GoPro Inc (GPRO) 2015 Q2 法說會逐字稿

Good day and welcome to the GoPro second-quarter 2015 financial results conference call. Today's conference is being recorded. At this time I'd like to turn the conference over to Mr. Jeff Brown, Vice President of Communications. Please go ahead.

Thank you. Good afternoon, and welcome to GoPro's second-quarter 2015 earnings conference call. With me today are GoPro CEO, Nicholas Woodman; our President, Tony Bates; and our Chief Financial Officer, Jack Lazar.

Before we begin, I would like remind you that statements on this call including, but not limited to, those about our projected future and financial results including revenue and expenses, economic and marketing trends, our future plans, prospects, and growth opportunities, the continued adoption of our products, the anticipated benefits of our long-term strategy, our customers' competitive position, market share and leadership position in various markets constitute forward-looking statements. These forward-looking statements and all other statements that may be made on this call are not historical facts, are subject to a number of risks and uncertainties that may cause actual results to differ materially. These forward-looking statements speak only to today's call, and we do not undertake any obligation to undertake these forward-looking statements. We refer you to our annual report form 10-K for the year ended December 31, 2014, which is on file with the Securities and Exchange Commission. In particular to the section entitled risk factors, and to other reports that we may file from time to time with the SEC for additional information on factors that can cause actual results to differ materially from our current expectations.

We report net income and basic diluted net income per share in accordance with GAAP, and additionally on a non-GAAP basis. We believe that non-GAAP information is useful because it can enhance the understanding of our ongoing economic performance. We use non-GAAP reporting internally to evaluate and manage our operations. We have chosen to provide this information to enable investors to perform comparisons of operating results in a manner similar to how we analyze our own operating results. A reconciliation of GAAP to non-GAAP financial data can be found in the earnings press release we issued today. We ask that you review this information in conjunction with this call. All numbers that are disclosed in today's conference call, other than revenue, are non-GAAP unless otherwise noted.

In addition to the earnings press release, we have posted slides containing detailed financial data and metrics for the second quarter of 2015. Both of those documents and a link to the webcast for today's earnings conference call are posted on the events and presentations page of the GoPro Investor Relations website for your reference.

(Caller Instructions)

Now I'll turn the call over to GoPro CEO, Nicholas Woodman. Nick?

Good afternoon, and thanks for joining us on a call that marks our one-year anniversary as a publicly traded company. In June of 2014 we took GoPro public, and investors joined us for a year of exciting growth. And thanks to the breadth of our vision and the execution of our team, that growth continues.

Today I will review highlights from our second quarter, as well as some of our recently announced projects. Tony will update you on our international progress, software and services, and GoPro Entertainment. Jack will then cover our second quarter financials and provide guidance for the third quarter. We will then take your questions.

We're excited to report another quarter of great execution and terrific results. Year over year, second quarter revenue grew 72% to $420 million and resulted in an EPS of $0.35. Our performance was driven by the growing strength of our global brand, new products, and the continued success of our Hero4 line of cameras and accessories.

According to NPD, in the United States combined camera/camcorder market for the second quarter, GoPro accounted for three of the top five products on a dollar basis and four of the top five on a unit basis. Recently we launched two exciting new products that focus on improving ease of use and broadening our appeal to consumers.

On June 1 we debuted Hero+ LCD, which delivers the quality and accessibility of our entry level Hero with the convenience of touch display. This new device also adds Wi-Fi and bluetooth, and is our first product to enable short-form editing on-camera with its trim-and-save feature.

And earlier this month we unveiled Hero4 Session, the lightest, smallest and most convenient GoPro yet. Session's breakthrough design packs GoPro's Emmy award-winning image quality and our renowned durability into an all-new form factor that is 50% smaller and 40% lighter than other Hero4 cameras. We are excited to welcome Session to our family of premium GoPro products which has expanded from just one device a year ago to three devices today.

Hero4 Session stands out because of its simplicity. One button control makes it faster and easier than ever to get the shot, and battery life is dramatically enhanced because when Session isn't recording, it powers itself off. Its innovative waterproof design eliminates the need for second housing, reducing complexity and vastly improving audio performance. All of this results in a stunning new capture solution that we believe appeals to both new and existing customers. In the words of the Wall Street Journal, Session is the best camera on the market for documenting the rough and tumble of family life. I can personally attest to that. Session is now my favorite GoPro for chasing my family around.

In the past year, GoPro has made enormous progress in expanding our business, our reach and our value proposition to consumers. While we have a clear vision for our business and benefit from great execution, we are also enjoying strong tailwinds from adjacent industries and consumer mega trends. Today, GoPro is both an enabler and a beneficiary of four of the biggest trends in technology and entertainment. The first trend is user-generated content. As consumers spend more time communicating digitally, GoPro has become one of the most popular forms of visual expression.

Beyond the entertainment value, UGC represents a powerful promotional engine, driving our virtuous cycle and creating awareness and demand for our products. We believe that as consumers' affinity for sharing personal content scales, so does GoPro's opportunity.

The second major trend propelling GoPro is social media, which represents a global audience for shared GoPro content. Facebook, Instagram, YouTube. These platforms succeed because of people's desire to consume entertaining content, and GoPro is enabling some of the most engaging content the world has ever seen.

GoPro continues to be a top brand channel on YouTube where subscribers were up 40% year over year to 3.1 million in Q2. On Instagram, GoPro remains the fourth most engaging brand, with GoPro channel subscribers now totaling 5.8 million. For the second quarter, subscribers are up 140% year over year and 23% sequentially. On Facebook, GoPro's following was up more than 16% year over year in Q2, with now approximately 8.8 million fans worldwide. This, combined with increased GoPro content distribution to Facebook, resulted in over 40 million views during the quarter.

Viewership drives conversation. Our tracking shows that the social conversation around GoPro is growing rapidly. Year to date we have doubled the number of hashtag GoPro mentions in social channels to roughly 45,000 a day. Even more encouraging is the progress we are seeing from our outreach to women. Women participating in the GoPro conversation has risen from 9% to 27% year to date.

A third trend benefiting GoPro is virtual reality. With our recent acquisition of VR content enabling software and our continued development of spherical capture devices, we believe GoPro is exceptionally well positioned for the virtual reality movement. As leaders such as Google, Facebook, and Microsoft seek to establish VR as a media platform of the future, all are looking to GoPro to enable compelling content to drive consumer interest and engagement. In May, GoPro announced two new products that will play a significant role in the creation of content for virtual reality. The first is a six-camera spherical array for capturing high resolution video and photos for virtual and augmented reality. The resulting images are stitched into a 6,000 spherical image using GoPro software and viewed on VR and AR headsets like Facebook's Oculus, Google Cardboard and Microsoft's Hollow Lens.

Our second breakthrough in VR technology is Odyssey, GoPro's 16-camera array. This array, developed by GoPro, was announced in partnership with Google in May. Odyssey provides high quality 360-degree video and enables a number of use cases ranging from education to entertainment. Odyssey is compatible with Google's Jump platform, and will be available through an early access program in Q3.

The fourth trend benefiting GoPro is quad copter. In May we announced that we will be launching our own quad copter in the first half of 2016. Our product development team is having a blast testing and refining this differentiated product, one that we believe will be the ultimate accessory for your GoPro.

It's exciting to think about how well positioned GoPro is to take advantage of these opportunities. It's thanks to our aggressive approach to innovation and the incredible pace in execution of our teams. We run hard, we run fast, and it's working. With that, I'll hand it over to our President, Tony Bates.

Thanks, Nick. Today I am going to provide a brief update on three key aspects of the business. First, a report on our growth in international markets where our investments are showing strong returns. Second, our strategy for simplifying the user experience with improved software and services. And third, an overview of what we are planning at GoPro Entertainment.

I will start with international markets, which accounted for over 50% of our revenue for the second quarter in a row. We are investing in people and programs to expand our global business. In the past 18 months we have opened new offices in Amsterdam, Munich, Shanghai, Shenzhen, and most recently London and Melbourne. We continue to put people on the ground to work closely with our distributer network. And last week GoPro was named Best Consumer Electronics Partner by Dixons, the largest consumer electronics retailer in the UK.

We expanded global awareness with our multi-year partnership with MotoGP, a sport with an enormous following outside of the US. Earlier this month, the initial broadcast of our title race, the GoPro Motorrad Grand Prix of Deutschland, was watched live by more than nine million viewers across Europe. Millions more saw the race on subsequent broadcasts and online. Each GoPro course preview video has generated more than a 0.5 million views.

Last week we announced another milestone demonstrating our global reach. GoPro is the official camera of the Tour de France. GoPros mounted on riders and bikes provide never before seen perspectives on the world's most prestigious cycling event. GoPro is enabling content for major broadcasters, including NBC, in addition to streaming highlights on our YouTube, Facebook, Vine and Instagram channels.

Next, a quick update on China, where we are very pleased with our progress. China has become a Top 10 revenue generating country for GoPro, and our store count grew 31% sequentially. Later this quarter we will launch a simplified Chinese user interface for our Hero4 line of cameras and a simplified Chinese version of our mobile app.

Around the globe we have significantly increased the number of retail locations that sell GoPro products. We now have more than 20,000 storefronts outside of the US and over 40,000 worldwide. For the first six months of the year, GoPro point-of-purchase display shipments are up 40% year over year, with strong growth in Europe, Asia and Latin America. Not only are there more displays, but they're bigger. Total linear feet of new displays increased over 75% year over year.

While our international growth has been strong in 2015, we're also seeing strong results in the US, attributable to a great brand, great products, and great sales execution. In June, Target honored us with their Partner Award of Excellence, another reflection of our sale teams' terrific work.

Next, our focus on software and services, a critical area of focus for GoPro. With the Hero4 Session launched, we introduced updates to both the GoPro app for mobile devices and GoPro Studio for desktop. The new mobile experience improves both pairing and connectivity while also supporting the features of our newest capture devices. To date GoPro Studio has been downloaded over 11 million times and the GoPro app has been downloaded over 18 million times.

We continue to make good progress on our software initiatives. We are now in the final phases of development and testing of a new mobile app that allow our users to seamlessly trim and share the best photo and video moments captured on a GoPro. We expect to launch this experience before the end of summer. We're also testing an alpha version of our cloud service which will support a seamless offload of content from GoPro cameras to be managed and viewed on other devices.

Finally, I will offer some highlights on the progress of our GoPro Entertainment initiatives. To date the primary mission of GoPro Entertainment is to inspire people with great content, and in doing so power the virtuous cycle that drives consumer demand for our products. In-house productions and high quality user-generated content are placed on the GoPro network, a collection of popular platforms like Facebook, Instagram, Pinterest, Roku, YouTube, Xbox, and others. This curated content experience helps to define our brand and to encourage adoption by a growing number of consumers who want to tell their own stories with a GoPro.

GoPro content has the potential to generate additional revenue streams over time. Yesterday we unveiled GoPro Licensing, a content licensing portal that marketing professionals can use to search, sort and license content from GoPro's rapidly growing library. (Inaudible) also offers an opportunity for our vast community of GoPro contributors, including athletes, musicians, professionals, and consumers to earn money and rewards for their content.

In summary, we're delivering on our promises. We are executing on our core business. We are expanding our total addressable market with domestic and international initiatives. We are improving the consumer experience with upgrades in software and services, and driving new revenue streams with our content. It's been a great year so far, and we are looking forward to many more new and exciting developments in the second half of 2015. With that, I'll hand over to our CFO, Jack Lazar.

Thanks Tony, and thanks all of you for joining us today. If you have not already done so, I would encourage you to download from the investor section of our website the financial slides we posted concurrent with our press release earlier today. My prepared remarks will be focused on a financial overview of Q2 as well as our related business trends. I will then provide our guidance for the third quarter of 2015.

We are very pleased with the Company's performance in the second quarter, as the results were better than anticipated. Our financial results reflect strong revenue, gross margin and EPS, and we successfully launched two new products: the Hero4 Session and the hero+ LCD. Q2 was also our second highest revenue quarter ever, and units shipped were up over 90% year over year.

Second quarter revenue of $419.9 million was up 72% year over year, and above our guidance range of $380 million to $400 million. Gross margin for the quarter was 46.4% compared with 42.2% in the second quarter of 2014, representing a 420 basis point increase. Operating income for the second quarter was $65.8 million, or 15.7% of revenue, an increase of $48 million, or 270% year over year.

Adjusted EBITDA was $75.3 million, or 17.9% of revenue, up 193% year over year. Earnings per diluted share for the second quarter were $0.35, up from $0.08 in Q2 of 2014, and above our guidance of $0.24 to $0.26. We are beginning to see attractive returns from some of our recent product development efforts, coupled with our ongoing investments in new areas such as quad copters, virtual reality, software and entertainment we are really enthusiastic about the future.

Let's take a closer look at our Q2 performance. Our revenue growth for the quarter was driven primarily by a 93% increase in capture devices sold year over year. During the quarter we shipped approximately 1.6 million capture devices to our retail and distribution partners throughout the world. This was our fourth consecutive quarter of shipping over one million capture devices. And over the last four quarters we've shipped 40% of our 16.3 million cumulative historical units.

Revenue from our direct sales channel increased 53% year over year to $197.8 million driven by continued strong sell-through and sell-in with our big box and online retailers. Sales to our distributors increased 93% year over year to $222.1 million, due primarily to strengthening international demand for our products.

On a product basis, we continue to see strong consumer demand for our Hero4 products. The Hero4 Black and Silver, both priced at $399 and above, were our best sellers during the quarter and once again made up over 50% of our total units and revenue.

Our guidance going into the quarter was for strength in international channels, particularly APAC. Our Q2 results reflect this. EMEA and APAC revenue increased 105% and 183% year over year respectively. These results reflect the success of our international investments and execution, and the popularity of our products worldwide.

Second quarter revenue by geography was as follows. Americas was $212.4 million (sic - see slide, "$212.3 million") or 50%. EMEA was $137.2 million, or 33%. And APAC was $70.4 million, or 17% of revenue.

Second quarter gross margin increased 420 basis points year over year to 46.4%, due primarily to favorable product mix shift towards our higher end capture devices -- higher margin capture devices. Sequentially the 120 basis points increase in gross margin was driven by product mix and cost reductions. Q2 gross margin was above our long-term target model range of 42% to 44%.

We did not experience any noticeable camera pricing pressure during this quarter. AFPs declined slightly year over year due to an almost doubling of distribution revenue, the continued expansion of our product line to include entry-level Hero capture devices, and increased MDF funds related to our Q2 product launches. This was partially offset by large year-over-year increase in revenue from products with a $399 and above price point, as our premium products continue to be well received by consumers.

Operating expenses of $129.1 million were up 51% year over year. Sales and marketing expenses were up 44% year over year demonstrating continued operating leverage from these efforts. Consistent with prior periods, R&D investments drove the overall increase in OpEx and were up 64% year over year. Our continued aggressive investment in R&D reflects our long-term commitment to the development of next-generation capture devices, our recently announced quad copter and our software and entertainment initiatives.

GAAP net income for the second quarter was $35 million, or $0.24 per diluted share, and this compares to a GAAP net loss of $19.8 million, or $0.24 per diluted share for Q2 of 2014. Shares outstanding of 146.8 million for the quarter decreased sequentially by 1.8 million, due primarily to a 4.7 million share contribution back to the Company by our CEO.

Turning to the balance sheet, we ended the quarter with cash, cash equivalents and marketable securities of $517 million, up $25 million, or 5.1% sequentially, due primarily to cash flow from operations. Cash and cash equivalents and marketable securities increased $412.1 million year over year, and at the end of the second quarter represented over 45% of GoPro's total assets.

Cash flow from operations for Q2 was $65.9 million. Accounts receivable was $118.6 million, an increase 12.6 million, or slightly less than the sequential revenue growth. DSO of 25 days in Q2 was sequentially flat. Inventory increased by $55.2 million sequentially, and turns were 4.7. The substantial portion of increased inventory relates to new products we are bringing to market and our efforts to prepare for the holiday season. In the second quarter our capital expenditures were $16 million and depreciation was $6.4 million.

I will now move onto our guidance for the third quarter. After a great first half of the year, we're also quite optimistic about the remainder of 2015. Channel inventory levels both in the US and abroad look healthy. On a year-over-year basis, we anticipate increased revenue across all channels and geos, with particular strength in EMEA and APAC and with our distribution partners.

Accordingly, we anticipate revenue of between $430 million and $445 million for the third quarter, and at the midpoint of this guidance it represents a 56% year-over-year increase. In the third quarter we expect our product and channel mix to remain favorable, and our family of three premium $399 and above devices to continue making up over 50% of our units and revenue, and our gross margin will continue to be above our long-term target. For the third quarter we anticipate our gross margin will be 46%, plus or minus 50 basis points, up from the 44.5% in the prior-year comparable quarter.

We will continue to invest prudently in the people, products, and infrastructure necessary to pursue our growth and our vision. To support our ongoing investments and broadening family of capture devices and accessories, as well as entry into new markets, we anticipate our operating expenses will be between $140 million and $145 million, with once again the majority of growth coming from R&D. We estimate our effective tax rate to be approximately 24%, with fully diluted shares outstanding of approximately 149 million. Accordingly, we anticipate EPS to be in the range of $0.29 to $0.32. So with that Stephanie, I think we are ready to take questions.

(Operator Instructions)

We will go first to Joseph Wolf with Barclays.

Thanks, guys. A question about product releases. I think this is one of the first quarters, or maybe the first quarter, where you released a product before the fourth quarter. And I am wondering if that tells us something about a new seasonality that you are trying to achieve, or whether we should be continuing -- or we should continue to expect a set of new products throughout the remainder of 2015?

Hi, Joe. This is Nick Woodman answering. Good question. As we have shared with you in the past, we've cautioned anybody about getting too used to any typical cadence for product releases from us. When we see an opportunity to introduce a product that we believe has significant new value proposition to consumers, we'll do it. If that's outside of the typical fourth quarter holiday release schedule, so be it.

We're very focused on pushing forward our customers' experience, making it easier and more convenient to use our products and help our customers achieve success in capturing and sharing their lives with a GoPro. So I wouldn't look at this as a signal of any shift that may or may not be repeatable. You will just have to trust us that we're going to continue to develop great products in the interest of our customers.

Joe, I will add one thing on that, which is one of the nice things about releasing the products a little early this time is it gave us an opportunity to actually get ready for the holiday season. So having Session out now is nice. We can start building up some inventory, and you see some of that happening on the balance sheet. I think it just make us better prepared and a better operating business.

Just a quick follow up. It's only been a week or so, but you getting any feedback on the Session sales?

Yes, we're getting initial feedback on Session. I think we're -- obviously, we are very pleased with the product, and we think it will be well received. One of the things that we are seeing that is kind of nice, again this is a small data set so I really wouldn't infer too much out of this at this point, but we do see it as being relatively additive to the premium products. So that's a nice data point upfront. That may be because there is a lot of the early people are probably folks that own GoPros and just want to get the next one. But it may be that the product mix is gravitating to the $399 and above level, which is always good in our mind. The best products are going to provide the best experience for the customer.

Great. I have more questions, but I will keep to the rules.

Thanks.

I will add one more thing. This is Nick again. I think that the momentum that we are seeing with Session out of the gates, given the fact that we launched the product in July, which is not a typical time to launch a consumer product. The momentum we are seeing is testament to the strength of GoPro's brand, and that we don't have to fortunately wait for a fourth quarter holiday season to launch a product and get a strong positive response from the marketplace. Thanks to the strength of our global distribution network and strength of the brand, it seems that we are capable of launching a product at any time of year. We're happy with what we are seeing.

Great. Thank you.

We'll go now to Paul Coster with JPMorgan.

(Technical difficulties) taking my questions -- well, question. It looks like you are now distributing GoPro products to 40,000 stores worldwide, and according to my notes it was only 25,000 last quarter. Am I right that you added 15,000 new outlets in a single quarter? And if you did, can you kind of elaborate on the nature of those outlets and the sell-through volumes in them? Thank you.

Paul, it's Jack. I'd love to tell you we have added that many more, 15,000 more, in a quarter. Basically what it was, was an annual update. When we went public we had disclosed that we had about 25,000 locations around the world in over 100 countries and we have now just updated it to over 40,000. I think you would look at that as more the evolution over the last year. Of course, we're still evolving and adding more doors worldwide. But I think that's pretty good progress for the last year.

I'd just add, the other focus is very important. It's not just the amount of stores. It's the amount of linear feet that we're also growing. If you think about the work we're doing, it's penetrating new retailers with more store count but also getting more and more space in those stores. It's been a lot of hard work, but very positive progress.

Even so, okay, so it is not 15,000. But you are adding and you are not seeing a diminishing return on the new stores. It sounds like they're pretty accretive in terms of linear feet and unit volume sell-through per store, is that a correct statement?

Absolutely. I think it's reflective in the results. You see it translate into the growth. It's still our primary sales motion, and you see that certainly be accretive, yes.

Okay. Thank you.

No concerns that we are saturating the market, Paul.

We go now to Erinn Murphy with Piper Jaffray.

Great. Thank you and congratulations on a great first half. I guess my question is on China. It sounds like you have really hit the ground running there. Any insights on what's tracking well there from a product perspective?

And you mentioned it being in a Top 10 revenue country for you today. How do you think about that longer term? What's the kind of bigger longer-term potential of that market? Thank you.

Hey Erinn. It's Tony. What I would say, from a standing start we are really pleased with the results. Won't give you too much color on kind of the mix, but definitely if you look at sort of our ability to sort of charge a premium, which we are, we think we have a great product and it deservedly so. We are seeing the returns on that. We feel pretty good about it. We are going to continue to add stores. We have kind of a similar mix to what we see in the rest of the world. So I think that's you know very strong.

I think the other instinct thing that's different, and I talked about this last time, is that as you know, and perhaps a lot of people on the call know, is China is quite different in terms of the way that people buy product, particularly consumer electronics product. You've got to play both sides. You've got a mixture of both offline retail, and we talked about our growth, 35% growth quarter on quarter. But you also have to work with major online players. We made sure we went and did that before we launched in market. So both the JDs, the Alibabas, and Amazons.

The last point that is quite unique and different, I touched on it, is that the Chinese consumer is more and more predominantly buying through their mobile device. That's why a very important milestone we talked about coming up is to get a much more localized product. We think we are doing all the right things to continue to execute well, given the type of things you need to do in the market.

Okay. That's helpful. How many doors do you physically have today in China?

We haven't disclosed that. We're just giving you the growth rate.

Okay, got it.

We are pleased with our approach so far.

Thanks.

We'll now go to Simona Jankowski with Goldman Sachs.

Hi. Thanks very much. Just wanted to ask you a question on gross margins, which were up sequentially even though it looks like ASPs were down sequentially. Just wanted to understand the dynamics behind that margin expansion. And related to that, how do margins of the new products compare to the average?

So as far as margins on a product-by-product basis, Simona, we actually don't get into that level of granularity. I think when you look at ASPs, you have to remember there's -- you guys don't get the full picture of ASPs because you are simply taking -- you are probably taking revenue and dividing it by units.

Right.

There's a lot of other things that go into that pie. There are standalone accessories that we sell. There is some software that we do, licensing and things like that. There is a lot of pieces to it. I did make the comment very specifically on the call, though, that camera ASPs, we didn't see any significant change in camera ASPs. So it was actually quite small.

If you couple that with the fact that we are getting more leverage out of our supply chain, we're doing a better job of designing our products to be more cost effective in the channels themselves, I think that overall is what's delivering certainly the year-over-year 400-plus basis point increase in gross margins. But also the sequential increase is also coming from there. You get kind of a product mix piece and you are getting a supply chain piece all combined together. It's making the gross margins work right now.

Got it. Thank you.

Thank you.

(Operator Instructions)

We go now to Will Power with Robert Baird.

Great. Thanks for taking the question, and congratulations on the results. I just wanted to follow up a little bit, I guess, on the Session, which looks like an exciting new product for you. Any color with respect to where distribution is to date, and any type of supply constraints you are seeing or expecting with that device?

I can comment a little bit on that. As far as distribution, this was a worldwide launch. This is a pretty exciting product. Certainly encourage you, if you haven't already, to go watch the launch video that's on our web page. Also I think the team put together an awesome video of how the product itself works, the Session product video, which I would also encourage you to look at.

It's a worldwide launch. It's available all over. I know I have seen it in the local stores here. It's gone overseas, too. As far as the channel itself, I think it's going to get pushed everywhere.

It's the exact same strategy we've taken with all of our premium products, and it will have the same distribution across -- on a global basis. I think we were very prepared for this on a global launch. So I think your question was about inventory. It's very early to tell, but we feel very good about where we are. (Multiple speakers)

There were no challenges to manufacturing or getting the product out of the channel.

Just to add, this is one of the things that we have really benefited on over the last year. As we have grown, good reason to go public and get bigger and stronger is you are able to add the resources, the teams, the people that can do all the product planning, that can get the products out on a timely basis and set up the supply chain so that you can get product out on time. We have grown a lot of people in the Company in the last year. There's just more people focused on making these great events happen. And we are seeing positive results of that.

Okay. That's great. Thank you.

Thank you.

We go now to Charlie Anderson with Dougherty & Company.

Thank you for taking my question, and congrats. Nick, I had a question for you on the quadcopter. I wonder if you are thinking about this market relative to your normal GoPro capture device market. The sizing of that market over the long term, do you think it's similar, larger, smaller, kind of your thoughts on how that will evolve?

That's a good question. I think that for the first few years it's going to be a subset of our overall market opportunity in terms of unit volume. I think that it all comes down to accessibility and ease of use when selling consumer solutions, and frankly with the value proposition and what problem is it solving for a consumer. I think that definitely with the introduction of Session, we have made a GoPro so much easier to use and so much more relevant to somebody in their daily life that I think we're going to see Session appeal to a big new audience of GoPro customers as well as existing customers who are looking for an additional GoPro to add to their capture solution.

So as we grow that overall customer base for our cameras, I think that the number of customers we're going to be able to attract for quad is on a unit volume basis going to be smaller than that, but still very significant. We are confident that GoPro has an opportunity to take a leadership role in the consumer quad space. And then down the road as quads get smaller, easier to fly, lower cost, I think it is quite possible that we see the numbers grow dramatically. But I think in the near to mid-term, I think we're going to see larger numbers on a unit basis from our camera business.

Thank you so much.

We'll go now to Tavis McCourt with Raymond James.

Can I get a clarification that doesn't count as a question, hopefully, and that is were there any Session volumes that were shipped in Q2? And are there any new products unannounced included in the Q3 guidance? And my question was regarding currency. Jack, I think most consumer companies' going to be talking about that quite a bit this quarter. And wondering if that had any impact on your quarter and whether you have raised prices selectively to toss out any currency impacts. Thanks.

Got it. So you were asking first about Session, whether was there any Session in the quarter. There was a small amount of Session in the quarter. We are not going to get into specifics. As far as products that are unannounced in the third quarter that we would have built, those would be unannounced so we can't talk about products that are unannounced. But we are pretty excited about the stuff that we have right now between the Hero+ LCD and Session. That's clearly a great opportunity in the upcoming quarter.

As far as currency, currency I would say most of our business is denominated in dollars. So we are probably a little less exposed than most. We did have to deal with some fluctuations in the euro in particular during the quarter, and we do periodic adjustments to our recommended retail pricing. And that did actually happen in this last quarter where we had to bump them up. I think it was in Europe and Australia. And so that would have already flowed through. I am sure it had some impact, but it is not something that we are actually pointing to as a driver or detractor of the business.

Thanks very much.

Thank you, Tavis.

We go now to Gus Richard with Northland.

Yes. Thanks for taking my question. When you look out at your growth opportunities, you've got drones, virtual reality, and GoPro Entertainment. Can you give qualitative commentary on which ones of those you think will provide the most growth next year and maybe the year after that?

That's a good question. I think that we're very optimistic about the growth of our core business of capture devices and accessories. That's our bread and butter, and now being sold in over 40,000 locations and worldwide, and with a brand, global brand that's proven strong enough to sell well in China out of the gates. Combined with the increase in our product line, with product like Hero+ LCD at the more entry level and Hero4 Session as a new addition, exciting new innovative addition to our premium line of products, we have a much more compelling product line out for consumers. We look at that across the globe.

I think we are going to have a pretty good growth story next year in our core business. And then as we have shared, we are announcing -- we're releasing a quadcopter in the first half of 2016. And of course we're very optimistic about our ability to excite the consumer with a differentiated quadcopter capture solution. And we think that again our distribution coupled with our brand, GoPro is going to really help take quads even more mainstream than they are today and provide a much improved out-of-box user experience. That said, we expect that to obviously trail our core capture business, but it will be a nice additive.

And then I think virtual reality is an exciting new opportunity that's frankly going to take a bit of time to develop, right? I mean, it's still early days. I think everybody involved in the space from an industry perspective is very excited about what we are going to be able to achieve with virtual reality, but there is still a ways to go in terms of making it ready for the consumer. That's going to be a bit further out.

Then on the media front, we are already starting to see terrific progress with the release of our licensing portal, GoPro Licensing. But as we have shared, the strength of our core business is such that it's going to take some time for the media revenue to become a substantial revenue stream for us, but it is exciting to see the progress that we have made and that we have now actually productized the licensing side of our business, and we are open for business. So we are really excited about it. I want to give a special shout out to Zander Lurie and his leadership and the rest of the GoPro Entertainment team that got this terrific new licensing platform out for us. We are very pleased, and way to go, Zander and GoPro Entertainment.

Maybe just, on the licensing, that's really a case of we talked about on many calls, we have seen enough interest where it really made sense for us to essentially create a platform. Perhaps that's a way for you to think about the entertainment opportunity as we move forward. I know there are always questions about it. This was case where we have enough interest, where people were calling us that it was time to make a self-service automated professional platform that is targeted at professionals. And so it's early days, but that's the type of opportunity that we will see as we move forward. And so we will try and capitalize those as we go.

Great. Very helpful. Thank you very much.

Thank you.

We go now to Brad Erickson with Pacific Crest.

Hi. Thanks for taking my question. Just wanted to circle back on the content licensing piece. Curious any -- there were some media reports that were speculating some metrics in terms of what you might be coming to market with. Wondering if you can offer any clarity around that in terms of the number of videos in the portal over a certain period of time, anything along those lines? And then would also be curious, just obviously could this be a contributor into 2016, would be helpful. Thanks.

Let me take that one. Just a kind of baseline, what we announced in the licensing poll is we have 600 pieces of content, incredibly premium high-value content, again targeted at professionals. We've had a number of inbounds. We said at the beginning of that, but at the same time we felt proud of the content and the platform that we've created.

So I would say we will generate -- we will have more content available. That will be one of the metrics, but primarily it's going to be gauging the interest that we see from the professionals out there that want to use that, the marketers, advertisers and so on. We are not providing any data just yet. We will see how that goes. I wouldn't expect that to be a very large contributor, but it's definitely an interesting opportunity for us.

We'll go now to James Faucette with Morgan Stanley.

Thank you very much. Most of my questions have been answered. One question I do want to touch on is if we look at Europe, or EMEA, sequentially in the June quarter it was down a little bit as opposed to the other regions. And I am just wondering if you can speak to a little bit as what the seasonality might be there, or if there was any impact from price changes? And I'm just trying to get a feel for kind of why that geography looked different sequentially than the rest of the world. Thank you very much.

James, it's Jack. I think you're talking about individual movements here that are relatively small. As you said, it's down slightly. Year over year the numbers are huge. So we're pretty happy with the year-over-year numbers, and frankly the year-to-date numbers. I mean, Just look at the six-month numbers year over year. They're pretty impressive. I think it's just more timing than anything else.

As we go into the upcoming quarter, we made some comments about where we see the strength in revenue and overall it looks pretty good. The opportunities that we're finding in EMEA are quite attractive. Some of the things we are seeing in APAC are quite attractive. I think overall there are pretty good opportunities internationally.

We tried to message this at the beginning of the year that we thought international was one of the big opportunities. I think the team has done a great job of going out and executing. You heard Tony mention some of the places where we have opened up offices over the last year. We have really grown our international footprint quite a bit. I think right now it looks to be working pretty well.

We'll go now to Jeremy David with Citigroup.

Thanks for taking my question, and congrats on your very strong execution this quarter. Leading a set of new [POP displays] grew over 75% year over year in the first six months. I think you're obviously opening new doors and you're expanding shelf space. I think Best Buy grew your shelf space quite a lot in the second half last year. Is there more opportunity for you to expand even more at Best Buy and other large big box retailers in the US in the second half of 2015? And is a 75% year-over-year growth in linear feet of POP displays, is that sustainable? At what point does that trend down? Thanks.

Let me take the first part, and then maybe for the long-term growth. There are definitely more opportunities. Best Buy is one of our big box retailers. We have tremendous strength in some of the others, the Targets and Walmarts. You just heard me talk about Target. We just won an award as being a great partner.

Within the traditional US space we certainly see that in big box, but I would just say this is a strategy that we see can actually play out globally as well. So just like we have seen with Best Buy really started it with the large displays [that modeled] this, that is part of our strategy to grow that on a global basis.

You don't quite get the concentration around one large retailer like you have in the US, but on a country basis, particularly in Europe, you see the ability for us to do that. We are in the early days of that, I think. In terms of is it sustainable, at some point you can argue that we hit every single retailer in the maximum linear feet, but we are a long way from that right now, certainly on a global basis. We feel very good about this go-to-market approach and it seems to be playing out well.

Let me give you a typical example. I was in Target two days ago and I stopped and looked at the POP there. It's a three-foot POP. That's a typical Target POP. It works well. Could we increase that in size and probably move more volume? Yes, we absolutely probably could. Just takes time to roll all these things out. That's what we are working on. I think we have done a good job of rolling out that POP strategy over the last year.

Maybe one other thing to add. If you think about what's going on at the Company as well, we have touched on it a couple of times. We are expanding the amount of products. We have more SKUs in the lineup. We've talked about quads. A key part of our distribution strategy is also to make sure that we can support all of those products, and that means growing the linear feet. So far, so good. It has been received really well. That actually is what gives us confidence as we enter into a new market like the quadcopter market.

We go now to Joseph Wolf with Barclays.

Thanks. I guess just a final question. Thanks for getting me in here. You have talked a little bit about the -- I guess, wanted to hear your thoughts on the commercial side of the market and revenue opportunities connected with that. The marketing spend you did on the Tour de France and how that turns into -- or the broadcast. I'm not asking this very cleanly, sorry. Can you think about a revenue stream coming from the broadcast on the commercial side of the business, which is in addition to the retail side of the business based on some of the announcements that you've made that would be meaningful, or is it really just to drive the overall retail [scale]?

That's a good question. This is Nick here. I think initially you are right that these broadcast deals, sponsorship deals, GoPro very much benefits by growing brand awareness through the integration of GoPro capture technology into these fantastic sports and helping to provide more immersive, engaging broadcasts of the sports on television and online. Goes a great length towards validating our brand to see GoPro worn on these top riders at the very highest level of the sport, and being embraced and actually really enhancing the viewing experience is massive for our brand.

Now, where it goes from there is that we have increased opportunities to do this with more and more venues, more and more events. No promises, but with that come the opportunity to potentially monetize some of these broadcasts in innovative new second-screen ways, helping people tap into their favorite events or celebrities in a way that was never possible before. So we definitely -- it's a lay-up on the brand promotion side with an expanding option on the monetization side that we may be able to realize in the future.

Thank you.

We'll go to Alex Guana with JMP Securities.

Thanks for taking my questions. Congratulations on shredding another quarter. I am just curious about what you are saying about your global footprint, your expansion of retail presence. My observations are that the competition is actually going in reverse. I seem to be seeing a lack of competition. Is that accurate? Can you give me some color behind what you are seeing in your channels in terms of the ostensible competition, either there or not there?

We share your view. We're in a leadership position. We work very, very hard. On the call I mentioned that we run fast and we run hard, and it's working. I frankly share your feeling that we have outpaced the competition. We run at an exhausting pace, and this is all we do.

We're over 1300 employees that are maniacally focused on our vision. And we all come to work everyday with that shared vision. And this is all that we think about, all that we work on. And you see it in the execution.

And that's a very difficult thing for somebody to compete with. And I think you are seeing that play out at retail. Look at what we did with Hero4 Black and Silver, just last fourth quarter. And then we quickly came out with Hero+ LCD. And then the upper cut nobody was expecting was Hero4 Session. And we're not done yet.

It's getting easier from the perspective that we're able to attract incredible talent. GoPro being a public company now makes it easier to recruit. We are more visible. It is easier to get people excited about coming to work with us and help us realize the vision. As much trouble as competition was having with us over the past few years, I expect it to become even more difficult for them because our pace of innovation is increasing. Thanks for noticing. It feels good.

One more, if I could. You gave a shout out to your GoPro Entertainment team. And I am wondering what was it that they did deserving the shout out? Obviously you've got great content already. But what about the system you have put in place is differentiated, if you could?

Well, they're executing. At the end of the day, that's what matters. They're delivering on our vision. They've got a ton of programs in parallel that they're working on, and they're shipping product. And that is not easy to do at a company of this scale, this pace, to come out with such compelling product, new platform like this, licensing portal in such short order. Zander's building that team up from scratch. And so to be building the race car as you are driving it in the race is no small feat. They've executed fabulously.

I will just add a little bit. I think being [with driving] when I think about the team that we are assembling, and Zander, hats off to him when we recruited him into the Company, is really building a great team. And to Nick's point, there's execution and it's the quality of the content that we produce. We've made sure that we've stayed very true to being authentically GoPro and wowing our audience on a global basis, and they just do a tremendous job.

Great. Thank you. Can't wait to see what's next.

Lots in the pipe. Thanks Alex.

This concludes our question-and-answer session. I will now turn the call back to CEO Nicholas Woodman for closing remarks.

Okay. Thanks to everyone for joining our call today. Before we go, I want to let everybody know that we'll be at the Pacific Crest, Oppenheimer, Citibank, B. Riley, Stifel and Deutsche Bank conferences in August and September. It's been a great first year as a publicly traded company, and we have never had more fun growing this business. On behalf of more than 1300 employees, many thanks for your ongoing support, everybody. This is Team GoPro signing off.

This concludes our conference. Thank you for your participation.