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Fitbit Reports Third Quarter Results for the Three Months Ended September 28, 2019

Fitbit, Inc. (NYSE:FIT) today reported revenue of $347 million, GAAP net loss per share of $(0.20), non-GAAP net loss per share of $(0.10), GAAP net loss of $(52) million, non-GAAP net loss of $(27) million, cash used in operations of $(41) million and free cash flow of $(56) million for its third quarter of 2019.

“In Q3 we continued to make good progress shifting our business towards the faster growing smartwatch category with the introduction of Versa 2, expanding Fitbit Health Solutions, and deepening our relationship with consumers with the launch of Premium,” said James Park, co-founder and CEO. “The continued success of the Fitbit brand is built on the trust of our users, and our commitment to strong user privacy and security will not change. I’m excited about the combination of Fitbit and Google and look forward to closing the transaction and further advancing our vision and mission, accelerating innovation in the category and ultimately helping more people around the world get healthier.”

Third Quarter 2019

For the Three Months Ended

For the Nine Months Ended

In millions, except percentages and per share amounts

September 28,
2019

September 29,
2018

September 28,
2019

September 29,
2018

GAAP Results

Revenue

$

347.2

$

393.6

$

932.6

$

940.8

Gross Margin

31.1

%

39.0

%

32.8

%

41.1

%

Net Loss

$

(51.9

)

$

(2.1

)

$

(199.9

)

$

(201.2

)

Net Loss Per Share

$

(0.20

)

$

(0.01

)

$

(0.78

)

$

(0.83)

Non-GAAP Results

Gross Margin

32.0

%

40.1

%

33.9

%

42.2

%

Net Income (Loss)

$

(26.7

)

$

10.0

$

(100.5

)

$

(85.1

)

Net Income (Loss) Per Share

$

(0.10

)

$

0.04

$

(0.39

)

$

(0.35

)

Adjusted EBITDA

$

(19.4

)

$

21.0

$

(93.5

)

$

(81.0

)

Devices Sold

3.5

3.5

10.0

8.4

For additional information regarding the non-GAAP financial measures, see “Non-GAAP Financial Measures” and “Reconciliation of GAAP to Non-GAAP Financial Measures” below. Please note that certain terms used here, including “active user,” “activations,” and “repeat users,” are defined in our Annual Report on Form 10-K for the full year ended December 31, 2018 or our most recently filed Quarterly Report on Form 10-Q.

Third Quarter 2019 Financial Highlights

  • Sold 3.5 million devices. Overall revenue declined 12% year-over-year driven by a 12% decline in pricing and flat year-over-year growth in devices sold. Average selling price per device sold was $96.
  • Smartwatch revenue increased year-over-year and represented 58% of revenue. With no new trackers launched in the third quarter and facing a difficult comparison from the launch of Charge 3 last year, tracker revenue declined and represented 39% of total revenue. Accessory and non-device revenue represented 3% of revenue.
  • Fitbit Health Solutions revenue grew 10% in the quarter, producing $73 million in revenue for the year-to-date period, up 31% year-over-year.
  • Consumer direct business Fitbit.com grew 23% to $27 million.
  • U.S. revenue represented 60% of total revenue or $207 million, down 10% year-over-year.
  • International revenue represented 40% of total revenue and declined 14% to $141 million: APAC revenue grew 19% to $41 million; EMEA revenue declined 20% to $83 million; Americas excluding U.S. revenue declined 33% to $17 million (all on a year-over-year basis).
  • New devices introduced in the past 12 months, Fitbit InspireTM, Fitbit Inspire HRTM, Fitbit Ace 2TM, Fitbit Versa Lite EditionTM, and Fitbit Versa 2 TM represented 61% of revenue.
  • GAAP gross margin was 31.1% and non-GAAP gross margin was 32.0%. Both GAAP and non-GAAP gross margin were negatively impacted by lower average selling prices driven by increased promotions, the mix shift to smartwatches, higher hosting costs, higher warranty costs, and fixed cost de-leveraging.
  • GAAP operating expenses represented 46% of revenue, declining 7% year-over-year to $160 million, and non-GAAP operating expenses represented 41% of revenue, declining 4% year-over-year to $143 million.

Third Quarter and Other 2019 Operational Highlights

  • Active users grew 9% year-over-year.
  • 45% of activations came from repeat users; of the repeat users, 52% came from users who were inactive for 90 days or more. Active users increased year-over-year.
  • Fitbit devices will be expanding to 59 Medicare Advantage plans in 2020 as a fully covered benefit from 42 plans.
  • Fitbit announced two disease detection partnerships, Fibricheck and Bristol-Meyers Squibb Pfizer Alliance, to target chronic condition areas and raise awareness and support from screening to diagnosis for heart rhythm irregularities and atrial fibrillation.
  • Fitbit launched Fitbit Premium, a paid membership in the Fitbit app that uses consumer’s unique data to deliver personalized, actionable guidance. The offering can be purchased separately at $9.99 per month, $79.99 per year, or bundled together with a device.

Fitbit Acquisition by Google

  • On November 1, 2019, Fitbit announced that it had entered into a definitive agreement to be acquired by Google LLC in an all-cash transaction that values the company at a fully diluted equity value of approximately $2.1 billion. Under the terms of the agreement, the company’s stockholders will receive $7.35 per share in cash upon the closing of the transaction. The transaction is expected to close in 2020, subject to customary closing conditions, including approval by Fitbit’s stockholders and regulatory approvals.
  • Due to the pending acquisition by Google, Fitbit does not plan to host an earnings call nor provide forward-looking guidance.

Additional Information and Where to Find It

In connection with the proposed acquisition, Fitbit will file relevant materials with the Securities and Exchange Commission (the “SEC”), including a preliminary and definitive proxy statement. Promptly after filing the definitive proxy statement, Fitbit will mail the definitive proxy statement and a proxy card to the stockholders of Fitbit. FITBIT’S STOCKHOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) CAREFULLY WHEN IT BECOMES AVAILABLE BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED TRANSACTION BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND THE PARTIES TO THE PROPOSED TRANSACTION. Stockholders of Fitbit will be able to obtain a free copy of these documents, when they become available, at the website maintained by the SEC at www.sec.gov or free of charge at www.Fitbit.com.

Additionally, Fitbit will file other relevant materials in connection with the proposed acquisition of Fitbit by Google pursuant to the terms of an Agreement and Plan of Merger, by and among Fitbit, Google and Magnoliophyta Inc. (the “Merger Agreement”). Fitbit and its directors, executive officers and other members of its management and employees, under SEC rules, may be deemed to be participants in the solicitation of proxies of Fitbit stockholders in connection with the proposed acquisition. Stockholders of Fitbit may obtain more detailed information regarding the names, affiliations and interests of certain of Fitbit’s executive officers and directors in the solicitation by reading Fitbit’s most recent Annual Report on Form 10-K, which was filed with the SEC on March 1, 2019 and the proxy statement for Fitbit’s 2019 annual meeting of stockholders, which was filed with the SEC on April 11, 2019. These documents are available free of charge at the SEC’s website at www.sec.gov or by going to Fitbit’s Investor Relations website at www.Fitbit.com. Information concerning the interests of Fitbit’s participants in the solicitation, which may, in some cases, be different than those of Fitbit’s stockholders generally, will be set forth in the definitive proxy statement relating to the proposed transaction when it becomes available.

Forward Looking Statements

This communication contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. In some cases, you can identify these forward-looking statements by the use of terms such as “expect,” “will,” “continue,” or similar expressions, and variations or negatives of these words, but the absence of these words does not mean that a statement is not forward-looking. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, but not limited to: the anticipated continued growth of Fitbit’s community of users; any statements regarding the expected timing of the completion of the transaction; the ability of Google and Fitbit to complete the proposed transaction considering the various conditions to the transaction, some of which are outside the parties’ control, including those conditions related to regulatory approvals; the expected benefits and costs of the proposed transaction; any statements concerning the expected development or competitive performance relating to Fitbit’s products and services; any statements regarding Google’s future intention with Fitbit; any other statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. A number of important factors and uncertainties could cause actual results or events to differ materially from those described in these forward-looking statements, including without limitation: the failure to satisfy any of the conditions to the consummation of the proposed transaction, including the adoption of the Merger Agreement by Fitbit’s stockholders and the receipt of certain governmental and regulatory approvals; the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement; the outcome of any legal proceedings that may be instituted against Fitbit related to the Merger Agreement or the proposed transaction; unexpected costs, charges or expenses resulting from the proposed transaction; the occurrence of a Company Material Adverse Effect (as defined in the Merger Agreement).

Additional risks and uncertainties are included under the caption “Risk Factors” in our Annual Report on Form 10-K for the full year ended December 31, 2018 and our most recently filed Quarterly Report on Form 10-Q which are available on our Investor Relations website at investor.fitbit.com and on the SEC website at www.sec.gov. Once filed with the SEC, additional information will be set forth in our Quarterly Report on Form 10-Q for the quarter ended September 28, 2019. All forward-looking statements contained herein are based on information available to us as of the date hereof and we do not assume any obligation to update these statements as a result of new information or future events. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on such statements.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures in this press release: non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating loss, non-GAAP operating loss before income taxes, non-GAAP net loss, non-GAAP basic/diluted net loss per share, non-GAAP free cash flow, non-GAAP effective tax rate, non-GAAP research and development expenses, non-GAAP sales and marketing expenses, non-GAAP general and administrative expenses, and adjusted EBITDA. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP.

We use non-GAAP measures to internally evaluate and analyze financial results. We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and enable comparison of our financial results with other public companies, many of which present similar non-GAAP financial measures.

There are limitations associated with the use of non-GAAP financial measures as an analytical tool. In particular, many of the adjustments to our GAAP financial measures reflect the exclusion of certain items, specifically stock-based compensation expense, depreciation, amortization of intangible assets, interest income, net, and the related income tax effects of the aforementioned exclusions, that are recurring and will be reflected in our financial results for the foreseeable future. In addition, these measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes. A reconciliation of our non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included in this press release, and investors are encouraged to review the reconciliation.

The following are explanations of the adjustments that are reflected in one or more of our non-GAAP financial measures:

  • Stock-based compensation expense relates to equity awards granted primarily to our employees. We exclude stock-based compensation expense because we believe that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In particular, companies calculate stock-based compensation expense using a variety of valuation methodologies and subjective assumptions.
  • Restructuring costs primarily included severance-related costs. We believe that excluding this expense provides greater visibility to the underlying performance of our business operations, facilitates comparison of our results with other periods, and may also facilitate comparison with the results of other companies in our industry.
  • Litigation expense relates to legal costs incurred due to litigation with Aliphcom, Inc. d/b/a Jawbone. We exclude these expenses because we do not believe they have a direct correlation to the operations of our business and because of the singular nature of the claims underlying the Jawbone litigation matters.
  • Amortization of intangible assets relates to our acquisitions of FitStar, Pebble, Vector and Twine Health. We exclude these amortization expenses because we do not believe they have a direct correlation to the operation of our business.
  • Income tax effect of non-GAAP adjustments relates to the tax effect of the adjustments that we incorporate into non-GAAP financial measures such as stock-based compensation, amortization of intangibles, restructuring and valuation allowance in order to provide a more meaningful measure of non-GAAP net loss.
  • We define free cash flow as net cash provided by (used in) operating activities less purchase of property and equipment. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that can possibly be used for investing in our business and strengthening the balance sheet, but it is not intended to represent the residual cash flow available for discretionary expenditures. Free cash flow is not prepared in accordance with U.S. GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with U.S. GAAP.

About Fitbit, Inc. (NYSE: FIT)

Fitbit helps people lead healthier, more active lives by empowering them with data, inspiration and guidance to reach their goals. Fitbit designs products and experiences that track and provide motivation for everyday health and fitness. Fitbit’s diverse line of innovative and popular products include Fitbit Charge 3™, Fitbit Inspire HR™, Fitbit Inspire™ and Fitbit Ace 2™ activity trackers, as well as the Fitbit Ionic™ and Fitbit Versa™ family of smartwatches, Fitbit Flyer™ wireless headphones, and Fitbit Aria family of smart scales. Fitbit products are carried in approximately 39,000 retail stores and in 100+ countries around the globe. Powered by one of the world’s largest databases of activity, exercise and sleep data and Fitbit’s leading health and fitness social network, the Fitbit platform delivers personalized experiences, insights and guidance through leading software and interactive tools, including the Fitbit and Fitbit Coach apps, and Fitbit OS for smartwatches. Fitbit’s paid subscription service, Fitbit Premium, uses your unique data to deliver actionable guidance and coaching in the Fitbit app to help you reach your health and fitness goals. Fitbit Health Solutions develops health and wellness solutions designed to help increase engagement, improve health outcomes, and drive a positive return for employers, health plans and health systems.

Fitbit and the Fitbit logo are trademarks or registered trademarks of Fitbit, Inc. in the U.S. and other countries. Additional Fitbit trademarks can be found at www.fitbit.com/legal/trademark-list. Third-party trademarks are the property of their respective owners.

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FITBIT, INC.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(unaudited)

 

Three Months Ended

Nine Months Ended

September 28, 2019

September 29, 2018

September 28, 2019

September 29, 2018

Revenue

$

347,200

$

393,575

$

932,646

$

940,784

Cost of revenue

239,248

240,061

627,027

554,132

Gross profit

107,952

153,514

305,619

386,652

Operating expenses:

Research and development

65,693

79,840

213,651

256,223

Sales and marketing

71,296

66,676

222,972

239,573

General and administrative

23,083

24,812

74,640

91,111

Total operating expenses

160,072

171,328

511,263

586,907

Operating loss

(52,120

)

(17,814

)

(205,644

)

(200,255

)

Interest income, net

2,388

2,072

8,476

5,599

Other income (expense), net

(492

)

(5,141

)

1,242

(2,366

)

Loss before income taxes

(50,224

)

(20,883

)

(195,926

)

(197,022

)

Income tax expense (benefit)

1,669

(18,827

)

3,950

4,179

Net loss

$

(51,893

)

$

(2,056

)

$

(199,876

)

$

(201,201

)

Net loss per share:

Basic

$

(0.20

)

$

(0.01

)

$

(0.78

)

$

(0.83

)

Diluted

$

(0.20

)

$

(0.01

)

$

(0.78

)

$

(0.83

)

Shares used to compute net loss per share:

Basic

258,753

245,838

256,046

242,746

Diluted

258,753

245,838

256,046

242,746

FITBIT, INC.

Condensed Consolidated Balance Sheets

(In thousands)

(unaudited)

September 28, 2019

December 31, 2018

Assets

Current assets:

Cash and cash equivalents

$

287,431

$

473,956

Marketable securities

214,817

249,493

Accounts receivable, net

345,562

414,209

Inventories

245,096

124,871

Income tax receivable

965

6,957

Prepaid expenses and other current assets

33,376

42,325

Total current assets

1,127,247

1,311,811

Property and equipment, net

88,232

106,286

Operating lease right-of use-assets

71,529

Goodwill

60,979

60,979

Intangible assets, net

17,519

23,620

Deferred tax assets

3,925

4,489

Other assets

7,170

8,362

Total assets

$

1,376,601

$

1,515,547

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

263,181

$

251,657

Accrued liabilities

365,812

437,234

Operating lease liabilities

23,313

Deferred revenue

28,076

29,400

Income taxes payable

986

1,092

Total current liabilities

681,368

719,383

Long-term deferred revenue

6,174

7,436

Long-term operating lease liabilities

70,202

Other liabilities

29,883

52,790

Total liabilities

787,627

779,609

Stockholders’ equity:

Class A and Class B common stock

26

25

Additional paid-in capital

1,107,659

1,055,046

Accumulated other comprehensive income (loss)

232

(66

)

Accumulated deficit

(518,943

)

(319,067

)

Total stockholders’ equity

588,974

735,938

Total liabilities and stockholders’ equity

$

1,376,601

$

1,515,547

FITBIT, INC.

Condensed Consolidated Statements of Cash Flow

(In thousands)

(unaudited)

Three Months Ended

Nine Months Ended

September 28,
2019

September 29,
2018

September 28,
2019

September 29,
2018

Cash Flows from Operating Activities

Net loss

$

(51,893

)

$

(2,056

)

$

(199,876

)

$

(201,201

)

Adjustments to reconcile net loss to net cash used in operating activities:

Provision for doubtful accounts

(19

)

41

29

37

Provision for inventory obsolescence

1,041

1,005

5,163

9,019

Depreciation

13,109

11,816

43,215

35,388

Non-cash lease expense

6,346

17,961

Write-off of property and equipment

(1

)

28

169

7,513

Amortization of intangible assets

1,979

2,061

6,100

5,866

Stock-based compensation

18,084

24,115

59,175

73,613

Deferred income taxes

484

(391

)

618

(1,690

)

Impairment of equity investment

6,000

6,000

Other

(212

)

(278

)

(50

)

(693

)

Changes in operating assets and liabilities, net of acquisition:

Accounts receivable

(86,944

)

(83,968

)

68,617

80,227

Inventories

(84,317

)

(55,847

)

(125,500

)

(80,064

)

Prepaid expenses and other assets

(2,135

)

85,732

11,872

123,356

Fitbit force recall reserve

106

(104

)

242

(395

)

Accounts payable

112,343

80,541

11,826

16,357

Accrued liabilities and other liabilities

37,095

6,220

(61,005

)

(67,813

)

Lease liabilities

(7,398

)

(20,975

)

Deferred revenue

889

(26

)

(2,586

)

(9,649

)

Income taxes payable

407

(16,148

)

(107

)

5,653

Net cash provided by (used in) operating activities

(41,036

)

58,741

(185,112

)

1,524

Cash Flows from Investing Activities

Purchase of property and equipment

(15,450

)

(11,650

)

(26,277

)

(40,174

)

Purchases of marketable securities

(67,474

)

(60,174

)

(287,969

)

(284,986

)

Sales of marketable securities

19,250

2,016

93,020

Maturities of marketable securities

82,703

72,748

322,132

309,323

Acquisition, net of cash acquired

(2,625

)

(2,625

)

(13,646

)

Net cash provided by (used in) investing activities

(2,846

)

20,174

7,277

63,537

Cash Flows from Financing Activities

Repayment of debt

(747

)

Financing lease

(1,302

)

(2,239

)

Proceeds from issuance of common stock

232

903

7,044

11,641

Taxes paid related to net share settlement of restricted stock units

(2,846

)

(5,697

)

(13,495

)

(15,684

)

Net cash used in financing activities

(3,916

)

(4,794

)

(8,690

)

(4,790

)

Net increase (decrease) in cash and cash equivalents

(47,798

)

74,121

(186,525

)

60,271

Cash and cash equivalents at beginning of period

335,229

328,116

473,956

341,966

Cash and cash equivalents at end of period

$

287,431

$

402,237

$

287,431

$

402,237

FITBIT, INC.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except percentages and per share amounts)

(unaudited)

Three Months Ended

Nine Months Ended

September 28,
2019

September 29,
2018

September 28,
2019

September 29,
2018

Non-GAAP gross profit:

GAAP gross profit

$

107,952

$

153,514

$

305,619

$

386,652

Stock-based compensation expense

1,446

1,999

4,397

5,129

Impact of restructuring

190

Intangible assets amortization

1,773

2,304

5,480

5,336

Non-GAAP gross profit

$

111,171

$

157,817

$

315,686

$

397,117

Non-GAAP gross margin (as a percentage of revenue):

GAAP gross margin

31.1

%

39.0

%

32.8

%

41.1

%

Stock-based compensation expense

0.4

0.5

0.5

0.5

Intangible assets amortization

0.5

0.6

0.6

0.6

Non-GAAP gross margin

32.0

%

40.1

%

33.9

%

42.2

%

Non-GAAP research and development:

GAAP research and development

$

65,693

$

79,840

$

213,651

$

256,223

Stock-based compensation expense

(10,557

)

(14,097

)

(34,437

)

(43,858

)

Impact of restructuring

(1,550

)

Non-GAAP research and development

$

55,136

$

65,743

$

177,664

$

212,365

Non-GAAP sales and marketing expense:

GAAP sales and marketing

$

71,296

$

66,676

$

222,972

$

239,573

Stock-based compensation expense

(2,587

)

(3,638

)

(8,900

)

(10,996

)

Impact of restructuring

(589

)

Intangible assets amortization

(135

)

315

(406

)

(316

)

Non-GAAP sales and marketing

$

68,574

$

63,353

$

213,077

$

228,261

Non-GAAP general and administrative expense:

GAAP general and administrative

$

23,083

$

24,812

$

74,640

$

91,111

Stock-based compensation expense

(3,494

)

(4,381

)

(11,441

)

(13,630

)

Litigation expense

(765

)

Impact of restructuring

(129

)

Intangible assets amortization

(71

)

(71

)

(214

)

(214

)

Non-GAAP general and administrative

$

19,518

$

20,360

$

62,856

$

76,502

Non-GAAP operating expenses:

GAAP operating expenses

$

160,072

$

171,328

$

511,263

$

586,907

Stock-based compensation expense

(16,638

)

(22,116

)

(54,778

)

(68,484

)

Litigation expense

(765

)

Impact of restructuring

(2,268

)

Intangible assets amortization

(206

)

244

(620

)

(530

)

Non-GAAP operating expenses

$

143,228

$

149,456

$

453,597

$

517,128

FITBIT, INC.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except percentages and per share amounts)

(unaudited)

Three Months Ended

Nine Months Ended

September 28,
2019

September 29,
2018

September 28,
2019

September 29,
2018

Non-GAAP operating income (loss) and income (loss) before income taxes:

GAAP operating loss

$

(52,120

)

$

(17,814

)

$

(205,644

)

$

(200,255

)

Stock-based compensation expense

18,084

24,115

59,175

73,613

Litigation expense

765

Impact of restructuring

2,458

Intangible assets amortization

1,979

2,060

6,100

5,866

Non-GAAP operating income (loss)

(32,057

)

8,361

(137,911

)

(120,011

)

Interest income, net

2,388

2,072

8,476

5,599

Other income (expense), net

(492

)

(5,141

)

1,242

(2,366

)

Non-GAAP income (loss) before income taxes

$

(30,161

)

$

5,292

$

(128,193

)

$

(116,778

)

Non-GAAP net income (loss) and net income (loss) per share:

Net loss

$

(51,893

)

$

(2,056

)

$

(199,876

)

$

(201,201

)

Stock-based compensation expense

18,084

24,115

59,175

73,613

Litigation expense

765

Impact of restructuring

2,458

Impairment of equity investment

6,000

6,000

Intangible assets amortization

1,979

2,060

6,100

5,866

Income tax effect of non-GAAP adjustments

5,141

(20,077

)

31,615

29,810

Non-GAAP net income (loss)

$

(26,689

)

$

10,042

$

(100,528

)

$

(85,147

)

GAAP diluted shares

258,753

245,838

256,046

242,746

Other dilutive equity awards

14,509

Non-GAAP diluted shares

258,753

260,347

256,046

242,746

Non-GAAP diluted net income (loss) per share

$

(0.10

)

$

0.04

$

(0.39

)

$

(0.35

)

Free cash flow:

Net cash provided by (used in) operating activities

$

(41,036

)

$

58,741

$

(185,112

)

$

1,524

Purchases of property and equipment

(15,450

)

(11,650

)

(26,277

)

(40,174

)

Free cash flow

$

(56,486

)

$

47,091

$

(211,389

)

$

(38,650

)

Net cash provided by (used in) investing activities

$

(2,846

)

$

20,174

$

7,277

$

63,537

Net cash used in financing activities

$

(3,916

)

$

(4,794

)

$

(8,690

)

$

(4,790

)

FITBIT, INC.

Reconciliation of GAAP to Non-GAAP Financial Measures

(In thousands, except percentages and per share amounts)

(unaudited)

Three Months Ended

Nine Months Ended

September 28,
2019

September 29,
2018

September 28,
2019

September 29,
2018

Adjusted EBITDA:

Net loss

$

(51,893

)

$

(2,056

)

$

(199,876

)

$

(201,201

)

Stock-based compensation expense

18,084

24,115

59,175

73,613

Litigation expense

765

Impact of restructuring

2,458

Impairment of equity investment

6,000

6,000

Depreciation and intangible assets amortization

15,089

13,877

49,314

41,254

Interest income, net

(2,388

)

(2,072

)

(8,476

)

(5,599

)

Income tax expense (benefit)

1,669

(18,827

)

3,950

4,179

Adjusted EBITDA

$

(19,439

)

$

21,037

$

(93,455

)

$

(80,989

)

Stock-based compensation expense:

Cost of revenue

$

1,446

$

1,999

$

4,397

$

5,129

Research and development

10,557

14,097

34,437

43,858

Sales and marketing

2,587

3,638

8,900

10,996

General and administrative

3,494

4,381

11,441

13,630

Total stock-based compensation expense

$

18,084

$

24,115

$

59,175

$

73,613

FITBIT, INC.

Revenue by Geographic Region

(In thousands)

(unaudited)

Three Months Ended

Nine Months Ended

September 28,
2019

September 29,
2018

September 28,
2019

September 29,
2018

United States

$

206,654

$

230,171

$

522,607

$

552,118

Americas, excluding United States

16,722

24,799

51,227

56,737

Europe, Middle East, and Africa

82,951

104,186

257,612

234,693

APAC

40,873

34,419

101,200

97,236

Total

$

347,200

$

393,575

$

932,646

$

940,784

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