GOPRO, INC., 10-Q filed on 11/4/2021
Quarterly Report
v3.21.2
Cover - shares
9 Months Ended
Sep. 30, 2021
Nov. 01, 2021
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, $0.0001 par value  
Trading Symbol GPRO  
Entity Registrant Name GOPRO, INC.  
City Area Code (650)  
Local Phone Number 332-7600  
Entity Central Index Key 0001500435  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Document Type 10-Q  
Document Period End Date Sep. 30, 2021  
Document Transition Report false  
Entity File Number 001-36514  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q3  
Amendment Flag false  
Entity Emerging Growth Company false  
Entity Small Business false  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Shell Company false  
Security Exchange Name NASDAQ  
Document Quarterly Report true  
Common Class A [Member]    
Class of Stock [Line Items]    
Entity Common Stock, Shares Outstanding   128,937,145
Common Class B [Member]    
Class of Stock [Line Items]    
Entity Common Stock, Shares Outstanding   27,058,546
v3.21.2
Condensed Consolidated Balance Sheets - USD ($)
Sep. 30, 2021
Dec. 31, 2020
Current assets:    
Cash and cash equivalents $ 296,357,000 $ 325,654,000
Marketable securities 82,184,000 0
Accounts receivable, net 98,832,000 107,244,000
Inventory 120,891,000 97,914,000
Prepaid expenses and other current assets 44,830,000 23,872,000
Total current assets 643,094,000 556,684,000
Property and equipment, net 20,409,000 23,711,000
Operating Lease, Right-of-Use Asset 27,762,000 31,560,000
Intangible assets, net 133,000 1,214,000
Goodwill 146,459,000 146,459,000
Other long-term assets 280,390,000 11,771,000
Total assets 1,118,247,000 771,399,000
Current liabilities:    
Accounts payable 118,876,000 111,399,000
Accrued expenses and other current liabilities 112,480,000 113,776,000
Short-term operating lease liabilities 9,542,000 9,369,000
Deferred revenue 34,400,000 28,149,000
Short-term Bank Loans and Notes Payable 120,213,000 0
Total current liabilities 395,511,000 262,693,000
Long-term taxes payable 6,353,000 18,099,000
Long-term debt 109,470,000 218,172,000
Long-term operating lease liabilities 45,138,000 51,986,000
Other long-term liabilities 6,780,000 4,431,000
Total liabilities 563,252,000 555,381,000
Commitments, contingencies and guarantees
Stockholders’ equity:    
Preferred Stock, Value, Outstanding 0 0
Common Stocks, Including Additional Paid in Capital 1,000,579,000 980,147,000
Treasury Stock, Value (113,613,000) (113,613,000)
Accumulated deficit (331,971,000) (650,516,000)
Total stockholders’ equity 554,995,000 216,018,000
Total liabilities and stockholders’ equity $ 1,118,247,000 $ 771,399,000
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 1,000,579,000 980,147,000
Preferred Stock, Value, Outstanding $ 0 $ 0
Treasury Stock, Shares (shares) 10,710,000 10,710,000
Restricted Cash $ 0 $ 2,000,000
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 outstanding (shares) 128,697,000 122,233,000
Common Stock, Shares Authorized (shares) 500,000,000 500,000,000
Common Stock, Shares, Issued 128,697,000 122,233,000
Common Stock, Shares Authorized (shares) 500,000,000 500,000,000
Common Stock, Shares, Issued 128,697,000 122,233,000
Common Class B [Member]    
Common stock outstanding (shares) 27,259,000 28,885,000
Common Stock, Shares Authorized (shares) 150,000,000 150,000,000
Common Stock, Shares, Issued 27,259,000 28,885,000
Common Stock, Shares Authorized (shares) 150,000,000 150,000,000
Common Stock, Shares, Issued 27,259,000 28,885,000
v3.21.2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Dec. 31, 2021
Sep. 30, 2021
Dec. 31, 2020
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) 500,000,000 500,000,000 500,000,000
Common Stock, Shares, Issued 128,700,000 128,697,000 122,233,000
Common stock outstanding (shares)   128,697,000 122,233,000
Common Class B [Member]      
Common Stock, Shares Authorized (shares) 150,000,000 150,000,000 150,000,000
Common Stock, Shares, Issued 27,300,000 27,259,000 28,885,000
Common stock outstanding (shares) 27,300,000 27,259,000 28,885,000
v3.21.2
Condensed Consolidated Statements of Operations - USD ($)
shares in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Sep. 30, 2021
Sep. 30, 2020
Income Statement [Abstract]        
Revenue $ 316,669,000 $ 280,507,000 $ 769,935,000 $ 534,153,000
Cost of revenue 178,616,000 181,195,000 453,904,000 355,722,000
Gross profit 138,053,000 99,312,000 316,031,000 178,431,000
Operating expenses:        
Research and development 36,458,000 37,235,000 106,688,000 104,074,000
Sales and marketing 37,352,000 34,378,000 108,812,000 112,845,000
General and administrative 15,642,000 18,845,000 45,940,000 53,686,000
Total operating expenses 89,452,000 90,458,000 261,440,000 270,605,000
Operating income (loss) 48,601,000 8,854,000 54,591,000 (92,174,000)
Interest expense (5,748,000) (5,260,000) (17,160,000) (14,774,000)
Other Nonoperating Expense 1,320,000      
Other income (expense), net   955,000 435,000 462,000
Total other expense, net (7,068,000) (4,305,000) (16,725,000) (14,312,000)
Income (loss) before income taxes 41,533,000 4,549,000 37,866,000 (106,486,000)
Income tax expense (benefit) (270,228,000) 1,242,000 (280,679,000) 4,710,000
Net income (loss) $ 311,761,000 $ 3,307,000 $ 318,545,000 $ (111,196,000)
Earnings Per Share, Basic $ 2.01 $ 0.02 $ 2.07 $ (0.75)
Earnings Per Share, Diluted $ 1.92 $ 0.02 $ 1.96 $ (0.75)
Weighted Average Number of Shares Outstanding, Basic 155,009 149,406 153,618 148,491
Weighted Average Number of Shares Outstanding, Diluted 162,746 151,849 162,728 148,491
v3.21.2
Condensed Consolidated Statements of Cash Flows - USD ($)
9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Net income (loss) $ 318,545,000 $ (111,196,000)
Adjustments to reconcile net income (loss) to net cash used in operating activities:    
Depreciation and amortization 8,598,000 15,495,000
Amortization of Leased Asset 3,798,000 4,907,000
Stock-based compensation 28,227,000 21,926,000
Deferred income taxes (269,922,000) (51,000)
Restructuring Costs (99,000) (5,242,000)
Operating Lease, Impairment Loss 0 12,460,000
Amortization of Debt Discount (Premium) 10,535,000 7,348,000
Other 874,000 738,000
Changes in operating assets and liabilities:    
Accounts receivable, net 7,426,000 93,240,000
Inventory (22,977,000) 11,420,000
Prepaid expenses and other assets (18,617,000) 3,613,000
Accounts payable and other liabilities (10,362,000) (81,325,000)
Deferred revenue 9,279,000 3,712,000
Net Cash Provided by (Used in) Operating Activities 65,305,000 (12,471,000)
Investing activities:    
Purchases of property and equipment, net (4,840,000) (4,560,000)
Purchases of marketable securities (82,270,000) 0
Maturities of marketable securities 0 14,830,000
Payments for (Proceeds from) Other Investing Activities 0 438,000
Net cash provided by (used in) investing activities (87,110,000) 9,832,000
Financing activities:    
Proceeds from issuance of common stock 7,225,000 3,508,000
Payment, Tax Withholding, Share-based Payment Arrangement (15,013,000) (4,713,000)
Proceeds from Lines of Credit 0 30,000,000
Repayments of Lines of Credit 0 (30,000,000)
Net cash used in financing activities (7,788,000) (1,205,000)
Effect of Exchange Rate on Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents (1,704,000) 414,000
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Period Increase (Decrease), Including Exchange Rate Effect (31,297,000) (3,430,000)
Cash, cash equivalents and restricted cash at beginning of period 325,654,000  
Cash, cash equivalents and restricted cash at end of period $ 296,357,000 $ 146,871,000
v3.21.2
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]
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 income (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 income (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 income (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 income (loss) 3,307     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    
Beginning Balance at Dec. 31, 2020 216,018 $ 980,147 (113,613) (650,516)
Beginning Balance (shares) at Dec. 31, 2020   151,119    
Common stock issued under employee benefit plans, net of shares withheld for tax 2,998 $ 2,998    
Share-based Payment Arrangement, Decrease for Tax Withholding Obligation (6,246) $ 6,246    
Common stock issued under employee benefit plans, net of shares withheld for tax (shares)   2,214    
Allocated share-based compensation expense 8,869 $ 8,869    
Net income (loss) (10,168)     (10,168)
Ending Balance at Mar. 31, 2021 211,471 $ 985,768 (113,613) (660,684)
Ending Balance (shares) at Mar. 31, 2021   153,333    
Beginning Balance at Dec. 31, 2020 216,018 $ 980,147 (113,613) (650,516)
Beginning Balance (shares) at Dec. 31, 2020   151,119    
Net income (loss) 318,545      
Ending Balance at Sep. 30, 2021 554,995 $ 1,000,579 (113,613) (331,971)
Ending Balance (shares) at Sep. 30, 2021   155,956    
Beginning Balance at Mar. 31, 2021 211,471 $ 985,768 (113,613) (660,684)
Beginning Balance (shares) at Mar. 31, 2021   153,333    
Common stock issued under employee benefit plans, net of shares withheld for tax 1,442 $ 1,442    
Share-based Payment Arrangement, Decrease for Tax Withholding Obligation (1,729) $ 1,729    
Common stock issued under employee benefit plans, net of shares withheld for tax (shares)   717    
Allocated share-based compensation expense 10,029 $ 10,029    
Net income (loss) 16,952     16,952
Ending Balance at Jun. 30, 2021 238,165 $ 995,510 (113,613) (643,732)
Ending Balance (shares) at Jun. 30, 2021   154,050    
Adjustments to Additional Paid in Capital, Capped Call Option, Issuance Costs (10,200)      
Common stock issued under employee benefit plans, net of shares withheld for tax 2,780 $ 2,780    
Share-based Payment Arrangement, Decrease for Tax Withholding Obligation (7,040) $ 7,040    
Common stock issued under employee benefit plans, net of shares withheld for tax (shares)   1,906    
Allocated share-based compensation expense 9,329 $ 9,329    
Net income (loss) 311,761     311,761
Ending Balance at Sep. 30, 2021 $ 554,995 $ 1,000,579 $ (113,613) $ (331,971)
Ending Balance (shares) at Sep. 30, 2021   155,956    
v3.21.2
Summary of business and significant accounting policies
9 Months Ended
Sep. 30, 2021
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) make it easy for the world to capture and share itself in immersive and exciting ways, helping people get the most out of their photos and videos. The Company is committed to developing solutions that create an easy, seamless experience for consumers to capture, create, manage 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 for fiscal year 2020 were negatively impacted by the COVID-19 pandemic. As the global impact of the pandemic began to emerge in the first quarter of 2020, 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 were reflected in 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 in the second half of 2020. In 2020, the Company also issued additional convertible senior notes and entered into a new credit facility.
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 any other future period. The Condensed Consolidated Balance Sheet at December 31, 2020 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, 2020. 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 and the allocation of the transaction price (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), fair value of convertible senior notes, 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, 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 by management 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 chain 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.
Revenue recognition. The Company derives substantially all of its revenue from the sale of cameras, mounts and accessories, subscription and services and implied post contract support to customers. The transaction price recognized as revenue represents the amount the Company expects to be entitled to and is primarily comprised of product revenue, net of returns and variable consideration, including sales incentives provided to customers.
The Company’s camera sales contain multiple performance obligations that can include four separate obligations: a) a camera hardware component (which may be bundled with hardware accessories) and the embedded firmware essential to the functionality of the camera component delivered at the time of sale, b) the implicit right to the Company’s downloadable free apps and software solutions, c) the implied right for the customer to receive post contract support after the initial sale (PCS), and d) a subscription service. 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, chat and telephone support. The Company allocates a portion of the transaction price to the PCS performance obligation based on a cost-plus methodology and recognizes the associated revenue on a straight-line basis over the estimated term of the support period, which is estimated to be 24 months based on historical experience. The transaction price allocated to subscription services is based on the standalone selling price and is recognized ratably over the subscription term, with payments received in advance of services being rendered recorded in deferred revenue. The transaction price is allocated to the remaining performance obligations on a residual value methodology. The transaction price 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 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, market trends in the pricing for similar offerings and the standalone selling price.
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.
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.
Deferred revenue as of September 30, 2021 and December 31, 2020 also included amounts related to the Company’s subscription services. The Company’s short-term and long-term deferred revenue balances totaled $38.5 million and $29.3 million as of September 30, 2021 and December 31, 2020, respectively. Of the deferred revenue balance as of December 31, 2020 and 2019, the Company recognized $6.6 million and $3.2 million of revenue during the three months ended September 30, 2021 and 2020, respectively, and $24.6 million and $12.9 million of revenue during the nine months ended September 30, 2021 and 2020, respectively. Of the deferred revenue balance as of June 30, 2021 and 2020, the Company recognized $13.8 million and $5.6 million of revenue during the three months ended September 30, 2021 and 2020, respectively.
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
StandardDescriptionExpected date of adoption
Effect 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, 2022
Upon adoption, the Company expects a decrease to additional paid in capital, an increase in the carrying value of its convertible notes and an increase to retained earnings. After adoption, the Company expects a reduction in its reported interest expense and the Company expects to reverse the deferred tax consequences originally recognized. Additionally, the Company expects the use of the if-converted method for calculating diluted earnings per share will result in an increase in weighted-average shares outstanding. The Company will continue to evaluate the effect that the adoption of this standard will have on its financial statements.
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.
v3.21.2
Fair value measurements
9 Months Ended
Sep. 30, 2021
Fair Value Disclosures [Abstract]  
Fair Value measurements 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:
September 30, 2021December 31, 2020
(in thousands)Level 1Level 2TotalLevel 1Level 2Total
Cash equivalents (1):
Money market funds$139,110 $— $139,110 $19,445 $— $19,445 
Total cash equivalents$139,110 $— $139,110 $19,445 $— $19,445 
Marketable securities:
Commercial paper$— $55,436 $55,436 $— $— $— 
Corporate debt securities— 26,748 26,748 — — — 
Total marketable securities$— $82,184 $82,184 $— $— $— 
(1)    Included in cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheets. Cash balances were $157.2 million as of September 30, 2021 and $308.2 million, including $2.0 million of restricted cash, as of December 31, 2020.
Cash equivalents are classified as Level 1 because the Company uses quoted market prices to determine their fair value. Marketable securities are classified as Level 2 because the Company uses 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 September 30, 2021 were all less than one year in duration. At September 30, 2021 and December 31, 2020, the Company had no financial assets or liabilities measured at fair value on a recurring basis that were classified as Level 3, which are valued based on inputs supported by little or no market activity.
At September 30, 2021 and December 31, 2020, 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 (2022 Notes). In November 2020, the Company issued $143.8 million principal amount of Convertible Senior Notes due 2025 (2025 Notes) (see Note 4 Financing arrangements). The estimated fair value of the 2022 Notes and 2025 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 2022 Notes and 2025 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 2022 Notes was $133.3 million and $146.0 million as of September 30, 2021 and December 31, 2020, respectively, while the calculated fair value of the 2025 Notes was $182.0 million and $166.8 million as of September 30, 2021 and December 31, 2020, respectively. The calculated fair value 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 2022 Notes and 2025 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.
The Company also measures certain non-financial assets at fair value on a nonrecurring basis, primarily goodwill, intangible assets and operating lease right-of-use assets, in connection with periodic evaluations for potential impairment.
v3.21.2
Condensed consolidated financial statement details
9 Months Ended
Sep. 30, 2021
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, 2021December 31, 2020
Components
$10,372 $13,229 
Finished goods
110,519 84,685 
Total inventory
$120,891 $97,914 
Property and equipment, net
(in thousands)
September 30, 2021December 31, 2020
Leasehold improvements$33,772 $35,180 
Production, engineering and other equipment45,594 48,908 
Tooling16,899 17,635 
Computers and software22,554 22,385 
Furniture and office equipment5,618 6,315 
Tradeshow equipment and other1,970 5,860 
Construction in progress102 22 
Gross property and equipment
126,509 136,305 
Less: Accumulated depreciation and amortization(106,100)(112,594)
Property and equipment, net
$20,409 $23,711 
Intangible assets
September 30, 2021
(in thousands)Gross carrying valueAccumulated amortizationNet carrying value
Purchased technology $51,066 $(50,948)$118 
Domain name15 — 15 
Total intangible assets
$51,081 $(50,948)$133 

December 31, 2020
(in thousands)Gross carrying valueAccumulated amortizationNet carrying value
Purchased technology $51,066 $(49,867)$1,199 
Domain name15 15 
Total intangible assets
$51,081$(49,867)$1,214

Amortization expense was $0.1 million and $1.0 million for the three months ended September 30, 2021 and 2020, respectively, and $1.1 million and $3.9 million for the nine months ended September 30, 2021 and 2020, respectively. At September 30, 2021, expected amortization expense of intangible assets with definite lives for future periods was as follows:
(in thousands)
Total
Year ending December 31,
2021 (remaining 3 months)$71 
202247 
$118 
Other long-term assets
(in thousands)
September 30, 2021December 31, 2020
Point of purchase (POP) displays
$2,399 $3,612 
Long-term deferred tax assets
270,819 966 
Deposits and other
7,172 7,193 
Other long-term assets$280,390 $11,771 
Accrued expenses and other current liabilities
(in thousands)
September 30, 2021December 31, 2020
Accrued liabilities$33,295 $39,444 
Accrued sales incentives
24,958 30,609 
Employee related liabilities8,937 7,067 
Return liability
10,266 10,817 
Warranty liability
7,446 7,997 
Inventory received
10,274 1,709 
Customer deposits
5,976 2,347 
Purchase order commitments
914 1,921 
Income taxes payable
188 221 
Other
10,226 11,644 
Accrued expenses and other current liabilities$112,480 $113,776 
Product warranty
Three months ended September 30,Nine months ended September 30,
(in thousands)
2021202020212020
Beginning balance
$7,621 $7,326 $8,523 $11,398 
Charged to cost of revenue
4,560 4,560 11,329 7,546 
Settlement of warranty claims
(4,272)(4,269)(11,943)(11,327)
Warranty liability
$7,909 $7,617 $7,909 $7,617 
At September 30, 2021 and December 31, 2020, $7.4 million and $8.0 million, respectively, of the warranty liability was recorded as a component of accrued expenses and other current liabilities, and $0.5 million was recorded as a component of other long-term liabilities for both periods.
v3.21.2
Financing Arrangements
9 Months Ended
Sep. 30, 2021
Debt Disclosure [Abstract]  
Financing Arrangements Financing arrangements
2021 Credit Facility
In January 2021, the Company entered into a Credit Agreement (2021 Credit Agreement) which provides for a revolving credit facility (2021 Credit Facility) under which the Company may borrow up to an aggregate amount of $50.0 million. The 2021 Credit Facility will terminate and any outstanding borrowings become due and payable on the earlier of (i) January 2024 and (ii) unless the Company has cash in a specified deposit account in an amount equal to or greater than the amount required to repay the Company’s convertible notes due April 2022, 91 days prior to the maturity date of such convertible notes. Concurrently with the execution of the 2021 Credit Agreement in January 2021, the Company terminated its previous 2016 Credit Agreement, which would otherwise have matured in March 2021.
The amount that may be borrowed under the 2021 Credit Agreement may be based on a customary borrowing base calculation if the Company’s Asset Coverage Ratio is at any time less than 1.50. The Asset Coverage Ratio
is defined as the ratio of (i) the sum of (a) the Company’s cash and cash equivalents in the United States plus specified percentages of other qualified debt investments (Qualified Cash) plus (b) specified percentages of the net book values of the Company’s accounts receivable and certain inventory to (ii) $50.0 million.
At the Company’s option, borrowed funds accrue interest at either (i) a floating rate per annum equal to the base rate plus a margin of from 0.50% to 1.00% depending on the Company’s Asset Coverage Ratio or (ii) a per annum rate equal to the rate at which dollar deposits are offered in the London interbank market plus a margin of from 1.50% to 2.00% depending on the Company’s Asset Coverage Ratio. The Company is required to pay a commitment fee on the unused portion of the 2021 Credit Facility of 0.375% to 0.50% per annum, based on the level of utilization of the 2021 Credit Facility. Amounts owed under the 2021 Credit Agreement are guaranteed by certain of the Company’s United States subsidiaries and secured by a first priority security interest in substantially all of the assets of the Company and certain of its subsidiaries (other than intellectual property, which is subject to a negative pledge restricting grants of security interests to third parties).
The 2021 Credit Agreement contains customary representations, warranties, and affirmative and negative covenants. The negative covenants include restrictions on the incurrence of liens and indebtedness, certain investments, dividends, stock repurchases and other matters, all subject to certain exceptions. In addition, the Company is required to maintain Liquidity (the sum of unused availability under the credit facility and the Company’s Qualified Cash) of at least $55.0 million (of which at least $40.0 million shall be attributable to Qualified Cash), or, if the borrowing base is then in effect, minimum unused availability under the credit facility of at least $10.0 million. The 2021 Credit Agreement also includes customary events of default that include, among other things, non-payment of principal, interest or fees, inaccuracy of representations and warranties, violation of certain covenants, cross default to certain other indebtedness, bankruptcy and insolvency events, material judgments and change of control. Upon an event of default, the lender may, subject to customary cure rights, require the immediate payment of all amounts outstanding.
At September 30, 2021, the Company was in compliance with all financial covenant contained in the 2021 Credit Agreement. The Company has made no borrowings from the 2021 Credit Facility to date.
2022 Convertible Notes
In April 2017, the Company issued $175.0 million aggregate principal amount of 3.50% Convertible Senior Notes due 2022 (2022 Notes). The 2022 Notes are senior, unsecured obligations of GoPro and mature on April 15, 2022, unless earlier repurchased or converted into shares of Class A common stock under certain circumstances. The 2022 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 2022 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 2022 Notes then outstanding upon conversion. The Company pays interest on the 2022 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 2022 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 2022 Notes. The liability component will be accreted up to the face value of the 2022 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 2022 Notes’ maturity date. The accretion of the 2022 Notes to par and debt issuance cost recorded to long-term debt is amortized into interest expense over the term of the 2022 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 2022 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 2022 Notes using the effective interest method.
The Company may not redeem the 2022 Notes prior to the maturity date and no sinking fund is provided for the 2022 Notes. The indenture includes customary terms and covenants, including certain events of default after which the 2022 Notes may be due and payable immediately.
Holders have the option to convert the 2022 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 2022 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 2022 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 2022 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 2022 Notes on April 15, 2022, a holder may convert its 2022 Notes, in multiples of $1,000 principal amount. Holders of the 2022 Notes who convert their 2022 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 2022 Notes at a repurchase price equal to 100% of the principal amount of the 2022 Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the repurchase date. During the three months ended September 30, 2021, the conditions allowing holders of the 2022 Notes to convert were not met.
Concurrently with the November 2020 issuance of the 2025 Notes, the Company used $56.2 million of the net cash proceeds from the 2025 Notes to repurchase $50.0 million principal amount of the 2022 Notes through an individual, privately negotiated transaction. The $56.2 million net cash proceeds were allocated between long-term debt (liability component) of $50.6 million and additional paid-in capital (equity component) of $5.4 million on the Condensed Consolidated Balance Sheets, and the remaining $0.2 million was related to the payment of interest. The fair value of the liability component was measured using rates determined for similar debt instrument without a conversion feature. The Company’s effective interest rate of 2.4% was based on the trading details of the 2022 Notes immediately prior to the repurchase date to determine the volatility of the 2022 Notes, and their remaining term. The cash consideration allocated to the equity component was calculated by deducting the fair value of the liability component and interest payment from the total aggregate cash consideration. The difference between the fair value of the 2022 Notes repurchased and the carrying value of $45.2 million resulted in a $5.4 million loss on extinguishment of debt.
As of September 30, 2021 and December 31, 2020, the outstanding principal on the 2022 Notes was $125.0 million, the unamortized debt discount was $4.5 million and $10.2 million, respectively, the unamortized debt issuance cost was $0.3 million and $0.8 million, respectively, and the net carrying amount of the liability component was $120.2 million and $114.0 million, respectively, which was recorded as short-term debt and long-term debt, respectively, within the Condensed Consolidated Balance Sheets. For the three months ended September 30, 2021 and 2020, the Company recorded interest expense of $1.1 million and $1.5 million, respectively, for contractual coupon interest, $0.1 million and $0.2 million for amortization of debt issuance costs, respectively, and $2.0 million and $2.4 million, respectively, for amortization of the debt discount. For the nine months ended September 30, 2021 and 2020, the Company recorded interest expense of $3.3 million and $4.6 million, respectively, for contractual coupon interest, $0.4 million and $0.6 million, respectively, for amortization of debt issuance costs, and $5.8 million and $7.3 million, respectively, for amortization of the debt discount.
In connection with the 2022 Notes 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 2022 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.
In the fourth quarter of 2020, 8.8 million shares out of the 9.2 million shares of Class A common stock underlying the Prepaid Forward entered into as part of the Company’s 2022 Notes were early settled and delivered to the Company. In April 2021, the remaining 0.4 million shares of Class A common stock underlying the Prepaid Forward were early settled and delivered to the Company. There was no financial statement impact due to the return of shares; however, shares outstanding for corporate law purposes are reduced by the early settlements.
2025 Convertible Notes
In November 2020, the Company issued $125.0 million aggregate principal amount of 1.25% Convertible Senior Notes due 2025 and granted an option to the initial purchasers to purchase up to an additional $18.8 million aggregate principal amount of the 2025 Notes to cover over-allotments, of which $18.8 million was subsequently exercised during November 2020, resulting in a total issuance of $143.8 million aggregate principal amount of the 2025 Notes. The 2025 Notes are senior, unsecured obligations of GoPro and mature on November 15, 2025, unless earlier repurchased or converted into shares of Class A common stock under certain circumstances. The 2025 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 107.1984 shares of Class A common stock per $1,000 principal amount of the 2025 Notes, which is equivalent to an initial conversion price of approximately $9.3285 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 2025 Notes then outstanding upon conversion. The Company pays interest on the 2025 Notes semi-annually in arrears on May 15 and November 15 of each year.
The $143.8 million of proceeds received from the issuance of the 2025 Notes were allocated between long-term debt (liability component) of $106.9 million and additional paid-in-capital (equity component) of $36.9 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 2025 Notes. The liability component will be accreted up to the face value of the 2025 Notes of $143.8 million, which will result in additional non-cash interest expense being recognized in the Condensed Consolidated Statements of Operations through the 2025 Notes’ maturity date. The accretion of the 2025 Notes to par and debt issuance cost recorded to long-term debt is amortized into interest expense over the term of the 2025 Note using an effective interest rate of approximately 7.5%. The equity component will not be remeasured as long as it continues to meet the conditions for equity classification.
The Company incurred approximately $4.7 million of issuance costs related to the issuance of the 2025 Notes, of which $3.5 million and $1.2 million were recorded to long-term debt and additional paid-in capital, respectively. The $3.5 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 2025 Notes using the effective interest method.
The Company may redeem all or any portion of the 2025 Notes on or after November 20, 2023 for cash if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides the redemption notice, at a redemption price equal to 100% of the principal amount of the 2025 Notes to be redeemed, plus accrued interest and unpaid interest to, but excluding the redemption date. No
sinking fund is provided for the 2025 Notes. The indenture includes customary terms and covenants, including certain events of default after which the 2025 Notes may be due and payable immediately.
Holders have the option to convert the 2025 Notes in multiples of $1,000 principal amount at any time prior to August 15, 2025, but only in the following circumstances:
during any calendar quarter beginning after the calendar quarter ending on March 31, 2021, 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 2025 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 2025 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 2025 Notes on each such trading day;
if the Company calls any or all of the 2025 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately before the redemption date; or
upon the occurrence of specified corporate events.
At any time on or after August 15, 2025 until the second scheduled trading day immediately preceding the maturity date of the 2025 Notes on November 15, 2025, a holder may convert its 2025 Notes, in multiples of $1,000 principal amount. Holders of the 2025 Notes who convert their 2025 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 2025 Notes at a repurchase price equal to 100% of the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the repurchase date. During the three months ended September 30, 2021, the conditions allowing holders of the 2025 Notes to convert were not met.
As of September 30, 2021 and December 31, 2020, the outstanding principal on the 2025 Notes was $143.8 million, the unamortized debt discount was $31.4 million and $36.1 million, respectively, the unamortized debt issuance cost was $2.9 million and $3.4 million, respectively, and the net carrying amount of the liability component was $109.5 million and $104.2 million, respectively, which was recorded as long-term debt within the Condensed Consolidated Balance Sheets. For the three months ended September 30, 2021, the Company recorded interest expense of $0.4 million for contractual coupon interest, $0.2 million for amortization of debt issuance costs, and $1.6 million for amortization of the debt discount. For the nine months ended September 30, 2021, the Company recorded interest expense of $1.3 million for contractual coupon interest, $0.6 million for amortization of debt issuance costs, and $4.7 million for amortization of the debt discount.
In connection with the offering of the 2025 Notes, the Company paid $10.2 million to enter into privately negotiated capped call transactions with certain financial institutions (Capped Calls). The Capped Calls have an initial strike price of $9.3285 per share, which corresponds to the initial conversion price of the 2025 Notes. The Capped Calls cover, subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the 2025 Notes, the number of Class A common stock initially underlying the 2025 Notes. The Capped Calls are generally expected to reduce potential dilution to the Company’s Class A common stock upon any conversion of the 2025 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 2025 Notes, as the case may be, with such reduction and/or offset subject to a cap, initially equal to $12.0925, and is subject to certain adjustments under the terms of the Capped Call transactions. The Capped Calls will expire in November 2025, if not exercised earlier.
The Capped Calls are subject to adjustment upon the occurrence of specified extraordinary events affecting the Company, including merger events, tender offers and announcement events. In addition, the Capped Calls are subject to certain specified additional disruption events that may give rise to a termination of the Capped Calls, including nationalization, insolvency or delisting, changes in law, failures to deliver, insolvency filings and hedging disruptions. For accounting purposes, the Capped Calls are separate transactions, and not part of the terms of the 2025 Notes. As these transactions meet certain accounting criteria, the Capped Calls are recorded in stockholders’ equity as a reduction to additional paid-in capital and will not be remeasured as long as they
continue to meet certain accounting criteria.
v3.21.2
Stockholders' equity
9 Months Ended
Sep. 30, 2021
Equity [Abstract]  
Stockholders' Equity Note Disclosure [Text Block] 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 September 30, 2021, 128.7 million shares of Class A stock were issued and outstanding and 27.3 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 September 30, 2021, the Class B stock continued to represent greater than 10% of the overall outstanding shares.
The Company had the following shares of common stock reserved for issuance upon the exercise of equity instruments as of September 30, 2021:
(in thousands)
September 30, 2021
Stock options outstanding
3,431 
Restricted stock units outstanding
10,639 
Performance stock units outstanding
1,319 
Common stock available for future grants
32,795 
Total common stock shares reserved for issuance48,184 
v3.21.2
Employee benefit plans
9 Months Ended
Sep. 30, 2021
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 financial and operating 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 2020 Annual Report.
Stock options
A summary of the Company’s stock option activity for the nine months ended September 30, 2021 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, 20203,431 $8.79 6.50$6,259 
Granted309 7.97 
Exercised(548)5.31 
Forfeited/Cancelled(58)18.90 
Outstanding at September 30, 20213,134 $9.13 6.20$6,853 
Vested and expected to vest at September 30, 20213,134 $9.13 6.20$6,853 
Exercisable at September 30, 20212,074 $10.90 5.01$2,930 
The aggregate intrinsic value of the stock options outstanding as of September 30, 2021 represents the value of the Company’s closing stock price on September 30, 2021 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, 2021 is as follows:
Shares
(in thousands)
Weighted-average grant date fair value
Non-vested shares at December 31, 202010,639 $5.04 
Granted3,698 8.35 
Vested(4,590)5.29 
Forfeited(821)5.67 
Non-vested shares at September 30, 20218,926 $6.22 
Performance stock units
A summary of the Company’s PSU activity for the nine months ended September 30, 2021 is as follows:
Shares
(in thousands)
Weighted-average grant date fair value
Non-vested shares at December 31, 20201,319 

$4.48 
Granted573 7.93 
Vested(532)4.69 
Forfeited(288)4.05 
Non-vested shares at September 30, 20211,072 $6.34 
Employee stock purchase plan. For the nine months ended September 30, 2021 and 2020, the Company issued 0.8 million and 1.0 million shares under its ESPP, respectively, at weighted-average prices of $5.28 and $3.42, 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 2020 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)
2021202020212020
Cost of revenue
$483 $340 $1,420 $1,175 
Research and development
4,380 3,597 13,131 9,682 
Sales and marketing
1,950 1,601 5,968 4,107 
General and administrative
2,516 2,875 7,708 6,962 
Total stock-based compensation expense
$9,329 $8,413 $28,227 $21,926 
At September 30, 2021, total unearned stock-based compensation of $52.4 million related to stock options, RSUs, PSUs and ESPP shares is expected to be recognized over a weighted-average period of 1.98 years.
v3.21.2
Net loss per share
9 Months Ended
Sep. 30, 2021
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)
2021202020212020
Numerator:
Net income (loss)$311,761 $3,307 $318,545 $(111,196)
Denominator:
Weighted-average common shares - basic for Class A and Class B common stock155,009 149,406 153,618 148,491 
Effect of dilutive securities7,737 2,443 9,110 — 
Weighted-average common shares - diluted for Class A and Class B common stock162,746 151,849 162,728 148,491 
Net income (loss) per share
Basic$2.01 $0.02 $2.07 $(0.75)
Diluted$1.92 $0.02 $1.96 $(0.75)

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)
2021202020212020
Stock-based awards1,772 10,598 1,682 14,652 
The Company has the intent and ability to deliver cash up to the principal amount of the 2022 Notes and 2025 Notes subject to conversion, based on the Company’s projected liquidity levels. The Company uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The conversion spread is dilutive in periods of net income when the average market price of the Company’s Class A common stock for a given reporting period exceeds the initial conversion prices of $10.64 and $9.3285 per share for the 2022 Notes and 2025 Notes, respectively. For the three and nine months ended September 30, 2021, only the conversion spread relating to the 2025 Notes had a dilutive effect on net income per share. The initial conversion price of the 2022 Notes was greater than the average market price of the Company’s Class A Common Stock for the three and nine months ended September 30, 2021, and as such, had no impact on anti-dilutive or dilutive share calculations. Upon conversion of the 2025 Notes, there will be no economic dilution until the average market price of the Company’s Class A common stock exceeds the cap price of $12.0925 per share, as exercise of the Capped Calls offset any dilution from the 2025 Notes from the initial conversion price up to the cap price. The Capped Calls are excluded from diluted net income per share as they would be anti-dilutive under the treasury stock method.
The Company’s 2022 Notes mature on April 15, 2022 and the 2025 Notes mature on November 15, 2025, unless earlier repurchased or converted into shares of Class A common stock under certain circumstances as described further in Note 4 Financing arrangements. The 2022 Notes and 2025 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 2022 Notes is 20.6 million shares of Class A common stock and 20.8 million shares of Class A common stock upon conversion of the 2025 Notes. Additionally, the calculation of weighted-average shares outstanding for the three and nine months ended September 30, 2021 and 2020 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 2022 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.
v3.21.2
Commitments, contingencies and guarantees
9 Months Ended
Sep. 30, 2021
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)2021202020212020
Operating lease cost (1)
$2,797 $3,352 $8,785 $11,647 
Sublease income— (133)(333)(393)
Right-of-use asset impairment cost— 12,460 — 12,460 
Net lease cost$2,797 $15,679 $8,452 $23,714 
(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)20212020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$11,167 $10,869 
Right-of-use assets obtained in exchange for operating lease liabilities1,314 1,252 
Operating lease modifications to decrease right-of-use assets— (2,482)
Supplemental balance sheet information related to leases was as follows:
September 30, 2021December 31, 2020
Weighted-average remaining lease term (in years) - operating leases4.905.53
Weighted-average discount rate - operating leases6.1%6.2%

As of September 30, 2021, maturities of operating lease liabilities were as follows:
(in thousands)
September 30, 2021
2021 (remaining 3 months)$2,047 
202213,555 
202312,192 
202411,686 
202511,477 
Thereafter12,684 
Total lease payments
63,641 
Less: Imputed interest
(9,416)
Present value of lease liabilities
$54,225 
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, 2021, the Company’s total undiscounted future expected obligations under multi-year agreements described above with terms longer than one year was $353.5 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 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.
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 Delaware Court of Chancery granted defendants’ motion to dismiss the Consolidated Delaware Derivative Action complaint with prejudice (the “April 28 Order”). Plaintiffs filed a notice of appeal of the April 28 Order to the Delaware Supreme Court on May 8, 2020. On August 3, 2021, pursuant to the terms of the Settlement described below, the parties filed a stipulation dismissing the appeal, which the Delaware Supreme Court entered on August 4, 2021.
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 (the Non-Consolidated Delaware Actions).
Following settlement negotiations, an agreement in principle to settle all derivative claims on behalf of the Company (the Settlement) was reached by plaintiffs in the Consolidated Federal Derivative Actions, the Consolidated Delaware Derivative Actions, certain other plaintiffs (the Settling Plaintiffs), and the current and former executive officers and members of the Company’s Board. On February 9, 2021, the Settling Plaintiffs filed a motion for preliminary approval of the Settlement in the Consolidated Federal Derivative Actions, and the court preliminarily approved the Settlement on April 1, 2021. On July 28, 2021, the court entered an order granting final
approval of the Settlement and judgment was entered the same day (the “Final Order and Judgment”). Following entry of the Final Order and Judgment, two of the Non-Consolidated Delaware Actions were dismissed with prejudice on August 10, 2021, with the remaining Non-Consolidated Delaware Action dismissed with prejudice on August 31, 2021. The Settlement is not expected to have a material impact on the Company’s condensed consolidated financial statements.
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. GoPro filed an inter partes review (IPR) at the United States Patent and Trademark Office. On November 30, 2015, Contour dismissed the Utah action, and Contour IP Holdings LLC (CIPH), a non-practicing entity, re-filed a similar complaint in Delaware. The case was transferred to the Northern District of California in July 2017 (case 3:17-cv-04738) and was stayed pending the IPR proceedings. Upon conclusion of the IPRs, the District Court lifted the stay on October 1, 2019. Due to COVID-19 delays, the trial was delayed several times. Separately, on March 26, 2021, CIPH filed a new lawsuit against Company in the same court (case 3:21-cv-02143), asserting the same patents against certain GoPro products. On May 6, 2021, the Court consolidated the two cases, and trial is set to commence on May 4, 2022. The Company believes that the matters lack merit, and intends to vigorously defend against CIPH.
The Company regularly evaluates 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, the Company is unable to determine a loss or a range of loss, and does not believe the ultimate cost to resolve these matters will have a material adverse effect on its business, financial condition, cash flows or results of operations.
Indemnifications. The Company has entered into indemnification agreements with its directors and executive officers which requires the Company to indemnify its directors and executive officers against liabilities that may arise by reason of their status or service. In addition, 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, 2021, 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.
v3.21.2
Concentrations of risk and geographic information
9 Months Ended
Sep. 30, 2021
Risks and Uncertainties [Abstract]  
Concentrations of risk and segment information Concentrations of risk and geographic information Concentration of risk. Financial instruments which potentially subject the Company to concentration of credit risk includes cash and cash equivalents, restricted cash, marketable securities, accounts receivable, and derivative instruments, including the Capped Calls associated with the 2025 Notes. The Company places cash and cash equivalents with high-credit-quality financial institutions; however, the Company maintains cash balances in excess of the FDIC insurance limits. 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. The Company believes its counterparty credit risk related to its derivative instruments is mitigated by transacting with major financial institutions with high credit ratings.
Customers who represented 10% or more of the Company’s net accounts receivable balance were as follows:
September 30, 2021December 31, 2020
Customer A18%23%
Customer B31%15%
Customer C*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:
Three months ended September 30,Nine months ended September 30,
(in thousands)
2021202020212020
Accounts receivable sold$39,231 $30,832 $73,867 $66,393 
Factoring fees130 247 345 433 
Third-party 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,
2021202020212020
Customer A13%13%12%25%
Customer B***10
Customer C***14
* Less than 10% of total revenue for the period indicated.
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:
Three months ended September 30,Nine months ended September 30,
(in thousands)
2021202020212020
Americas
$160,875 $157,720 $414,113 $297,607 
Europe, Middle East and Africa (EMEA)
85,791 64,563 196,784 129,191 
Asia and Pacific (APAC)
70,003 58,224 159,038 107,355 
Total revenue
$316,669 $280,507 $769,935 $534,153 
Revenue from the United States, which is included in the Americas geographic region, was $138.1 million and $141.0 million for the three months ended September 30, 2021 and 2020, respectively, and $362.8 million and $263.5 million for the nine months ended September 30, 2021 and 2020, 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 September 30, 2021 and December 31, 2020, long-lived assets, which represent net property and equipment, located outside the United States, primarily in Hong Kong and mainland China, were $6.6 million and $6.9 million, respectively.
v3.21.2
Subsequent Events
1 Months Ended
Nov. 04, 2021
Subsequent Event [Line Items]  
Subsequent Events [Text Block]
10. Subsequent events
In October 2021 the Company entered into a fully executed and consented sublease agreement for certain buildings on its headquarters campus, which were previously vacated in the prior year as part of the Company’s 2020 Restructuring Plan. The sublease term will extend through December 2026, which is commensurate with the original lease term. The total subleased space is 78,408 square feet, which includes a 3% annual rate increase and common area maintenance (“CAM”) fees and property taxes reimbursed by the sublessee. We are expecting cash inflows from this agreement of approximately$20.0 million starting in the second quarter of 2022.
v3.21.2
Valuation and Qualifying Accounts
9 Months Ended
Sep. 30, 2021
SEC Schedule, 12-09, Valuation and Qualifying Accounts [Abstract]  
SEC Schedule, 12-09, Schedule of Valuation and Qualifying Accounts Disclosure [Text Block]
VALUATION AND QUALIFYING ACCOUNTS
For the year ended December 31, 2021, 2020 and 2019
(in thousands)Balance at Beginning of YearCharges to RevenueCharges (Benefits) to ExpenseCharges to Other Accounts - EquityDeductions/Write-offsBalance at End of Year
Allowance for doubtful accounts receivable:
Year ended September 30, 2021$830 $— $(24)$— $(314)$492 
Year ended September 30, 2020500 — 616 — (286)830 
Year ended December 31, 2019750 — 199 — (449)500 
Valuation allowance for deferred tax assets:
Year ended September 30, 2021$277,693 $— $16,762 $(7,179)$— $287,276 
Year ended September 30, 2020271,374 — 4,717 1,602 — 277,693 
Year ended December 31, 2019226,458 — 42,772 2,144 — 271,374 
v3.21.2
Summary of business and significant accounting policies (Policies)
9 Months Ended
Sep. 30, 2021
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 for fiscal year 2020 were negatively impacted by the COVID-19 pandemic. As the global impact of the pandemic began to emerge in the first quarter of 2020, 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 were reflected in 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 in the second half of 2020. In 2020, the Company also issued additional convertible senior notes and entered into a new credit facility.
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 any other future period. The Condensed Consolidated Balance Sheet at December 31, 2020 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, 2020. 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 and the allocation of the transaction price (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), fair value of convertible senior notes, 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, 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 by management 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 chain 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
Revenue recognition
Revenue recognition. The Company derives substantially all of its revenue from the sale of cameras, mounts and accessories, subscription and services and implied post contract support to customers. The transaction price recognized as revenue represents the amount the Company expects to be entitled to and is primarily comprised of product revenue, net of returns and variable consideration, including sales incentives provided to customers.
The Company’s camera sales contain multiple performance obligations that can include four separate obligations: a) a camera hardware component (which may be bundled with hardware accessories) and the embedded firmware essential to the functionality of the camera component delivered at the time of sale, b) the implicit right to the Company’s downloadable free apps and software solutions, c) the implied right for the customer to receive post contract support after the initial sale (PCS), and d) a subscription service. 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, chat and telephone support. The Company allocates a portion of the transaction price to the PCS performance obligation based on a cost-plus methodology and recognizes the associated revenue on a straight-line basis over the estimated term of the support period, which is estimated to be 24 months based on historical experience. The transaction price allocated to subscription services is based on the standalone selling price and is recognized ratably over the subscription term, with payments received in advance of services being rendered recorded in deferred revenue. The transaction price is allocated to the remaining performance obligations on a residual value methodology. The transaction price 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 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, market trends in the pricing for similar offerings and the standalone selling price.
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.
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.
Deferred revenue as of September 30, 2021 and December 31, 2020 also included amounts related to the Company’s subscription services. The Company’s short-term and long-term deferred revenue balances totaled $38.5 million and $29.3 million as of September 30, 2021 and December 31, 2020, respectively. Of the deferred revenue balance as of December 31, 2020 and 2019, the Company recognized $6.6 million and $3.2 million of revenue during the three months ended September 30, 2021 and 2020, respectively, and $24.6 million and $12.9 million of revenue during the nine months ended September 30, 2021 and 2020, respectively. Of the deferred revenue balance as of June 30, 2021 and 2020, the Company recognized $13.8 million and $5.6 million of revenue during the three months ended September 30, 2021 and 2020, respectively.
Revenue Recognition, 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.
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 financial and operating 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 2020 Annual Report.
Stock options
A summary of the Company’s stock option activity for the nine months ended September 30, 2021 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, 20203,431 $8.79 6.50$6,259 
Granted309 7.97 
Exercised(548)5.31 
Forfeited/Cancelled(58)18.90 
Outstanding at September 30, 20213,134 $9.13 6.20$6,853 
Vested and expected to vest at September 30, 20213,134 $9.13 6.20$6,853 
Exercisable at September 30, 20212,074 $10.90 5.01$2,930 
The aggregate intrinsic value of the stock options outstanding as of September 30, 2021 represents the value of the Company’s closing stock price on September 30, 2021 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, 2021 is as follows:
Shares
(in thousands)
Weighted-average grant date fair value
Non-vested shares at December 31, 202010,639 $5.04 
Granted3,698 8.35 
Vested(4,590)5.29 
Forfeited(821)5.67 
Non-vested shares at September 30, 20218,926 $6.22 
Performance stock units
A summary of the Company’s PSU activity for the nine months ended September 30, 2021 is as follows:
Shares
(in thousands)
Weighted-average grant date fair value
Non-vested shares at December 31, 20201,319 

$4.48 
Granted573 7.93 
Vested(532)4.69 
Forfeited(288)4.05 
Non-vested shares at September 30, 20211,072 $6.34 
Employee stock purchase plan. For the nine months ended September 30, 2021 and 2020, the Company issued 0.8 million and 1.0 million shares under its ESPP, respectively, at weighted-average prices of $5.28 and $3.42, 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 2020 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)
2021202020212020
Cost of revenue
$483 $340 $1,420 $1,175 
Research and development
4,380 3,597 13,131 9,682 
Sales and marketing
1,950 1,601 5,968 4,107 
General and administrative
2,516 2,875 7,708 6,962 
Total stock-based compensation expense
$9,329 $8,413 $28,227 $21,926 
At September 30, 2021, total unearned stock-based compensation of $52.4 million related to stock options, RSUs, PSUs and ESPP shares is expected to be recognized over a weighted-average period of 1.98 years.
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.
v3.21.2
Compensation Related Costs, Share Based Payments (Policies)
9 Months Ended
Sep. 30, 2021
Share-based Payment Arrangement [Abstract]  
Share-based Payment Arrangement
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)
2021202020212020
Cost of revenue
$483 $340 $1,420 $1,175 
Research and development
4,380 3,597 13,131 9,682 
Sales and marketing
1,950 1,601 5,968 4,107 
General and administrative
2,516 2,875 7,708 6,962 
Total stock-based compensation expense
$9,329 $8,413 $28,227 $21,926 
v3.21.2
Summary of business and significant accounting policies (Tables)
9 Months Ended
Sep. 30, 2021
Accounting Policies [Abstract]  
Schedule of recent accounting pronouncements
Recent accounting standards
StandardDescriptionExpected date of adoption
Effect 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, 2022
Upon adoption, the Company expects a decrease to additional paid in capital, an increase in the carrying value of its convertible notes and an increase to retained earnings. After adoption, the Company expects a reduction in its reported interest expense and the Company expects to reverse the deferred tax consequences originally recognized. Additionally, the Company expects the use of the if-converted method for calculating diluted earnings per share will result in an increase in weighted-average shares outstanding. The Company will continue to evaluate the effect that the adoption of this standard will have on its financial statements.
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.
v3.21.2
Fair value measurements (Tables)
9 Months Ended
Sep. 30, 2021
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, 2021December 31, 2020
(in thousands)Level 1Level 2TotalLevel 1Level 2Total
Cash equivalents (1):
Money market funds$139,110 $— $139,110 $19,445 $— $19,445 
Total cash equivalents$139,110 $— $139,110 $19,445 $— $19,445 
Marketable securities:
Commercial paper$— $55,436 $55,436 $— $— $— 
Corporate debt securities— 26,748 26,748 — — — 
Total marketable securities$— $82,184 $82,184 $— $— $— 
(1)    Included in cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheets. Cash balances were $157.2 million as of September 30, 2021 and $308.2 million, including $2.0 million of restricted cash, as of December 31, 2020.
v3.21.2
Condensed consolidated financial statement details (Tables)
9 Months Ended
Sep. 30, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Schedule of Inventory
Inventory
(in thousands)
September 30, 2021December 31, 2020
Components
$10,372 $13,229 
Finished goods
110,519 84,685 
Total inventory
$120,891 $97,914 
Property, Plant and Equipment
Property and equipment, net
(in thousands)
September 30, 2021December 31, 2020
Leasehold improvements$33,772 $35,180 
Production, engineering and other equipment45,594 48,908 
Tooling16,899 17,635 
Computers and software22,554 22,385 
Furniture and office equipment5,618 6,315 
Tradeshow equipment and other1,970 5,860 
Construction in progress102 22 
Gross property and equipment
126,509 136,305 
Less: Accumulated depreciation and amortization(106,100)(112,594)
Property and equipment, net
$20,409 $23,711 
Schedule of Finite-Lived Intangible Assets
Intangible assets
September 30, 2021
(in thousands)Gross carrying valueAccumulated amortizationNet carrying value
Purchased technology $51,066 $(50,948)$118 
Domain name15 — 15 
Total intangible assets
$51,081 $(50,948)$133 

December 31, 2020
(in thousands)Gross carrying valueAccumulated amortizationNet carrying value
Purchased technology $51,066 $(49,867)$1,199 
Domain name15 15 
Total intangible assets
$51,081$(49,867)$1,214
Schedule of Future Amortization At September 30, 2021, expected amortization expense of intangible assets with definite lives for future periods was as follows:
(in thousands)
Total
Year ending December 31,
2021 (remaining 3 months)$71 
202247 
$118 
Schedule of Other Assets
Other long-term assets
(in thousands)
September 30, 2021December 31, 2020
Point of purchase (POP) displays
$2,399 $3,612 
Long-term deferred tax assets
270,819 966 
Deposits and other
7,172 7,193 
Other long-term assets$280,390 $11,771 
Schedule of Accrued Liabilities
Accrued expenses and other current liabilities
(in thousands)
September 30, 2021December 31, 2020
Accrued liabilities$33,295 $39,444 
Accrued sales incentives
24,958 30,609 
Employee related liabilities8,937 7,067 
Return liability
10,266 10,817 
Warranty liability
7,446 7,997 
Inventory received
10,274 1,709 
Customer deposits
5,976 2,347 
Purchase order commitments
914 1,921 
Income taxes payable
188 221 
Other
10,226 11,644 
Accrued expenses and other current liabilities$112,480 $113,776 
v3.21.2
Employee benefit plans (Tables)
9 Months Ended
Sep. 30, 2021
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, 2021 is as follows:
Shares
(in thousands)
Weighted-average grant date fair value
Non-vested shares at December 31, 2020