
Notes to Consolidated Financial Statements
11. Restructuring charges
Restructuring charges for each period were as follows:
(in thousands)
Cost of revenue
Research and development
Sales and marketing
General and administrative
Total restructuring charges
First quarter 2018 restructuring plan
Year ended December 31,
2019
2018
2017
$
$
54
$
1,379
$
585
314
501
12,794
5,291
3,279
1,454
$
22,743
$
634
10,092
7,047
2,519
20,292
On January 2, 2018, the Company approved a restructuring plan to further reduce future operating expenses and
better align resources around its long-term business strategy. The restructuring provided for a reduction of the
Company's global workforce of approximately 18%, the closure of the Company's aerial group and the
consolidation of certain leased office facilities. Under the first quarter 2018 restructuring plan, the Company
recorded restructuring charges of $17.8 million, including $14.1 million related to severance and $3.7 million
related to other charges.
The following table provides a summary of the Company’s restructuring activities and the movement in the related
liabilities recorded in accrued expenses and other current liabilities on the consolidated balance sheet under the
first quarter 2018 restructuring plan.
(in thousands)
Severance
Other
Total
Restructuring liability as of December 31, 2017
$
— $
— $
Restructuring charges
Cash paid
Non-cash settlements
Restructuring liability as of December 31, 2018
Restructuring charges
Cash paid
Non-cash reductions
14,107
(12,460)
(528)
1,119
—
(1,095)
(24)
3,686
(1,988)
(1,299)
399
8
(25)
(264)
Restructuring liability as of December 31, 2019
$
— $
118
$
—
17,793
(14,448)
(1,827)
1,518
8
(1,120)
(288)
118
First quarter 2017 restructuring plan
On March 15, 2017, the Company approved a restructuring plan to reduce future operating expenses and further
align resources around its long-term business strategy. The restructuring provided for a reduction of the
Company’s global workforce by approximately 17% and the consolidation of certain leased office facilities. Under
the first quarter 2017 restructuring plan, the Company recorded restructuring charges of $23.1 million, including
$10.3 million related to severance, and $12.8 million related to accelerated depreciation and other charges. The
actions associated with the first quarter 2017 restructuring plan were substantially completed by the fourth quarter
of 2017.
89
GoPro, Inc.
Notes to Consolidated Financial Statements
The following table provides a summary of the Company’s restructuring activities and the movement in the related
liabilities recorded in accrued expenses and other current liabilities, and other long-term liabilities on the
consolidated balance sheet under the first quarter 2017 restructuring plan.
(in thousands)
Severance
Other
Total
Restructuring liability as of December 31, 2016
Restructuring charges (1)
Cash paid
Non-cash reductions
Restructuring liability as of December 31, 2017
Restructuring charges (1)
Cash paid
Non-cash charges
Restructuring liability as of December 31, 2018
Restructuring charges (1)
Cash paid
Non-cash reductions
$
— $
— $
10,312
(9,509)
(803)
—
—
—
—
—
—
—
—
6,654
(151)
(2,953)
3,550
4,783
(3,293)
627
5,667
1,395
(2,257)
(335)
Restructuring liability as of December 31, 2019
$
— $
4,470
$
—
16,966
(9,660)
(3,756)
3,550
4,783
(3,293)
627
5,667
1,395
(2,257)
(335)
4,470
(1)
Includes lease termination charges, which is included in accrued expenses and other current liabilities, and other long-term liabilities in
the accompanying consolidated balance sheets, and totaled $4.5 million as of December 31, 2019.
Fourth quarter 2016 restructuring plan
On November 29, 2016, the Company approved a restructuring plan to reduce future operating expenses. The
restructuring provided for a reduction of the Company’s global workforce of approximately 15%, the closure of the
Company’s entertainment group to concentrate on its core business and the consolidation of certain leased office
facilities. Under the fourth quarter 2016 restructuring plan, the Company recorded restructuring charges of $40.0
million, including $36.8 million related to severance, and $3.2 million related to accelerated depreciation and other
charges. The actions associated with the fourth quarter 2016 restructuring plan were substantially completed by
March 31, 2017.
The following table provides a summary of the Company’s restructuring activities and the movement in the related
liabilities recorded in accrued expenses and other current liabilities on the consolidated balance sheet under the
fourth quarter 2016 restructuring plan.
(in thousands)
Severance
Other
Total
Restructuring liability as of December 31, 2016
$
9,660
$
879
$
Restructuring charges
Cash paid
Non-cash settlements
Restructuring liability as of December 31, 2017
Restructuring charges
Cash paid
Restructuring liability as of December 31, 2018
Restructuring charges
Cash paid
Non-cash reductions
Restructuring liability as of December 31, 2019
$
272
$
90
2,134
(11,411)
1,055
(1,884)
17
400
143
(244)
299
51
(78)
—
10,539
3,189
(13,295)
17
450
143
(244)
349
51
(78)
(50)
272
—
50
—
—
50
—
—
(50)
— $
GoPro, Inc.
Notes to Consolidated Financial Statements
Schedule II
GoPro, Inc.
VALUATION AND QUALIFYING ACCOUNTS
For the year ended December 31, 2019, 2018 and 2017
(in thousands)
Balance at
Beginning
of Year
Charges to
Revenue
Charges
(Benefits)
to Expense
Charges to
Other
Accounts -
Equity
Deductions
/Write-offs
Balance at
End of Year
Allowance for doubtful accounts
receivable:
Year ended December 31, 2019
$
Year ended December 31, 2018
Year ended December 31, 2017
Valuation allowance for deferred
tax assets:
500
750
1,281
$
— $
—
—
616
199
(263)
$
— $
(286) $
—
—
(449)
(268)
830
500
750
Year ended December 31, 2019
$
271,374
$
— $
4,717
$
1,602
$
— $
277,693
Year ended December 31, 2018
Year ended December 31, 2017
226,458
110,433
—
—
42,772
2,144
(36,497)
152,522
—
—
271,374
226,458
91
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, 2019. Based on the evaluation of
our disclosure controls and procedures as of December 31, 2019, 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
Commission (COSO). Based on that assessment, our management has concluded that our internal control over
financial reporting was effective as of December 31, 2019. The effectiveness of the Company’s internal control
over financial reporting as of December 31, 2019 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, 2019 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.
92
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
2020 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2019.
Item 11. Executive Compensation
The information required for this Item is incorporated by reference from our Proxy Statement to be filed for our
2020 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2019.
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
2020 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2019.
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
2020 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2019.
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
2020 Annual Meeting of Stockholders within 120 days after the end of the fiscal year ended December 31, 2019.
93
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 Form 10-K.
2. Financial Statement Schedules
The financial statement schedule filed in response to Part II, Item 8 and Part IV, Item 15(c) of this Form 10-K
is listed under Part II, Item 8 on the Index to Consolidated Financial Statements.
3. Exhibit Listing
Exhibit
Number
Exhibit Title
3.01
3.02
4.01
4.08
Restated Certificate of Incorporation of the
Registrant, with Certificate of Change of Registered
Agent and/or Registered Office
Amended and Restated Bylaws of the Registrant.
Form of Registrant’s Class A common stock
certificate.
Description of Registrant’s Securities Registered
Under Section 12 of the Exchange Act
10.01*
Form of Indemnity Agreement by and between the
Registrant and each of its directors and executive
officers.
Incorporated by Reference
Exhibit
Filing Date
Form File No.
10-K
001-36514
3.01
February 15, 2019
S-1
S-1
333-200038
3.02
November 10, 2014
333-196083
4.01
May 19, 2014
S-1
333-196083
10.01
May 19, 2014
Filed
Herewith
X
10.02*
Form of Change in Control Severance Agreement.
S-1
333-196083
10.09
May 19, 2014
10.03*
10.04*
10.05*
2010 Equity Incentive Plan, as amended, and form
of stock option agreement and restricted stock unit
agreement.
2014 Equity Incentive Plan, as amended, and forms
thereunder.
2014 Employee Stock Purchase Plan and forms
thereunder.
S-1
333-196083
10.02
May 19, 2014
10-Q
001-36514
10.03
July 29, 2016
S-1/A
333-196083
10.04
June 11, 2014
10.06*
Executive Severance Policy.
10-K
001-36514
10.06
February 15, 2019
10.07*
10.08*
10.09*
10.10*
10.11*
10.12*
10.13
10.14
Employment Letter to Nicholas Woodman from the
Registrant, dated June 2, 2014.
Waiver Agreement dated January 1, 2018 by and
between Nicholas Woodman and the Registrant.
Offer Letter to Eve Saltman from the Registrant,
dated March 7, 2018.
Offer Letter to Brian McGee from the Registrant,
dated September 3, 2015.
Offer Letter to Sandor Barna from the Registrant,
dated July 8, 2015
Officer Letter to Sandor Barna from the Registrant,
dated February 12, 2018
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.
Eighth amendment to Office Lease Agreement, by
and between RAR2 - Clearview Business Park
Owner QRS, LLC and the Registrant, dated
February 24, 2016.
S-1/A
333-196083
10.16
June 11, 2014
10-K
001-36514
10.17
February 16, 2018
10-Q
001-36514
10.02
May 4, 2018
10-K
001-36514
10.12
February 16, 2017
10-K
001-36514
10.11
February 15, 2019
10-Q
001-36514
10.01
May 4, 2018
S-1
333-196083
10.12
May 19, 2014
10-K
001-36514
10.15
February 16, 2017
94
10-K
001-36514
10.16
February 16, 2017
10-Q
001-36514
10.17
May 6, 2016
8-K
001-36514
10.1
April 7, 2017
10-Q
001-36514
10.02
August 4, 2017
10-Q
001-36514
10.01
May 10, 2019
10.15
10.16
10.17
10.18
10.19
10.20
10.21
Ninth amendment to Office Lease Agreement, by
and between RAR2 - Clearview Business Park
Owner QRS, LLC and the Registrant, dated August
3, 2016.
Credit Agreement by and among Registrant, the
Lenders party thereto and JPMorgan Chase Bank,
N.A. dated March 25, 2016.
Forward Stock Purchase Transaction, dated April 6,
2017, between the Company and JPMorgan Chase
Bank, National Association.
First Amendment, dated August 12, 2016, to Office
Lease Agreement dated November 1, 2011, between
the Company and RAR2-Clearview Business Park
Owner, LLC.
Tenth amendment to Office Lease Agreement by and
between HG Clearview Owner LLC and the
Registrant, dated April 30, 2019
Amendment No. 1, dated June 28, 2019, to Credit
Agreement by and among Registrant, the Lenders
party thereto and JPMorgan Chase Bank, N.A. dated
March 25, 2016
Amendment No. 2, dated September 27, 2019, to
Credit Agreement by and among Registrant, the
Lenders party thereto and JPMorgan Chase Bank,
N.A. dated March 25, 2016
21.01
List of Subsidiaries.
23.01
24.01
31.01
31.02
Consent of Independent Registered Public
Accounting Firm.
Power of Attorney (included on the signature page to
this Annual Report on Form 10-K).
Certification of Principal Executive Officer Required
Under Rule 13(a)-14(a) and 15(d)-14(a) of the
Securities Exchange Act of 1934, as amended.
Certification of Principal Financial Officer Required
Under Rule 13(a)-14(a) and 15(d)-14(a) of the
Securities Exchange Act of 1934, as amended.
32.01‡
Certification of the Chief Executive Officer and Chief
Financial Officer Pursuant to 18 U.S.C. Section
1350.
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema
101.CAL
Inline XBRL Taxonomy Extension Calculation
Linkbase
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase
101.PRE
Inline XBRL Taxonomy Extension Presentation
Linkbase
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase
104
Inline XBRL For the cover page of this Annual Report
on Form 10-K, included in the Exhibit 101 Inline
XBRL Document Set
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Indicates a management contract or compensatory plan.
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.
Item 16. Form 10-K Summary
None.
95
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Dated: February 14, 2020
GoPro, Inc.
(Registrant)
By: /s/ Nicholas Woodman
Nicholas Woodman
Chief Executive Officer
(Principal Executive Officer)
Dated: February 14, 2020
By: /s/ Brian McGee
Brian McGee
Chief Financial Officer and Chief Operating Officer
(Principal Financial Officer)
96
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby
constitutes and appoints Nicholas Woodman and Brian McGee, 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 14, 2020
Nicholas Woodman
(Principal Executive Officer)
By:
/s/ Brian McGee
Chief Financial Officer and Chief Operating Officer
February 14, 2020
Brian McGee
(Principal Financial and Accounting Officer)
By:
/s/ Tyrone Ahmad-Taylor
Director
February 14, 2020
Tyrone Ahmad-Taylor
By:
/s/ Kenneth Goldman
Director
February 14, 2020
Kenneth Goldman
By:
/s/ Peter Gotcher
Director
February 14, 2020
Peter Gotcher
By:
/s/ James Lanzone
Director
February 14, 2020
James Lanzone
By:
/s/ Alexander Lurie
Director
February 14, 2020
Alexander Lurie
By:
/s/ Susan Lyne
Director
February 14, 2020
Susan Lyne
By:
/s/ Frederic Welts
Director
February 14, 2020
Frederic Welts
By:
/s/ Lauren Zalaznick
Director
February 14, 2020
Lauren Zalaznick
97
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GoPro, Inc.
3000 Clearview Way
San Mateo, CA 94402
(650) 332-7600
gopro.com
Investor Relations
investor.gopro.com
GoPro, HERO and their respective logos are trademarks or registered trademarks of GoPro, Inc. in the United States and other countries.
All other trademarks are the property of their respective owners. © 2020 GoPro, Inc. All rights reserved.
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200107_2019_Annual_Report_InsideCover_Letter.indd 2
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Proxy Statement
Annual Report
Fiscal Year 2019