GOPRO, INC., 10-Q filed on 11/5/2020
Quarterly Report
v3.20.2
Cover - shares
9 Months Ended
Sep. 30, 2020
Nov. 02, 2020
Class of Stock [Line Items]    
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 77-0629474  
Entity Address, Address Line One 3025 Clearview Way  
Entity Address, City or Town San Mateo,  
Entity Address, State or Province CA  
Entity Address, Postal Zip Code 94402  
Title of 12(b) Security Class A common stock, $0.001 par value  
Trading Symbol GPRO  
Entity Registrant Name GOPRO, INC.  
City Area Code (650)  
Local Phone Number 332-7600  
Entity Central Index Key 0001500435  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2020  
Document Transition Report false  
Entity File Number 001-36514  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q3  
Amendment Flag false  
Entity Emerging Growth Company false  
Entity Small Business false  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Shell Company false  
Security Exchange Name NASDAQ  
Common Class A [Member]    
Class of Stock [Line Items]    
Entity Common Stock, Shares Outstanding   121,861,718
Common Class B [Member]    
Class of Stock [Line Items]    
Entity Common Stock, Shares Outstanding   28,887,185
v3.20.2
Condensed Consolidated Balance Sheets - USD ($)
Sep. 30, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 146,871,000 $ 150,301,000
Marketable securities 0 14,847,000
Accounts receivable, net 107,168,000 200,634,000
Inventory 132,816,000 144,236,000
Prepaid expenses and other current assets 26,124,000 25,958,000
Total current assets 412,979,000 535,976,000
Property and equipment, net 26,455,000 36,539,000
Operating Lease, Right-of-Use Asset 33,218,000 53,121,000
Intangible assets, net 1,937,000 5,247,000
Goodwill 146,459,000 146,459,000
Other long-term assets 12,539,000 15,461,000
Total assets 633,587,000 792,803,000
Current liabilities:    
Accounts payable 124,996,000 160,695,000
Accrued expenses and other current liabilities 104,026,000 141,790,000
Short-term operating lease liabilities 9,053,000 9,099,000
Deferred revenue 19,459,000 15,467,000
Total current liabilities 257,534,000 327,051,000
Long-term taxes payable 16,783,000 13,726,000
Long-term debt 156,782,000 148,810,000
Long-term operating lease liabilities 54,293,000 62,961,000
Other long-term liabilities 5,098,000 6,726,000
Total liabilities 490,490,000 559,274,000
Commitments, contingencies and guarantees
Stockholders’ equity:    
Preferred Stock, Value, Outstanding 0 0
Common Stocks, Including Additional Paid in Capital 951,639,000 930,875,000
Treasury Stock, Value (113,613,000) (113,613,000)
Accumulated deficit (694,929,000) (583,733,000)
Total stockholders’ equity 143,097,000 233,529,000
Total liabilities and stockholders’ equity $ 633,587,000 $ 792,803,000
Preferred Stock, par value (usd per share) $ 0.0001 $ 0.0001
Preferred Stock, Shares Authorized (shares) 5,000,000 5,000,000
Preferred Stock, par value (usd per share) $ 0.0001 $ 0.0001
Preferred Stock, Shares Authorized (shares) 5,000,000 5,000,000
Common stock, par value (in dollars per share) $ 0.0001 $ 0.0001
Treasury Stock, Value $ 113,613,000 $ 113,613,000
Common Stocks, Including Additional Paid in Capital 951,639,000 930,875,000
Preferred Stock, Value, Outstanding $ 0 $ 0
Treasury Stock, Shares (shares) 10,710,000 10,710,000
Common stock, par value (in dollars per share) $ 0.0001 $ 0.0001
Treasury Stock, Shares (shares) 10,710,000 10,710,000
Common Class A [Member]    
Common stock outstanding (shares) 121,337,000 117,922,000
Common Stock, Shares Authorized (shares) 500,000,000 500,000,000
Common Stock, Shares, Issued 121,337,000 117,922,000
Common Stock, Shares Authorized (shares) 500,000,000 500,000,000
Common Stock, Shares, Issued 121,337,000 117,922,000
Common Class B [Member]    
Common stock outstanding (shares) 28,887,000 28,897,000
Common Stock, Shares Authorized (shares) 150,000,000 150,000,000
Common Stock, Shares, Issued 28,887,000 28,897,000
Common Stock, Shares Authorized (shares) 150,000,000 150,000,000
Common Stock, Shares, Issued 28,887,000 28,897,000
v3.20.2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Sep. 30, 2020
Dec. 31, 2019
Preferred Stock, par value (usd per share) $ 0.0001 $ 0.0001
Preferred Stock, Shares Authorized (shares) 5,000,000 5,000,000
Common stock, par value (in dollars per share) $ 0.0001 $ 0.0001
Treasury Stock, Shares (shares) 10,710,000 10,710,000
Common Class A [Member]    
Common Stock, Shares Authorized (shares) 500,000,000 500,000,000
Common Stock, Shares, Issued 121,337,000 117,922,000
Common stock outstanding (shares) 121,337,000 117,922,000
Common Class B [Member]    
Common Stock, Shares Authorized (shares) 150,000,000 150,000,000
Common Stock, Shares, Issued 28,887,000 28,897,000
Common stock outstanding (shares) 28,887,000 28,897,000
v3.20.2
Condensed Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
Income Statement [Abstract]        
Revenue $ 280,507 $ 131,169 $ 534,153 $ 666,306
Cost of revenue 181,195 102,737 355,722 455,342
Gross profit 99,312 28,432 178,431 210,964
Operating expenses:        
Research and development 37,235 34,940 104,074 111,215
Sales and marketing 34,378 48,848 112,845 148,273
General and administrative 18,845 15,842 53,686 49,909
Total operating expenses 90,458 99,630 270,605 309,397
Operating income (loss) 8,854 (71,198) (92,174) (98,433)
Interest expense (5,260) (4,623) (14,774) (14,032)
Other income, net 955 738 462 1,503
Total other expense, net (4,305) (3,885) (14,312) (12,529)
Income (loss) before income taxes 4,549 (75,083) (106,486) (110,962)
Income tax expense (benefit) (1,242) 273 (4,710) 500
Net income (loss) $ 3,307 $ (74,810) $ (111,196) $ (110,462)
Earnings Per Share, Basic $ 0.02 $ (0.51) $ (0.75) $ (0.77)
Earnings Per Share, Diluted $ 0.02 $ (0.51) $ (0.75) $ (0.77)
Weighted Average Number of Shares Outstanding, Basic 149,406 145,617 148,491 144,306
Weighted Average Number of Shares Outstanding, Diluted 151,849 145,617 148,491 144,306
v3.20.2
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Net loss $ (111,196) $ (110,462)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 15,495 19,823
Amortization of Leased Asset 4,907 7,599
Stock-based compensation 21,926 30,160
Deferred income taxes (51) 13
Restructuring Costs 5,242 199
Amortization of Debt Discount (Premium) 7,348 6,633
Other 738 (779)
Changes in operating assets and liabilities:    
Accounts receivable, net 93,240 57,160
Inventory 11,420 (133,574)
Prepaid expenses and other assets 3,613 8,136
Accounts payable and other liabilities (81,325) 6,481
Deferred revenue 3,712 (3,686)
Net Cash Provided by (Used in) Operating Activities (12,471) (112,695)
Investing activities:    
Purchases of property and equipment, net (4,560) (6,310)
Purchases of marketable securities 0 (43,636)
Maturities of marketable securities 14,830 51,738
Sale of marketable securities 0 1,889
Payments for (Proceeds from) Other Investing Activities 438 0
Net cash provided by investing activities 9,832 3,681
Financing activities:    
Proceeds from issuance of common stock 3,508 5,574
Payment, Tax Withholding, Share-based Payment Arrangement (4,713) (5,798)
Proceeds from Lines of Credit 30,000 0
Net cash used in financing activities (1,205) (224)
Repayments of Lines of Credit (30,000) 0
Effect of exchange rate changes on cash and cash equivalents 414 159
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Period Increase (Decrease), Including Exchange Rate Effect (3,430) (109,079)
Cash and cash equivalents at beginning of period 150,301 152,095
Cash and cash equivalents at end of period 146,871 43,016
Operating Lease, Impairment Loss $ 12,460 $ 0
v3.20.2
Condensed Consolidated Statements Stockholders' Equity (Deficit) - USD ($)
shares in Thousands, $ in Thousands
Total
Common Stock Including Additional Paid in Capital [Member]
Treasury Stock [Member]
Retained Earnings [Member]
Retained Earnings [Member]
Cumulative effect of adoption of new accounting standard
Beginning Balance at Dec. 31, 2018 $ 212,112 $ 894,755 $ (113,613) $ (569,030)  
Beginning Balance (shares) at Dec. 31, 2018   141,067      
Common stock issued under employee benefit plans, net of shares withheld for tax 3,761 $ 3,761      
Share-based Payment Arrangement, Decrease for Tax Withholding Obligation (2,673) $ 2,673      
Common stock issued under employee benefit plans, net of shares withheld for tax (shares)   3,293      
Allocated share-based compensation expense 9,782 $ 9,782      
Net loss (24,365)     (24,365)  
Ending Balance at Mar. 31, 2019 198,556 $ 905,625 (113,613) (593,456) $ (61)
Ending Balance (shares) at Mar. 31, 2019   144,360      
Beginning Balance at Dec. 31, 2018 212,112 $ 894,755 (113,613) (569,030)  
Beginning Balance (shares) at Dec. 31, 2018   141,067      
Net loss (110,462)        
Ending Balance at Sep. 30, 2019 131,559 $ 924,725 (113,613) (679,553)  
Ending Balance (shares) at Sep. 30, 2019   146,331      
Beginning Balance at Mar. 31, 2019 198,556 $ 905,625 (113,613) (593,456) $ (61)
Beginning Balance (shares) at Mar. 31, 2019   144,360      
Common stock issued under employee benefit plans, net of shares withheld for tax 144 $ 144      
Share-based Payment Arrangement, Decrease for Tax Withholding Obligation (1,324) $ 1,324      
Common stock issued under employee benefit plans, net of shares withheld for tax (shares)   528      
Allocated share-based compensation expense 10,606 $ 10,606      
Net loss (11,287)     (11,287)  
Ending Balance at Jun. 30, 2019 196,695 $ 915,051 (113,613) (604,743)  
Ending Balance (shares) at Jun. 30, 2019   144,888      
Common stock issued under employee benefit plans, net of shares withheld for tax 1,706 $ 1,706      
Share-based Payment Arrangement, Decrease for Tax Withholding Obligation (1,801) $ 1,801      
Common stock issued under employee benefit plans, net of shares withheld for tax (shares)   1,443      
Allocated share-based compensation expense 9,769 $ 9,769      
Net loss (74,810)     (74,810)  
Ending Balance at Sep. 30, 2019 131,559 $ 924,725 (113,613) (679,553)  
Ending Balance (shares) at Sep. 30, 2019   146,331      
Beginning Balance at Dec. 31, 2019 233,529 $ 930,875 (113,613) (583,733)  
Beginning Balance (shares) at Dec. 31, 2019   146,818      
Common stock issued under employee benefit plans, net of shares withheld for tax 1,863 $ 1,863      
Share-based Payment Arrangement, Decrease for Tax Withholding Obligation (2,003) $ 2,003      
Common stock issued under employee benefit plans, net of shares withheld for tax (shares)   1,542      
Allocated share-based compensation expense 7,637 $ 7,637      
Net loss (63,528)     (63,528)  
Ending Balance at Mar. 31, 2020 177,498 $ 938,372 (113,613) (647,261)  
Ending Balance (shares) at Mar. 31, 2020   148,360      
Beginning Balance at Dec. 31, 2019 233,529 $ 930,875 (113,613) (583,733)  
Beginning Balance (shares) at Dec. 31, 2019   146,818      
Net loss (111,196)        
Ending Balance at Sep. 30, 2020 143,097 $ 951,639 (113,613) (694,929)  
Ending Balance (shares) at Sep. 30, 2020   150,224      
Beginning Balance at Mar. 31, 2020 177,498 $ 938,372 (113,613) (647,261)  
Beginning Balance (shares) at Mar. 31, 2020   148,360      
Common stock issued under employee benefit plans, net of shares withheld for tax 30 $ 30      
Share-based Payment Arrangement, Decrease for Tax Withholding Obligation (351) $ 351      
Common stock issued under employee benefit plans, net of shares withheld for tax (shares)   278      
Allocated share-based compensation expense 5,876 $ 5,876      
Net loss (50,975)     (50,975)  
Ending Balance at Jun. 30, 2020 132,078 $ 943,927 (113,613) (698,236)  
Ending Balance (shares) at Jun. 30, 2020   148,638      
Common stock issued under employee benefit plans, net of shares withheld for tax 1,658 $ 1,658      
Share-based Payment Arrangement, Decrease for Tax Withholding Obligation (2,359) $ 2,359      
Common stock issued under employee benefit plans, net of shares withheld for tax (shares)   1,586      
Allocated share-based compensation expense 8,413 $ 8,413      
Net loss 3,307        
Ending Balance at Sep. 30, 2020 $ 143,097 $ 951,639 $ (113,613) $ (694,929)  
Ending Balance (shares) at Sep. 30, 2020   150,224      
v3.20.2
Summary of business and significant accounting policies
9 Months Ended
Sep. 30, 2020
Accounting Policies [Abstract]  
Summary of business and significant accounting policies Summary of business and significant accounting policies
GoPro, Inc. and its subsidiaries (GoPro or the Company) helps the world capture and share itself 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 on its website, and through retailers and wholesale distributors. The Company’s global corporate headquarters are located in San Mateo, California.
Basis of presentation. The accompanying unaudited condensed 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.
The Company’s operating results, financial position and cash flows were negatively impacted by the COVID-19 pandemic and as a result, the Company accelerated a shift in its sales channel strategy to focus more on direct-to-consumer sales through GoPro.com, and implemented a restructuring plan in April 2020, which primarily impacted the Company’s global workforce, sales and marketing expenses, and leased facilities. These actions impacted the Company’s financial results starting in the second quarter of 2020 by reducing on-going operating expenses and helped accelerate its ability to achieve profitability, thus providing sufficient resources to continue as a going concern for at least one year from the date of issuance of the condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q.
The condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, that management believes are necessary for the fair statement of the Company's financial statements, but are not necessarily indicative of the results expected for the full fiscal year or any other future period. The Condensed Consolidated Balance Sheet at December 31, 2019 has been derived from the audited financial statements at that date, but does not include all the disclosures required by GAAP. This Quarterly Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K (Annual Report) for the year ended December 31, 2019. There have been no material changes in the Company’s critical accounting policies and estimates from those disclosed in its Annual Report.
Principles of consolidation. These condensed 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 condensed 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 condensed 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), inventory valuation, product warranty liabilities, the valuation, impairment and useful lives of long-lived assets (property and equipment, operating lease right-of-use assets, intangible assets and goodwill), income taxes and going concern. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances, including but not limited to the potential impacts arising from the COVID-19 pandemic, 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. The extent and continued impact of COVID-19 has been taken into account in making the significant assumptions and estimates related to the above, however if the duration and spread of the outbreak, the impact on our customers, and the effect on our contract manufacturers, vendors and supply chains is different from the Company’s estimates and assumptions, then actual results could differ materially. Given the uncertainty with respect to COVID-19, the Company’s estimates and assumptions may evolve as conditions change. 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 Condensed Consolidated Statements of Comprehensive Income (Loss) have been omitted.
Leases. The Company leases its office space and facilities under cancelable and non-cancelable operating leases. 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 Condensed 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.

The Company performs periodic assessments of its ROU assets whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The recoverability of assets is measured by comparing the net carrying amount to the estimated future undiscounted cash flows. If it is determined that an asset is not recoverable, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds its fair value. Significant assumptions under the Company’s assessment include future sublease rates, future sublease market conditions and a discount rate based on the weighted-average cost of capital.
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.
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 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 can include four 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) a subscription service, c) the implicit right to the Company's downloadable free apps and software solutions and d) 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 September 30, 2020 and December 31, 2019 also included immaterial amounts related to the Company’s subscription services. The Company’s short-term and long-term deferred revenue balances totaled $20.4 million and $16.6 million as of September 30, 2020 and December 31, 2019, respectively. Of the deferred revenue balance as of June 30, 2020 and 2019, the Company recognized $5.6 million and $5.5 million of revenue in the three months ended September 30, 2020 and 2019, respectively. Of the deferred revenue balance as of December 31, 2019 and 2018, the Company recognized $12.9 million of revenue in the nine months ended September 30, 2020 and 2019.
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.
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.
Recent accounting standards
StandardDescriptionCompany’s date of adoptionEffect on the condensed consolidated financial statements or other significant matters
Standards that were adopted
Intangible - Goodwill and Other
ASU No. 2017-04 (Topic 350)

This standard simplifies the accounting for goodwill and removes Step 2 of the annual goodwill impairment test. Upon adoption, goodwill impairment is 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. The standard is applied on a prospective transition method.January 1, 2020The adoption of this standard did not impact the Company’s condensed consolidated financial statements and related disclosures.
Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments
ASU No. 2016-13
(Topic 326)
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 is applied on a modified retrospective approach.January 1, 2020The Company’s allowance for doubtful accounts and valuation of available-for-sale securities are subject to this standard. The Company concluded the adoption of this standard did not have a material impact on its condensed consolidated financial statements and related disclosures.
StandardDescriptionExpected date of adoptionEffect on the condensed consolidated financial statements or other significant matters
Standards not yet adopted
Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)
ASU No. 2020-06

This standard simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible debt instruments and contracts on an entity’s own equity. Specifically, the standard removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments, requiring bifurcation only if the convertible debt feature qualifies as a derivative under ASC 815 or if the convertible debt was issued at a substantial premium. This standard also removes certain settlement conditions required for equity contracts to qualify for the derivative scope exception. Lastly, entities are required to use the if-converted method for convertible instruments in the diluted earnings per share calculation. Early adoption is permitted, but no earlier than the fiscal year beginning after December 15, 2020. The standard can be applied using a full or modified retrospective approach.January 1, 2021The Company is currently evaluating the impact of adopting this standard on its condensed 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 condensed consolidated financial statements.
v3.20.2
Condensed consolidated financial statement details
9 Months Ended
Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Consolidated financial statement details Condensed consolidated financial statement details
The following sections and tables provide details of selected balance sheet items.
Inventory
(in thousands)
September 30, 2020December 31, 2019
Components
$16,205 $20,370 
Finished goods
116,611 123,866 
Total inventory
$132,816 $144,236 
Property and equipment, net
(in thousands)
September 30, 2020December 31, 2019
Leasehold improvements (1)
$35,527 $50,736 
Production, engineering and other equipment48,813 45,649 
Tooling17,571 19,216 
Computers and software22,349 21,719 
Furniture and office equipment6,315 10,846 
Tradeshow equipment and other5,886 7,009 
Construction in progress81 45 
Gross property and equipment
136,542 155,220 
Less: Accumulated depreciation and amortization(110,087)(118,681)
Property and equipment, net
$26,455 $36,539 
(1)    Refer to Note 10 Restructuring charges, for details of operating lease right-of-use asset impairment charges in the three and nine months ended September 30, 2020.
Intangible assets
September 30, 2020
(in thousands)Gross carrying valueAccumulated amortizationNet carrying value
Purchased technology $51,066 $(49,144)$1,922 
Domain name15 — 15 
Total intangible assets
$51,081 $(49,144)$1,937 

December 31, 2019
(in thousands)Gross carrying valueAccumulated amortizationNet carrying value
Purchased technology $50,501 $(45,269)$5,232 
Domain name15 15 
Total intangible assets
$50,516$(45,269)$5,247

Amortization expense was $1.0 million and $1.9 million for the three months ended September 30, 2020 and 2019, respectively, and $3.9 million and $6.0 million for the nine months ended September 30, 2020 and 2019, respectively. At September 30, 2020, expected amortization expense of intangible assets with definite lives for future periods was as follows:
(in thousands)
Total
Year ending December 31,
2020 (remaining 3 months)$723 
20211,152 
202247 
$1,922 
Other long-term assets
(in thousands)
September 30, 2020December 31, 2019
Point of purchase (POP) displays
$4,228 $7,595 
Long-term deferred tax assets
915 864 
Deposits and other
7,396 7,002 
Other long-term assets$12,539 $15,461 
Accrued expenses and other current liabilities
(in thousands)
September 30, 2020December 31, 2019
Accrued payables (1)
$40,622 $42,153 
Accrued sales incentives
21,782 39,120 
Employee related liabilities (1)
4,846 20,494 
Return liability
10,014 14,854 
Warranty liability
7,118 9,899 
Inventory received
3,819 5,737 
Customer deposits
4,486 2,063 
Purchase order commitments
2,314 1,710 
Income taxes payable
960 1,166 
Other
8,065 4,594 
Accrued expenses and other current liabilities$104,026 $141,790 
(1)    See Note 10 Restructuring charges for amounts associated with restructuring liabilities.
Product warranty
Three months ended September 30,Nine months ended September 30,
(in thousands)
2020201920202019
Beginning balance
$7,326 $12,850 $11,398 $10,971 
Charged to cost of revenue
4,560 1,610 7,546 12,013 
Settlement of warranty claims
(4,269)(3,981)(11,327)(12,505)
Warranty liability
$7,617 $10,479 $7,617 $10,479 
At September 30, 2020 and December 31, 2019, $7.1 million and $9.9 million, respectively, of the warranty liability was recorded as a component of accrued expenses and other current liabilities, and $0.5 million and $1.5 million, respectively, was recorded as a component of other long-term liabilities.
v3.20.2
Financing Arrangements
9 Months Ended
Sep. 30, 2020
Debt Disclosure [Abstract]  
Financing Arrangements Financing Arrangements
For a discussion around the Company’s liquidity requirements for at least one year from the issuance of these financial statements, see Note 1 Summary of business and significant accounting policies, to the Notes to Condensed Consolidated Financial Statements.
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. has also granted security interests in substantially all of its 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 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 September 30, 2020 and December 31, 2019, the Company was in compliance with all financial covenants contained in the Credit Agreement. As of September 30, 2020, the Company could borrow up to $48.2 million. As of September 30, 2020 and December 31, 2019, the Company had zero borrowings outstanding on the Credit Facility.
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 Condensed Consolidated Balance Sheets. 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 Condensed 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 Condensed Consolidated Balance Sheets 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 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 September 30, 2020 and December 31, 2019, the outstanding principal on the Notes was $175.0 million, the unamortized debt discount was $16.9 million and $24.3 million, respectively, the unamortized debt issuance cost was $1.3 million and $1.9 million, respectively, and the net carrying amount of the liability component was $156.8 million and $148.8 million, respectively, which was recorded as long-term debt within the Condensed Consolidated Balance Sheets. For the three months ended September 30, 2020 and 2019, the Company recorded interest expense of $1.5 million for contractual coupon interest, $0.2 million for amortization of debt issuance costs, and $2.4 million and $2.2 million, respectively, for amortization of the debt discount. For the nine months ended September 30, 2020 and 2019, the Company recorded interest expense of $4.6 million for contractual coupon interest, $0.6 million for amortization of debt issuance costs, and $7.3 million and $6.6 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 Condensed Consolidated Balance Sheets (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.
On October 22, 2020, 8.8 million shares of common stock underlying the Prepaid Forward entered into as part of the Company’s Convertible Notes were early settled and delivered to the Company. The remaining 0.4 million shares of common stock under the Prepaid Forward will continue to be treated as treasury stock on the Condensed Consolidated Balance Sheets until the Forward Counterparty delivers the remaining underlying shares to the Company. There was no financial statement impact due to the return of shares, however shares outstanding for corporate law purposes will be reduced by the early settlement.
v3.20.2
Employee benefit plans
9 Months Ended
Sep. 30, 2020
Share-based Payment Arrangement [Abstract]  
Employee benefit plans Employee benefit plans Equity incentive plans. The Company has outstanding equity grants from its three stock-based employee compensation plans: the 2014 Equity Incentive Plan (2014 Plan), the 2010 Equity Incentive Plan (2010 Plan) and the 2014 Employee Stock Purchase Plan (ESPP). 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. Options granted under the 2014 Plan generally expire within ten years from the date of grant and generally vest over one to four years. Restricted stock units (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. For additional information regarding the Company’s equity incentive plans, refer to the 2019 Annual Report.
Stock options
A summary of the Company’s stock option activity for the nine months ended September 30, 2020 is as follows:
Shares
(in thousands)
Weighted-average exercise price
Weighted-average remaining contractual term (in years)
Aggregate intrinsic value (in thousands)
Outstanding at December 31, 20193,963 $10.16 6.35$374 
Granted1,025 4.01 
Exercised(42)0.94 
Forfeited/Cancelled(1,041)10.15 
Outstanding at September 30, 20203,905 $8.65 6.23$703 
Vested and expected to vest at September 30, 20203,905 $8.65 6.23$703 
Exercisable at September 30, 20202,614 $10.54 4.83$233 
The aggregate intrinsic value of the stock options outstanding as of September 30, 2020 represents the value of the Company’s closing stock price on September 30, 2020 in excess of the exercise price multiplied by the number of options outstanding.
Restricted stock units
A summary of the Company’s RSU activity for the nine months ended September 30, 2020 is as follows:
Shares
(in thousands)
Weighted-average grant date fair value
Non-vested shares at December 31, 20198,225 $6.11 
Granted8,005 4.33 
Vested(3,212)6.17 
Forfeited(2,176)5.42 
Non-vested shares at September 30, 202010,842 $4.91 
Performance stock units
A summary of the Company’s PSU activity for the nine months ended September 30, 2020 is as follows:
Shares
(in thousands)
Weighted-average grant date fair value
Non-vested shares at December 31, 2019788 $7.51 
Granted1,231 4.05 
Vested(214)7.50 
Forfeited(291)6.60 
Non-vested shares at September 30, 20201,514 $4.87 
Employee stock purchase plan. For the nine months ended September 30, 2020 and 2019, the Company issued 1,014,000 and 958,000 shares under its ESPP, respectively, at weighted-average prices of $3.42 and $4.13, respectively.
Stock-based compensation expense. 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 stock options granted and ESPP issuance is estimated using the Black-Scholes option pricing model. The fair value of RSUs and PSUs are determined using the Company’s closing stock price on the date of grant. There have been no significant changes in the Company’s valuation assumptions from those disclosed in its 2019 Annual Report.
The following table summarizes stock-based compensation expense included in the Condensed Consolidated Statements of Operations:
Three months ended September 30,Nine months ended September 30,
(in thousands)
2020201920202019
Cost of revenue
$340 $448 $1,175 $1,483 
Research and development
3,597 4,507 9,682 14,068 
Sales and marketing
1,601 2,084 4,107 6,518 
General and administrative
2,875 2,730 6,962 8,091 
Total stock-based compensation expense
$8,413 $9,769 $21,926 $30,160 

The income tax benefit related to stock-based compensation expense was zero for the three and nine months ended September 30, 2020 and 2019 due to a full valuation allowance on the Company’s United States net deferred tax assets (see Note 7 Income taxes).
At September 30, 2020, total unearned stock-based compensation of $51.3 million related to stock options, RSUs, PSUs and ESPP shares is expected to be recognized over a weighted-average period of 2.2 years.
v3.20.2
Net loss per share
9 Months Ended
Sep. 30, 2020
Earnings Per Share [Abstract]  
Net loss per share Net income (loss) per share
The following table presents the calculations of basic and diluted net income (loss) per share:
Three months ended September 30,Nine months ended September 30,
(in thousands, except per share data)
2020201920202019
Numerator:
Net income (loss)$3,307 $(74,810)$(111,196)$(110,462)
Denominator:
Weighted-average common shares - basic for Class A and Class B common stock149,406 145,617 148,491 144,306 
Effect of dilutive stock-based awards
2,443 — — — 
Weighted-average common shares - diluted for Class A and Class B common stock151,849 145,617 148,491 144,306 
Basic net income (loss) per share$0.02 $(0.51)$(0.75)$(0.77)
Diluted net income (loss) per share$0.02 $(0.51)$(0.75)$(0.77)
The following potentially dilutive shares were not included in the calculation of diluted shares outstanding as the effect would have been anti-dilutive:
Three months ended September 30,Nine months ended September 30,
(in thousands)
2020201920202019
Anti-dilutive stock-based awards10,598 13,168 14,652 13,064 
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 three and nine months ended September 30, 2020 and 2019 excludes approximately 9.2 million shares, effectively repurchased and held in treasury stock on the Condensed 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.
v3.20.2
Commitments, contingencies and guarantees
9 Months Ended
Sep. 30, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments, contingencies and guarantees 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:
Three months ended September 30,Nine months ended September 30,
(in thousands)2020201920202019
Operating lease cost (1)
$3,352 $4,092 $11,647 $13,656 
Sublease income(133)(129)(393)(528)
Right-of-use asset impairment cost12,460 — 12,460 — 
Net lease cost$15,679 $3,963 $23,714 $13,128 
(1)    Operating lease cost includes variable lease costs, which are immaterial.

Supplemental cash flow information related to leases was as follows:
Nine months ended September 30,
(in thousands)20202019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$10,869 $10,402 
Right-of-use assets obtained in exchange for operating lease liabilities1,252 10,541 
Operating lease modifications to decrease right-of-use assets(2,482)— 

Supplemental balance sheet information related to leases was as follows:
September 30, 2020December 31, 2019
Weighted-average remaining lease term (in years) - operating leases5.756.44
Weighted-average discount rate - operating leases6.2%6.2%

As of September 30, 2020, maturities of operating lease liabilities were as follows:
(in thousands)
September 30, 2020
2020 (remaining 3 months)$2,486 
2021
13,662 
2022
12,871 
2023
11,917 
2024
11,519 
Thereafter23,932 
Total lease payments
76,387 
Less: Imputed interest
(13,087)
Present value of lease liabilities
$63,300 
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 September 30, 2020, the Company’s total undiscounted future expected obligations under multi-year agreements described above with terms longer than one year was $208.3 million.
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. On June 15, 2020, defendants moved to dismiss the complaint.
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). On April 28, 2020, the Court granted defendants’ motion to dismiss the Consolidated Delaware Derivative Actions with prejudice. On May 8, 2020, plaintiffs filed a notice of appeal.
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 United States Patent and Trademark Office. The case was transferred to the Northern District of California in July 2017 and was stayed pending the IPR proceedings. Upon conclusion of the IPRs, the District Court lifted the stay on October 1, 2019 and thereafter entered a schedule for the remainder of the case. On August 31, 2020, the Court ruled on various dispositive motions filed by each party, none of which resolved the case and the remaining issues are slated to go to jury trial. Due to COVID-19 delays and to complete supplemental expert discovery, the trial is now scheduled to commence on January 25, 2021. 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.
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 September 30, 2020, 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.
v3.20.2
Summary of business and significant accounting policies (Policies)
9 Months Ended
Sep. 30, 2020
Accounting Policies [Abstract]  
Basis of presentation
Basis of presentation. The accompanying unaudited condensed 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.
The Company’s operating results, financial position and cash flows were negatively impacted by the COVID-19 pandemic and as a result, the Company accelerated a shift in its sales channel strategy to focus more on direct-to-consumer sales through GoPro.com, and implemented a restructuring plan in April 2020, which primarily impacted the Company’s global workforce, sales and marketing expenses, and leased facilities. These actions impacted the Company’s financial results starting in the second quarter of 2020 by reducing on-going operating expenses and helped accelerate its ability to achieve profitability, thus providing sufficient resources to continue as a going concern for at least one year from the date of issuance of the condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q.
The condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, that management believes are necessary for the fair statement of the Company's financial statements, but are not necessarily indicative of the results expected for the full fiscal year or any other future period. The Condensed Consolidated Balance Sheet at December 31, 2019 has been derived from the audited financial statements at that date, but does not include all the disclosures required by GAAP. This Quarterly Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K (Annual Report) for the year ended December 31, 2019. There have been no material changes in the Company’s critical accounting policies and estimates from those disclosed in its Annual Report.
Principles of consolidation Principles of consolidation. These condensed 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 Use of estimates. The preparation of condensed 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 condensed 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), inventory valuation, product warranty liabilities, the valuation, impairment and useful lives of long-lived assets (property and equipment, operating lease right-of-use assets, intangible assets and goodwill), income taxes and going concern. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances, including but not limited to the potential impacts arising from the COVID-19 pandemic, 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. The extent and continued impact of COVID-19 has been taken into account in making the significant assumptions and estimates related to the above, however if the duration and spread of the outbreak, the impact on our customers, and the effect on our contract manufacturers, vendors and supply chains is different from the Company’s estimates and assumptions, then actual results could differ materially. Given the uncertainty with respect to COVID-19, the Company’s estimates and assumptions may evolve as conditions change. To the extent there are material differences between the estimates and the actual results, future results of operations could be affected.
Comprehensive income (loss) Comprehensive income (loss). For all periods presented, comprehensive income (loss) approximated net income (loss). Therefore, the Condensed Consolidated Statements of Comprehensive Income (Loss) have been omitted
Leases
Leases. The Company leases its office space and facilities under cancelable and non-cancelable operating leases. 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 Condensed 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.

The Company performs periodic assessments of its ROU assets whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The recoverability of assets is measured by comparing the net carrying amount to the estimated future undiscounted cash flows. If it is determined that an asset is not recoverable, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds its fair value. Significant assumptions under the Company’s assessment include future sublease rates, future sublease market conditions and a discount rate based on the weighted-average cost of capital.
Revenue recognition
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.
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 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 can include four 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) a subscription service, c) the implicit right to the Company's downloadable free apps and software solutions and d) 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 September 30, 2020 and December 31, 2019 also included immaterial amounts related to the Company’s subscription services. The Company’s short-term and long-term deferred revenue balances totaled $20.4 million and $16.6 million as of September 30, 2020 and December 31, 2019, respectively. Of the deferred revenue balance as of June 30, 2020 and 2019, the Company recognized $5.6 million and $5.5 million of revenue in the three months ended September 30, 2020 and 2019, respectively. Of the deferred revenue balance as of December 31, 2019 and 2018, the Company recognized $12.9 million of revenue in the nine months ended September 30, 2020 and 2019.
Sales incentives 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.
Segment information 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.
v3.20.2
Summary of business and significant accounting policies (Tables)
9 Months Ended
Sep. 30, 2020
Accounting Policies [Abstract]  
Schedule of recent accounting pronouncements
Recent accounting standards
StandardDescriptionCompany’s date of adoptionEffect on the condensed consolidated financial statements or other significant matters
Standards that were adopted
Intangible - Goodwill and Other
ASU No. 2017-04 (Topic 350)

This standard simplifies the accounting for goodwill and removes Step 2 of the annual goodwill impairment test. Upon adoption, goodwill impairment is 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. The standard is applied on a prospective transition method.January 1, 2020The adoption of this standard did not impact the Company’s condensed consolidated financial statements and related disclosures.
Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments
ASU No. 2016-13
(Topic 326)
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 is applied on a modified retrospective approach.January 1, 2020The Company’s allowance for doubtful accounts and valuation of available-for-sale securities are subject to this standard. The Company concluded the adoption of this standard did not have a material impact on its condensed consolidated financial statements and related disclosures.
StandardDescriptionExpected date of adoptionEffect on the condensed consolidated financial statements or other significant matters
Standards not yet adopted
Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)
ASU No. 2020-06

This standard simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible debt instruments and contracts on an entity’s own equity. Specifically, the standard removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments, requiring bifurcation only if the convertible debt feature qualifies as a derivative under ASC 815 or if the convertible debt was issued at a substantial premium. This standard also removes certain settlement conditions required for equity contracts to qualify for the derivative scope exception. Lastly, entities are required to use the if-converted method for convertible instruments in the diluted earnings per share calculation. Early adoption is permitted, but no earlier than the fiscal year beginning after December 15, 2020. The standard can be applied using a full or modified retrospective approach.January 1, 2021The Company is currently evaluating the impact of adopting this standard on its condensed 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 condensed consolidated financial statements.
v3.20.2
Fair value measurements (Tables)
9 Months Ended
Sep. 30, 2020
Fair Value Disclosures [Abstract]  
Assets measured at fair value on recurring basis
The Company’s assets that are measured at fair value on a recurring basis within the fair value hierarchy are summarized as follows:
September 30, 2020December 31, 2019
(in thousands)Level 1Level 2TotalLevel 1Level 2Total
Cash equivalents (1):
Money market funds$19,444 $— $19,444 $4,413 $— $4,413 
Total cash equivalents$19,444 $— $19,444 $4,413 $— $4,413 
Marketable securities:
Corporate debt securities$— $— $— $— $14,847 $14,847 
Total marketable securities$— $— $— $— $14,847 $14,847 
(1)    Included in cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheets. Cash balances were $127.4 million and $145.9 million as of September 30, 2020 and December 31, 2019, respectively.
v3.20.2
Condensed consolidated financial statement details (Tables)
9 Months Ended
Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Schedule of Inventory
Inventory
(in thousands)
September 30, 2020December 31, 2019
Components
$16,205 $20,370 
Finished goods
116,611 123,866 
Total inventory
$132,816 $144,236 
Property, Plant and Equipment
Property and equipment, net
(in thousands)
September 30, 2020December 31, 2019
Leasehold improvements (1)
$35,527 $50,736 
Production, engineering and other equipment48,813 45,649 
Tooling17,571 19,216 
Computers and software22,349 21,719 
Furniture and office equipment6,315 10,846 
Tradeshow equipment and other5,886 7,009 
Construction in progress81 45 
Gross property and equipment
136,542 155,220 
Less: Accumulated depreciation and amortization(110,087)(118,681)
Property and equipment, net
$26,455 $36,539 
Schedule of Finite-Lived Intangible Assets
Intangible assets
September 30, 2020
(in thousands)Gross carrying valueAccumulated amortizationNet carrying value
Purchased technology $51,066 $(49,144)$1,922 
Domain name15 — 15 
Total intangible assets
$51,081 $(49,144)$1,937 

December 31, 2019
(in thousands)Gross carrying valueAccumulated amortizationNet carrying value
Purchased technology $50,501 $(45,269)$5,232 
Domain name15 15 
Total intangible assets
$50,516$(45,269)$5,247
Schedule of Future Amortization At September 30, 2020, expected amortization expense of intangible assets with definite lives for future periods was as follows:
(in thousands)
Total
Year ending December 31,
2020 (remaining 3 months)$723 
20211,152 
202247 
$1,922 
Schedule of Other Assets
Other long-term assets
(in thousands)
September 30, 2020December 31, 2019
Point of purchase (POP) displays
$4,228 $7,595 
Long-term deferred tax assets
915 864 
Deposits and other
7,396 7,002 
Other long-term assets$12,539 $15,461 
Schedule of Accrued Liabilities
Accrued expenses and other current liabilities
(in thousands)
September 30, 2020December 31, 2019
Accrued payables (1)
$40,622 $42,153 
Accrued sales incentives
21,782 39,120 
Employee related liabilities (1)
4,846 20,494 
Return liability
10,014 14,854 
Warranty liability
7,118 9,899 
Inventory received
3,819 5,737 
Customer deposits
4,486 2,063 
Purchase order commitments
2,314 1,710 
Income taxes payable
960 1,166 
Other
8,065 4,594 
Accrued expenses and other current liabilities$104,026 $141,790 
v3.20.2
Employee benefit plans (Tables)
9 Months Ended
Sep. 30, 2020
Share-based Payment Arrangement [Abstract]  
schedule of share-based compensation, Performance Stock Units Award Activity [Table Text Block]
A summary of the Company’s PSU activity for the nine months ended September 30, 2020 is as follows:
Shares
(in thousands)
Weighted-average grant date fair value
Non-vested shares at December 31, 2019788 $7.51 
Granted1,231 4.05 
Vested(214)7.50 
Forfeited(291)6.60 
Non-vested shares at September 30, 20201,514 $4.87 
Schedule of Share-based Compensation, Stock Options, Activity
A summary of the Company’s stock option activity for the nine months ended September 30, 2020 is as follows:
Shares
(in thousands)
Weighted-average exercise price
Weighted-average remaining contractual term (in years)
Aggregate intrinsic value (in thousands)
Outstanding at December 31, 20193,963 $10.16 6.35$374 
Granted1,025 4.01 
Exercised(42)0.94 
Forfeited/Cancelled(1,041)10.15 
Outstanding at September 30, 20203,905 $8.65 6.23$703 
Vested and expected to vest at September 30, 20203,905 $8.65 6.23$703 
Exercisable at September 30, 20202,614 $10.54 4.83$233 
Schedule of Share-based Compensation, Restricted Stock Units Award Activity
A summary of the Company’s RSU activity for the nine months ended September 30, 2020 is as follows:
Shares
(in thousands)
Weighted-average grant date fair value
Non-vested shares at December 31, 20198,225 $6.11 
Granted8,005 4.33 
Vested(3,212)6.17 
Forfeited(2,176)5.42 
Non-vested shares at September 30, 202010,842 $4.91 
Allocation of Stock-based Compensation Expense
The following table summarizes stock-based compensation expense included in the Condensed Consolidated Statements of Operations:
Three months ended September 30,Nine months ended September 30,
(in thousands)
2020201920202019
Cost of revenue
$340 $448 $1,175 $1,483 
Research and development
3,597 4,507 9,682 14,068 
Sales and marketing
1,601 2,084 4,107 6,518 
General and administrative
2,875 2,730 6,962 8,091 
Total stock-based compensation expense
$8,413 $9,769 $21,926 $30,160 
v3.20.2
Net loss per share (Tables)
9 Months Ended
Sep. 30, 2020
Earnings Per Share [Abstract]  
Schedule of Net Income per Share, Basic and Diluted
The following table presents the calculations of basic and diluted net income (loss) per share:
Three months ended September 30,Nine months ended September 30,
(in thousands, except per share data)
2020201920202019
Numerator:
Net income (loss)$3,307 $(74,810)$(111,196)$(110,462)
Denominator:
Weighted-average common shares - basic for Class A and Class B common stock149,406 145,617 148,491 144,306 
Effect of dilutive stock-based awards
2,443 — — — 
Weighted-average common shares - diluted for Class A and Class B common stock151,849 145,617 148,491 144,306 
Basic net income (loss) per share$0.02 $(0.51)$(0.75)$(0.77)
Diluted net income (loss) per share$0.02 $(0.51)$(0.75)$(0.77)
Schedule of Antidilutive Securities Excluded from Computation of Net Income per Share
The following potentially dilutive shares were not included in the calculation of diluted shares outstanding as the effect would have been anti-dilutive:
Three months ended September 30,Nine months ended September 30,
(in thousands)
2020201920202019
Anti-dilutive stock-based awards10,598 13,168 14,652 13,064 
v3.20.2
Income taxes (Tables)
9 Months Ended
Sep. 30, 2020
Income Tax Disclosure [Abstract]  
Schedule of Components of Income Tax Expense (Benefit)
The Company’s tax provision and the resulting effective tax rate for interim periods is determined based upon its estimated annual effective tax rate, adjusted for the effect of discrete items arising in that quarter. The Company also excludes jurisdictions with a projected loss for the year (or year-to-date loss) where the Company cannot or does not expect to recognize a tax benefit from its estimated annual effective tax rate. The impact of such inclusions could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings or losses versus annual projections. In each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual tax rate changes, a cumulative adjustment is made in that quarter.
Three months ended September 30,Nine months ended September 30,
(dollars in thousands)2020201920202019
Income tax expense (benefit) $1,242 $(273)$4,710 $(500)
Effective tax rate27.3 %0.4 %(4.4)%0.5 %
v3.20.2
Commitments, contingencies and guarantees (Tables)
9 Months Ended
Sep. 30, 2020
Commitments and Contingencies Disclosure [Abstract]  
Components of Lease Expense [Text Block]
The components of net lease cost, which were recorded in operating expenses, were as follows:
Three months ended September 30,Nine months ended September 30,
(in thousands)2020201920202019
Operating lease cost (1)
$3,352 $4,092 $11,647 $13,656 
Sublease income(133)(129)(393)(528)
Right-of-use asset impairment cost12,460 — 12,460 — 
Net lease cost$15,679 $3,963 $23,714 $13,128 
(1)    Operating lease cost includes variable lease costs, which are immaterial.
Schedule of Supplemental Cash Flow Information Related To Leases [Text Block]
Supplemental cash flow information related to leases was as follows:
Nine months ended September 30,
(in thousands)20202019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$10,869 $10,402 
Right-of-use assets obtained in exchange for operating lease liabilities1,252 10,541 
Operating lease modifications to decrease right-of-use assets(2,482)— 

Supplemental balance sheet information related to leases was as follows:
September 30, 2020December 31, 2019
Weighted-average remaining lease term (in years) - operating leases5.756.44
Weighted-average discount rate - operating leases6.2%6.2%
Schedule of Maturities of Lease Liabilities [Text Block]
As of September 30, 2020, maturities of operating lease liabilities were as follows:
(in thousands)
September 30, 2020
2020 (remaining 3 months)$2,486 
2021
13,662 
2022
12,871 
2023
11,917 
2024
11,519 
Thereafter23,932 
Total lease payments
76,387 
Less: Imputed interest
(13,087)
Present value of lease liabilities
$63,300 
v3.20.2
Concentrations of risk and geographic information (Tables)
9 Months Ended
Sep. 30, 2020
Concentration Risk [Line Items]  
Schedule of Accounts, Notes, Loans and Financing Receivable
The following table summarizes the Company’s accounts receivables sold, without recourse, and factoring fees paid:
Three months ended September 30,Nine months ended September 30,
(in thousands)
2020201920202019
Accounts receivable sold$30,832 $23,804 $66,393 $78,752 
Factoring fees247 423 433 1,121 
Schedule of Revenue by Geographic Region
Revenue by geographic region was as follows:
Three months ended September 30,Nine months ended September 30,
(in thousands)
2020201920202019
Americas
$157,720 $60,409 $297,607 $311,750 
Europe, Middle East and Africa (EMEA)
64,563 49,387 129,191 203,146 
Asia and Pacific (APAC)
58,224 21,373 107,355 151,410 
Total revenue
$280,507 $131,169 $534,153 $666,306 
Accounts Receivable [Member]  
Concentration Risk [Line Items]  
Schedules of Customer Concentration by Risk Factor
Customers who represented 10% or more of the Company’s net accounts receivable balance were as follows:
September 30, 2020December 31, 2019
Customer A*15%
Customer B23%11%
* Less than 10% of net accounts receivable for the period indicated.
Sales Revenue [Member]  
Concentration Risk [Line Items]  
Schedules of Customer Concentration by Risk Factor
Customers who represented 10% or more of the Company’s total revenue were as follows:
Three months ended September 30,Nine months ended September 30,
2020201920202019
Customer A13%*25%12%
Customer B**14%*
Customer C**10%*
* Less than 10% of total revenue for the period indicated.
v3.20.2
Restructuring charges (Tables)
9 Months Ended
Sep. 30, 2020
Restructuring Cost and Reserve [Line Items]  
Restructuring and Related Costs
Restructuring charges for each period were as follows:
Nine months ended September 30,
(in thousands)
20202019
Cost of revenue
$1,270 $54 
Research and development
8,383 556 
Sales and marketing
11,189 314 
General and administrative
5,660 501 
Total restructuring charges
$26,502 $1,425 
Schedule of Restructuring Reserve by Type of Cost
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 Condensed Consolidated Balance Sheets under the first quarter 2017 restructuring plan.
(in thousands)
Severance
Other
Total
Restructuring liability as of December 31, 2019
$— $