GoPro Inc (GPRO) 2016 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to GoPro's third-quarter 2016 earnings conference call. Today's call is being recorded. At this time, I would like to turn the conference over to Mr. Peter Salkowski, Head of Investor Relations. Please go ahead, sir.

Hi everyone, and welcome to GoPro's third-quarter 2016 earnings conference call. With me today are Nicholas Woodman, GoPro's CEO; Tony Bates, our President; and Brian McGee, our Chief Financial Officer.

Before we get started, I'd would like to remind everyone that our remarks today may include forward-looking statements. These forward-looking statements and all other statements made on this call that are not historical facts are not guarantees of future performance and are subject to a number of risks and uncertainties which may cause actual results to differ materially. Additionally, any forward-looking statements we make on this call are based on assumptions as of today and we do not undertake any obligation to update any of those forward-looking statements as a result of new information or future events.

Information concerning our risk factors is available in our most recent Annual Report on Form 10-K for the year ended December 31, 2015, which is on file with the Securities and Exchange Commission and in other reports that we may file from time to time with the SEC. We report gross margin, operating expenses, net profit and loss, and basic and diluted net profit and loss 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.

In addition to the earnings press release we have posted slides containing detailed financial data and metrics for the third quarter of 2016. These slides and a link to the webcast for today's earnings call are posted on the Events and Presentations page of the GoPro Investor Relations website for your reference. Any income statement related numbers that are discussed during today's conference call other than revenue are non-GAAP unless otherwise noted.

In the interest of time, I would like to remind those participating in the Q&A session to please limit yourself to one question. Now I will turn the call over to GoPro's CEO, Nicholas Woodman. Nick?

Good afternoon and welcome. Today I'm going to review how GoPro is now a simple end-to-end storytelling solution thanks to recently launched products and services. I will also recap our third-quarter performance and provide thoughts related to 2017.

With our recent product launches, we have delivered on the hardware and software vision outlined at the time of our IPO. Hardware highlights include our new HERO5 line of cameras, the most connected GoPros ever, and Karma, our exciting entry into the drone market. In software, we introduced GoPro Plus, a cloud content management solution that seamlessly connects to HERO5 cameras and Quik, our mobile and desktop editing suite.

We've finally made it easy for our customers to capture, edit and share great personal content. And the experience is awesome. Starting with our new cameras, HERO5 Black and HERO5 Session represent dramatic improvements and eliminate many pain points.

Every GoPro is now waterproof without a separate housing. We eliminated buttons where they were not absolutely necessary. We added voice control to both cameras and a touch display to HERO5 Black. We improved image quality and added high performance in-camera video stabilization. And importantly, HERO5 Black and HERO5 Session can now auto-upload your photos and videos to the cloud.

Next I will review Karma, which went on sale in the US on October 23. As we have shared, Karma is so much more than a drone. It is Hollywood caliber aerial, handheld and mountable stabilization in a backpack for $799. Karma represents an exciting set of solutions for new and existing customers and extends our brand into an important new category.

Next I'll review our progress in software and services. In February, we committed to providing a seamless upload, access and editing experience across mobile, desktop and cloud platforms. And we delivered.

HERO5 customers can now auto-upload photos and videos directly from their camera to a GoPro Plus cloud account. Owners of older generation cameras can manually upload their content using the Quik desktop app. Once a user's content has been uploaded to a GoPro Plus account, it's easy to access, edit, and share that content using a smartphone, and the Quik app.

I want to take a moment to thank all of the GoPro employees who contributed to making this fantastic experience possible. Thank you.

As good as these products are and as impactful as we expect them to be, unfortunately we experienced production issues that resulted in lower-than-expected launch volumes for HERO5 Black and Karma. While our teams worked tirelessly to solve the problems, we expect the situation to have a negative impact on results for the second half of the year. As a consequence of our compromised production ramp, we were unable to fully restock channels which had been cleared of legacy products during the third quarter. And furthermore, we anticipate difficulty catching up to meet forecasted demand during the fourth quarter.

As a result, third-quarter revenue was up only 9% sequentially to $240 million. We shipped slightly over 1 million cameras in the quarter, and we are lowering our 2016 revenue expectations. Despite the anticipated difficulty in meeting fourth-quarter demand, we expect to be profitable for the quarter.

Looking forward to 2017, we expect the market's strong reception of our new products this holiday to set us up for double-digit year-over-year revenue growth. This, combined with plans to lower our 2017 operating expenses well below $700 million, gives us confidence that GoPro can return to full-year profitability next year. In summary, we are proud of the customer experience that we have built and we are keenly focused on executing the fourth quarter. With that, I will hand it off to Tony.

Thanks Nick. Today I'm going to provide some color on our retail landscape, review our launch metrics and I'll close on our expectations for operating expenses in 2017. I will start with our retail performance and the transition to HERO5.

Together with our retail partners we were very effective in drawing down inventories of previous generation HERO4 product. In the third quarter, HERO4 channel inventory dropped over 70% sequentially. Unfortunately, the production issues resulted in limited restocking of our channels and will negatively impact our ability to meet forecasted demand in the fourth quarter. That said, we are now at full production and aggressively ramping distribution of HERO5 globally. This includes Amazon.

With only four weeks of data, the early read is that demand for our new products is strong and that consumers are showing a distinct preference for our premium offering HERO5 Black. By comparison, in the US, HERO5 products accounted for approximately 75% of our sell-through mix, versus HERO4 at 54% during its first four weeks in 2014. Despite the production issues we encountered, GoPro maintained its long-standing category leadership in both North America and Europe.

According to NPD, in the US, GoPro held three of the top five positions in the camera camcorder category. For the eighth consecutive quarter, HERO4 Silver held the number 1 spot on a unit basis. Based on our estimate, Session was the second best-selling camera in the US on a unit basis for the third consecutive quarter.

Moving to international, GoPro continued it solid progress in key markets. In Europe, according to GFK, GoPros third-quarter digital imaging unit share increased year over year 200 basis points to 11%. HERO4 Silver volume increased nearly 14% sequentially and GoPro accounted for four of the top five camcorders in Europe on a unit basis.

By our estimates, in the third quarter HERO4 Silver was the top-selling camera for the eighth consecutive quarter. And with three weeks of data, unit sell-through for HERO5 Black in Europe was 45% higher than HERO4 Silver and Black combined during the same period in 2014.

In Japan, GFK reports that GoPro's third-quarter unit sell-through was up sequentially 67% and 125% year over year. Our share of the action camera market in Japan for the third quarter has increased 10 points year over year to 41%.

In India we are rolling out HERO5 this month and looking forward to a great partnership with our retail partners Reliance and Stereo Vision. In China, initial shipments of HERO5 Black quickly sold through and China remains a top 10 country for GoPro.

A brief update on software. Monthly active users of the Quik mobile app have almost doubled since we rebranded earlier this year. In the third quarter, the Quik mobile app was downloaded more than 3 million times. Since the launch of GoPro Plus at the end of September, we are seeing a higher-than-expected attach rate and lower than expected churn.

Next I'll talk about marketing. I will begin with our September launch event, where 120 journalists, critics, and social media influences joined us at the Squaw Valley Resort for the unveiling of our new products. In addition, the event was live streamed to over 1 million viewers with roughly 70% of the audience outside of the US.

The social media metrics surrounding our launch reflect strong demand for GoPro. According to Google, September searches for the term GoPro were up 43% year over year on a global basis. And our social media reach has expanded by more than 30% year over year, including a 60% increase on Instagram, where we now have over 10 million followers. Our marketing campaign for HERO5, Karma and the Quik app are now building momentum into the holidays with aggressive placement in digital, outdoor and television.

Finally, I want to address operating expenses from a 2016 exit run rate of approximately $780 million. While we're not offering specific details today on our 2017 plan, we expect to reduce operating expenses to approximately $650 million for 2017. We believe this can be achieved without impacting our product road map and should result in profitability for 2017. With that, I'll hand over to Brian

Thanks Tony. My prepared remarks will focus on a financial overview of the third quarter and I will then update our guidance.

Third-quarter revenue of $240.6 million increased sequentially by 9% and was down 40% year over year. We shipped just over 1 million units in the quarter, a sequential increase of 34%. During the third quarter, we continued to focus on clearing channel inventory of our HERO4 products in preparation for the October 2 global launch of our HERO5 cameras. We estimate HERO4 channel inventory decreased sequentially by over 70%.

We estimate third-quarter unit sell-through slightly exceeded sell-in, making this the fourth consecutive quarter where sell-through exceeded sell-in. During September, we globally shipped several hundred thousand units of our HERO5 cameras. More units of HERO5 cameras were shipped in September 2016 than the units of HERO4 cameras that were shipped during the launch of those products in September 2014. Additionally, HERO5 was distributed more broadly versus the HERO4 launch.

Regarding camera mix for the third quarter, our $399 and above cameras accounted for more than 50% of the units in revenue. Demand reflected a strong preference for our flagship HERO5 Black camera and demand for our HERO5 Session camera was in line with our expectations.

Street ASP defined as total reported revenue divided by camera units shipped, experiencing 19% quarter-over-quarter decline. We have not experienced any noticeable pricing pressure in the average selling price of any individual camera model. The sequential reduction in street ASP we experienced in the third quarter was primarily due to changes in camera mix and lower accessory revenue.

Based on retail price points, camera mix in the third quarter reflected a higher proportion of $199 cameras and the introduction of $299 HERO Session camera. In the third quarter, we shipped more units of HERO Session than any other camera. Third-quarter inventory increased $55 million sequentially to $145 million. Reflecting a build of HERO5 and HERO Session inventory in anticipation of the upcoming holiday season.

HERO4 inventory declined sequentially by more than 50% and we expect a majority of the remaining HERO4 inventory to ship and sell through in the fourth quarter. Regionally, the Americas accounted for the largest portion of our revenue, making up 57% of Q3 revenue followed by EMEA at 32% and APAC at 11%. Direct revenue accounted for 62% of Q3 revenue compared to 58% in the second quarter.

Gross margin for the third quarter was 40.6%, down sequentially from 42.4% in the second quarter due primarily to changes in camera mix and lower accessory sales. Gross margin in the third quarter of 2015 was 46.8%, which benefited by an estimated 500 basis points from a higher MSRP for the HERO4 Session.

Third-quarter operating expenses of $186.3 million included $4.3 million in nonrecurring charges resulting from our plans to consolidate two leased office facilities. Excluding these charges, operating expenses were flat compared to the second quarter of 2016 and up 30% year over year.

Research and development was up 30% year over year, reflecting our investment and the development of HERO5 cameras, Karma, accessories and software. Sales and marketing expenses grew nearly 40% year over year, reflecting an increase in our expanded branding, product marketing and entertainment initiative. Sales and marketing was up 8% sequentially in support of our September product launch.

We recorded an operating loss in the third quarter of $89 million, flat sequentially, reflecting a year-over-year decline in units shipped and growth in operating expenses. The third-quarter operating loss included the previously discussed $4.3 million in nonrecurring charges. Loss per share for the third quarter was $0.60, down year over year from earnings per diluted share of $0.25. GAAP net loss for the third quarter was $104 million or $0.74 per share. This compares with GAAP net income of $18.8 million or $0.13 per diluted share for the third quarter of 2015.

Turning to the balance sheet, we ended the quarter with cash, cash equivalents and marketable securities of $225 million, down $54 million from the end of the second quarter. Accounts receivable at September 30 were $92.4 million and DSOs came in at 35 days. No borrowings have been made to date under our credit facility and we have no debt. As of September 30 we had borrowing availability through the credit facility of over $110 million.

I'll now move on to our guidance for 2016 and 2017. We expect fourth-quarter revenue to be approximately $625 million, plus or minus $25 million, resulting in 2016's revenue of between $1.25 billion and $1.3 billion. We expect unit sell-through to exceed sell-in during the fourth quarter, resulting in full-year unit sell-through to be at least 20% greater than sell-in. Channel inventories are expected to be lean as we exit 2016.

Our camera ASP is expected to improve sequentially, with the HERO5 Black camera accounting for the majority of the camera shift in the fourth quarter. Gross margin for the fourth quarter is expected to be 40%, plus or minus 100 basis points. We expect fourth-quarter total operating expenses to grow modestly on a sequential basis with both marketing contributing to the increase.

With the recent launch of several hardware and software products, we expect a sequential decline in fourth-quarter R&D spending. We expect fourth-quarter 2016 non-GAAP earnings per share to be $0.30, plus or minus $0.05. Using a 2016 non-GAAP tax rate of approximately 12% and a fourth-quarter fully-diluted share count of approximately 146 million shares.

Turning to 2017, our goal is to return to profitability for the year. Leveraging operating efficiencies we are targeting total operating expenses to be approximately $650 million for the year. We expect double-digit year-over-year revenue growth and plan to provide full-year revenue and gross margin guidance when we report our fourth-quarter 2016 results in early February. We expect a 2017 non-GAAP tax rate to be approximately 15% and our fully diluted share count to be approximately 152 million shares.

So with that, operator, we're ready to take questions.

Thank you.

(Operator Instructions)

As a reminder, we do ask that you limit yourself to one question. Again, one question today and star one. We will go to Paul Coster, JPMorgan.

Thank you for taking my question. I'm going to make it a two-part question, I apologize. Nick, can you provide us a little bit of color around the production issues and did they affect both the camera and the drone and if so why? And then my second question is the profit profile next year, will it be, do you think, more similar to 2015 where the profit was more front end loaded than we saw last year? Thank you.

(technical difficulties) Please stand by.

I'm sorry Paul, it's Tony, we were somehow muted. Let me just pick up your first part, which was production issues. Yes, we did have an issue on both HERO5 and Karma, but the bulk of the issue has really been around the H5 line, in particular H5 Black. And fundamentally we found an issue very late, as we mentioned, demand is very strong and we're essentially playing -- once we address the issue, which we did very quickly with the team, and then started to get the full ramp back up, we just can't catch up to the forecasted demand, and that's what you see reflected. But there was a slight issue on both, but really the big issue has been on the H5.

Hi Paul, this is Brian. Regarding your question about 2017, we are not -- we will give full year guidance in our next call. As we have said in our prepared remarks, I think clearly you'd expect Q1 to be down sequentially, of course, because we have done that historically, and obviously strengthen the second half with Q4.

That's kind of our normal tendency, seasonality pattern. As you'd expect, we will do that this year, we've in 2015 and 2014. That's kind of the profile. And then it's really driving operating expenses back down to drive possibility for the year.

Just one other point I wanted to clarify, I mentioned in the notes, with respect to the H5 production issue, at this point we are at full production. So we're at full ramp, and it's just a question of us getting those channels loaded to meet the forecasted demand from we've seen from our retailers.

Jason Mitchell, Bank of America Merrill Lynch.

Hi guys. So I just want to know if you can give us a little bit of a breakdown on what you're expecting in terms of like the drone shipping in Q4 versus like camera shipments.

We didn't break it out, obviously the bulk of the revenue will be on cameras. As we said in the prepared remarks, particularly the HERO5 Black, will be the top selling camera in the quarter.

Okay. I guess then, did you expect the drone to help [split] ASP at all or is it mostly going to be driven by the camera mix?

I think from an ASP perspective, we'll obviously see an aggregate lift with Karma, but we'll also see a lift in camera ASP irrespective of Karma.

Simona Jankowski, Goldman Sachs

This is actually Doug Clark on behalf of Simona. First question on the OpEx for 2017, you mentioned, first of all, that it's down pretty significantly from 2016, I'm wondering if you could detail where those cuts are going to come from, particularly after you said that it's not going to impact the product roadmap.

Let me pick that up. We are not outlining the full color, we are in the process that right now. When we think about how we're framing up the OpEx plan for next year, number 1, we're already at a stage where we have a pretty good line of sight around -- really focused around our key core product line. The focus is really going to be around core camera, associated software with that, and of course aerial.

And so to give you a little bit of a sense of where we are going with that. Obviously, that [slightly] potentially includes some restructuring around that. So the way we get there is obviously a combination of looking at efficiency, but also really taking a very strong focus view toward product innovation of course, but really around our core business.

Charlie Anderson, Dougherty & Company.

Yes thanks for taking my questions. I wonder on the outlook for next year, it's interesting. You haven't seen holiday sell-through yet, so what gives you that confidence of the trajectory of the products? And I wonder also, to what degree are you counting on new products in the next year and then also the outlook on the drone business into the next year. Thanks

I think we're seeing strong initial reception and enthusiasm from consumers and certainly the critics have agreed that HERO5, GoPro plus and Karma are all impressive new products from GoPro. And we are seeing impressive sell-through rates, strong demand, so we feel good that this is, unfortunately a manufacturing and production ramp up issue, not a demand issue.

Ben Bollin, Cleveland Research Company

Thanks for taking the question. When you look at some of the new items, the warranty attachment you've been offering, the service that you are offering on a subscription basis, could you talk a little bit about what you are seeing about attachment there and how it has trended relative to what you had expected and if we should see that manifest in any way, like in deferred revenue?

And then longer-term, when you think about the action camera market, I know this question comes up a lot, but how are you thinking about the TAM, the growth opportunity in the competitive environment over the next 12, 18 months? Thank you.

In terms of GoPro Plus, as I mentioned in my remarks, we are seeing a higher attach than we had forecasted and, the caveat would be, we're still in the early days, it is one month in and for those of you have been following up, it's a free-to-pay model that we have. So it's a free trial.

We are pretty optimistic that these attach rates are a lot higher than we expected. Order 50% higher than we forecast right now, without giving you the details, we're also seeing a very strong indicator around churn, some of the folks on the team have been in these businesses and we see very favorable churn rate right now.

Too early to call how that manifests revenue wise, but we do also think that, to your second point, vis-a-vis 10, primary thesis is if we make it that much easier for you to capture, offload and create a great editing suite and ultimately share those things, which is really what GoPro Plus along with the new H5 cameras does, is that it will open up an increased TAM for us.

The second part about your question, competition, we are always sort of making sure that we look out there and see what's going on, we think we have very, very strong competitive products right now and we're not seeing competition, I think you see that -- we don't see that manifesting in price, we see early indication of sell-through that preference is for our premium product. And so it still is very much similar in terms of competition.

Think the number 1 thing is, we have a really, a great set of products, probably the best products we ever put in the market for sure. And now an end to end solution that really allows it -- the big pain point has been it's very hard to unlock all that great content that we capture, and now we have that solution and we think that will help drive TAM.

Jim Duffy, Stifel Nicolaus

Thank you. My question is a big picture question. I understand that (inaudible) underserved the market in 2016, you're planning OpEx savings for next year, trying to get profitability, what is the big picture, longer run plan for the business beyond targeting profitability?

What are the category assumptions that underpin this? So you have any sort of long run view on margin targets? I'm trying to figure out where you are trying to bring this and if you decide whether or not we want to go along with you for the ride.

I think that the thesis for GoPro remains the same, the world is filled with an increasing number of consumers that are interested in capturing and expressing themselves visually and socially. And that GoPro is at the epicenter of that as a storytelling solution that really is a differentiated way to capture and share one's life in a manner that you simply just cannot do with a smart phone or a DSLR or any other type of camera.

And now with the deployment of auto offloading cameras and GoPro plus, which makes it easy for you to access your content and edit it using a smart phone, and the Quik app, we have really made the GoPro experience seamless and contemporary.

It's frankly a night and day experience, so I encourage anybody on the call to go and buy a HERO5 camera and sign up for a trial subscription to GoPro Plus and see how terrific the experience really is. And you can see it's really a before and after improvement that we have made that we think can have a fundamental shift in the momentum and trajectory of our business as our customers are finally successful on a more frequent basis in creating and sharing great edits.

And then as we continue to build upon this experience, we think we can better address the consumer demand to help them capture and share stories in this way. So that thesis remains the same. I will hand it off to Brian to answer your margin question.

Jim this is Brian. We just reported 40.6% and 40% kind of guide plus or minus 100 bps for Q4. Our expectation is to keep margins at around this level. Excuse me. The longer term play is 40% or so in margins and then drive operating expenses to the point where we are making money.

(Operator Instructions)

Will Power, Baird.

Great. Thanks. Yes, so you talked to the HERO5 Black demands and the trends you're seeing there, I guess I wonder what that means for the Session, what are you seeing on that front, does that imply you're seeing weaker demand there than you expected and if so, is that price, or any other color around the Session.

And second part, I would be curious on any updated thoughts on Amazon, of what took place there, how big of an impact that has had in Q4?

Let me take that. Session, in particular [AT5] Session, right now, it's right in line with our own expectations in terms of mix. So we think exactly how we thought about the product line and the good, better, best has played out. Again, it's early, we're still stocking into channel, but right now it's totally in line with expectations.

In terms of Amazon, what I can tell you is Amazon's back online, if you go out there now, you'll see they are about to take orders, and so that will be coming through. Obviously hard to tell if it had a major impact because as we said, we were in a channel fill, we're still ramping that.

So I think overall probably not, Amazon is a great partner and of course you want to have product available for them and that's about to happen. In the grand scheme of things given the production issue we had, it probably wasn't a big impact, but great to have the partner up and being able to order the product directly from them.

Joe Wittine, Longbow Research.

Hi, thanks. Brian, you compared HERO5 shipments in September, I think and that was your sell into HERO4 shipments and in the first month of the availability in September 2014. What is that same comp on a sell-through basis? So H5 versus H4 today, I'm sure you have some data.

Actually, it was a sell-through comp.

It was all sales through.

So what we were trying to really show you was real-time sell-through in the case of the US, you have to have about four weeks and in the case of Europe it's three weeks just because the data takes a little bit of time to come through. So just for clarity, the was a sell-through comment.

Okay, I appreciate that. And then quick follow up, on refresh here, so for your capture devices, the cadence has obviously been 12 months in most cases. Do you still expect to maintain that rate going forward? And perhaps more interestingly, would Karma also be on a 12 month cadence, or could that be longer given the engineering involved?

Yes, as we've talked about before, we don't provide information of roadmap and product candace, so we can't share any more details than that. What we're trying to do is map it to what the future set that our users want and time products into the marketplace accordingly.

Brad Erickson, Pacific Crest Securities

Hi there and thanks for taking the questions. Just in terms of the Q4 revenue composition I guess between action cameras and drones, it would seem like a fair assumption relative to the 2017 outlook is the unit growth would potentially be as high as midteens or maybe even a little higher than that, is that kind of the correct way to think about it? And with the balance of the revenue coming from drones, or am I off there?

Brad, this is Brian. I think in the prepared remarks I think we said the (inaudible) Q4 revenue with the cameras. In terms of units, and then quad. So quad, on a percentage basis it would be less than 10% for the quarter. If that helps.

(Operator Instructions)

Jerry Liu, Morgan Stanley.

Hi guys, thank you. Just a question about the OpEx cuts next year, if we look at this holiday season, it seems like the products have started better than last holiday season, especially if there were no supply issues. Yet you are cutting off OpEx for next year. Are there any things you are seeing in demand with HERO5 or Karma that makes you feel you need to cut costs, or is it just a pivot in strategy or something else?

We have a significant amount of cost in R&D and innovation that went into establishing this new platform, be it Karma as a platform, be it HERO5 as a platform for connected camera and GoPro Plus as our cloud content management platform. And as we have now deployed what in some cases you could argue is the full GoPro 1.0 vision for the first time, we are now able to scale back a little bit in terms of spending there because the platforms are deployed and 2017 will be more of an evolutionary year for us, versus of revolutionary year, and so you're seeing some of that reflect in the OpEx.

Erinn Murphy, Piper Jaffray.

Great, thanks, good afternoon. Just a couple of questions. One, I think there has been some mixed reviews on the capture app thus far, can you talk about what you are learning from that, have you been able to make any tweaks to the user interface there?

And secondly, just a clarification, on some of the production issues, did that change how you were planning to be positioned with your key retailers into holiday, or what you were planning to do with any of those, whether it was in the circulars or Black Friday or any other type of marketing events that you would have typically done with these retailers? Thanks.

Erin, it's Tony. Just to capture the reviews, -- talking about mix, our understanding, it's certainly not been about UI, it's been about the fact we moved to a login process, it's a one-time login process. That's the change. For some of the folks, especially the existing users, that was perhaps unexpected.

The logic there is that as we move to this model which is much more of an ecosystem, it's one, important to have a very strong relationship with our customers, but more importantly, it's definitely a way for us to start to understand more about what's going on analytics wide. And it is something that, I think questions have been asked many times, I think for many of the analyst, and it's been part of the ecosystem strategy for a while.

Yes, we will look at certain ways perhaps to reduce friction, but really this is the plan of record going forward and we just have to keep improving on that and working with our customer base.

And your second question I think was vis-a-vis this changed relationship with retailers, no it doesn't at the highest level, but of course, as with everything, there is timing. And there's turns and there's planning. And as we started to ramp in, a little later than we would have expected, that could have some impact of placement. That being said, we feel strongly positioned to drive as much forecasted demand as we can going into the holidays, right? And our retailers are with us on that.

And Erinn, you asked about Black Friday and the production issue on H5 won't affect Black Friday.

No.

Follow up from Charlie Anderson, Dougherty & Company.

I just want to ask on Karma, there has not been a lot of availability there, you mentioned more of the production issues are in HERO5, so wondering why we're not seeing some of the standalones available? Where we're not seeing it bundled with Session available. We're also seeing some competitor issues there, is there anything happening industrywide in terms of any component shortages or anything?

I can't speak to other players in the market, we candidly had a couple of issues there and started to get off to a slow start so we are just ramping in. We are going to hopefully catch up.

But it's been a slow start, I don't think we can pin it on a component shortage at this stage, we are doing everything we can to bring that supply up to get to the forecasted demand. It has resulted in limited availability and that has made us focus on our primary H5 Black bundle just to address your question. As we continue to ramp and we continue to get production up, you'll start to see those other variants over time.

Thank you. With no additional questions, I'd like to turn the conference back over to CEO Nick Woodman.

Thank you very much. To close, I want to reiterate some key points in our outlook. GoPro products have never been better and demand is strong. We have deployed a consumer experience that makes GoPro a seamless storytelling solution and we believe the strength of our products will help lead GoPro to double digit revenue growth and full-year profitability in 2017. With that, this is team GoPro signing off.

Thank you ladies and gentlemen, again, that concludes today's conference. Thank you all again for your participation.