UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): February 6, 2019

GOPRO, INC.
(Exact name of registrant as specified in its charter)

	
			
Delaware	001-36514	77-0629474	
(State or Other Jurisdiction
of Incorporation)	(Commission File No.)	(I.R.S. Employer
Identification No.)	
3000 Clearview Way, San Mateo, California 94402
(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (650) 332-7600

N/A
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
		
o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
		
o	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
		
o	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

	

Item 2.02 Results of Operations and Financial Condition
On February 6, 2019 , GoPro, Inc. (the “Company”) issued a press release to report its financial results for its fourth quarter and full year ended December 31, 2018 .
A copy of the press release is furnished as Exhibit 99.1 to this report.
The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to this or such filing. The information in this report, including the exhibit hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.
Item 9.01 Financial Statements and Exhibits

(d) Exhibits

	
		
Exhibit
Number	Description of Document	
99.1	Press Release of GoPro, Inc. dated February 6, 2019 to report its financial results for its fourth quarter and full year ended December 31, 2018	

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	
			
 	 	GoPro, Inc.	
 	 	(Registrant)	

 	 	 	

Dated:	February 6, 2019	By: /s/ Brian McGee	
 	 	Brian McGee
Chief Financial Officer
(Principal Financial Officer)	

EXHIBIT INDEX

	
		
Exhibit
Number	Description of Document	
99.1	Press Release of GoPro, Inc. dated February 6, 2019 to report its financial results for its fourth quarter and full year ended December 31, 2018	

EXHIBIT 99.1

GoPro Announces Fourth Quarter and Full Year 2018 Results
Fourth Quarter Revenue of $377 Million, Up 13% Year-over-Year
GAAP Profitable in the Fourth Quarter of 2018
Camera Unit Sell-Through Up 9% in 2018 and Up 20% in the Fourth Quarter Year-over-Year

SAN MATEO, Calif., February 6, 2019 - GoPro, Inc. (NASDAQ: GPRO) announced financial results for its fourth quarter and full year ended December 31, 2018.

“Thanks to a strong product line-up and efficient execution, GoPro grew both camera unit sell-through and market share in 2018, resulting in GAAP profitability in the fourth quarter and second half of the year,” said founder and CEO Nicholas Woodman. “With this momentum and a continued focus on expense management, we’re planning for growth and profitability in 2019.”

Recent GoPro Highlights
		
•	Revenue for Q4 2018 was $377 million , up 13% year-over-year.	
		
•	GAAP gross margin for Q4 2018 was 38% , up from 32% in the prior quarter. Non-GAAP gross margin for Q4 2018 was 38% , up from 33% in the prior quarter.	
		
•	Q4 2018 GAAP net income was $32 million , or $0.22 per share. Non-GAAP net income was $42 million , or $0.30 per share. On a year-over-year basis, GAAP net income increased by $88 million.	
		
•	GoPro reduced Q4 2018 GAAP and non-GAAP operating expenses by $29 million and $22 million , a year-over-year reduction of 21% and 18% , respectively.	
		
•	Cash and investments totaled $198 million at the end of Q4 2018.	
		
•	Revenue for the full year 2018 was approximately $1.15 billion , down 3% year-over-year. Excluding our aerial business, revenue would have increased 3% year-over-year.	
		
•	GoPro.com represented more than 10% of revenue in Q4 2018, growing more than 50% year-over-year.	
		
•	In the US, GoPro captured 97% dollar share and 87% unit share of the action camera category in Q4 2018. The top-five cameras sold by unit volume were GoPro cameras, and GoPro’s three HERO7 cameras were the top-three selling action cameras according to the NPD Group.	
		
•	In the US, Fusion captured 38% dollar share of the spherical camera market in Q4 2018 according to the NPD Group.	
		
•	In Europe, in the $199 and above price band, GoPro held 91% unit share and 90% dollar share in Q4 2018, up from 83% and 84%, respectively, year-over-year . Four out of the top-five cameras sold by unit volume were GoPro cameras according to GfK .	
		
•	In Japan, GoPro captured 57% unit share in Q4 2018, up from 50% in Q4 2017, according to GfK.	
		
•	In China, GoPro grew unit sell-through by 2% year-over-year in Q4 2018, according to GfK.	
		
•	In Korea, GoPro market share in Q4 2018 was 36% and 53% by units and dollars, up from 28% and 44% in Q4 2017, respectively, according to GfK.	
		
•	In Thailand, in Q4 2018 GoPro sell-through increased by 169% in units and 154% in dollars, year-over-year, according to GfK. Market share was 88% and 91% by units and dollars, respectively, year-over-year.	

		
•	Social followers increased by over three million in 2018 to approximately 38 million, driven primarily by increases on Instagram and YouTube. GoPro gained one million social followers in Q4 2018 .	
		
•	GoPro’s Million Dollar Challenge Campaign generated an all-time high of 25,000 customer content submissions, and the resulting highlight reel has been viewed more than 25 million times with more than 3 million engagements across all social platforms.	
		
•	GoPro Plus subscription service reached 199,000 active paying subscribers as of today, up 8% since September 30, 2018 and up more than 50% year-over-year.	
    
Results Summary:

																							
($ in thousands, except per share amounts)	 	Three months ended December 31,	 	Year ended December 31,	
	 	2018	 	2017	 	% Change	 	2018	 	2017	 	% Change	
Revenue	 	$	377,378		 	$	334,796		 	12.7	 %	 	$	1,148,337		 	$	1,179,741		 	(2.7	)%	
Gross margin	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP	 	37.7	%	 	23.8	%	 	1390 bps		 	31.5	%	 	32.6	%	 	(110) bps		
Non-GAAP	 	38.4	%	 	24.8	%	 	1360 bps		 	32.8	%	 	33.3	%	 	(50) bps		
Operating income (loss)	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP	 	$	32,967		 	$	(58,311	)	 	(156.5	)%	 	$	(93,962	)	 	$	(163,460	)	 	(42.5	)%	
Non-GAAP	 	$	46,001		 	$	(37,427	)	 	(222.9	)%	 	$	(18,876	)	 	$	(82,922	)	 	(77.2	)%	
Net income (loss)	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP	 	$	31,671		 	$	(55,848	)	 	(156.7	)%	 	$	(109,034	)	 	$	(182,873	)	 	(40.4	)%	
Non-GAAP	 	$	42,356		 	$	(41,319	)	 	(202.5	)%	 	$	(31,909	)	 	$	(95,867	)	 	(66.7	)%	
Diluted net income (loss) per share	 	 	 	 	 	 	 	 	 	 	 	 	
GAAP	 	$	0.22		 	$	(0.41	)	 	(153.7	)%	 	$	(0.78	)	 	$	(1.32	)	 	(40.9	)%	
Non-GAAP	 	$	0.30		 	$	(0.30	)	 	(200.0	)%	 	$	(0.23	)	 	$	(0.69	)	 	(66.7	)%	
Adjusted EBITDA	 	$	58,807		 	$	(26,544	)	 	(321.5	)%	 	$	21,778		 	$	(31,368	)	 	(169.4	)%	

Conference Call
GoPro management will host a conference call and live webcast for analysts and investors today at 2 p.m. Pacific Time (5 p.m. Eastern Time) to discuss the Company's financial results.
To listen to the live conference call, please dial toll free (800) 458-4148 or (323) 794-2597, access code 2816808, approximately 5 minutes prior to the start of the call. A live webcast of the conference call will be accessible on the “Events & Presentations” section of the Company’s website at http://investor.gopro.com. A recording of the webcast will be available on GoPro’s website, http://investor.gopro.com, approximately two hours after the call and for 90 days thereafter.
About GoPro, Inc. (NASDAQ: GPRO)
GoPro helps the world capture and share itself in immersive and exciting ways.
GoPro, HERO and their respective logos are trademarks or registered trademarks of GoPro, Inc. in the United States and other countries.
For more information, visit  www.gopro.com . GoPro users can submit their photos, raw clips and video edits to GoPro Awards for social stoke, GoPro gear and cash prizes. Learn more at  www.gopro.com/awards . Connect with GoPro on  Facebook ,  Instagram ,  LinkedIn ,  Pinterest ,  Twitter ,  YouTube , and GoPro's blog  The Inside Line .
GoPro’s Use of Social Media
GoPro announces material financial information using the Company’s investor relations website, SEC filings, press releases, public conference calls and webcasts. GoPro may also use social media channels to communicate about the Company, its brand and other matters; these communications could be deemed material information. Investors and others are encouraged to review posts on GoPro’s pages on Facebook, Instagram, LinkedIn, Pinterest, Twitter, YouTube, GoPro’s investor relations website and The Inside Line .
Note Regarding Use of Non-GAAP Financial Measures
GoPro reports gross profit, gross margin, operating expenses, operating income (loss), net income (loss) and diluted net income (loss) per share in accordance with U.S. generally accepted accounting principles (GAAP) and on a non-GAAP basis. Additionally, GoPro reports non-GAAP adjusted EBITDA. Non-GAAP items exclude, where applicable, the effects of stock-based compensation, acquisition-related costs, restructuring costs, non-cash interest expense, gain on sale and license of intellectual property and the tax impact of these items. When planning, forecasting and analyzing gross margin, operating expenses, other income (expense), tax expense, net income and net income (loss) per share for future periods, GoPro does so primarily on a non-GAAP basis without preparing a GAAP analysis as that would require estimates for reconciling items which are inherently difficult to predict with reasonable accuracy.
Note on Forward-looking Statements
This press release may contain projections or other forward-looking statements within the meaning Section 27A of the Private Securities Litigation Reform Act. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “should,” “will” and variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements. Forward-looking statements in this presentation may include, but are not limited to, our momentum heading into 2019, including planned growth and increased profitability in 2019. These statements involve risks and uncertainties, and actual events or results may differ materially. Among the important factors that could cause actual results to differ materially from those in the forward-looking statements are the risk that our reduction in operating expenses may impact our ability to meet our business objectives and achieve our revenue targets and may not result in the expected improvement in our profitability; our ability to continue to focus on expense management; the fact that our future growth depends in part on further penetrating our addressable market and growing internationally, and we may not be successful in doing so; any inability to successfully manage frequent product introductions (including roadmap for new hardware, software and subscription products) and transitions, including managing our sales channel and inventory and accurately forecasting future sales; our reliance on third party suppliers, some of which are sole source suppliers, to provide components for our products; our dependence on sales of our cameras, mounts and accessories for substantially all of our revenue (and the effects of changes in the sales mix or decrease in demand for these products) and; the fact that an economic downturn or economic uncertainty in our key U.S. and international markets may adversely affect consumer discretionary spending; any changes to trade policies, tariffs, and import/export regulations; the effects of transferring US-bound production out of China; the effects of the highly competitive market in which we operate; the

fact that we may not be able to achieve revenue growth or profitability in the future; risks related to inventory, purchase commitments and long-lived assets; difficulty in accurately predicting our future customer demand; the importance of maintaining the value and reputation of our brand; and other factors detailed in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2017 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, and as updated in future filings with the SEC including the Annual Report on Form 10-K for the year ended December 31, 2018 , each of which are on file with the Securities and Exchange Commission. These forward-looking statements speak only as of the date hereof or as of the date otherwise stated herein. GoPro disclaims any obligation to update these forward-looking statements.

GoPro, Inc.
Preliminary Condensed Consolidated Statement of Operations
(unaudited)

	
																
 	Three months ended December 31,	 	Twelve months ended December 31,	
(in thousands, except per share data)	2018	 	2017	 	2018	 	2017	
Revenue	$	377,378		 	$	334,796		 	$	1,148,337		 	$	1,179,741		
Cost of revenue	235,261		 	255,010		 	786,903		 	795,211		
Gross profit	142,117		 	79,786		 	361,434		 	384,530		
 	 	 	 	 	 	 	 	
Operating expenses:	 	 	 	 	 	 	 	
Research and development	36,935		 	52,504		 	167,296		 	229,265		
Sales and marketing	56,799		 	65,425		 	222,096		 	236,581		
General and administrative	15,416		 	20,168		 	66,004		 	82,144		
Total operating expenses	109,150		 	138,097		 	455,396		 	547,990		
Operating income (loss)	32,967		 	(58,311	)	 	(93,962	)	 	(163,460	)	
Other income (expense):	 	 	 	 	 	 	 	
Interest expense	(4,879	)	 	(4,508	)	 	(18,683	)	 	(13,660	)	
Other income, net	5,238		 	28		 	4,970		 	733		
Total other income (expense), net	359		 	(4,480	)	 	(13,713	)	 	(12,927	)	
Income (loss) before income taxes	33,326		 	(62,791	)	 	(107,675	)	 	(176,387	)	
Income tax (benefit) expense	1,655		 	(6,943	)	 	1,359		 	6,486		
Net income (loss)	$	31,671		 	$	(55,848	)	 	$	(109,034	)	 	$	(182,873	)	
 	 	 	 	 	 	 	 	
Net income (loss) per share:	 	 	 	 	 	 	 	
Basic	$	0.22		 	$	(0.41	)	 	$	(0.78	)	 	$	(1.32	)	
Diluted	$	0.22		 	$	(0.41	)	 	$	(0.78	)	 	$	(1.32	)	
 	 	 	 	 	 	 	 	
Weighted-average shares used to compute net income (loss) per share:	 	 	 	 	 	 	 	
Basic	140,882		 	136,886		 	139,425		 	138,056		
Diluted	143,241		 	136,886		 	139,425		 	138,056		

GoPro, Inc.
Preliminary Condensed Consolidated Balance Sheets
(unaudited)

								
(in thousands)	December 31,
2018	 	December 31,
2017	
Assets	 	 	 	
Current assets:	 	 	 	
Cash and cash equivalents	$	152,095		 	$	202,504		
Marketable securities	45,417		 	44,886		
Accounts receivable, net	129,216		 	112,935		
Inventory	116,458		 	150,551		
Prepaid expenses and other current assets	30,887		 	62,811		
Total current assets	474,073		 	573,687		
Property and equipment, net	46,567		 	68,587		
Intangible assets, net and goodwill	159,524		 	170,958		
Other long-term assets	18,195		 	37,014		
Total assets	$	698,359		 	$	850,246		
 	 	 	 	
Liabilities and Stockholders’ Equity	 	 	 	
Current liabilities:	 	 	 	
Accounts payable	$	148,478		 	$	138,257		
Accrued liabilities	135,892		 	213,030		
Deferred revenue	15,129		 	19,244		
Total current liabilities	299,499		 	370,531		
Long-term debt	138,992		 	130,048		
Other long-term liabilities	47,756		 	50,962		
Total liabilities	486,247		 	551,541		
 	 	 	 	
Stockholders’ equity:	 	 	 	
Common stock and additional paid-in capital	894,755		 	854,452		
Treasury stock, at cost	(113,613	)	 	(113,613	)	
Accumulated deficit	(569,030	)	 	(442,134	)	
Total stockholders’ equity	212,112		 	298,705		
Total liabilities and stockholders’ equity	$	698,359		 	$	850,246		

GoPro, Inc.
Preliminary Condensed Consolidated Statement of Cash Flows
(unaudited)

																
 	Three months ended December 31,	 	Twelve months ended December 31,	
(in thousands)	2018	 	2017	 	2018	 	2017	
Operating activities:	 	 	 	 	 	 	 	
Net income (loss)	$	31,671		 	$	(55,848	)	 	$	(109,034	)	 	$	(182,873	)	
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:	 	 	 	 	 	 	 	
Depreciation and amortization	7,290		 	9,218		 	35,063		 	41,478		
Stock-based compensation	9,716		 	15,020		 	40,887		 	51,255		
Deferred income taxes	598		 	(709	)	 	(389	)	 	(2,527	)	
Non-cash restructuring charges	494		 	3,456		 	6,282		 	7,315		
Non-cash interest expense	2,124		 	1,979		 	8,112		 	5,345		
Sale and license of intellectual property	(5,000	)	 	—		 	(5,000	)	 	—		
Other	1,997		 	203		 	1,696		 	4,094		
Net changes in operating assets and liabilities	(476	)	 	83,671		 	(17,600	)	 	39,060		
Net cash provided by (used in) operating activities	48,414		 	56,990		 	(39,983	)	 	(36,853	)	
 	 	 	 	 	 	 	 	
Investing activities:	 	 	 	 	 	 	 	
Purchases of property and equipment, net	(2,800	)	 	(5,748	)	 	(11,004	)	 	(24,061	)	
Purchases of marketable securities	(42,835	)	 	(20,400	)	 	(57,731	)	 	(52,318	)	
Maturities of marketable securities	2,500		 	7,499		 	57,500		 	21,659		
Sale of marketable securities	—		 	—		 	—		 	11,623		
Proceeds from the sale and license of intellectual property	5,000		 	—		 	5,000		 	—		
Net cash used in investing activities	(38,135	)	 	(18,649	)	 	(6,235	)	 	(43,097	)	
 	 	 	 	 	 	 	 	
Financing activities:	 	 	 	 	 	 	 	
Proceeds from issuance of common stock	38		 	128		 	5,169		 	9,751		
Taxes paid related to net share settlement of equity awards	(1,262	)	 	(840	)	 	(6,650	)	 	(12,118	)	
Proceeds from issuance of convertible senior notes	—		 	—		 	—		 	175,000		
Prepayment of forward stock repurchase transaction	—		 	—		 	—		 	(78,000	)	
Payment of deferred acquisition-related consideration	—		 	1		 	(2,450	)	 	(75	)	
Payment of credit facility issuance costs	—		 	(1	)	 	—		 	(5,964	)	
Net cash provided by (used in) financing activities	(1,224	)	 	(712	)	 	(3,931	)	 	88,594		
Effect of exchange rate changes on cash and cash equivalents	(206	)	 	259		 	(260	)	 	1,746		
Net change in cash and cash equivalents	8,849		 	37,888		 	(50,409	)	 	10,390		
Cash and cash equivalents at beginning of period	143,246		 	164,616		 	202,504		 	192,114		
Cash and cash equivalents at end of period	$	152,095		 	$	202,504		 	$	152,095		 	$	202,504		

GoPro, Inc.
Reconciliation of Preliminary GAAP to Non-GAAP Financial Measures
To supplement our unaudited selected financial data presented on a basis consistent with GAAP, we disclose certain non-GAAP financial measures, including non-GAAP gross profit, gross margin, operating expenses, operating income (loss), net income (loss), diluted net income (loss) per share and adjusted EBITDA. We also provide forecasts of non-GAAP gross margin, non-GAAP operating expenses, non-GAAP net income (loss) and non-GAAP diluted net income (loss) per share. We use these non-GAAP financial measures to help us understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short-term and long-term operational plans. Our management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing our operating results. These non-GAAP financial measures should not be considered in isolation from, or as an alternative to, the measures prepared in accordance with GAAP, and are not based on any comprehensive set of accounting rules or principles. We believe that these non-GAAP measures, when read in conjunction with our GAAP financials, provide useful information to investors by facilitating:
		
•	the comparability of our on-going operating results over the periods presented;	
		
•	the ability to identify trends in our underlying business; and	
		
•	the comparison of our operating results against analyst financial models and operating results of other public companies that supplement their GAAP results with non-GAAP financial measures.	
These non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP. Some of these limitations are:
		
•	adjusted EBITDA does not reflect tax payments that reduce cash available to us;	
		
•	adjusted EBITDA excludes depreciation and amortization and, although these are non-cash charges, the property and equipment being depreciated and amortized often will have to be replaced in the future, and adjusted EBITDA does not reflect any cash capital expenditure requirements for such replacements;	
		
•	adjusted EBITDA excludes the amortization of POP display assets because it is a non-cash charge, and is treated similarly to depreciation of property and equipment and amortization of acquired intangible assets;	
		
•	adjusted EBITDA and non-GAAP net income (loss) exclude the impairment of intangible assets because it is a non-cash charge that is inconsistent in amount and frequency;	
		
•	adjusted EBITDA and non-GAAP net income (loss) exclude restructuring costs which primarily include severance-related costs, stock-based compensation expenses and facilities consolidation charges recorded in connection with restructuring actions announced in the first and fourth quarters of 2016, first quarter of 2017 and first quarter of 2018. These expenses do not reflect expected future operating expenses and do not contribute to a meaningful evaluation of current operating performance or comparisons to the operating performance in other periods;	
		
•	adjusted EBITDA and non-GAAP net income (loss) exclude stock-based compensation expense related to equity awards granted primarily to our workforce. We exclude stock-based compensation expense because we believe that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In particular, we note that companies calculate stock-based compensation expense for the variety of award types that they employ using different valuation methodologies and subjective assumptions. These non-cash charges are not factored into our internal evaluation of net income (loss) as we believe their inclusion would hinder our ability to assess core operational performance;	
		
•	non-GAAP net income (loss) excludes acquisition-related costs including the amortization of acquired intangible assets (primarily consisting of acquired technology), the impairment of acquired intangible assets (if applicable), as well as third-party transaction costs incurred for legal and other professional services. These costs are not factored into our evaluation of potential acquisitions, or of our performance after completion of the acquisitions, because these costs are not related to our core operating performance or reflective of ongoing operating results in the period, and the frequency and amount of such costs are inconsistent and vary significantly based on the timing and magnitude of our acquisition transactions and the maturities of the businesses being acquired;	

		
•	non-GAAP net income (loss) excludes non-cash interest expense. In connection with the issuance of the Convertible Senior Notes in April 2017, we are required to recognize non-cash interest expense in accordance with the authoritative accounting guidance for convertible debt that may be settled in cash;	
		
•	non-GAAP net income (loss) excludes a gain on the sale and license of intellectual property. This gain is not related to our core operating performance or reflective of ongoing operating results in the period, and the frequency and amount of such gains are inconsistent;	
		
•	non-GAAP net income (loss) includes income tax adjustments . Beginning in the first quarter of 2017, we implemented a cash-based non-GAAP tax expense approach (based upon expected annual cash payments for income taxes) for evaluating operating performance as well as for planning and forecasting purposes. This non-GAAP tax approach eliminates the effects of period specific items, which can vary in size and frequency and does not necessarily reflect our long-term operations. Historically, we computed a non-GAAP tax rate based on non-GAAP pre-tax income on a quarterly basis, which considered the income tax effects of the adjustments above; and	
		
•	other companies may calculate these non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures.	

GoPro, Inc.
Reconciliation of Preliminary GAAP to Non-GAAP Financial Measures
(unaudited)

Reconciliations of non-GAAP financial measures are set forth below:

																
 	Three months ended December 31,	 	Twelve months ended December 31,	
(in thousands, except per share data)	2018	 	2017	 	2018	 	2017	
GAAP net income (loss)	$	31,671		 	$	(55,848	)	 	$	(109,034	)	 	$	(182,873	)	
Stock-based compensation:	 	 	 	 	 	 	 	
Cost of revenue	548		 	580		 	1,954		 	1,935		
Research and development	4,694		 	7,924		 	19,636		 	24,963		
Sales and marketing	1,970		 	3,203		 	9,459		 	10,498		
General and administrative	2,504		 	3,313		 	9,838		 	13,859		
Total stock-based compensation	9,716		 	15,020		 	40,887		 	51,255		
 	 	 	 	 	 	 	 	
Acquisition-related costs:	 	 	 	 	 	 	 	
Cost of revenue	2,082		 	2,360		 	11,434		 	5,985		
Research and development	—		 	—		 	—		 	3,028		
General and administrative	19		 	—		 	22		 	(22	)	
Total acquisition-related costs	2,101		 	2,360		 	11,456		 	8,991		
 	 	 	 	 	 	 	 	
Restructuring costs:	 	 	 	 	 	 	 	
Cost of revenue	22		 	176		 	1,379		 	634		
Research and development	762		 	1,686		 	12,794		 	10,092		
Sales and marketing	249		 	1,087		 	5,291		 	7,047		
General and administrative	184		 	555		 	3,279		 	2,519		
Total restructuring costs	1,217		 	3,504		 	22,743		 	20,292		
 	 	 	 	 	 	 	 	
Non-cash interest expense	2,124		 	1,979		 	8,112		 	5,345		
Gain on sale and license of intellectual property	(5,000	)	 	—		 	(5,000	)	 	—		
Income tax adjustments	527		 	(8,334	)	 	(1,073	)	 	1,123		
Non-GAAP net income (loss)	$	42,356		 	$	(41,319	)	 	$	(31,909	)	 	$	(95,867	)	
 	 	 	 	 	 	 	 	
GAAP shares for diluted net income (loss) per share	140,882		 	136,886		 	139,425		 	138,056		
    Add: dilutive shares	2,359		 	—		 	—		 	—		
Non-GAAP shares for diluted net income (loss) per share	143,241		 	136,886		 	139,425		 	138,056		
 	 	 	 	 	 	 	 	
Non-GAAP diluted net income (loss) per share	$	0.30		 	$	(0.30	)	 	$	(0.23	)	 	$	(0.69	)	

	
																
 	Three months ended December 31,	 	Twelve months ended December 31,	
(dollars in thousands)	2018	 	2017	 	2018	 	2017	
GAAP gross profit	$	142,117		 	$	79,786		 	$	361,434		 	$	384,530		
Stock-based compensation	548		 	580		 	1,954		 	1,935		
Acquisition-related costs	2,082		 	2,360		 	11,434		 	5,985		
Restructuring costs	22		 	176		 	1,379		 	634		
Non-GAAP gross profit	$	144,769		 	$	82,902		 	$	376,201		 	$	393,084		
 	 	 	 	 	 	 	 	
GAAP gross profit as a % of revenue	37.7	%	 	23.8	%	 	31.5	%	 	32.6	%	
Stock-based compensation	0.1		 	0.2		 	0.2		 	0.2		
Acquisition-related costs	0.6		 	0.7		 	1.0		 	0.5		
Restructuring costs	—		 	0.1		 	0.1		 	—		
Non-GAAP gross profit as a % of revenue	38.4	%	 	24.8	%	 	32.8	%	 	33.3	%	
 	 	 	 	 	 	 	 	
GAAP operating expenses	$	109,150		 	$	138,097		 	$	455,396		 	$	547,990		
Stock-based compensation	(9,168	)	 	(14,440	)	 	(38,933	)	 	(49,320	)	
Acquisition-related costs	(19	)	 	—		 	(22	)	 	(3,006	)	
Restructuring costs	(1,195	)	 	(3,328	)	 	(21,364	)	 	(19,658	)	
Non-GAAP operating expenses	$	98,768		 	$	120,329		 	$	395,077		 	$	476,006		
 	 	 	 	 	 	 	 	
GAAP operating income (loss)	$	32,967		 	$	(58,311	)	 	$	(93,962	)	 	$	(163,460	)	
Stock-based compensation	9,716		 	15,020		 	40,887		 	51,255		
Acquisition-related costs	2,101		 	2,360		 	11,456		 	8,991		
Restructuring costs	1,217		 	3,504		 	22,743		 	20,292		
Non-GAAP operating income (loss)	$	46,001		 	$	(37,427	)	 	$	(18,876	)	 	$	(82,922	)	

	
																
 	Three months ended December 31,	 	Twelve months ended December 31,	
(in thousands)	2018	 	2017	 	2018	 	2017	
GAAP net income (loss)	$	31,671		 	$	(55,848	)	 	$	(109,034	)	 	$	(182,873	)	
Income tax (benefit) expense	1,655		 	(6,943	)	 	1,359		 	6,486		
Interest expense, net	4,470		 	4,163		 	17,278		 	12,804		
Depreciation and amortization	7,290		 	9,218		 	35,063		 	41,478		
POP display amortization	2,788		 	4,342		 	13,482		 	19,190		
Stock-based compensation	9,716		 	15,020		 	40,887		 	51,255		
Restructuring costs	1,217		 	3,504		 	22,743		 	20,292		
Adjusted EBITDA	$	58,807		 	$	(26,544	)	 	$	21,778		 	$	(31,368	)	

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