GOPRO, INC., 10-Q filed on 5/6/2016
Quarterly Report
Document, Entity and Information
3 Months Ended
Mar. 31, 2016
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
Large Accelerated Filer 
Document Type
10-Q 
Document Period End Date
Mar. 31, 2016 
Document Fiscal Year Focus
2016 
Document Fiscal Period Focus
Q1 
Amendment Flag
false 
Entity Well-known Seasoned Issuer
   
Entity Voluntary Filers
   
Entity Current Reporting Status
   
Common Class A [Member]
 
Class of Stock [Line Items]
 
Entity Common Stock, Shares Outstanding
101,868,386 
Common Class B [Member]
 
Class of Stock [Line Items]
 
Entity Common Stock, Shares Outstanding
36,299,074 
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2016
Dec. 31, 2015
Statement of Financial Position [Abstract]
 
 
Other Payments to Acquire Businesses
$ 356 
 
Current assets:
 
 
Cash and cash equivalents
248,717 
279,672 
Marketable securities
139,951 
194,386 
Accounts receivable, net
46,519 
145,692 
Inventory
139,736 
188,232 
Prepaid expenses and other current assets
27,452 
25,261 
Total current assets
602,375 
833,243 
Property and equipment, net
67,725 
70,050 
Intangible assets, net
36,781 
31,027 
Goodwill
94,583 
57,095 
Other long-term assets
127,465 
111,561 
Total assets
928,929 
1,102,976 
Current liabilities:
 
 
Accounts payable
50,989 
89,989 
Accrued liabilities
148,309 
192,446 
Deferred revenue
13,847 
12,742 
Total current liabilities
213,145 
295,177 
Long-term liabilities
36,389 
35,766 
Total liabilities
249,534 
330,943 
Commitments, contingencies and guarantees
   
   
Stockholders’ equity:
 
 
Preferred stock, $0.0001 par value, 5,000 shares authorized; none issued
Common stock and additional paid-in capital, $0.0001 par value, 500,000 Class A shares authorized,101,868 and 100,596 shares issued and outstanding, respectively; 150,000 Class B shares authorized, 36,299 and 36,005 shares issued and outstanding, respectively
678,132 
663,311 
Treasury stock, at cost, 1,545 and 1,545 shares, respectively
(35,613)
(35,613)
Retained earnings
36,876 
144,335 
Total stockholders’ equity
679,395 
772,033 
Total liabilities and stockholders’ equity
$ 928,929 
$ 1,102,976 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
Mar. 31, 2016
Dec. 31, 2015
Preferred Stock, Par or Stated Value Per Share
$ 0.0001 
$ 0.0001 
Preferred Stock, Shares Authorized
5,000,000 
5,000,000 
Preferred Stock, Shares Issued
Common stock, par value (in dollars per share)
$ 0.0001 
$ 0.0001 
Treasury Stock, Shares
1,545,000 
1,545,000 
Common Class A [Member]
 
 
Common Stock, Shares Authorized
500,000,000 
500,000,000 
Common Stock, Shares, Issued
101,868,000 
100,596,000 
Common stock, shares, outstanding
101,868,000 
100,596,000 
Common Class B [Member]
 
 
Common Stock, Shares Authorized
150,000,000 
150,000,000 
Common Stock, Shares, Issued
36,299,000 
36,005,000 
Common stock, shares, outstanding
36,299,000 
36,005,000 
Condensed Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Income Statement [Abstract]
 
 
Revenue
$ 183,536 
$ 363,109 
Cost of revenue
123,822 
199,376 
Gross profit
59,714 
163,733 
Operating expenses:
 
 
Research and development
76,979 
49,437 
Sales and marketing
79,449 
56,369 
General and administrative
24,721 
35,659 
Total operating expenses
181,149 
141,465 
Operating income (loss)
(121,435)
22,268 
Other expense, net
(307)
(2,244)
Income (loss) before income taxes
(121,742)
20,024 
Income tax expense (benefit)
(14,283)
3,272 
Net income (loss)
$ (107,459)
$ 16,752 
Net income per share attributable to common stockholders - Basic (in dollars per share)
$ (0.78)
$ 0.13 
Net income per share attributable to common stockholders - Diluted (in dollars per share)
$ (0.78)
$ 0.11 
Weighted-average shares used to compute net income per share attributable to common stockholders - Basic (in shares)
137,543 
132,278 
Weighted-average shares used to compute net income per share attributable to common stockholders - Diluted (in shares)
137,543 
148,573 
Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Statement of Cash Flows [Abstract]
 
 
Net income (loss)
$ (107,459)
$ 16,752 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
Depreciation and amortization
8,322 
5,369 
Stock-based compensation
15,731 
26,501 
Excess tax benefit from stock-based compensation
(690)
(6,067)
Deferred income taxes
(10,328)
(1,590)
Other
765 
2,829 
Changes in operating assets and liabilities:
 
 
Accounts receivable, net
99,368 
77,684 
Inventory
48,496 
(11,017)
Prepaid expenses and other assets
(4,574)
1,451 
Accounts payable and other liabilities
(84,001)
(43,950)
Deferred revenue
1,105 
(1,695)
Net cash provided by (used in) operating activities
(33,265)
66,267 
Investing activities:
 
 
Purchases of property and equipment, net
(8,219)
(5,207)
Purchases of marketable securities
(79,368)
Proceeds from Sale and Maturity of Available-for-sale Securities
54,229 
12,503 
Acquisitions, net of cash acquired
(45,040)
(5,100)
Net cash provided by (used in) investing activities
970 
(77,172)
Financing activities:
 
 
Proceeds from issuance of common stock, net
4,103 
11,004 
Excess tax benefit from stock-based compensation
690 
6,067 
Other Payments to Acquire Businesses
356 
Payments of Debt Issuance Costs
(3,085)
Payments of Stock Issuance Costs
(903)
Net cash provided by financing activities
1,352 
16,168 
Effect of exchange rate changes on cash and cash equivalents
(12)
(2,027)
Net increase (decrease) in cash and cash equivalents
(30,955)
3,236 
Cash and cash equivalents at beginning of period
279,672 
319,929 
Cash and cash equivalents at end of period
$ 248,717 
$ 323,165 
Basis of presentation
Summary of business and significant accounting policies
Summary of business and significant accounting policies
GoPro, Inc. (GoPro or the Company) makes mountable and wearable cameras and accessories. The Company’s products are sold globally through retailers, wholesale distributors and on the Company’s website. The Company's global corporate headquarters are located in San Mateo, California.
Basis of presentation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The Company's fiscal year ends on December 31, and its fiscal quarters end on March 31, June 30, and September 30. The condensed consolidated financial statements reflect all adjustments (which are normal and recurring in nature) that management believes are necessary for the fair presentation of its financial statements, 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, 2015 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 on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K (Annual Report) for the year ended December 31, 2015. There have been no significant changes in the Company’s accounting policies from those disclosed in its Annual Report.
Principles of consolidation. These condensed consolidated financial statements include all the accounts of the Company and its wholly-owned subsidiaries. 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. Significant estimates and assumptions made by management include those related to: revenue recognition (including sales returns, web-based sale deliveries at period-end, implied post contract support and marketing allowances), stock-based compensation, inventory valuation, product warranty liabilities, the valuation and useful lives of long-lived assets (property and equipment, goodwill and intangibles) 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 approximated net income. Therefore, the condensed consolidated statements of comprehensive income have been omitted from the condensed 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.

Recent accounting pronouncements
Standard
 
Description
 
Date of adoption
 
Effect on the financial statements or other significant matters
Standards that are not yet adopted
 
 
 
 
Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606)
 
This standard 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. In August 2015, the FASB deferred the effective date by one year while providing the option to adopt the standard on the original effective date of January 1, 2017. In March 2016, the FASB issued additional guidance regarding principal versus agent considerations in the accounting of revenue. The standard may be adopted either retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption.
 
January 1, 2018
 
The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements and related disclosures.
ASU No. 2016-02, Leases (Topic 842)
 
This standard requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. Lessees would recognize a right-to-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The new standard should be applied on a modified retrospective basis.
 
January 1, 2019
 
The Company is beginning to evaluate the impact that the adoption of this standard will have on its consolidated financial statements.
ASU No. 2016-09, Stock Compensation (Topic 718)
 
This standard requires income tax effects of awards to be recognized in the income statement when the awards vest or are settled, allowing an employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, and to make a policy election to account for forfeitures as they occur. Early adoption is permitted for an entity in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period.
 
January 1, 2017
 
The Company is beginning to evaluate the impact that the adoption of this standard will have on its consolidated financial statements.
Standards that were adopted
 
 
 
 
ASU No. 2015-03 and ASU 2015-15, Interest - Imputation of Interest (Subtopic 835-30)

 
ASU 2015-03 requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, consistent with debt discounts.
ASU 2015-15 was issued to provide clarification to ASU 2015-03 in that fees related to line-of-credit arrangements should continue to be presented as an asset and subsequently amortized ratably over the term of the line-of-credit arrangement.
 
January 1, 2016
 
The adoption of this standard did not have a material impact on the consolidated financial statements. At March 31, 2016, the Company presented debt issuance costs of $3.3 million related to its secured revolving credit facility as an asset on its consolidated balance sheet.
Acquisitions
Acquisitions
Acquisitions
On March 9, 2016, the Company completed its acquisition of a privately-held mobile editing application company for cash consideration of approximately $45 million. The preliminary purchase price allocation primarily included approximately $7.3 million of identifiable intangible assets and approximately $37.5 million of residual goodwill, based on the best estimates of management. Changes to amounts recorded as assets or liabilities resulting from finalizing the purchase price allocation may result in a corresponding adjustment to goodwill. Goodwill is primarily attributable to expected synergies in the technologies that can be leveraged by the Company in future software offerings. Goodwill is not expected to be deductible for U.S. income tax purposes. The operating results of the acquired company have been included in the Company's consolidated financial statements for the three months ended March 31, 2016 from the date of acquisition.
On April 11, 2016, the Company completed its acquisition of a privately-held mobile editing application company for cash consideration of approximately $59 million. The Company is currently determining the fair value of assets acquired and liabilities assumed necessary to develop the purchase price allocation. The Company expects to provide disclosure of the purchase price allocation in its quarterly report on Form 10-Q for the second quarter of 2016.
The acquired companies are headquartered in Austin, Texas and Paris, France. In addition to the amounts above, aggregate deferred cash and stock compensation of up to approximately $37 million is payable to certain continuing employees subject to specified future employment conditions. This amount is expected to be recognized as compensation expense over the requisite service periods of up to four years from the respective acquisition dates.
Actual and pro forma results of operations for these acquisitions have not been presented because they do not have a material impact to the Company's consolidated results of operations, either individually or in aggregate.
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:
 
 
March 31, 2016
 
December 31, 2015
(in thousands)
 
Level 1
 
Level 2
 
Total
 
Level 1
 
Level 2
 
Total
Cash equivalents (1):
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
 
$
56,821

 
$

 
$
56,821

 
$
51,059

 
$

 
$
51,059

Total cash equivalents
 
$
56,821

 
$

 
$
56,821

 
$
51,059

 
$

 
$
51,059

Marketable securities:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. agency securities
 
$

 
$
14,440

 
$
14,440

 
$

 
$
14,451

 
$
14,451

Commercial paper
 

 
1,200

 
1,200

 

 
2,197

 
2,197

Corporate debt securities
 

 
112,459

 
112,459

 

 
165,825

 
165,825

Municipal securities
 

 
11,852

 
11,852

 

 
11,913

 
11,913

Total marketable securities
 
$

 
$
139,951

 
$
139,951

 
$

 
$
194,386

 
$
194,386

(1) Included in “cash and cash equivalents” in the accompanying condensed consolidated balance sheets as of March 31, 2016 and December 31, 2015. Cash balances were $191.9 million and $228.6 million as of March 31, 2016 and December 31, 2015, respectively.
Cash equivalents and marketable securities are classified as Level 1 or Level 2 because the Company uses quoted market prices or alternative pricing sources and models utilizing market observable inputs to determine their fair value. At March 31, 2016 and December 31, 2015, 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. During the three months ended March 31, 2016, the Company had no transfers of financial assets between levels.
The remaining contractual maturities of available-for-sale marketable securities are as follows:
(in thousands)
 
March 31,
2016
 
December 31,
2015
Less than one year
 
$
83,678

 
$
122,199

Greater than one year but less than two years
 
56,273

 
72,187

Total
 
$
139,951

 
$
194,386


At March 31, 2016, 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 the aggregate.
Consolidated financial statement details
Consolidated financial statement details
Condensed consolidated financial statement details
The following sections and tables provide details of selected balance sheet items.
Inventory
(in thousands)
March 31,
2016
 
December 31,
2015
Components
$
8,319

 
$
9,476

Finished goods
131,417

 
178,756

Total inventory
$
139,736

 
$
188,232


Property and equipment, net
(dollars in thousands)
Useful life
(in years)
 
March 31,
2016
 
December 31,
2015
Leasehold improvements
3–10
 
$
40,860

 
$
40,841

Production, engineering and other equipment
4
 
25,969

 
25,174

Tooling
1–2
 
19,844

 
19,537

Computers and software
2
 
14,931

 
14,581

Furniture and office equipment
3
 
11,444

 
11,389

Construction in progress
 
 
5,368

 
4,632

Tradeshow equipment and other
2-5
 
6,217

 
4,136

Gross property and equipment
 
 
124,633

 
120,290

Less: Accumulated depreciation and amortization
 
 
(56,908
)
 
(50,240)

Property and equipment, net
 
 
$
67,725

 
$
70,050


Depreciation expense was $6.8 million and $5.0 million in the three months ended March 31, 2016 and 2015, respectively.
Intangible assets and goodwill
The following table summarizes the Company's intangible assets:
 
March 31, 2016
(in thousands)
Gross carrying value
 
Accumulated
amortization
 
Net carrying value
Purchased technology and other amortizable assets
$
39,451

 
$
(10,045
)
 
$
29,406

In-process research and development (IPR&D)
7,375

 

 
7,375

Total intangible assets
$
46,826

 
$
(10,045
)
 
$
36,781


 
December 31, 2015
(in thousands)
Gross carrying value
 
Accumulated
amortization
 
Net carrying value
Purchased technology and other amortizable assets
$
32,952

 
$
(8,540
)
 
$
24,412

IPR&D
6,615

 

 
6,615

Total intangible assets
$
39,567

 
$
(8,540
)
 
$
31,027


As of March 31, 2016, technological feasibility has not been established for IPR&D assets; they have no alternative future use and, as such, continue to be accounted for as indefinite-lived intangible assets.
Amortization expense was $1.5 million and $0.3 million in the three months ended March 31, 2016 and 2015, respectively. At March 31, 2016, the estimated amortization expense of existing intangible assets for future periods is as follows:
(in thousands)
 
Total
Year ending December 31,
 
 
2016 (remaining 9 months)
 
$
5,670

2017
 
6,797

2018
 
6,404

2019
 
5,894

2020
 
3,771

Thereafter
 
870

 
 
$
29,406


The carrying amount of goodwill was $94.6 million and $57.1 million as of March 31, 2016 and December 31, 2015, respectively. The increase in the three months ended March 31, 2016 was entirely attributable to the acquisition described in Note 2 above.
Accrued liabilities
(in thousands)
March 31,
2016
 
December 31,
2015
Accrued payables
$
58,937

 
$
64,831

Excess purchase order commitments
27,878

 
38,477

Accrued sales incentive
16,206

 
29,298

Employee related liabilities
15,904

 
26,491

Warranty liability
7,807

 
10,400

Customer deposits
6,456

 
8,877

Income taxes payable
8,711

 
7,536

Other
6,410

 
6,536

Accrued liabilities
$
148,309

 
$
192,446

Financing Arrangements
Financing arrangements
Financing Arrangements
In March 2016, the Company entered into a Credit Agreement (Credit Agreement) with JPMorgan Chase Bank, N.A., as administrative agent, Wells Fargo Bank, National Association, as co-agent, and the lender parties thereto. The Credit Agreement provides for a secured revolving credit facility (Credit Facility) under which the Company may borrow up to an aggregate of $250 million and the Company and lenders may increase the total commitments under the Credit Facility to up to $300 million, subject to certain conditions. The Credit Facility will terminate, and all outstanding borrowings become due and payable, in March 2021.
The amount that may be borrowed under the Credit Facility is based upon a borrowing base formula with respect to the Company’s inventory and accounts receivable balances. Borrowed funds accrue interest, at the Company’s election, based on an annual rate of (a) London Interbank Offered Rate (LIBOR) or (b) the administrative agent’s base rate, plus an applicable margin of between 1.50% and 2.00% for LIBOR rate loans, and between 0.50% and 1.00% for base rate loans, depending on the level of utilization of the Credit Facility. The Company is required to pay a commitment fee on the unused portion of the Credit Facility of 0.25% or 0.375% per annum, based on the level of utilization of the Credit Facility. Amounts owing under the Credit Agreement and related credit documents are guaranteed by the Company and its material subsidiaries. The Company and its U.S., Cayman and Netherlands subsidiaries have also granted security interests in substantially all of their assets to collateralize these obligations.
The Credit Agreement contains customary affirmative covenants, such as financial statement reporting requirements and delivery of borrowing base certificates, as well as customary covenants that limit the ability of the Company and its subsidiaries to, among other things, pay dividends, incur debt, create liens and encumbrances, make investments and redeem or repurchase stock. The Company is required to maintain a minimum fixed charge coverage ratio if and when the unborrowed availability under the Credit Facility is less than the greater of $25.0 million or 10.0% of the borrowing base at such time. The Credit Agreement contains customary events of default, such as the failure to pay obligations when due, initiation of bankruptcy or insolvency proceedings, defaults on certain other indebtedness, change of control or breach of representations and warranties or covenants. Upon an event of default, the lenders may, subject to customary cure rights, require the immediate payment of all amounts outstanding and foreclose on collateral.
No borrowings have been made from the Credit Facility to date. As of March 31, 2016, the Company was in compliance with all financial covenants contained in the Credit Agreement.
Stockholders' equity
Stockholders' equity (deficit) and redeemable convertible preferred stock
Stockholders' equity
Stock repurchase program
On September 30, 2015, the Company's board of directors authorized a program to repurchase up to $300 million of the Company's Class A common stock. The repurchase program, which expires in September 2016, does not obligate the Company to acquire any specific number of shares and may be discontinued or extended at any time by the board of directors. Share repurchases under the program may be made from time-to-time through open market transactions, block trades, privately negotiated transactions or otherwise, including under plans complying with both Rule 10b-18 and Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. At March 31, 2016 and December 31, 2015, the Company has a remaining share repurchase authorization of $264.4 million. The Company currently intends to hold its repurchased shares as treasury stock.
CEO stock contributions
In 2015, the CEO contributed an aggregate 5.2 million 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 were 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 0.5 million shares of Class B common stock from January 2015 through April 2015.  In May 2015, the CEO contributed back to the Company 4.7 million 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 retired during 2015.
Employee benefit plans
Employee benefit plans
Employee benefit plans
Equity incentive plans
The Company has outstanding equity grants from its three stock-based employee compensation plans: the 2014 Equity Incentive Plan (2014 Plan), the 2010 Equity Incentive Plan (2010 Plan) and the 2014 Employee Stock Purchase Plan (ESPP). No new options or awards have been granted under the 2010 Plan since June 2014. Outstanding options and awards under the 2010 plan continue to be subject to the terms and conditions of the 2010 Plan. Options granted under the 2014 Plan generally expire within 10 years from the date of grant and generally vest over four years. RSUs granted under the 2014 Plan generally vest annually over a four year period based upon continued service and are settled at vesting in shares of the Company's Class A common stock. The ESPP allows eligible employees to purchase shares of the Company's Class A common stock through payroll deductions at a price equal to 85% of the lesser of the fair market value of the stock as of the first date or the ending date of each six month offering period. For additional information regarding the Company's equity incentive plans, please refer to the audited financial statements contained in its 2015 Annual Report.
Stock option activity
A summary of the Company’s stock option activity in the three months ended March 31, 2016 and related information is as follows:
 
Options outstanding
(shares in thousands)
Shares
 
Weighted- average
exercise price
 
Weighted-
average
remaining
contractual
term
(in years)
 
Aggregate
intrinsic value
(in thousands)
Outstanding at December 31, 2015:
13,081

 
$
11.82

 
6.70
 
$
108,846

Granted
2,054

 
10.73

 
 
 
 
Exercised
(795
)
 
1.10

 
 
 
 
Forfeited/Cancelled
(440
)
 
20.66

 
 
 
 
Outstanding at March 31, 2016:
13,900

 
$
11.99

 
6.64
 
$
58,742

 
 
 
 
 
 
 
 
Exercisable at March 31, 2016
8,191

 
7.67

 
5.67
 
$
55,808

Vested and expected to vest at March 31, 2016
13,578

 
$
11.86

 
6.60
 
$
58,533


The aggregate intrinsic value of the stock options outstanding as of March 31, 2016 represents the value of the Company's closing stock price on March 31, 2016 in excess of the exercise price multiplied by the number of options outstanding.
Restricted stock units
A summary of the Company’s RSU activity in the three months ended March 31, 2016 is as follows:
(shares in thousands)
Shares
 
Weighted- average grant date fair value
Non-vested shares at December 31, 2015
4,638

 
$
32.15

Granted
4,028

 
11.88

Vested
(386
)
 
21.53

Forfeited
(645
)
 
22.97

Non-vested shares at March 31, 2016
7,635

 
$
22.77


In June 2014, the Company granted an award of 4.5 million RSUs to the Company's CEO (CEO RSUs), which included 1.5 million RSUs that vested immediately upon grant and 3.0 million RSUs that were subject to both a market-based condition and a service condition. The market-based condition was achieved in January 2015. Stock-based compensation expense related to the CEO RSUs was $2.4 million and $15.8 million for the three months ended March 31, 2016 and 2015, respectively.
Employee stock purchase plan
In the three months ended March 31, 2016 and 2015, the Company issued 431,673 and 313,233 shares under the ESPP at weighted average prices of $8.76 and $20.40, respectively. The weighted-average fair value of each right to purchase shares of common stock granted under the ESPP was $3.49 and $16.56 for the three months ended March 31, 2016 and 2015, respectively. At March 31, 2016, there were 5.6 million shares reserved for future issuances under the ESPP.
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. The fair value of RSUs is determined using the Company's stock price on the date of grant. 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 2015 Annual Report.
The following table summarizes stock-based compensation included in the condensed consolidated statements of operations:
 
Three months ended
(in thousands)
March 31,
2016
 
March 31,
2015
Cost of revenue
$
357

 
$
283

Research and development
6,010

 
3,535

Sales and marketing
3,204

 
3,066

General and administrative
6,160

 
19,617

Total stock-based compensation expense, before income taxes
15,731

 
26,501

Total tax benefit recognized
(2,002
)
 
(9,304
)
Total stock-based compensation expense, net of income taxes
$
13,729

 
$
17,197


At March 31, 2016, there was $172.9 million of unearned stock-based compensation related to the stock options, RSUs and ESPP, which is expected to be recognized over a weighted average period of 3.0 years.
Net income per share attributable to common stockholders
Net income per share attributable to common stockholders
Net income (loss) per share
Basic net income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted-average number of common shares outstanding, including all potentially dilutive common shares.
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.
Undistributed earnings are allocated based on the contractual participation rights of Class A and Class B 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 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 per share:
 
Three months ended
(in thousands, except per share data)
March 31,
2016
 
March 31,
2015
 
 
 
 
Numerator:
 
 
 
Net income (loss)
$
(107,459
)
 
$
16,752

 
 
 
 
Denominator:
 
 
 
Weighted-average common shares—basic for Class A and Class B
137,543

 
132,278

Effect of potentially dilutive shares

 
16,295

Weighted-average common shares—diluted for Class A and Class B
137,543

 
148,573

 
 
 
 
Net income (loss) per share:
 
 
 
Basic
$
(0.78
)
 
$
0.13

Diluted
$
(0.78
)
 
$
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
(in thousands)
March 31,
2016
 
March 31,
2015
Stock options, ESPP shares, and RSUs
18,880

 
1,984

Unvested restricted stock awards

 
5

 
18,880

 
1,989

Income taxes
Income taxes
Income taxes
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, a cumulative adjustment is made in that quarter.
 
Three months ended
(dollars in thousands)
March 31,
2016
 
March 31,
2015
Income tax expense (benefit)
$
(14,283
)
 
$
3,272

Effective tax rate
11.7
%
 
16.3
%

The Company recorded an income tax benefit of $14.3 million for the three months ended March 31, 2016 due to a pre-tax net loss, which resulted in an effective tax rate of 11.7%. The Company's lower effective tax rate for 2016 compared to 2015 resulted from incurring a higher proportion of its first quarter 2016 net loss in foreign jurisdictions that provide little or no tax benefit and a tax benefit from restructuring charges in the first quarter of 2016. The Company's provision for income taxes in each period has differed from the tax computed at U.S. federal statutory tax rates due to state taxes, the effect of non-U.S. operations, deductible and non-deductible stock-based compensation expense, and adjustments to unrecognized tax benefits.
The Company is currently under examination by the Internal Revenue Service for the 2012 through 2014 tax years and California Franchise Tax Board for the 2011 and 2012 tax years. At this time, the Company is not able to estimate the potential impact that the examination may have on income tax expense. If the examinations are resolved unfavorably, there is a possibility it may have a material negative impact on the Company's results of operations.
At March 31, 2016 and December 31, 2015, the Company’s gross unrecognized tax benefits was $45.4 million and $36.3 million, respectively. If recognized, $31.1 million of these unrecognized tax benefits (net of federal benefit) at March 31, 2016 would be recorded as a reduction of future income tax provision. 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. The Company recorded no expense in the three months ended March 31, 2016 and 2015 for services rendered. As of March 31, 2016 and December 31, 2015, 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. The Company recorded expense of $0.3 million and $0.1 million in the three months ended March 31, 2016 and 2015, respectively. As of March 31, 2016 and December 31, 2015, the Company had accounts payable associated with this vendor of $0.3 million and $0.1 million, respectively.
In 2013, the Company entered into a three-year agreement, which was amended in August 2015, 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 kart racing facility. As consideration for these naming rights, the Company would pay a total of $0.5 million over the three year period. As of March 31, 2016, the Company has recorded cumulative expense of $0.5 million, and has also provided 100 GoPro cameras at no cost each year.
See Notes 6 and 7 above 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
Facility Leases
The Company leases its facilities under long-term operating leases, which expire at various dates through 2027. As of December 31, 2015, the Company’s total future minimum lease payments under noncancelable operating leases were $152.2 million. The Company has not entered into any new material lease commitments during the three months ended March 31, 2016. Rent expense was $5.4 million and $2.4 million for the three months ended March 31, 2016 and 2015, respectively.
Other Commitments
In the ordinary course of business, the Company also enters into multi-year agreements to purchase sponsorships with event organizers, resorts and athletes as part of its marketing efforts; software licenses related to its financial and IT systems; manufacturing equipment for tooling and molds; and various other contractual commitments. As of December 31, 2015, the Company’s undiscounted future expected obligations under these agreements were $28.8 million. During the three months ended March 31, 2016, the Company entered into new agreements, primarily related to software licenses that resulted in additional total commitments of approximately $5 million over the next several years.
Legal proceedings
From time to time, the Company is involved in legal proceedings in the ordinary course of business, including the litigation matters described in Part II, Item 1 of this quarterly report on Form 10-Q. Due to inherent uncertainties of litigation, the Company cannot accurately predict the ultimate outcome of these matters. The Company is unable at this time to determine whether the outcome of the litigation would 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. It is not possible to determine the maximum potential amount under these indemnification agreements due to the Company’s limited history with indemnification claims and the unique facts and circumstances involved in each particular agreement. As of March 31, 2016, 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
(in thousands)
March 31,
2016
 
March 31,
2015
Beginning balances
$
10,856

 
$
6,405

Charged to cost of revenue
2,670

 
6,044

Settlements of warranty claims
(5,515
)
 
(3,480
)
Ending balances
$
8,011

 
$
8,969


At March 31, 2016, $7.8 million of the warranty liability was recorded as an element of accrued liabilities and $0.2 million was recorded as an element of other long-term liabilities. As of December 31, 2015$10.4 million of the warranty liability was recorded as an element of accrued liabilities and $0.5 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 geographic information
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.
Customers who represented 10% or more of the Company's net accounts receivable balance were as follows:
 
March 31,
2016
 
December 31,
2015
Customer A
36%
 
40%
Customer B
23%
 
*
Customer C
14%
 
*
Customer D
*
 
18%
* Less than 10% of total accounts receivable for the period indicated
The following table summarizes the Company's accounts receivables sold, without recourse, and factoring fees paid:
 
Three months ended
(in thousands)
March 31,
2016
 
March 31,
2015
Accounts receivable sold
$
20,653

 
$
35,299

Factoring fees
142

 
291


Customers with revenue greater than 10% of the Company's total revenue were as follows:
 
Three months ended
 
March 31,
2016
 
March 31,
2015
Customer B
15%
 
12%
Customer A
13%
 
*
* Less than 10% of total revenue for the period indicated
Supplier concentration
The Company relies on third parties for the supply and manufacture of its cameras and accessories, 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 information
Revenue by geographic region, based on ship-to destinations, was as follows:
 
Three months ended
(in thousands)
March 31,
2016
 
March 31,
2015
Americas
$
85,305

 
$
180,093

Europe, Middle East and Africa (EMEA)
60,278

 
139,079

Asia and Pacific area countries (APAC)
37,953

 
43,937

 
$
183,536

 
$
363,109


Revenue in the United States, which is included in the Americas geographic region, was $73.6 million and $155.3 million for the three months ended March 31, 2016 and 2015, respectively. 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 March 31, 2016 and December 31, 2015, long-lived assets, which represent gross property and equipment, located outside the United States, primarily in China, were $51.0 million and $47.6 million, respectively.
Restructuring
Restructuring charges
Restructuring charges
On January 12, 2016, the Company adopted a restructuring plan that provided for a reduction in the Company’s global workforce of approximately 7%. The Company incurred aggregate restructuring expenses of approximately $6.5 million in the first quarter of 2016, which primarily included cash-based severance costs. As of March 31, 2016, the restructuring plan was substantially completed and the remaining accrued liability was not material.
Subsequent Events
Subsequent events
Subsequent events
On April 11, 2016, the Company completed its acquisition of a mobile editing application company for aggregate cash consideration of approximately $59 million, as well as certain deferred cash and stock compensation subject to specified future employment conditions. See Note 2 above for additional information.
Basis of presentation (Policies)
Basis of presentation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The Company's fiscal year ends on December 31, and its fiscal quarters end on March 31, June 30, and September 30. The condensed consolidated financial statements reflect all adjustments (which are normal and recurring in nature) that management believes are necessary for the fair presentation of its financial statements, 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, 2015 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 on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K (Annual Report) for the year ended December 31, 2015. There have been no significant changes in the Company’s accounting policies from those disclosed in its Annual Report.
Principles of consolidation. These condensed consolidated financial statements include all the accounts of the Company and its wholly-owned subsidiaries. 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. Significant estimates and assumptions made by management include those related to: revenue recognition (including sales returns, web-based sale deliveries at period-end, implied post contract support and marketing allowances), stock-based compensation, inventory valuation, product warranty liabilities, the valuation and useful lives of long-lived assets (property and equipment, goodwill and intangibles) 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 approximated net income. Therefore, the condensed consolidated statements of comprehensive income have been omitted
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.
Recent accounting pronouncements
Standard
 
Description
 
Date of adoption
 
Effect on the financial statements or other significant matters
Standards that are not yet adopted
 
 
 
 
Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606)
 
This standard 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. In August 2015, the FASB deferred the effective date by one year while providing the option to adopt the standard on the original effective date of January 1, 2017. In March 2016, the FASB issued additional guidance regarding principal versus agent considerations in the accounting of revenue. The standard may be adopted either retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption.
 
January 1, 2018
 
The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements and related disclosures.
ASU No. 2016-02, Leases (Topic 842)
 
This standard requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. Lessees would recognize a right-to-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The new standard should be applied on a modified retrospective basis.
 
January 1, 2019
 
The Company is beginning to evaluate the impact that the adoption of this standard will have on its consolidated financial statements.
ASU No. 2016-09, Stock Compensation (Topic 718)
 
This standard requires income tax effects of awards to be recognized in the income statement when the awards vest or are settled, allowing an employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, and to make a policy election to account for forfeitures as they occur. Early adoption is permitted for an entity in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period.
 
January 1, 2017
 
The Company is beginning to evaluate the impact that the adoption of this standard will have on its consolidated financial statements.
Standards that were adopted
 
 
 
 
ASU No. 2015-03 and ASU 2015-15, Interest - Imputation of Interest (Subtopic 835-30)

 
ASU 2015-03 requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, consistent with debt discounts.
ASU 2015-15 was issued to provide clarification to ASU 2015-03 in that fees related to line-of-credit arrangements should continue to be presented as an asset and subsequently amortized ratably over the term of the line-of-credit arrangement.
 
January 1, 2016
 
The adoption of this standard did not have a material impact on the consolidated financial statements. At March 31, 2016, the Company presented debt issuance costs of $3.3 million related to its secured revolving credit facility as an asset on its consolidated balance sheet.
Fair value measurements (Tables)
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:
 
 
March 31, 2016
 
December 31, 2015
(in thousands)
 
Level 1
 
Level 2
 
Total
 
Level 1
 
Level 2
 
Total
Cash equivalents (1):
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
 
$
56,821

 
$

 
$
56,821

 
$
51,059

 
$

 
$
51,059

Total cash equivalents
 
$
56,821

 
$

 
$
56,821

 
$
51,059

 
$

 
$
51,059

Marketable securities:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. agency securities
 
$

 
$
14,440

 
$
14,440

 
$

 
$
14,451

 
$
14,451

Commercial paper
 

 
1,200

 
1,200

 

 
2,197

 
2,197

Corporate debt securities
 

 
112,459

 
112,459

 

 
165,825

 
165,825

Municipal securities
 

 
11,852

 
11,852

 

 
11,913

 
11,913

Total marketable securities
 
$

 
$
139,951

 
$
139,951

 
$

 
$
194,386

 
$
194,386

(1) Included in “cash and cash equivalents” in the accompanying condensed consolidated balance sheets as of March 31, 2016 and December 31, 2015. Cash balances were $191.9 million and $228.6 million as of March 31, 2016 and December 31, 2015, respectively.
The remaining contractual maturities of available-for-sale marketable securities are as follows:
(in thousands)
 
March 31,
2016
 
December 31,
2015
Less than one year
 
$
83,678

 
$
122,199

Greater than one year but less than two years
 
56,273

 
72,187

Total
 
$
139,951

 
$
194,386

Consolidated financial statement details (Tables)
Inventory
(in thousands)
March 31,
2016
 
December 31,
2015
Components
$
8,319

 
$
9,476

Finished goods
131,417

 
178,756

Total inventory
$
139,736

 
$
188,232

Property and equipment, net
(dollars in thousands)
Useful life
(in years)
 
March 31,
2016
 
December 31,
2015
Leasehold improvements
3–10
 
$
40,860

 
$
40,841

Production, engineering and other equipment
4
 
25,969

 
25,174

Tooling
1–2
 
19,844

 
19,537

Computers and software
2
 
14,931

 
14,581

Furniture and office equipment
3
 
11,444

 
11,389

Construction in progress
 
 
5,368

 
4,632

Tradeshow equipment and other
2-5
 
6,217

 
4,136

Gross property and equipment
 
 
124,633

 
120,290

Less: Accumulated depreciation and amortization
 
 
(56,908
)
 
(50,240)

Property and equipment, net
 
 
$
67,725

 
$
70,050

The following table summarizes the Company's intangible assets:
 
March 31, 2016
(in thousands)
Gross carrying value
 
Accumulated
amortization
 
Net carrying value
Purchased technology and other amortizable assets
$
39,451

 
$
(10,045
)
 
$
29,406

In-process research and development (IPR&D)
7,375

 

 
7,375

Total intangible assets
$
46,826

 
$
(10,045
)
 
$
36,781


 
December 31, 2015
(in thousands)
Gross carrying value
 
Accumulated
amortization
 
Net carrying value
Purchased technology and other amortizable assets
$
32,952

 
$
(8,540
)
 
$
24,412

IPR&D
6,615

 

 
6,615

Total intangible assets
$
39,567

 
$
(8,540
)
 
$
31,027

At March 31, 2016, the estimated amortization expense of existing intangible assets for future periods is as follows:
(in thousands)
 
Total
Year ending December 31,
 
 
2016 (remaining 9 months)
 
$
5,670

2017
 
6,797

2018
 
6,404

2019
 
5,894

2020
 
3,771

Thereafter
 
870

 
 
$
29,406

Accrued liabilities
(in thousands)
March 31,
2016
 
December 31,
2015
Accrued payables
$
58,937

 
$
64,831

Excess purchase order commitments
27,878

 
38,477

Accrued sales incentive
16,206

 
29,298

Employee related liabilities
15,904

 
26,491

Warranty liability
7,807

 
10,400

Customer deposits
6,456

 
8,877

Income taxes payable
8,711

 
7,536

Other
6,410

 
6,536

Accrued liabilities
$
148,309

 
$
192,446

Employee benefit plans (Tables)
A summary of the Company’s stock option activity in the three months ended March 31, 2016 and related information is as follows:
 
Options outstanding
(shares in thousands)
Shares
 
Weighted- average
exercise price
 
Weighted-
average
remaining
contractual
term
(in years)
 
Aggregate
intrinsic value
(in thousands)
Outstanding at December 31, 2015:
13,081

 
$
11.82

 
6.70
 
$
108,846

Granted
2,054

 
10.73

 
 
 
 
Exercised
(795
)
 
1.10

 
 
 
 
Forfeited/Cancelled
(440
)
 
20.66

 
 
 
 
Outstanding at March 31, 2016:
13,900

 
$
11.99

 
6.64
 
$
58,742

 
 
 
 
 
 
 
 
Exercisable at March 31, 2016
8,191

 
7.67

 
5.67
 
$
55,808

Vested and expected to vest at March 31, 2016
13,578

 
$
11.86

 
6.60
 
$
58,533

A summary of the Company’s RSU activity in the three months ended March 31, 2016 is as follows:
(shares in thousands)
Shares
 
Weighted- average grant date fair value
Non-vested shares at December 31, 2015
4,638

 
$
32.15

Granted
4,028

 
11.88

Vested
(386
)
 
21.53

Forfeited
(645
)
 
22.97

Non-vested shares at March 31, 2016
7,635

 
$
22.77

The following table summarizes stock-based compensation included in the condensed consolidated statements of operations:
 
Three months ended
(in thousands)
March 31,
2016
 
March 31,
2015
Cost of revenue
$
357

 
$
283

Research and development
6,010

 
3,535

Sales and marketing
3,204

 
3,066

General and administrative
6,160

 
19,617

Total stock-based compensation expense, before income taxes
15,731

 
26,501

Total tax benefit recognized
(2,002
)
 
(9,304
)
Total stock-based compensation expense, net of income taxes
$
13,729

 
$
17,197


Net income per share attributable to common stockholders (Tables)
The following table presents the calculations of basic and diluted net income per share:
 
Three months ended
(in thousands, except per share data)
March 31,
2016
 
March 31,
2015
 
 
 
 
Numerator:
 
 
 
Net income (loss)
$
(107,459
)
 
$
16,752

 
 
 
 
Denominator:
 
 
 
Weighted-average common shares—basic for Class A and Class B
137,543

 
132,278

Effect of potentially dilutive shares

 
16,295

Weighted-average common shares—diluted for Class A and Class B
137,543

 
148,573

 
 
 
 
Net income (loss) per share:
 
 
 
Basic
$
(0.78
)
 
$
0.13

Diluted
$
(0.78
)
 
$
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
(in thousands)
March 31,
2016
 
March 31,
2015
Stock options, ESPP shares, and RSUs
18,880

 
1,984

Unvested restricted stock awards

 
5

 
18,880

 
1,989

Income taxes (Tables)
Schedule of Income before Income Tax, Domestic and Foreign
 
Three months ended
(dollars in thousands)
March 31,
2016
 
March 31,
2015
Income tax expense (benefit)
$
(14,283
)
 
$
3,272

Effective tax rate
11.7
%
 
16.3
%
Commitments, contingencies and guarantees (Tables)
Schedule of Product Warranty Liability Activity
The following table summarizes the warranty liability activity:
 
Three months ended
(in thousands)
March 31,
2016
 
March 31,
2015
Beginning balances
$
10,856

 
$
6,405

Charged to cost of revenue
2,670

 
6,044

Settlements of warranty claims
(5,515
)
 
(3,480
)
Ending balances
$
8,011

 
$
8,969

Concentrations of risk and segment information (Tables)
The following table summarizes the Company's accounts receivables sold, without recourse, and factoring fees paid:
 
Three months ended
(in thousands)
March 31,
2016
 
March 31,
2015
Accounts receivable sold
$
20,653

 
$
35,299

Factoring fees
142

 
291

Revenue by geographic region, based on ship-to destinations, was as follows:
 
Three months ended
(in thousands)
March 31,
2016
 
March 31,
2015
Americas
$
85,305

 
$
180,093

Europe, Middle East and Africa (EMEA)
60,278

 
139,079

Asia and Pacific area countries (APAC)
37,953

 
43,937

 
$
183,536

 
$
363,109

Customers who represented 10% or more of the Company's net accounts receivable balance were as follows:
 
March 31,
2016
 
December 31,
2015
Customer A
36%
 
40%
Customer B
23%
 
*
Customer C
14%
 
*
Customer D
*
 
18%
* Less than 10% of total accounts receivable for the period indicated
Customers with revenue greater than 10% of the Company's total revenue were as follows:
 
Three months ended
 
March 31,
2016
 
March 31,
2015
Customer B
15%
 
12%
Customer A
13%
 
*
* Less than 10% of total revenue for the period indicated
Acquisitions Acquisitions (Details) (USD $)
3 Months Ended 0 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Mar. 31, 2016
Vemory, Inc. [Member]
Mar. 31, 2016
Series of Individually Immaterial Business Acquisitions [Member]
Apr. 11, 2016
Subsequent Event [Member]
Stupeflix [Member]
Business Acquisition [Line Items]
 
 
 
 
 
Payments to Acquire Businesses, Gross
$ 45,040,000 
$ 5,100,000 
$ 45,000,000 
 
$ 59,000,000 
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill
7,300,000 
 
 
 
 
Goodwill, Acquired During Period
37,500,000 
 
 
 
 
Business Combination, Separately Recognized Transactions, Expenses and Losses Recognized
 
 
 
$ 37,000,000 
 
Fair value measurements (Details) (USD $)
Mar. 31, 2016
Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Marketable securities with contractual maturity of one year or less
$ 83,678,000 
$ 122,199,000 
Marketable securities with contractual maturity of one to two years
56,273,000 
72,187,000 
Marketable securities
139,951,000 
194,386,000 
Cash and cash equivalents
191,900,000 
228,600,000 
Fair Value, Measurements, Recurring [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Cash equivalents
56,821,000 
51,059,000 
Marketable securities
139,951,000 
194,386,000 
Fair Value, Measurements, Recurring [Member] |
US Agency Securities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Marketable securities
14,440,000 
14,451,000 
Fair Value, Measurements, Recurring [Member] |
Commercial Paper [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Marketable securities
1,200,000 
2,197,000 
Fair Value, Measurements, Recurring [Member] |
Corporate Debt Securities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Marketable securities
112,459,000 
165,825,000 
Fair Value, Measurements, Recurring [Member] |
Municipal Notes [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Marketable securities
11,852,000 
11,913,000 
Fair Value, Measurements, Recurring [Member] |
Money Market Funds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Cash equivalents
56,821,000 
51,059,000 
Fair Value, Measurements, Recurring [Member] |
Level 1 [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Cash equivalents
56,821,000 
51,059,000 
Marketable securities
Fair Value, Measurements, Recurring [Member] |
Level 1 [Member] |
US Agency Securities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Marketable securities
Fair Value, Measurements, Recurring [Member] |
Level 1 [Member] |
Commercial Paper [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Marketable securities
Fair Value, Measurements, Recurring [Member] |
Level 1 [Member] |
Corporate Debt Securities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Marketable securities
Fair Value, Measurements, Recurring [Member] |
Level 1 [Member] |
Municipal Notes [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Marketable securities
Fair Value, Measurements, Recurring [Member] |
Level 1 [Member] |
Money Market Funds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Cash equivalents
56,821,000 
51,059,000 
Fair Value, Measurements, Recurring [Member] |
Level 2 [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Cash equivalents
Marketable securities
139,951,000 
194,386,000 
Fair Value, Measurements, Recurring [Member] |
Level 2 [Member] |
US Agency Securities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Marketable securities
14,440,000 
14,451,000 
Fair Value, Measurements, Recurring [Member] |
Level 2 [Member] |
Commercial Paper [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Marketable securities
1,200,000 
2,197,000 
Fair Value, Measurements, Recurring [Member] |
Level 2 [Member] |
Corporate Debt Securities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Marketable securities
112,459,000 
165,825,000 
Fair Value, Measurements, Recurring [Member] |
Level 2 [Member] |
Municipal Notes [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Marketable securities
11,852,000 
11,913,000 
Fair Value, Measurements, Recurring [Member] |
Level 2 [Member] |
Money Market Funds [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
Cash equivalents
$ 0 
$ 0 
Consolidated financial statement details - Inventory (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2016
Dec. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
 
Components
$ 8,319 
$ 9,476 
Finished goods
131,417 
178,756 
Total inventory
$ 139,736 
$ 188,232 
Consolidated financial statement details - Property and Equipment, Net (Details) (USD $)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2015
Property, Plant and Equipment [Line Items]
 
 
 
Depreciation
$ 6,800,000 
$ 5,000,000 
 
Gross property and equipment
124,633,000 
 
120,290,000 
Less: Accumulated depreciation and amortization
(56,908,000)
 
(50,240,000)
Property and equipment, net
67,725,000 
 
70,050,000 
Leasehold Improvements [Member]
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Gross property and equipment
40,860,000 
 
40,841,000 
Equipment [Member]
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Useful life (in years)
4 years 
 
 
Gross property and equipment
25,969,000 
 
25,174,000 
Tooling [Member]
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Gross property and equipment
19,844,000 
 
19,537,000 
Computer Equipment [Member]
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Useful life (in years)
2 years 
 
 
Gross property and equipment
14,931,000 
 
14,581,000 
Furniture and Fixtures [Member]
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Useful life (in years)
3 years 
 
 
Gross property and equipment
11,444,000 
 
11,389,000 
Construction in Progress [Member]
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Gross property and equipment
5,368,000 
 
4,632,000 
Tradeshow Equipment [Member]
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Gross property and equipment
$ 6,217,000 
 
$ 4,136,000 
Minimum [Member] |
Leasehold Improvements [Member]
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Useful life (in years)
3 years 
 
 
Minimum [Member] |
Tooling [Member]
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Useful life (in years)
1 year 
 
 
Minimum [Member] |
Tradeshow Equipment [Member]
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Useful life (in years)
2 years 
 
 
Maximum [Member] |
Leasehold Improvements [Member]
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Useful life (in years)
10 years 
 
 
Maximum [Member] |
Tooling [Member]
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Useful life (in years)
2 years 
 
 
Maximum [Member] |
Tradeshow Equipment [Member]
 
 
 
Property, Plant and Equipment [Line Items]
 
 
 
Useful life (in years)
5 years 
 
 
Consolidated financial statement details - Acquired Intangible Assets (Details) (USD $)
3 Months Ended
Mar. 31, 2016
Mar. 31, 2015
Dec. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
 
 
Goodwill
$ 94,583,000 
 
$ 57,095,000 
Finite-Lived Intangible Assets, Net [Abstract]
 
 
 
Net carrying value
29,406,000 
 
 
Intangible assets, net
36,781,000 
 
31,027,000 
Amortization of intangible assets
1,500,000 
300,000 
 
Series of Individually Immaterial Business Acquisitions [Member]
 
 
 
Finite-Lived Intangible Assets, Net [Abstract]
 
 
 
Gross carrying value
39,451,000 
 
32,952,000 
Accumulated amortization
(10,045,000)
 
(8,540,000)
Net carrying value
29,406,000 
 
24,412,000 
Indefinite lived intangible assets
7,375,000 
 
6,615,000 
Intangible Assets, Gross (Excluding Goodwill)
46,826,000 
 
39,567,000 
Intangible assets, net
$ 36,781,000 
 
$ 31,027,000 
Consolidated financial statement details - Future Amortization (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
2016 (remaining 9 months)
$ 5,670 
2017
6,797 
2018
6,404 
2019
5,894 
2020
3,771 
Thereafter
870 
Net carrying value
$ 29,406 
Consolidated financial statement details - Accrued Liabilities (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2016
Dec. 31, 2015
Supply Commitment [Line Items]
 
 
Accrued Payables
$ 58,937 
$ 64,831 
Accrued Marketing Costs, Current
16,206 
29,298 
Employee-related Liabilities, Current
15,904 
26,491 
Customer Deposits, Current
6,456 
8,877 
Warranty liability
7,807 
10,400 
Accrued Income Taxes, Current
8,711 
7,536 
Other Liabilities, Current
6,410 
6,536 
Total accrued liabilities
148,309 
192,446 
Inventory Valuation and Obsolescence [Member]
 
 
Supply Commitment [Line Items]
 
 
Loss Contingency, Accrual, Current
$ 27,878 
$ 38,477 
Consolidated financial statement details - Goodwill (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2016
Dec. 31, 2015
Business Combination, Goodwill [Abstract]
 
 
Goodwill
$ 94,583 
$ 57,095 
Financing Arrangements (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2016
Line of Credit Facility [Line Items]
 
Line of Credit Facility, Current Borrowing Capacity
$ 250 
Line of Credit Facility, Maximum Borrowing Capacity
300 
Line of Credit Facility, Fair Value of Amount Outstanding
$ 0 
Revolving Credit Facility [Member]
 
Line of Credit Facility [Line Items]
 
Debt Instrument, Covenant Description
.10 
Unused lines of Credit [Member]
 
Line of Credit Facility [Line Items]
 
Debt Instrument, Covenant Description
25.0 
Minimum [Member]
 
Line of Credit Facility [Line Items]
 
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage
0.25% 
Minimum [Member] |
London Interbank Offered Rate (LIBOR) [Member]
 
Line of Credit Facility [Line Items]
 
Debt Instrument, Interest Rate, Increase (Decrease)
1.50% 
Minimum [Member] |
Base Rate [Member]
 
Line of Credit Facility [Line Items]
 
Debt Instrument, Interest Rate, Increase (Decrease)
0.50% 
Maximum [Member]
 
Line of Credit Facility [Line Items]
 
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage
0.375% 
Maximum [Member] |
London Interbank Offered Rate (LIBOR) [Member]
 
Line of Credit Facility [Line Items]
 
Debt Instrument, Interest Rate, Increase (Decrease)
2.00% 
Maximum [Member] |
Base Rate [Member]
 
Line of Credit Facility [Line Items]
 
Debt Instrument, Interest Rate, Increase (Decrease)
1.00% 
Stockholders' equity - Stock Repurchase Program (Details) (USD $)
Mar. 31, 2016
Class of Stock Disclosures [Abstract]
 
Stock Repurchase Program, Authorized Amount
$ 300,000,000 
Stock Repurchase Program, Remaining Authorized Repurchase Amount
$ 264,400,000 
Stockholders' equity - CEO Stock Contributions (Details) (Chief Executive Officer (CEO) [Member], Common Class B [Member])
1 Months Ended 3 Months Ended
May 31, 2015
Apr. 30, 2015
Jun. 30, 2015
Chief Executive Officer (CEO) [Member] |
Common Class B [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Shares Contributed to Company Without Consideration
4,678,180 
540,000 
5,218,180 
Employee benefit plans - Narrative (Details) (USD $)
In Millions, except Share data, unless otherwise specified
1 Months Ended 3 Months Ended
Jun. 30, 2014
Mar. 31, 2016
Mar. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Number of stock-based employee compensation plans
 
 
Unearned stock-based compensation, expected recognition period
 
2 years 11 months 23 days 
 
Employee Stock Ownership Plan (ESOP), Plan Description
 
P6M 
 
Stock Issued During Period, Shares, Employee Stock Ownership Plan
 
431,673 
313,233 
Employee Stock Ownership Plan (ESOP), Weighted Average Purchase Price of Shares Purchased
 
$ 8.76 
$ 20.40 
Stock Options [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Unearned stock-based compensation, expected recognition period
 
10 years 
 
Award vesting period
 
4 years 
 
RSUs [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Award vesting period
 
4 years 
 
Shares granted
 
4,028,000 
 
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeitures, Weighted Average Grant Date Fair Value
 
$ 22.97 
 
RSUs [Member] |
Chief Executive Officer (CEO) [Member]
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Shares granted
4,500,000 
 
 
RSUs [Member] |
Vested Imme