SAN MATEO, Calif. (BRAIN) — GoPro Inc. announced a workforce reduction of more than 20% to reduce operating expenses in the wake of the COVID-19 pandemic, the company announced in a statement Wednesday afternoon.
All told more than 200 employees were affected. GoPro did not say if they were laid off, furloughed or if benefits will be extended.
The changes are part of a strategic realignment to become a more efficient and profitable direct-to-consumer business with plans to further reduce non-headcount related operating expenses to $250 million in 2021, according to the statement.
"GoPro's global distribution network has been negatively impacted by the COVID-19 pandemic, driving us to transition into a more efficient and profitable direct-to-consumer-centric business over the course of this year," said Nicholas Woodman, GoPro's founder and CEO. "We are crushed that this forces us to let go of many talented members of our team, and we are forever grateful for their contributions."
GoPro's direct business has grown more profitable in recent years. In 2019, GoPro.com attracted an average of seven million unique visitors each month, generated more than 20% of revenue in top European markets and nearly 20% in the United States, according to the statement. In addition, GoPro.com gained further ground in Q1 2020, generating a considerably larger percentage of sales in all regions, year-over-year, according to the statement.
"We have a clear opportunity to super-serve consumers' demand for our products in a more direct and efficient manner, which can have a positive impact on the profitability of our business," Woodman said.
To lead the company's direct-to-consumer growth initiatives spanning hardware, software and subscription sales, GoPro has appointed Aimée Lapic as chief digital officer. Lapic brings years of experience building digital businesses, most recently as chief marketing officer for Pandora and before that at Banana Republic, where she was chief marketing officer and general manager for BananaRepublic.com.
GoPro will continue to sell to select leading retailers in key regions where consumers prefer to purchase offline or indirectly. However, the company will be shifting primarily to consumer-direct sales to drive growth in regions where GoPro.com already has a strong share of the market, according to the statement.
In addition to the workforce reduction, GoPro's shift to a more consumer-direct approach includes cutting the following expenses:
- $100 million reduction in non-GAAP operating expenses in 2020 with plans to further reduce operating expenses into 2021 to $250 million.
- Office space reductions in five geographies.
- Sales and marketing expenditure reductions in 2020 and beyond.
- Additional reductions in spending across the business.
GoPro also said Woodman will forego the remainder of his salary through the end of 2020. Additionally, as of April 14, 2020, GoPro's Board of Directors volunteered to forego the remainder of their cash compensation through the end of 2020.
GoPro confirmed these reductions will not impact its 2020 product launches, which include new hardware, software and subscription products that will serve GoPro camera owners and smartphone-only users.
Additionally, GoPro is withdrawing its Q1 and full-year 2020 guidance due to global uncertainty related to the COVID-19 pandemic, and is providing a preview of its Q1 results:
- Revenue of approximately $119 million.
- Non-GAAP EPS loss is expected to be in the mid $0.30 loss per share range.
- Street ASP of $350, a 23% sequential increase.
- Sell-through of about 700,000 cameras during the quarter.
- Reduced channel inventory by nearly 30%.
- Cash and equivalents of $125 million as of March 31, 2020.
The restructuring of GoPro's business will result in an estimated aggregate charge of $31 million to $49 million. Cash expenditures will be about $5 million of the estimated aggregate charges in the second quarter of 2020 as a result of a reduction in force. The remaining expenditures are about $26 million to $44 million primarily pertaining to planned reductions of office space (including $4 million of non-cash charges) and about $5 million for other non-cash charges. The company anticipates the majority of the office space charges will result in future cash expenditures through 2027. The company anticipates that a substantial portion of these restructuring charges will be reflected in its second-quarter results.
GoPro will provide complete Q1 2020 results and further strategy updates on its first-quarter earnings report that will take place in May.
