GOPRO, INC., 10-Q filed on 7/22/2015
Quarterly Report
Document, Entity and Information
6 Months Ended
Jun. 30, 2015
Class of Stock [Line Items]
 
Entity Registrant Name
GoPro, Inc. 
Entity Central Index Key
0001500435 
Current Fiscal Year End Date
--12-31 
Entity Filer Category
Non-accelerated Filer 
Document Type
10-Q 
Document Period End Date
Jun. 30, 2015 
Document Fiscal Year Focus
2015 
Document Fiscal Period Focus
Q2 
Amendment Flag
false 
Common Class A [Member]
 
Class of Stock [Line Items]
 
Entity Common Stock, Shares Outstanding
97,082,949 
Common Class B [Member]
 
Class of Stock [Line Items]
 
Entity Common Stock, Shares Outstanding
35,778,083 
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Current assets:
 
 
Cash and cash equivalents
$ 338,031 
$ 319,929 
Marketable securities
178,953 
102,327 
Accounts receivable, net
118,551 
183,992 
Inventory
219,272 
153,026 
Prepaid expenses and other current assets
80,636 
63,769 
Total current assets
935,443 
823,043 
Property and equipment, net
52,252 
41,556 
Intangible assets
27,527 
2,937 
Goodwill
50,997 
14,095 
Other long-term assets
45,313 
36,060 
Total assets
1,111,532 
917,691 
Current liabilities:
 
 
Accounts payable
156,450 
126,240 
Accrued liabilities
133,442 
115,775 
Deferred revenue
13,298 
14,022 
Income taxes payable
4,691 
2,732 
Total current liabilities
307,881 
258,769 
Other long-term liabilities
20,678 
17,718 
Total liabilities
328,559 
276,487 
Commitments, contingencies and guarantees (see Note 9)
   
   
Stockholders’ equity:
 
 
Common stock and additional paid-in capital, $0.0001 par value, 500,000 Class A shares authorized, 97,083 and 52,091 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively; 150,000 Class B shares authorized, 35,778 and 77,023 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively
622,986 
533,000 
Retained earnings
159,987 
108,204 
Total stockholders’ equity
782,973 
641,204 
Total liabilities and stockholders’ equity
$ 1,111,532 
$ 917,691 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
Jun. 30, 2015
Dec. 31, 2014
Common stock, par value (in dollars per share)
$ 0.0001 
$ 0.0001 
Common Class A [Member]
 
 
Common stock, shares authorized
500,000,000 
500,000,000 
Common Stock, shares, issued
97,083,000 
52,091,000 
Common stock, shares, outstanding
97,083,000 
52,091,000 
Common Class B [Member]
 
 
Common stock, shares authorized
150,000,000 
150,000,000 
Common Stock, shares, issued
35,778,000 
77,023,000 
Common stock, shares, outstanding
35,778,000 
77,023,000 
Condensed Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Jun. 30, 2015
Jun. 30, 2014
Income Statement [Abstract]
 
 
 
 
Revenue
$ 419,919 
$ 244,605 
$ 783,028 
$ 480,321 
Cost of revenue
225,579 
141,736 
424,955 
280,938 
Gross profit
194,340 
102,869 
358,073 
199,383 
Operating expenses:
 
 
 
 
Research and development
58,453 
34,663 
107,890 
63,402 
Sales and marketing
63,494 
43,701 
119,863 
85,042 
General and administrative
26,255 
41,171 
61,914 
51,049 
Total operating expenses
148,202 
119,535 
289,667 
199,493 
Operating income (loss)
46,138 
(16,666)
68,406 
(110)
Other income (expense), net
122 
(1,536)
(2,122)
(3,161)
Income (loss) before income taxes
46,260 
(18,202)
66,284 
(3,271)
Income tax expense
11,229 
1,639 
14,501 
5,521 
Net income (loss)
$ 35,031 
$ (19,841)
$ 51,783 
$ (8,792)
Net income per share attributable to common stockholders - Basic (in dollars per share)
$ 0.26 
$ (0.24)
$ 0.39 
$ (0.11)
Net income per share attributable to common stockholders - Diluted (in dollars per share)
$ 0.24 
$ (0.24)
$ 0.35 
$ (0.11)
Weighted-average shares used to compute net income per share attributable to common stockholders - Basic (in shares)
133,150 
82,936 
132,716 
82,263 
Weighted-average shares used to compute net income per share attributable to common stockholders - Diluted (in shares)
146,781 
82,936 
147,720 
82,263 
Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2015
Jun. 30, 2014
Operating activities:
 
 
Net income (loss)
$ 51,783 
$ (8,792)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
Depreciation and amortization
11,791 
7,988 
Stock-based compensation
44,690 
38,230 
Foreign currency remeasurement and transaction losses
1,586 
Deferred taxes
(6,656)
(799)
Other
1,370 
298 
Changes in operating assets and liabilities:
 
 
Accounts receivable, net
65,562 
73,439 
Inventory
(66,045)
31,617 
Prepaids and other assets
(21,598)
(39,504)
Accounts payable and other liabilities
50,382 
(96,106)
Deferred revenue
(724)
378 
Net cash provided by operating activities
132,141 
6,749 
Investing activities:
 
 
Purchases of property and equipment
(21,269)
(12,657)
Purchases of marketable securities
(112,326)
Sales and maturities of marketable securities
34,446 
Acquisitions, net of cash acquired
(57,706)
(3,200)
Net cash used in investing activities
(156,855)
(15,857)
Financing activities:
 
 
Proceeds from issuance of common stock, net of repurchases
21,501 
509 
Taxes paid related to net share settlement of equity awards
(4,362)
Excess tax benefit from stock-based compensation
28,139 
20,836 
Payment of deferred public offering and debt issuance costs
(903)
(3,056)
Repayment of debt
(6,000)
Net cash provided by financing activities
44,375 
12,289 
Effect of exchange rate changes on cash and cash equivalents
(1,559)
Net increase in cash and cash equivalents
18,102 
3,181 
Cash and cash equivalents at beginning of period
319,929 
101,410 
Cash and cash equivalents at end of period
$ 338,031 
$ 104,591 
Business overview
Business overview
Business overview
GoPro, Inc. (GoPro or the Company) makes mountable and wearable cameras and accessories, which the Company refers to as capture devices. GoPro also develops and provides free software, the GoPro App (mobile) and GoPro Studio (desktop) that help users create, manage, and share GoPro content. The Company’s capture devices are sold globally through retailers, wholesale distributors and on the Company’s website.
Basis of presentation and summary of significant accounting policies
Basis of presentation and summary of significant accounting policies
Basis of presentation and summary of significant accounting policies
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and in accordance with the interim period reporting requirements of Form 10-Q. The unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) that management believes are necessary for the fair presentation of the Company's financial condition, results of operations, and cash flows for the periods presented, but are not necessarily indicative of the results expected for the full fiscal year or any other future period. The condensed consolidated balance sheet at December 31, 2014 has been derived from the audited financial statements at that date, but does not include all of the disclosures required by GAAP. This quarterly report should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2014 (2014 Annual Report). There have been no significant changes in the Company’s accounting policies from those disclosed in the footnotes to the audited financial statements contained in its 2014 Annual Report.
Principles of consolidation
These consolidated financial statements include all the accounts of the Company and its wholly-owned subsidiaries. Unless otherwise specified, references to the Company are references to GoPro, Inc. and its consolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of estimates
The preparation of 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. The Company regularly evaluates estimates and assumptions in several areas, including those related to: revenue recognition and related estimates (including sales returns, web-based sale deliveries at period-end, implied post contract support, and marketing allowances), collectability of accounts receivable, stock-based compensation, inventory valuation, product warranty liabilities, the valuation and useful lives of intangible assets and property and equipment, goodwill, 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, 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. Actual results could differ materially from management's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations could be affected.
Comprehensive income
For all periods presented, comprehensive income equaled net income. Therefore, the condensed consolidated statements of comprehensive income have been omitted from the condensed consolidated financial statements.
Recent accounting pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers, which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount to which an entity expects to be entitled when products and services are transferred to customers. ASU 2014-09 was originally to be effective for the Company on January 1, 2017. In July 2015, the FASB affirmed a one-year deferral of the effective date of the new revenue standard. The new standard will become effective for the Company on January 1, 2018 and can be adopted either retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption. Early application is permitted but not before the original effective date of annual periods beginning after December 15, 2016. The Company is currently evaluating the impact the adoption of ASU 2014-09 will have on the Company's consolidated financial statements.
Prior period reclassifications
Reclassifications of certain prior period amounts in the condensed consolidated financial statements have been made to conform to the current period presentation.
Balance sheet components
Balance sheet components
Balance sheet components
Inventory
Inventory consisted of the following:
(in thousands)
June 30,
2015
 
December 31,
2014
Components
$
8,480

 
$
4,324

Finished goods
210,792

 
148,702

Total inventory
$
219,272

 
$
153,026


Property and equipment, net
Property and equipment, net consisted of the following:
(in thousands)
Useful life
(in years)
 
June 30,
2015
 
December 31,
2014
Leasehold improvements
3–7
 
$
23,360

 
$
22,787

Computers, software, equipment and furniture
2–4
 
40,530

 
24,636

Tooling
1–2
 
19,050

 
16,159

Construction in progress
 
 
2,719

 
3,944

Tradeshow equipment and other
2-5
 
4,160

 
3,830

Gross property and equipment
 
 
89,819

 
71,356

Less: Accumulated depreciation and amortization
 
 
(37,567
)
 
(29,800)

Property and equipment, net
 
 
$
52,252

 
$
41,556




Acquisitions and acquired intangible assets and goodwill
During the six months ended June 30, 2015, the Company completed several acquisitions for an aggregate cash consideration of $59.3 million that were accounted for as business combinations. These acquisitions were not material to the Company's condensed consolidated financial statements, either individually or in the aggregate, and therefore actual and proforma disclosures under the applicable accounting guidance have not been presented. 
The following table summarizes the preliminary allocation of the fair values of the assets acquired and liabilities assumed, and the related useful lives, where applicable:
(in thousands)
Estimated
useful life
(in years)
 
Fair value
Developed technology
4 - 6 years
 
$
19,800

In-process research and development
 
 
6,000

Liabilities assumed
 
 
(71
)
Deferred tax liabilities
 
 
(3,284
)
Net assets acquired
 
 
22,445

Goodwill
 
 
36,902

Total fair value consideration
 
 
$
59,347


Goodwill represents the excess of the purchase price over the fair value of the net assets acquired and is primarily attributable to expected synergies in the technologies that can be leveraged by the Company in future product offerings. Goodwill is not expected to be deductible for tax purposes.
The following table summarizes the Company's acquired intangible assets:
 
 
 
 
 
 
 
 
 
June 30, 2015
 
December 31, 2014
(in thousands)
Gross carrying amount
 
Accumulated
amortization
 
Net carrying amount
 
Net carrying amount
Finite-lived acquired intangible assets
$
27,075

 
$
(5,563
)
 
$
21,512

 
$
2,922

Indefinite-lived acquired intangible assets
6,015

 

 
6,015

 
15

Total intangible assets
$
33,090

 
$
(5,563
)
 
$
27,527

 
$
2,937


Amortization expense for the six months ended June 30, 2015 and 2014 was $1.2 million and $0.6 million, respectively. Estimated amortization expense for future periods as of June 30, 2015, is as follows:
(in thousands)
 
Total
Year ending December 31,
 
 
Remainder of 2015
 
$
2,465

2016
 
4,768

2017
 
3,984

2018
 
3,592

2019
 
3,081

Thereafter
 
3,622

 
 
$
21,512


The carrying amount of goodwill was $51.0 million and $14.1 million as of June 30, 2015 and December 31, 2014, respectively. The increase during the six months ended June 30, 2015 was entirely attributable to goodwill acquired. The Company did not have any goodwill impairments during the periods presented.
Fair value measurements
Fair value measurements
Fair value measurements
The Company’s assets that are measured at fair value on a recurring basis, by level, within the fair value hierarchy are summarized as follows:
 
 
June 30, 2015
 
December 31, 2014
(in thousands)
 
Level 1
 
Level 2
 
Total
 
Level 1
 
Level 2
 
Total
Cash equivalents (1):
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
 
$
6,435

 
$

 
$
6,435

 
$
80,968

 
$

 
$
80,968

Corporate debt securities
 

 

 

 

 
2,000

 
2,000

Total cash equivalents
 
$
6,435

 
$

 
$
6,435

 
$
80,968

 
$
2,000

 
$
82,968

Marketable securities:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. treasury securities
 
$
5,992

 
$

 
$
5,992

 
$
1,994

 
$

 
$
1,994

U.S. agency securities
 

 
17,663

 
17,663

 

 
7,020

 
7,020

Commercial paper
 

 
2,400

 
2,400

 

 
2,497

 
2,497

Corporate debt securities
 

 
152,898

 
152,898

 

 
90,816

 
90,816

Total marketable securities
 
$
5,992

 
$
172,961

 
$
178,953

 
$
1,994

 
$
100,333

 
$
102,327

(1) Included in “cash and cash equivalents” in the accompanying condensed consolidated balance sheets as of June 30, 2015 and December 31, 2014, in addition to cash of $331.6 million and $237.0 million, respectively.
The Company classifies its cash equivalents and marketable securities as Level 1 or Level 2 within the fair value hierarchy. The fair value of Level 1 financial instruments, which are traded in active markets, is based on quoted market prices for identical instruments. The fair value of Level 2 financial instruments is obtained from an independent pricing service, which may use quoted market prices for identical or comparable instruments or model driven valuations using observable market data or inputs corroborated by observable market data. The Company's procedures include controls to ensure that appropriate fair values are recorded, including comparing the fair values obtained from the Company's pricing service against fair values obtained from other independent sources. At June 30, 2015 and December 31, 2014, the Company had no financial assets or liabilities that were classified as Level 3, which are valued based on inputs supported by little or no market activity.
At June 30, 2015 and December 31, 2014, the amortized cost of the Company's cash equivalents and marketable securities approximated their fair value and there were no material unrealized gains/(losses) either individually or in total.
During the six months ended June 30, 2015, the Company had no transfers of financial assets between levels. At June 30, 2015, $116.7 million of the Company's marketable securities had a contractual maturity of one year or less and $62.3 million had a contractual maturity of one to two years.
Stockholders' equity
Stock-based compensation
Stockholders' equity
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 Employee Stock Purchase Plan (ESPP). No shares have been issued under the 2010 Plan since June 2014. The 2014 Plan provides for the granting of incentive and nonqualified stock options, restricted stock awards (RSAs), restricted stock units (RSUs), stock appreciation rights, stock bonus awards, and performance awards to employees, non-employee directors, and consultants. Options granted under the 2014 Plan generally expire within 10 years from the date of grant and generally vest over four years. Options with performance or market-based conditions are generally subject to a required service period along with the performance or market condition. RSUs granted under the 2014 Plan generally vest either annually or quarterly over three or four years based upon on continued service. 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 lower of the fair market values of the stock as of the beginning or the end of six-month offering periods. For additional information regarding the Company's equity incentive plans, please refer to the footnotes to the audited financial statements contained in its 2014 Annual Report.
Stock option activity
A summary of the Company’s stock option activity and related information is as follows:
 
 
Options outstanding
(shares in thousands)
 
Shares
 
Weighted-
average
exercise
price
 
Weighted-
average
grant
date fair
value
 
Total intrinsic
value of
exercises
(in thousands)
 
Aggregate
intrinsic value
(in thousands)
Outstanding at December 31, 2014:
 
25,134

 
$
6.62

 
 
 
 
 
$
1,425,339

Granted
 
493

 
46.36

 
$
22.54

 
 
 
 
Exercised
 
(7,629
)
 
1.98

 
 
 
$
378,245

 
 
Forfeited/Cancelled
 
(154
)
 
17.10

 
 
 
 
 
 
Outstanding at June 30, 2015:
 
17,844

 
$
9.62

 
 
 
 
 
$
774,006

 
 
 
 
 
 
 
 
 
 
 
Exercisable at June 30, 2015
 
12,010

 
$
3.55

 
 
 
 
 
$
590,536

Vested and expected to vest at June 30, 2015
 
17,531

 
$
9.36

 
 
 
 
 
$
764,744


At June 30, 2015, there was $61.9 million of unearned stock-based compensation expense related to unvested options, which is expected to be amortized over a weighted average period of 2.46 years.
Restricted stock units
The cost of RSUs is determined using the fair value of the Company's common stock on the date of grant, and compensation is recognized on a straight-line basis over the requisite service period. The Company also has issued RSUs with both a market condition and service condition. The Company estimated the fair value of these market-based RSUs using a Monte Carlo valuation model on the date of grant. A summary of the Company’s RSU activity is as follows:
(shares in thousands)
Shares
 
Weighted- average grant date fair value
Non-vested shares at December 31, 2014
4,307

 
$
21.98

Granted
603

 
48.43

Vested
(1,083
)
 
15.84

Forfeited
(27
)
 
74.61

Non-vested shares at June 30, 2015
3,800

 
$
27.55


In June 2014, the Company granted an award of 4.5 million RSUs to the Chief Executive Officer (CEO RSUs), which included 1.5 million RSUs that vested immediately upon grant and 3.0 million RSUs that were subject to a market-based condition and a service condition. In January 2015, the market-based condition was achieved and the Company recorded stock-based compensation expense of $6.0 million and $21.8 million during the three and six months ended June 30, 2015.  At June 30, 2015, $14.5 million of total unearned compensation costs related to the CEO RSUs is expected to be recognized over the remaining vesting period of 2.0 years.
At June 30, 2015, there was $72.0 million of unearned stock-based compensation related to RSUs (including the CEO RSUs), which is expected to be amortized over a weighted average period of 2.27 years.
Stock contributions
In the second quarter of 2015, the CEO contributed an aggregate 4,858,180 shares of Class B common stock to the Company without consideration per the terms of a Contribution Agreement dated December 28, 2011, and amended on May 11, 2015.  Under the original Contribution Agreement, the CEO agreed to contribute back to the Company from time to time the same number of shares of common stock as are issued to a certain Company employee upon the exercise of certain stock options held by such employee.  Pursuant to this agreement, the CEO contributed back to the Company 180,000 shares of Class B common stock in April 2015.  In May 2015, the CEO contributed back to the Company 4,678,180 shares of Class B common stock pursuant to the amended agreement, representing all of the then remaining shares subject to the contribution obligations. All of the shares contributed by the CEO were subsequently retired during the three months ended June 30, 2015.
Employee stock purchase plan
On February 13, 2015, a purchase under the Company's ESPP was made and employees purchased an aggregate of 313,233 shares at a price of $20.40 per share. During the three and six months ended June 30, 2015, the Company recorded $0.9 million and $1.9 million of stock-based compensation expense related to the ESPP. At June 30, 2015, there was $0.5 million of unearned stock-based compensation related to the Company’s ESPP, which is expected to be recognized over 0.12 years.
Stock-based compensation expense
The Company measures compensation expense for all stock-based payment awards, including stock options, RSUs, and purchases under the Company's ESPP, based on the estimated fair values on the date of the grant. The fair value of stock options granted and purchases under the Company's ESPP is estimated using the Black-Scholes option pricing model. There have been no significant changes in the Company’s valuation assumptions for measuring compensation expense from those disclosed in the footnotes to the audited financial statements contained in its 2014 Annual Report.
The following table sets forth the detailed allocation of stock-based compensation expense:
 
Three months ended
 
Six months ended
(in thousands)
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
Stock-based compensation expense:
 
 
 
 
 
 
 
Cost of revenue
$
350

 
$
154

 
$
633

 
$
322

Research and development
3,710

 
1,657

 
7,245

 
3,058

Sales and marketing
2,932

 
1,654

 
5,998

 
3,068

General and administrative
11,197

 
30,728

 
30,814

 
31,782

Total stock-based compensation expense
18,189

 
34,193

 
44,690

 
38,230

Total tax benefit recognized
(6,240
)
 
(11,483
)
 
(15,544
)
 
(11,825
)
Decrease in net income
$
11,949

 
$
22,710

 
$
29,146

 
$
26,405

Net income (loss) per share attributable to common stockholders
Net income per share attributable to common stockholders
Net income (loss) per share attributable to common stockholders
Basic and diluted net income (loss) per common share is presented in conformity with the two-class method required for participating securities. The Company considers shares issued upon the early exercise of options subject to repurchase and non-vested restricted shares to be participating securities, because holders of such shares have a non-forfeitable right to dividends. Additionally, prior to the date of the Company's initial public offering (IPO) in June 2014, the Company considered its redeemable convertible preferred stock to be participating securities due to their non-cumulative dividend rights. Immediately after the completion of the Company's IPO, all outstanding shares of redeemable convertible preferred stock converted to Class B common stock.
The rights of the holders of Class A 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.
Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period. All participating securities are excluded from basic weighted average common shares outstanding. Diluted net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding, including all potentially dilutive common shares.
Undistributed earnings are allocated based on the contractual participation rights of common shares as if the earnings for the year have been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. The computation of the diluted net income (loss) per share of Class A common stock assumes the conversion of Class B common stock.
The following table presents the calculations of basic and diluted net income (loss) per share attributable to common stockholders:
 
Three months ended
 
Six months ended
(in thousands, except per share data)
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
 
Class A
 
Class B
 
Common
 
Class A
 
Class B
 
Common
Numerator:
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to common stockholders—basic
$
24,693

 
$
10,338

 
$
(19,841
)
 
$
32,086

 
$
19,697

 
$
(8,792
)
Reallocation of net income as a result of conversion of Class B to Class A shares
10,338

 

 

 
19,697

 

 

Reallocation of net income to Class B shares

 
2,277

 

 

 
3,233

 

Net income (loss) attributable to common stockholders—diluted
$
35,031

 
$
12,615

 
$
(19,841
)
 
$
51,783

 
$
22,930

 
$
(8,792
)
 
 
 
 
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
 
 
 
 
Weighted-average common shares—basic
93,855

 
39,295

 
82,936

 
82,234

 
50,482

 
82,263

Conversion of Class B to Class A common stock outstanding
39,295

 

 

 
50,482

 

 

Effect of potentially dilutive stock-based awards
13,631

 
13,563

 

 
15,004

 
14,929

 

Weighted-average common shares—diluted
146,781

 
52,858

 
82,936

 
147,720

 
65,411

 
82,263

 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share attributable to common stockholders:
 
 
 
 
 
 
 
 
 
 
 
Basic
$
0.26

 
$
0.26

 
$
(0.24
)
 
$
0.39

 
$
0.39

 
$
(0.11
)
Diluted
$
0.24

 
$
0.24

 
$
(0.24
)
 
$
0.35

 
$
0.35

 
$
(0.11
)

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
 
Six months ended
(in thousands)
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
Redeemable convertible preferred stock

 
30,523

 

 
30,523

Stock options, ESPP shares, and RSUs
1,814

 
29,502

 
1,981

 
28,550

Unvested restricted stock awards

 
370

 
2

 
411

 
1,814

 
60,395

 
1,983

 
59,484

Income tax expense
Income tax expense
Income tax expense
The Company's tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items arising in that quarter. In each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual tax rate changes, the Company makes a cumulative adjustment in that quarter.
 
Three months ended
 
Six months ended
(dollars in thousands)
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
Income tax expense
$
11,229

 
$
1,639

 
$
14,501

 
$
5,521

Effective tax rate
24.3
%
 
(9.0
)%
 
21.9
%
 
(168.8
)%

The Company’s income tax expense was $11.2 million and $1.6 million for the three months ended June 30, 2015 and 2014, respectively, and $14.5 million and $5.5 million for the six months ended June 30, 2015 and 2014, respectively. The Company’s provision for income taxes in each period has differed from the tax computed at the U.S. federal statutory income tax rate due to state taxes, the effect of non-U.S. operations, deductible and non-deductible stock-based compensation expense, non-deductible acquisition-related costs, tax credits and adjustments to unrecognized tax benefits. The higher income tax expense for the three and six months ended June 30, 2015, compared to the same periods in 2014, was primarily due to higher worldwide pre-tax income. The negative tax rates for the same periods in 2014 were primarily attributable to the impact of net losses that are not benefited, foreign withholding taxes, and non-deductible stock based compensation offset, in part, by research tax credits.
The Company is currently under examination by the U.S. Internal Revenue Service for tax years 2012 and 2013. The U.S. federal and U.S. state taxing authorities may choose to audit tax returns for tax years beyond the statute of limitation period due to significant tax attribute carryforwards from prior years, making adjustments only to carryforward attributes. The Company is also currently under examination by the California Franchise Tax Board for tax years 2011 and 2012. At this time, the Company is not able to estimate the potential impact that these examinations may have on income tax expense. If the examinations are resolved unfavorably, they may have a material negative impact on the Company's results of operations.
At June 30, 2015 and December 31, 2014, the Company’s total amount of gross unrecognized tax benefits was $17.7 million and $16.6 million, respectively. If recognized, $17.7 million of the unrecognized tax benefits (net of federal benefit) at June 30, 2015 would be recorded as a reduction of the income tax provision in future periods. Management believes events that could occur in the next 12 months and cause a material change in unrecognized tax benefits include, but are not limited to, the completion of examinations by the U.S. or foreign taxing authorities, and the expiration of statute of limitations on the Company's tax returns. The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations. Management regularly assesses the Company's tax positions in light of legislative, bilateral tax treaty, regulatory and judicial developments in the countries in which it does business. It is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase within the next 12 months. However, the range of the reasonably possible change cannot be reliably estimated.
Related parties
Related parties
Related parties
The Company has agreements for certain contract manufacturing and engineering services with a vendor affiliated with one of the Company's investors. In the six months ended June 30, 2015 and 2014, the Company made payments of $0.2 million and $11.4 million, respectively, for services rendered. As of June 30, 2015 and December 31, 2014, the Company had no accounts payable associated with this vendor.
The Company incurs costs for company-related chartered aircraft fees for the use of the CEO’s private plane. In the six months ended June 30, 2015 and 2014, the Company made payments of $0.7 million and zero, respectively.
In 2013, the Company entered into a three-year agreement with a company affiliated with the son of one of the members of the Company's Board of Directors to acquire certain naming rights to a sprint kart race track. As consideration for these naming rights, the Company would pay a total of $0.5 million in installments beginning in October 2013 over the naming rights period. As of June 30, 2015, the Company has made cumulative payments of $0.4 million and also provided 100 GoPro capture devices at no cost each year over the term of the agreement.
In the second quarter of 2013, the Company loaned one of its executive officers $0.2 million pursuant to a demand payment loan that did not bear interest, which was fully repaid in March 2014.
See Note 5, "Stockholders' Equity" for information regarding CEO RSUs and common stock contributed by the CEO back to the Company.
Commitments, contingencies and guarantees
Commitments, contingencies and guarantees
Commitments, contingencies and guarantees
The following table summarizes the Company’s contractual commitments as of June 30, 2015:
(in thousands)
Total
 
1 year (remaining
6 months in 2015)
 
2-3 years (2016 and 2017)
 
4-5 years (2018 and 2019)
 
More than
5 years (beyond 2019)
Operating leases(1)
$
56,489

 
$
7,409

 
$
29,280

 
$
17,044

 
$
2,756

Sponsorship commitments(2)
13,025

 
4,806

 
8,219

 

 

Other contractual commitments(3)
5,987

 
1,491

 
4,496

 

 

Capital equipment purchase commitments(4)
10,354

 
10,354

 

 

 

Total contractual cash obligations
$
85,855

 
$
24,060

 
$
41,995

 
$
17,044

 
$
2,756

(1)
The Company leases its facilities under long-term operating leases, which expire at various dates through 2019.
(2)
The Company sponsors sporting events, resorts and athletes as part of its marketing efforts. In many cases, the Company enters into multi-year agreements with event organizers, resorts and athletes.
(3)
The Company purchases software licenses and engages outside consultants to assist with upgrading or implementing its financial and IT systems, which require payments over multiple years.
(4)
The Company enters into contracts to acquire equipment for tooling and molds as part of its manufacturing operations. In addition, the Company incurs purchase commitments related to the manufacturing of its point-of-purchase (POP) displays by third parties.
Rent expense was $2.5 million and $1.9 million for the three months ended June 30, 2015 and 2014, respectively, and $4.9 million and $3.2 million for the six months ended June 30, 2015 and 2014, respectively.
Legal proceedings
From time to time, the Company is involved in legal proceedings in the ordinary course of business. The Company believes that the outcome of any existing litigation, either individually or in the aggregate, will not have a material impact on the results of operations, financial condition or cash flows of the Company.
Indemnifications
In the normal course of business, the Company enters into agreements that contain a variety of representations and warranties and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. As of June 30, 2015, the Company has not paid any claims or 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.
Product warranty
The following table summarizes the warranty liability activity:
 
Three months ended
 
Six months ended
(in thousands)
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
Beginning balances
$
8,969

 
$
2,551

 
$
6,405

 
$
3,870

Charged to cost of revenue
5,309

 
3,928

 
11,353

 
4,200

Settlements of warranty claims
(5,559
)
 
(1,801
)
 
(9,039
)
 
(3,392
)
Ending balances
$
8,719

 
$
4,678

 
$
8,719

 
$
4,678


At June 30, 2015, $8.3 million of the warranty liability was recorded as an element of accrued liabilities and $0.4 million was recorded as an element of other long-term liabilities. As of December 31, 2014, $6.0 million of the warranty liability was recorded as an element of accrued liabilities and $0.4 million was recorded as an element of other long-term liabilities.
Concentrations of risk and segment information
Concentrations of risk and segment information
Concentrations of risk and 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 CEO, who is the Company’s chief operating decision maker.
Customer concentration
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade receivables. The Company believes that credit risk in its 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 had the following customers who represented 10% or more of its net accounts receivable balance:
 
June 30,
2015
 
December 31,
2014
A
19%
 
17%
B
15%
 
*
C
11%
 
14%
D
*
 
11%
* Less than 10% of total accounts receivable for the period indicated
The Company sold accounts receivables, without recourse, of $50.4 million and $37.9 million in the three months ended June 30, 2015 and 2014, respectively, and $85.7 million and $69.2 million in the six months ended June 30, 2015 and 2014, respectively, to a third-party banking institution. Factoring fees of $0.4 million and $0.3 million in the three months ended June 30, 2015 and 2014, respectively and $0.7 million and $0.6 million in the six months ended June 30, 2015 and 2014, respectively, were included in other expense, net.
Customers with revenue equal to or greater than 10% of total revenue were as follows:
 
Three months ended
 
Six months ended
 
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
A
16%
 
17%
 
14%
 
15%
Supplier concentration
The Company relies on third parties for the supply and manufacture of its capture devices, 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.
Geographic and other information
Revenue by geographic region, based on ship-to destinations, was as follows:
 
Three months ended
 
Six months ended
(in thousands)
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
Americas
$
212,350


$
152,710

 
$
392,443


$
277,876

Europe, Middle East and Africa (EMEA)
137,186


67,043

 
276,265


151,217

Asia and Pacific area countries (APAC)
70,383


24,852

 
114,320


51,228

 
$
419,919

 
$
244,605

 
$
783,028

 
$
480,321


Revenue in the United States, which is included in the Americas geographic region, was $189.1 million and $132.7 million for the three months ended June 30, 2015 and 2014, respectively, and $344.4 million and $243.3 million for the six months ended June 30, 2015 and 2014, respectively. During the three months ended December 31, 2014, the Company reclassified four countries it had previously included in the APAC geographical region to now be included in the EMEA geographical region. This caused $8.3 million of revenue to be reclassified from the APAC region to the EMEA region for the six months ended June 30, 2014. 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 June 30, 2015 and December 31, 2014, long-lived assets, which represent gross property and equipment, located outside the United States, primarily in China, were $43.5 million and $25.4 million, respectively.
Basis of presentation and summary of significant accounting policies (Policies)
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and in accordance with the interim period reporting requirements of Form 10-Q. The unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) that management believes are necessary for the fair presentation of the Company's financial condition, results of operations, and cash flows for the periods presented, but are not necessarily indicative of the results expected for the full fiscal year or any other future period. The condensed consolidated balance sheet at December 31, 2014 has been derived from the audited financial statements at that date, but does not include all of the disclosures required by GAAP. This quarterly report should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2014 (2014 Annual Report). There have been no significant changes in the Company’s accounting policies from those disclosed in the footnotes to the audited financial statements contained in its 2014 Annual Report.
Principles of consolidation
These consolidated financial statements include all the accounts of the Company and its wholly-owned subsidiaries. Unless otherwise specified, references to the Company are references to GoPro, Inc. and its consolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of estimates
The preparation of 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. The Company regularly evaluates estimates and assumptions in several areas, including those related to: revenue recognition and related estimates (including sales returns, web-based sale deliveries at period-end, implied post contract support, and marketing allowances), collectability of accounts receivable, stock-based compensation, inventory valuation, product warranty liabilities, the valuation and useful lives of intangible assets and property and equipment, goodwill, 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, 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. Actual results could differ materially from management's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations could be affected.
Comprehensive income
For all periods presented, comprehensive income equaled net income. Therefore, the condensed consolidated statements of comprehensive income have been omitted from the condensed consolidated financial statements.
Recent accounting pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers, which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount to which an entity expects to be entitled when products and services are transferred to customers. ASU 2014-09 was originally to be effective for the Company on January 1, 2017. In July 2015, the FASB affirmed a one-year deferral of the effective date of the new revenue standard. The new standard will become effective for the Company on January 1, 2018 and can be adopted either retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption. Early application is permitted but not before the original effective date of annual periods beginning after December 15, 2016. The Company is currently evaluating the impact the adoption of ASU 2014-09 will have on the Company's consolidated financial statements.
Prior period reclassifications
Reclassifications of certain prior period amounts in the condensed consolidated financial statements have been made to conform to the current period presentation.
Balance sheet components (Tables)
Inventory consisted of the following:
(in thousands)
June 30,
2015
 
December 31,
2014
Components
$
8,480

 
$
4,324

Finished goods
210,792

 
148,702

Total inventory
$
219,272

 
$
153,026

Property and equipment, net consisted of the following:
(in thousands)
Useful life
(in years)
 
June 30,
2015
 
December 31,
2014
Leasehold improvements
3–7
 
$
23,360

 
$
22,787

Computers, software, equipment and furniture
2–4
 
40,530

 
24,636

Tooling
1–2
 
19,050

 
16,159

Construction in progress
 
 
2,719

 
3,944

Tradeshow equipment and other
2-5
 
4,160

 
3,830

Gross property and equipment
 
 
89,819

 
71,356

Less: Accumulated depreciation and amortization
 
 
(37,567
)
 
(29,800)

Property and equipment, net
 
 
$
52,252

 
$
41,556

The following table summarizes the preliminary allocation of the fair values of the assets acquired and liabilities assumed, and the related useful lives, where applicable:
(in thousands)
Estimated
useful life
(in years)
 
Fair value
Developed technology
4 - 6 years
 
$
19,800

In-process research and development
 
 
6,000

Liabilities assumed
 
 
(71
)
Deferred tax liabilities
 
 
(3,284
)
Net assets acquired
 
 
22,445

Goodwill
 
 
36,902

Total fair value consideration
 
 
$
59,347

The following table summarizes the Company's acquired intangible assets:
 
 
 
 
 
 
 
 
 
June 30, 2015
 
December 31, 2014
(in thousands)
Gross carrying amount
 
Accumulated
amortization
 
Net carrying amount
 
Net carrying amount
Finite-lived acquired intangible assets
$
27,075

 
$
(5,563
)
 
$
21,512

 
$
2,922

Indefinite-lived acquired intangible assets
6,015

 

 
6,015

 
15

Total intangible assets
$
33,090

 
$
(5,563
)
 
$
27,527

 
$
2,937

Estimated amortization expense for future periods as of June 30, 2015, is as follows:
(in thousands)
 
Total
Year ending December 31,
 
 
Remainder of 2015
 
$
2,465

2016
 
4,768

2017
 
3,984

2018
 
3,592

2019
 
3,081

Thereafter
 
3,622

 
 
$
21,512

Fair value measurements (Tables)
Fair Value, Assets Measured on Recurring Basis
The Company’s assets that are measured at fair value on a recurring basis, by level, within the fair value hierarchy are summarized as follows:
 
 
June 30, 2015
 
December 31, 2014
(in thousands)
 
Level 1
 
Level 2
 
Total
 
Level 1
 
Level 2
 
Total
Cash equivalents (1):
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
 
$
6,435

 
$

 
$
6,435

 
$
80,968

 
$

 
$
80,968

Corporate debt securities
 

 

 

 

 
2,000

 
2,000

Total cash equivalents
 
$
6,435

 
$

 
$
6,435

 
$
80,968

 
$
2,000

 
$
82,968

Marketable securities:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. treasury securities
 
$
5,992

 
$

 
$
5,992

 
$
1,994

 
$

 
$
1,994

U.S. agency securities
 

 
17,663

 
17,663

 

 
7,020

 
7,020

Commercial paper
 

 
2,400

 
2,400

 

 
2,497

 
2,497

Corporate debt securities
 

 
152,898

 
152,898

 

 
90,816

 
90,816

Total marketable securities
 
$
5,992

 
$
172,961

 
$
178,953

 
$
1,994

 
$
100,333

 
$
102,327

(1) Included in “cash and cash equivalents” in the accompanying condensed consolidated balance sheets as of June 30, 2015 and December 31, 2014, in addition to cash of $331.6 million and $237.0 million, respectively.
Stockholders' equity (Tables)
A summary of the Company’s stock option activity and related information is as follows:
 
 
Options outstanding
(shares in thousands)
 
Shares
 
Weighted-
average
exercise
price
 
Weighted-
average
grant
date fair
value
 
Total intrinsic
value of
exercises
(in thousands)
 
Aggregate
intrinsic value
(in thousands)
Outstanding at December 31, 2014:
 
25,134

 
$
6.62

 
 
 
 
 
$
1,425,339

Granted
 
493

 
46.36

 
$
22.54

 
 
 
 
Exercised
 
(7,629
)
 
1.98

 
 
 
$
378,245

 
 
Forfeited/Cancelled
 
(154
)
 
17.10

 
 
 
 
 
 
Outstanding at June 30, 2015:
 
17,844

 
$
9.62

 
 
 
 
 
$
774,006

 
 
 
 
 
 
 
 
 
 
 
Exercisable at June 30, 2015
 
12,010

 
$
3.55

 
 
 
 
 
$
590,536

Vested and expected to vest at June 30, 2015
 
17,531

 
$
9.36

 
 
 
 
 
$
764,744

A summary of the Company’s RSU activity is as follows:
(shares in thousands)
Shares
 
Weighted- average grant date fair value
Non-vested shares at December 31, 2014
4,307

 
$
21.98

Granted
603

 
48.43

Vested
(1,083
)
 
15.84

Forfeited
(27
)
 
74.61

Non-vested shares at June 30, 2015
3,800

 
$
27.55

The following table sets forth the detailed allocation of stock-based compensation expense:
 
Three months ended
 
Six months ended
(in thousands)
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
Stock-based compensation expense:
 
 
 
 
 
 
 
Cost of revenue
$
350

 
$
154

 
$
633

 
$
322

Research and development
3,710

 
1,657

 
7,245

 
3,058

Sales and marketing
2,932

 
1,654

 
5,998

 
3,068

General and administrative
11,197

 
30,728

 
30,814

 
31,782

Total stock-based compensation expense
18,189

 
34,193

 
44,690

 
38,230

Total tax benefit recognized
(6,240
)
 
(11,483
)
 
(15,544
)
 
(11,825
)
Decrease in net income
$
11,949

 
$
22,710

 
$
29,146

 
$
26,405

Net income (loss) per share attributable to common stockholders (Tables)
The following table presents the calculations of basic and diluted net income (loss) per share attributable to common stockholders:
 
Three months ended
 
Six months ended
(in thousands, except per share data)
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
 
Class A
 
Class B
 
Common
 
Class A
 
Class B
 
Common
Numerator:
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to common stockholders—basic
$
24,693

 
$
10,338

 
$
(19,841
)
 
$
32,086

 
$
19,697

 
$
(8,792
)
Reallocation of net income as a result of conversion of Class B to Class A shares
10,338

 

 

 
19,697

 

 

Reallocation of net income to Class B shares

 
2,277

 

 

 
3,233

 

Net income (loss) attributable to common stockholders—diluted
$
35,031

 
$
12,615

 
$
(19,841
)
 
$
51,783

 
$
22,930

 
$
(8,792
)
 
 
 
 
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
 
 
 
 
Weighted-average common shares—basic
93,855

 
39,295

 
82,936

 
82,234

 
50,482

 
82,263

Conversion of Class B to Class A common stock outstanding
39,295

 

 

 
50,482

 

 

Effect of potentially dilutive stock-based awards
13,631

 
13,563

 

 
15,004

 
14,929

 

Weighted-average common shares—diluted
146,781

 
52,858

 
82,936

 
147,720

 
65,411

 
82,263

 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share attributable to common stockholders:
 
 
 
 
 
 
 
 
 
 
 
Basic
$
0.26

 
$
0.26

 
$
(0.24
)
 
$
0.39

 
$
0.39

 
$
(0.11
)
Diluted
$
0.24

 
$
0.24

 
$
(0.24
)
 
$
0.35

 
$
0.35

 
$
(0.11
)
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
 
Six months ended
(in thousands)
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
Redeemable convertible preferred stock

 
30,523

 

 
30,523

Stock options, ESPP shares, and RSUs
1,814

 
29,502

 
1,981

 
28,550

Unvested restricted stock awards

 
370

 
2

 
411

 
1,814

 
60,395

 
1,983

 
59,484

Income tax expense (Tables)
Schedule of Components of Income Tax Expense (Benefit)
 
Three months ended
 
Six months ended
(dollars in thousands)
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
Income tax expense
$
11,229

 
$
1,639

 
$
14,501

 
$
5,521

Effective tax rate
24.3
%
 
(9.0
)%
 
21.9
%
 
(168.8
)%
Commitments, contingencies and guarantees (Tables)
The following table summarizes the Company’s contractual commitments as of June 30, 2015:
(in thousands)
Total
 
1 year (remaining
6 months in 2015)
 
2-3 years (2016 and 2017)
 
4-5 years (2018 and 2019)
 
More than
5 years (beyond 2019)
Operating leases(1)
$
56,489

 
$
7,409

 
$
29,280

 
$
17,044

 
$
2,756

Sponsorship commitments(2)
13,025

 
4,806

 
8,219

 

 

Other contractual commitments(3)
5,987

 
1,491

 
4,496

 

 

Capital equipment purchase commitments(4)
10,354

 
10,354

 

 

 

Total contractual cash obligations
$
85,855

 
$
24,060

 
$
41,995

 
$
17,044

 
$
2,756

(1)
The Company leases its facilities under long-term operating leases, which expire at various dates through 2019.
(2)
The Company sponsors sporting events, resorts and athletes as part of its marketing efforts. In many cases, the Company enters into multi-year agreements with event organizers, resorts and athletes.
(3)
The Company purchases software licenses and engages outside consultants to assist with upgrading or implementing its financial and IT systems, which require payments over multiple years.
(4)
The Company enters into contracts to acquire equipment for tooling and molds as part of its manufacturing operations. In addition, the Company incurs purchase commitments related to the manufacturing of its point-of-purchase (POP) displays by third parties.
The following table summarizes the warranty liability activity:
 
Three months ended
 
Six months ended
(in thousands)
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
Beginning balances
$
8,969

 
$
2,551

 
$
6,405

 
$
3,870

Charged to cost of revenue
5,309

 
3,928

 
11,353

 
4,200

Settlements of warranty claims
(5,559
)
 
(1,801
)
 
(9,039
)
 
(3,392
)
Ending balances
$
8,719

 
$
4,678

 
$
8,719

 
$
4,678

Concentrations of risk and segment information (Tables)
Revenue by geographic region, based on ship-to destinations, was as follows:
 
Three months ended
 
Six months ended
(in thousands)
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
Americas
$
212,350


$
152,710

 
$
392,443


$
277,876

Europe, Middle East and Africa (EMEA)
137,186


67,043

 
276,265


151,217

Asia and Pacific area countries (APAC)
70,383


24,852

 
114,320


51,228

 
$
419,919

 
$
244,605

 
$
783,028

 
$
480,321

The Company had the following customers who represented 10% or more of its net accounts receivable balance:
 
June 30,
2015
 
December 31,
2014
A
19%
 
17%
B
15%
 
*
C
11%
 
14%
D
*
 
11%
* Less than 10% of total accounts receivable for the period indicated
Customers with revenue equal to or greater than 10% of total revenue were as follows:
 
Three months ended
 
Six months ended
 
June 30,
2015
 
June 30,
2014
 
June 30,
2015
 
June 30,
2014
A
16%
 
17%
 
14%
 
15%
Balance sheet components - Inventory (Details) (USD $)
In Thousands, unless otherwise specified
Jun. 30, 2015
Dec. 31, 2014
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
 
Components
$ 8,480 
$ 4,324 
Finished goods
210,792 
148,702 
Total inventory
$ 219,272 
$ 153,026 
Balance sheet components - Property and Equipment, Net (Details) (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2015
Dec. 31, 2014
Jun. 30, 2015
Leasehold Improvements [Member]
Dec. 31, 2014
Leasehold Improvements [Member]
Jun. 30, 2015
Computers, Software, Equipment and Furniture [Member]
Dec. 31, 2014
Computers, Software, Equipment and Furniture [Member]
Jun. 30, 2015
Tooling [Member]
Dec. 31, 2014
Tooling [Member]
Jun. 30, 2015
Construction in Progress [Member]
Dec. 31, 2014
Construction in Progress [Member]
Jun. 30, 2015
Tradeshow Equipment and Other [Member]
Dec. 31, 2014
Tradeshow Equipment and Other [Member]
Jun. 30, 2015
Minimum [Member]
Leasehold Improvements [Member]
Jun. 30, 2015
Minimum [Member]
Computers, Software, Equipment and Furniture [Member]
Jun. 30, 2015
Minimum [Member]
Tooling [Member]
Jun. 30, 2015
Minimum [Member]
Tradeshow Equipment and Other [Member]
Jun. 30, 2015
Maximum [Member]
Leasehold Improvements [Member]
Jun. 30, 2015
Maximum [Member]
Computers, Software, Equipment and Furniture [Member]
Jun. 30, 2015
Maximum [Member]
Tooling [Member]
Jun. 30, 2015
Maximum [Member]
Tradeshow Equipment and Other [Member]
Property, Plant and Equipment [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Useful life (in years)
 
 
 
 
 
 
 
 
 
 
 
 
3 years 
2 years 
1 year 
2 years 
7 years 
4 years 
2 years 
5 years 
Gross property and equipment
$ 89,819 
$ 71,356 
$ 23,360 
$ 22,787 
$ 40,530 
$ 24,636 
$ 19,050 
$ 16,159 
$ 2,719 
$ 3,944 
$ 4,160 
$ 3,830 
 
 
 
 
 
 
 
 
Less: Accumulated depreciation and amortization
(37,567)
(29,800)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property and equipment, net
$ 52,252 
$ 41,556 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance sheet components - Business Acquisition (Details) (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jun. 30, 2015
Dec. 31, 2014
Jun. 30, 2015
Series of Individually Immaterial Business Acquisitions [Member]
Jun. 30, 2015
Developed Technology Rights [Member]
Series of Individually Immaterial Business Acquisitions [Member]
Jun. 30, 2015
Developed Technology Rights [Member]
Maximum [Member]
Series of Individually Immaterial Business Acquisitions [Member]
Jun. 30, 2015
Developed Technology Rights [Member]
Minimum [Member]
Series of Individually Immaterial Business Acquisitions [Member]
Jun. 30, 2015
In Process Research and Development [Member]
Series of Individually Immaterial Business Acquisitions [Member]
Business Acquisition [Line Items]
 
 
 
 
 
 
 
Estimated useful life (in years)
 
 
 
 
6 years 
4 years 
 
Developed technology
 
 
 
$ 19,800 
 
 
 
In-process research and development
 
 
 
 
 
 
6,000 
Liabilities assumed
 
 
(71)