On Wednesday evening, Fitbit (FIT) reported a quarter that pleased the bulls. Revenues of $299 million, down a painful -41% YOY, beat expectations by a wide margin of $18 million - even as devices sold plunged at a much faster rate of 38% than it had last quarter. Net loss per share of -$0.15 exceeded expectations by 3 pennies.
Source: Fitbit website
This was the company's first beat since the June 2016 quarter, which provided relief to a stock that has been down about -52% over the past 52 weeks. Shares are off to the races now, after gaining +12% as the Thursday session came to an end.
Non-GAAP margin of 40% was down slightly YOY but was also much better than last quarter's dismal 22%. This was one of the positive highlights of the company's financial performance in the quarter, in my view. GAAP operating expenses, however, were down only 2% YOY and now represent a very sizable 70% of revenues vs. last year's 43%.
Also very important was management's decision to keep 2017 guidance intact. It is worth noting that, using the midpoint of the 2Q17 guidance released last night as a base, all of the EPS and over half of the revenue upside to consensus observed in 1Q17 are expected to be offset by weaker performance next quarter. This can only mean one of two things: that (1) strength in 1Q17 might have been largely driven by timing, or that (2) the management team took advantage of the outperformance this time to set expectations lower for the balance of 2017.
My best answer to this question is "a little of both". Alta HR, Fitbit's new product that was introduced earlier than previously expected, could in fact have helped to pull some of the launch upside from 2Q17 into
