Financial statements go pro(1)-3

Financial Statements

GOPRO

Provide an overview of GoPro.

Discuss fi nancial statements and analysis.

TODAY’S OBJECTIVES

GOPRO PRODUCTS

GoPro – NHL [for my hockey fans, this one is brand new] https://www.youtube.com/watch?v=F1jpCBPiWS4

GoPro: Red Bull Stratos - Super Bowl Commercial 2014 https://www.youtube.com/watch?v=qEsIMp67pyM

GoPro: HERO3 https://www.youtube.com/watch?v=A3PDXmYoF5U

Red Bull 2013 https://www.youtube.com/watch?v=LZaQqouGMdc

VW http://www.autoblog.com/2014/06/03/2015-vw-gti-makes-movie-

magic-gopro-video/

GOPRO VIDEOS

COMPANY FINANCIAL ANALYSIS

Company introduction What does the company do?

Company SWOT analysis What are its strengths, weaknesses, opportunities, threats?

Industry analysis What is the company’s industry? What is the industry’s outlook?

Financial summary What are the company’s assets, liabilities, equity? What are its revenues, expenses, profits?


Financial projections What are the company’s future assets, liabilities, and

equity? What are its future revenues, expenses, profits?

Company outlook What is the company’s “next big thing”? How can it break away from its competitors?

Investment potential Is this company a worthwhile investment? Would you spend $1,000 on this company? Is this a Desert Island Challenge company?


COMPANYOVERVIEW

Provide financial details about a company 10K: annual report 10Q: quarterly report

Details come from company’s accounting records

Use generally accepted accounting principles (GAAP) American Institute of Certified Public Accountants (AICPA) Financial Accounting Standards Board (FASB) Securities and Exchange Commission (SEC)

FINANCIAL STATEMENTS

“Transforming the way consumers capture, manage, share, and enjoy meaningful life experiences”

Originally created for athletes playing sports

Has since become more pervasive with mainstream consumer and professional use

COMPANY OVERVIEW

1. CAPTURE Using mountable, wearable cameras and accessories Sold 8.5 million HD cameras since 2009, 3.8 million in 2013 Product sales in 100 countries, 25,000 retail stores #1 selling camcorder in the U.S., 45% market share

BUSINESS FOCUS

2. MANAGE “Seek to eliminate the pain point of managing content” GoPro Studio - desktop application, GoPro App Since March 2014, over 4.3 million downloads of GoPro

Studio Average of 20,000 videos per day using desktop application

BUSINESS FOCUS

3. SHARE Encourage sharing of videos through Facebook, Instagram,

YouTube Users share homemade videos, offi cial GoPro content In 2013, “2.8 years worth of video on YouTube” First three months of 2014, 6,000 videos posted daily

BUSINESS FOCUS

4. ENJOY Focus on “GoPro programming” - user, GoPro content Use content to interact with current and future customers Facebook 7.2 million likes, Instagram > 2 million followers No revenue generation to-date from social media

BUSINESS FOCUS

STRATEGIC PLANS

1. Invest in research & development, create and introduce new products

2. Increase sales and marketing activities

3. Promote media content

4. Expand into new markets

5. Combat sales seasonality

Products used by ESPN, Discovery Channel, other TV producers

Product endorsements with 120 athletes, celebrities, entertainers Shaun White, Kelly Slater,

Foo Fighters, Guy Fieri, Alton Brown

Partnerships with Red Bull, Vail and Whistler resorts

MARKETING FOCUS

http://www.cbsnews.com/news/gopro-ceo-heads-to-wall-street/

GOPRO ON “SIXTY MINUTES”

Strengths “Aspirational” company and products Customers make multiple purchases Viral nature of content - free word-of-

mouth advertising and marketing “Virtuous cycle” with “category-

definer”

Weaknesses Dependent on one product line Heavy use of third-party

manufacturers CEO Woodman, driver of business

SWOT ANALYSIS

Opportunities Continue market growth through

new products, sponsorships Focus on becoming a media brand

through partnerships (e.g., Xbox) Grow in-store brand, international

Threats Highly competitive market with

possibility of copycat, new products

Reliance on third-party suppliers Litigation - patents, user safety Dependent on international sales

(53%), holiday sales (45% in 4Q)

SWOT ANALYSIS

Sold 17,800,000 shares at $24 per share

Half of these shares belonged to GoPro, other part to original investors

Expected proceeds of $201M to each group

Planned use of proceeds Pay off some existing debt Invest in new businesses

and technologies

INITIAL PUBLIC OFFERING

STOCK PRICE

Company outlook What is the company’s “next big thing”? How can it break away from its competitors?

Investment potential Is this company a worthwhile investment? Would you spend $1,000 on this company? Why or why not? Is this a Desert Island Challenge company? Why or why not?

WEEK #3WEEKLY RESPONSE QUESTIONS

Financial Statements

GOPRO

Provide financial details about a company 10K: annual report 10Q: quarterly report

Details come from company’s accounting records

Use generally accepted accounting principles (GAAP) American Institute of Certified Public Accountants (AICPA) Financial Accounting Standards Board (FASB) Securities and Exchange Commission (SEC)



Income statement Profit or loss earned over a period Periods between “snapshots”

Balance sheet Current financial “snapshot”

Statement of cash flows Changes in cash status over time

INCOME STATEMENT

INCOME STATEMENT

Indicates profi t or loss earnedReflects periods between balance sheets

Statement divided into parts Operating revenues, expenses Non-operating revenues, expenses

INCOME = REVENUES - EXPENSES

GOPRO INCOME STATEMENT

($ millions) 2014 (est) 2013 2012 2011

Revenue 943 986 526 234Cost of Revenue 557 624 299 112Gross Profit 386 362 227 123

ExpensesResearch & Development 115 74 36 9Sales & Marketing 165 158 117 64General & Administrative 40 32 21 11Other Expenses 7 7 0 0Total Operating Expenses 326 270 174 84

Operating Income 60 91 53 39

Taxes 16 31 21 14Net Income 44 61 32 25

OPERATING REVENUES & EXPENSES

Revenues: exchange of goods, services Money coming into the business Sales of tickets, merchandise; sponsorships GoPro: sales of cameras and accessories

Expenses: costs incurred to earn revenue Money going out of the business Salaries, sales & marketing, R&D Cost of goods sold: production, distribution GoPro: third-party manufacturers, logistics,

warranties

NET INCOME

Revenues (or Sales)- Cost of Goods Sold= Gross Profit

- Operating Expenses- Other Expenses+ Other Income= Income before Income Taxes

- Income Tax Expense= Net Income

GOPRO INCOME STATEMENT

($ millions) 2014 (est) 2013 2012 2011

Revenue 943 986 526 234Cost of Revenue 557 624 299 112Gross Profit 386 362 227 123

ExpensesResearch & Development 115 74 36 9Sales & Marketing 165 158 117 64General & Administrative 40 32 21 11Other Expenses 7 7 0 0Total Operating Expenses 326 270 174 84

Operating Income 60 91 53 39

Taxes 16 31 21 14Net Income 44 61 32 25

BALANCE SHEET

BALANCE SHEET OVERVIEW

Reflects current financial status

Statement divided in half Left-hand (or top half): Assets Right-hand (or bottom half): Liabilities, Equity

ASSETS = LIABILITIES + EQUITY

GOPRO BALANCE SHEET

($million)

Assets Liabilities & EquityCash & Short-Term Investments 111 Accounts Payable 56Accounts Receivable, Net 47 Accrued Liabilities 70Inventory 90 Deferred Revenue 9Other Current Assets 25 Income Tax Payable 9Total Current Assets 273 Other Current Liabilities 63

Total Current Liabilities 206Property, Plant, Equipment, Net 34Intangibles and Goodwill 17 Total Long-Term Debt 61Other Long-Term Assets 31Total Long-Term Assets 82 Preferred & Common Stock 77

Paid-In Capital 19Total Assets 355 Accumulated Deficit -9

Total Equity 88

Total Liabilities & Equity 355

ASSETS

Listed based on time to convert to cash Current assets - can be converted in less than one

year Fixed assets - will take more than one year to

convert Goodwill, intangible assets

Assets reveal several factors Nature of business Nature of industry Financing, operating decisions

GOPRO ASSETS

($million)

AssetsCash & Short-Term Investments 111Accounts Receivable, Net 47Inventory 90Other Current Assets 25Total Current Assets 273

Property, Plant, Equipment, Net 34Intangibles and Goodwill 17Other Long-Term Assets 31Total Long-Term Assets 82

Total Assets 355

CURRENT ASSETS

Cash & cash equivalents Bank deposits Investments maturing < 3 months

Accounts (or trades) receivable, net Sales of goods or services Pending customer collection Allowance for doubtful accounts GoPro: sales to independent, big box retailers

CURRENT ASSETS

Inventories, net Raw and in process, finished goods Reserves for shrinkage, obsolescence GoPro: cameras, accessories from manufacturers

Shrinkage Loss of products due to theft, deterioration

Obsolescence Loss of value as products no longer desirable

GOPRO ASSETS

($million)



Total Assets 355

FIXED ASSETS

Property, plant, & equipment, net Buildings, stadiums, warehouses Net of depreciation

Depreciation Decline in value of fixed assets over time

Equity or real estate investments Land parcels for future use

INTANGIBLE ASSETS

Intangible assets, net Software, trademarks, licensing agreements Net of amortization

Amortization Decline in value of intangible assets over time E.g., Microsoft Offi ce 2010 versus 2003

GOODWILL

Goodwill “Excess of business acquisition costs over fair

value of net assets acquired” “Cost in excess of fair value of assets”

E.g., Disney versus Kings Island E.g., Coca-Cola versus Sam’s Cola

GOPRO ASSETS

($million)



Total Assets 355

GOPRO LIABILITIES & EQUITY

($million)

Liabilities & EquityAccounts Payable 56Accrued Liabilities 70Deferred Revenue 9Income Tax Payable 9Other Current Liabilities 63Total Current Liabilities 206

Total Long-Term Debt 61

Preferred & Common Stock 77Paid-In Capital 19Accumulated Deficit -9Total Equity 88


LIABILITIES & EQUITY

Listed based on when payment due Current liabilities - must pay in less than one year Long-term liabilities - have more than one year to pay Stockholders’ equity

Liabilities and equity reveal several factors Nature of business Nature of industry Financing, operating decisions


($million)





CURRENT LIABILITIES

Accounts (or trades) payable Payment owed to vendors Salary contracts: current period

Accrued liabilities Wages payable Rent payable Property taxes


($million)





LONG-TERM DEBT

Letters of credit Like a credit card--with a much larger balance Single bank or syndicate financial backing

Subordinated notes Funding for capital projects Lower repayment priority


($million)





EQUITY

Stock Common stock: voting shares Preferred stock: dividend priority

Paid-in capital Initial investment in company

Retained earnings Net income not distributed

GOPRO BALANCE SHEET

($million)

Assets Liabilities & EquityCash & Short-Term Investments 111 Accounts Payable 56Accounts Receivable, Net 47 Accrued Liabilities 70Inventory 90 Deferred Revenue 9Other Current Assets 25 Income Tax Payable 9Total Current Assets 273 Other Current Liabilities 63

Total Current Liabilities 206Property, Plant, Equipment, Net 34Intangibles and Goodwill 17 Total Long-Term Debt 61Other Long-Term Assets 31Total Long-Term Assets 82 Preferred & Common Stock 77

Paid-In Capital 19Total Assets 355 Accumulated Deficit -9

Total Equity 88


Financial summary What are the company’s assets, liabilities, equity? What are its revenues, expenses, profits? What is your assessment of the company based on these

numbers?

Investment potential What is the current stock price? Beta? 52-week high and

low? How would you evaluate these numbers? Based on what you now know, is this company a worthwhile

investment? Why or why not?

WEEK #4WEEKLY RESPONSE QUESTIONS

Documents

Financial statements go pro(1)-3