=Fitbit (FIT) reported earnings on Mon 26 Feb 2018 (a/h)

Fitbit misses by $0.02, misses on revs; guides Q1 EPS below consensus, revs in-line; Guides FY18 below consensus

• Reports Q4 (Dec) loss of $0.02 per share, excluding non-recurring items, $0.02 worse than the Capital IQ Consensus of ($0.00); revenues fell 0.5% year/year to $570.8 mln vs the $588.11 mln Capital IQ Consensus.
• Co issues guidancefor Q1, sees EPS of ($0.21)-($0.18), excluding non-recurring items, vs. ($0.09) Capital IQ Consensus Estimate; sees Q1 revs of $240-255 mln vs. $340.34 mln Capital IQ Consensus Estimate.
  • Expect free cash flow to decline less than revenue, as receivables turn into cash receipts and less overhead is required to support the growth in inventory, and anticipate free cash flow of approximately $(25) million.
• FY18 Outlook
  • Expect device mix to continue to shift towards smartwatches over the course of the year; expect to grow Fitbit Health Solutions and increase premium subscribers, but this growth will be relatively immaterial to wearable device revenue.
  • Extrapolated the demand trend forecasted in the first quarter 2018 for the full year and expect revenue to be approximately $1.5 billion (Capital IQ consensus $1.7 bln).
  • Expect device mix shift and fixed cost deleveraging to negatively impact gross margins, partially offset by operating efficiencies.
  • Expect to drive operating expenses 7% lower, to a target of $740 million.
  • Capital expenditures as a percentage of revenue of approximately 3.5%.
  • Expect free cash flow to decline less than revenue and expect to breakeven for 2018.