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Press Release: GoPro Announces Fourth Quarter and -3-

· 02/04/2021 16:05
-- adjusted EBITDA does not reflect tax payments that reduce cash available to us; -- adjusted EBITDA excludes depreciation and amortization and, although these are non-cash charges, the property and equipment being depreciated and amortized often will have to be replaced in the future, and adjusted EBITDA does not reflect any cash capital expenditure requirements for such replacements; -- adjusted EBITDA excludes the amortization of point of purchase (POP) display assets because it is a non-cash charge, and is treated similarly to depreciation of property and equipment and amortization of acquired intangible assets; -- adjusted EBITDA and non-GAAP net income (loss) exclude the impairment of intangible assets because it is a non-cash charge that is inconsistent in amount and frequency; -- adjusted EBITDA and non-GAAP net income (loss) exclude restructuring and other related costs which primarily include severance-related costs, stock-based compensation expenses, facilities consolidation charges recorded in connection with restructuring actions announced in the fourth quarter of 2016, first quarter of 2017, first quarter of 2018 and second quarter of 2020, and the related ongoing operating lease cost of those facilities recorded under Accounting Standards Codification 842, Leases. These expenses do not reflect expected future operating expenses and do not contribute to a meaningful evaluation of current operating performance or comparisons to the operating performance in other periods; -- adjusted EBITDA and non-GAAP net income (loss) exclude stock-based compensation expense related to equity awards granted primarily to our workforce. We exclude stock-based compensation expense because we believe that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In particular, we note that companies calculate stock-based compensation expense for the variety of award types that they employ using different valuation methodologies and subjective assumptions. These non-cash charges are not factored into our internal evaluation of net income (loss) as we believe their inclusion would hinder our ability to assess core operational performance; -- adjusted EBITDA and non-GAAP net income (loss) exclude the loss on extinguishment of debt because it is not related to our core operating performance or reflective of ongoing operating results in the period, and the frequency and amount of such losses are inconsistent; -- non-GAAP net income (loss) excludes acquisition-related costs including the amortization of acquired intangible assets (primarily consisting of acquired technology), the impairment of acquired intangible assets (if applicable), as well as third-party transaction costs incurred for legal and other professional services. These costs are not factored into our evaluation of potential acquisitions, or of our performance after completion of the acquisitions, because these costs are not related to our core operating performance or reflective of ongoing operating results in the period, and the frequency and amount of such costs are inconsistent and vary significantly based on the timing and magnitude of our acquisition transactions and the maturities of the businesses being acquired. Although we exclude the amortization of acquired intangible assets from our non-GAAP net income (loss), management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation; -- non-GAAP net income (loss) excludes non-cash interest expense. In connection with the issuance of the Convertible Senior Notes in April 2017, we are required to recognize non-cash interest expense in accordance with the authoritative accounting guidance for convertible debt that may be settled in cash; -- non-GAAP net income (loss) excludes a gain on the sale and license of intellectual property. This gain is not related to our core operating performance or reflective of ongoing operating results in the period, and the frequency and amount of such gains are inconsistent; -- non-GAAP net income (loss) includes income tax adjustments. We utilize a cash-based non-GAAP tax expense approach (based upon expected annual cash payments for income taxes) for evaluating operating performance as well as for planning and forecasting purposes. This non-GAAP tax approach eliminates the effects of period specific items, which can vary in size and frequency and does not necessarily reflect our long-term operations. Historically, we computed a non-GAAP tax rate based on non-GAAP pre-tax income on a quarterly basis, which considered the income tax effects of the adjustments above; and -- other companies may calculate these non-GAAP financial measures differently than we do, limiting their usefulness as comparative measures. GoPro, Inc. Reconciliation of Preliminary GAAP to Non-GAAP Financial Measures (unaudited) Reconciliations of non-GAAP financial measures are set forth below: Three months ended December 31, Year ended December 31, (in thousands, except per share data) 2020 2019 2020 2019 GAAP net income (loss) $44,413 $95,820 $(66,783) $(14,642) Stock-based compensation: Cost of revenue 373 419 1,548 1,902 Research and development 3,733 3,099 13,415 17,167 Sales and marketing 1,672 1,525 5,779 8,043 General and administrative 2,259 1,985 9,221 10,076 Total stock-based compensation 8,037 7,028 29,963 37,188 Acquisition-related costs: Cost of revenue 723 1,864 4,598 7,818 Total acquisition-related costs 723 1,864 4,598 7,818 Restructuring and other costs: Cost of revenue 11 -- 1,281 87 Research and development 159 29 8,542 910 Sales and marketing (264) -- 10,925 498 General and administrative 163 -- 5,823 701 Total restructuring and other costs 69 29 26,571 2,196 Non-cash interest expense 3,018 2,354 10,366 8,987 Loss on extinguishment of debt 5,389 -- 5,389 -- Income tax adjustments (585) (4,597) 2,675 (6,292) Non-GAAP net income $61,064 $102,498 $12,779 $35,255 GAAP shares for diluted net income (loss) per share 156,464 147,052 149,037 144,891 Add: dilutive shares -- -- 3,096 1,580 Non-GAAP shares for diluted net income per share 156,464 147,052 152,133 146,471 GAAP diluted net income (loss) per share $0.28 $0.65 $(0.45) $(0.10) Non-GAAP diluted net income per share $0.39 $0.70 $0.08 $0.24 Three months ended December 31, Year ended December 31, (dollars in thousands) 2020 2019 2020 2019 GAAP gross profit as a % of revenue 38.0 % 38.2 % 35.3 % 34.6 % Stock-based-- the comparability of our on-going operating results over the periods presented; -- the ability to identify trends in our underlying business; and -- the comparison of our operating results against analyst financial models and operating results of other public companies that supplement their GAAP results with non-GAAP financial measures.

To supplement our unaudited selected financial data presented on a basis consistent with GAAP, we disclose certain non-GAAP financial measures, including non-GAAP gross profit, gross margin, operating expenses, operating income (loss), other income (expense), tax expense, net income (loss), diluted net income (loss) per share and adjusted EBITDA. We also provide forecasts of non-GAAP gross margin, non-GAAP operating expenses, non-GAAP other income (expense), non-GAAP tax expense, non-GAAP net income (loss) and non-GAAP diluted net income (loss) per share. We use these non-GAAP financial measures to help us understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short-term and long-term operational plans. Our management uses, and believes that investors benefit from referring to these non-GAAP financial measures in assessing our operating results. These non-GAAP financial measures should not be considered in isolation from, or as an alternative to, the measures prepared in accordance with GAAP, and are not based on any comprehensive set of accounting rules or principles. We believe that these non-GAAP measures, when read in conjunction with our GAAP financials, provide useful information to investors by facilitating:

These non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP. Some of these limitations are:

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February 04, 2021 16:05 ET (21:05 GMT)