0001500435-21-000058.txt : 20210805 0001500435-21-000058.hdr.sgml : 20210805 20210805170228 ACCESSION NUMBER: 0001500435-21-000058 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 81 CONFORMED PERIOD OF REPORT: 20210630 FILED AS OF DATE: 20210805 DATE AS OF CHANGE: 20210805 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GoPro, Inc. CENTRAL INDEX KEY: 0001500435 STANDARD INDUSTRIAL CLASSIFICATION: PHOTOGRAPHIC EQUIPMENT & SUPPLIES [3861] IRS NUMBER: 770629474 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-36514 FILM NUMBER: 211149295 BUSINESS ADDRESS: STREET 1: 3025 CLEARVIEW WAY CITY: SAN MATEO STATE: CA ZIP: 94402 BUSINESS PHONE: 650-332-7600 MAIL ADDRESS: STREET 1: 3025 CLEARVIEW WAY CITY: SAN MATEO STATE: CA ZIP: 94402 FORMER COMPANY: FORMER CONFORMED NAME: Woodman Labs, Inc. DATE OF NAME CHANGE: 20100901 10-Q 1 gpro-20210630.htm 10-Q gpro-20210630
GPRO000150043512/3110-Q6/30/20212021Q2FALSEClass A common stock, $0.0001 par valueNASDAQ Global Select MarketDelaware77-06294743025 Clearview WaySan Mateo,California94402(650)332-7600126,408,29727,666,296false0.50.812.512234.167.373.015.0Stockholders’ equity
Common stock. The Company has two classes of authorized common stock: Class A common stock with 500 million shares authorized and Class B common stock with 150 million shares authorized. As of June 30, 2021, 126.2 million shares of Class A stock were issued and outstanding and 27.9 million shares of Class B stock were issued and outstanding. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting power and conversion rights. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to ten votes per share. Each share of Class B common stock is convertible at any time at the option of the stockholder into one share of Class A common stock and has no expiration date. The Class B common stock is also convertible into Class A common stock on the same basis upon any transfer, whether or not for value, except for “permitted transfers” as defined in the Company’s restated certificate of incorporation. Each share of Class B common stock will convert automatically into one share of Class A common stock upon the date when the outstanding shares of Class B common stock represent less than 10% of the aggregate number of shares of common stock then outstanding. As of June 30, 2021, the Class B stock continued to represent greater than 10% of the overall outstanding shares.
The Company had the following shares of common stock reserved for issuance upon the exercise of equity instruments as of June 30, 2021:
(in thousands)
June 30, 2021
Stock options outstanding
3,431 
Restricted stock units outstanding
10,639 
Performance stock units outstanding
1,319 
Common stock available for future grants
32,795 
Total common stock shares reserved for issuance48,184 
500150126.2126.227.927.9onetenoneone3,43110,6391,31932,79548,184P1YP2Y10010041.41.44.0126.15.4-6.10.50.50.570,57228,233110,3188,6159,1632,643107,675164522,82184481754,3944,8764,3951,748248503363750333891,35913,01121.04,00521.022,61221.016,76727.14,71724.742,77239.75,0108.13,94920.73,2853.16961.11,7319.110,97410.26821.11,8729.82,9972.89,6879.018,69417.43,5385.75,12326.85,9965.61230.23051.63,7863.55390.9240.15280.623.21,3591.3285.023.2177,987163,83279,69475,6245,1925,7102,4924,1505,4535,38414,10416,60211,68719,493296,609290,795287,276277,6939,33313,1021,1127,25512,2388,36712,238966864287.316.87.2680.2239.7234.745.842.9680.28.11.715.312.517.313.027,17832,55658,5842,5412504831,6814453,9295,62826,95627,47127,17832,5561,05945019,1656,3611,8821187,279128,0731,7971,797145,322Restructuring charges
Restructuring charges for each period were as follows:
Year ended December 31,
(in thousands)
202120202019
Cost of revenue
$33 $332 $1,379 
Research and development
287 2,500 12,794 
Sales and marketing
201 7,215 5,291 
General and administrative
109 1,240 3,279 
Total restructuring charges
$630 $11,287 $22,743 
Second quarter 2020 restructuring plan
On April 14, 2020, the Company approved a restructuring plan to reduce future operating expenses, optimize its business model and address the impact of the COVID-19 pandemic. The restructuring provided for a reduction of the Company’s global workforce by approximately 20% and the consolidation of certain leased office facilities. Under the second quarter 2020 restructuring plan, the Company recorded restructuring charges of $25.5 million, including a $12.5 million right-of-use asset impairment primarily related to its headquarters campus, $7.3 million related to severance, and $5.8 million related to accelerated depreciation and other charges.
The Company ceased using a portion of its headquarters campus in the third quarter of 2020 as part of the second quarter 2020 restructuring plan. The unused portion of the Company’s headquarters campus has its own identifiable expenses and is not dependent on other parts of the Company, and thus was considered its own asset group. As a result, the Company impaired a part of the carrying value of the related right-of-use asset to its estimated fair value using the discounted future cash flows method. The discounted future cash flows were determined based on future sublease rental rates, future sublease market conditions and a discount rate based on the weighted-average cost of capital. Based on the results of the Company’s assessment, the Company recognized a $12.3 million impairment, which was reflected as a restructuring expense, primarily in the operating expense financial statement line items in the Condensed Consolidated Statements of Operations.
The following table provides a summary of the Company’s restructuring activities and the movement in the related liabilities recorded in accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets under the second quarter 2020 restructuring plan.
(in thousands)
Severance
Other
ROU Asset Impairment
Total
Restructuring liability as of December 31, 2019
$— $— $— $— 
Restructuring charges
7,287 5,800 12,460 25,547 
Cash paid
(7,238)(1,592)— (8,830)
Non-cash reductions
— (4,169)(12,460)(16,629)
Restructuring liability as of December 31, 2020$49 $39 $— $88 
First quarter 2017 restructuring plan
On March 15, 2017, the Company approved a restructuring plan to reduce future operating expenses and further align resources around its long-term business strategy. The restructuring provided for a reduction of the Company’s global workforce by approximately 17% and the consolidation of certain leased office facilities. Under the first quarter 2017 restructuring plan, the Company recorded restructuring charges of $23.1 million, including $10.3 million related to severance, and $12.8 million related to accelerated depreciation and other charges. The actions associated with the first quarter 2017 restructuring plan were substantially completed by the fourth quarter of 2017.
The following table provides a summary of the Company’s restructuring activities and the movement in the related liabilities recorded in accrued expenses and other current liabilities, and other long-term liabilities on the Condensed Consolidated Balance Sheets under the first quarter 2017 restructuring plan.
(in thousands)
Severance
Other
Total
Restructuring liability as of December 31, 2017— 3,550 3,550 
Restructuring charges (1)
— 4,783 4,783 
Cash paid
— (3,293)(3,293)
Non-cash charges
— 627 627 
Restructuring liability as of December 31, 2018
— 5,667 5,667 
Restructuring charges (1)
— 1,395 1,395 
Cash paid
— (2,257)(2,257)
Non-cash reductions
— (335)(335)
Restructuring liability as of December 31, 2019$— $4,470 $4,470 
Restructuring charges (1)
— (57)(57)
Cash paid
— (3,559)(3,559)
Restructuring liability as of December 31, 2020$— $854 $854 
(1)     Includes lease termination charges, which is included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheets, and totaled $0.9 million as of June 30, 2021.
Restructuring charges for each period were as follows:
Year ended December 31,
(in thousands)
202120202019
Cost of revenue
$33 $332 $1,379 
Research and development
287 2,500 12,794 
Sales and marketing
201 7,215 5,291 
General and administrative
109 1,240 3,279 
Total restructuring charges
$630 $11,287 $22,743 
333321,3792872,50012,7942017,2155,2911091,2403,27963011,28722,7432025.512.57.35.812.37,2875,80012,46025,5477,2381,5928,8304,16912,46016,6294939881723.110.312.8
The following table provides a summary of the Company’s restructuring activities and the movement in the related liabilities recorded in accrued expenses and other current liabilities, and other long-term liabilities on the Condensed Consolidated Balance Sheets under the first quarter 2017 restructuring plan.
(in thousands)
Severance
Other
Total
Restructuring liability as of December 31, 2017— 3,550 3,550 
Restructuring charges (1)
— 4,783 4,783 
Cash paid
— (3,293)(3,293)
Non-cash charges
— 627 627 
Restructuring liability as of December 31, 2018
— 5,667 5,667 
Restructuring charges (1)
— 1,395 1,395 
Cash paid
— (2,257)(2,257)
Non-cash reductions
— (335)(335)
Restructuring liability as of December 31, 2019$— $4,470 $4,470 
Restructuring charges (1)
— (57)(57)
Cash paid
— (3,559)(3,559)
Restructuring liability as of December 31, 2020$— $854 $854 
3,5503,5504,7834,7833,2933,2936276275,6675,6671,3951,3952,2572,2573353354,4704,47057573,5593,5598548540.9
VALUATION AND QUALIFYING ACCOUNTS
For the year ended December 31, 2021, 2020 and 2019
(in thousands)Balance at Beginning of YearCharges to RevenueCharges (Benefits) to ExpenseCharges to Other Accounts - EquityDeductions/Write-offsBalance at End of Year
Allowance for doubtful accounts receivable:
Year ended June 30, 2021$830 $— $(24)$— $(314)$492 
Year ended June 30, 2020500 — 616 — (286)830 
Year ended December 31, 2019750 — 199 — (449)500 
Valuation allowance for deferred tax assets:
Year ended June 30, 2021$277,693 $— $16,762 $(7,179)$— $287,276 
Year ended June 30, 2020271,374 — 4,717 1,602 — 277,693 
Year ended December 31, 2019226,458 — 42,772 2,144 — 271,374 
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0

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
þ        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
OR
        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________

Commission file number: 001-36514
gpro-20210630_g1.jpg
GOPRO, INC.
(Exact name of registrant as specified in its charter)
Delaware77-0629474
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
3025 Clearview Way
San Mateo, California94402
(Address of principal executive offices)(Zip Code)
(650)332-7600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, $0.0001 par valueGPRONASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes þ    No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes þ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer        þ                        Smaller reporting company        ☐
Accelerated filer             ☐                        Emerging growth company        ☐
Non-accelerated filer        ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of August 2, 2021, 126,408,297 and 27,666,296 shares of Class A and Class B common stock were outstanding, respectively.


1


GoPro, Inc.
Index

2


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GoPro, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except par values)
June 30, 2021December 31, 2020
Assets
Current assets:
Cash and cash equivalents
$285,806 $325,654 
Restricted cash 2,000 
Marketable securities
32,889  
Accounts receivable, net
96,471 107,244 
Inventory
106,751 97,914 
Prepaid expenses and other current assets
28,763 23,872 
Total current assets
550,680 556,684 
Property and equipment, net
20,519 23,711 
Operating lease right-of-use assets
29,114 31,560 
Intangible assets, net
203 1,214 
Goodwill
146,459 146,459 
Other long-term assets
10,969 11,771 
Total assets
$757,944 $771,399 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$86,076 $111,399 
Accrued expenses and other current liabilities
108,018 113,776 
Short-term operating lease liabilities
9,126 9,369 
Deferred revenue
32,631 28,149 
Short-term debt
118,087  
Total current liabilities
353,938 262,693 
Long-term taxes payable
5,573 18,099 
Long-term debt
107,680 218,172 
Long-term operating lease liabilities
47,609 51,986 
Other long-term liabilities
4,979 4,431 
Total liabilities
519,779 555,381 
Commitments, contingencies and guarantees (Note 8)


Stockholders’ equity:
Preferred stock, $0.0001 par value, 5,000 shares authorized; none issued
  
Common stock and additional paid-in capital, $0.0001 par value, 500,000 Class A shares authorized, 126,184 and 122,233 shares issued and outstanding, respectively; 150,000 Class B shares authorized, 27,866 and 28,885 shares issued and outstanding, respectively
995,510 980,147 
Treasury stock, at cost, 10,710 and 10,710 shares, respectively
(113,613)(113,613)
Accumulated deficit
(643,732)(650,516)
Total stockholders’ equity
238,165 216,018 
Total liabilities and stockholders’ equity
$757,944 $771,399 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3


GoPro, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
Three months ended June 30,Six months ended June 30,
(in thousands, except per share data)
2021202020212020
Revenue
$249,586 $134,246 $453,266 $253,646 
Cost of revenue
150,304 93,554 275,288 174,527 
Gross profit
99,282 40,692 177,978 79,119 
Operating expenses:
Research and development
37,800 34,558 70,230 66,839 
Sales and marketing
35,670 34,965 71,460 78,467 
General and administrative
16,310 16,083 30,298 34,841 
Total operating expenses
89,780 85,606 171,988 180,147 
Operating income (loss)9,502 (44,914)5,990 (101,028)
Other income (expense):
Interest expense
(5,532)(4,671)(11,412)(9,514)
Other income (expense), net1,312 (321)1,755 (493)
Total other expense, net
(4,220)(4,992)(9,657)(10,007)
Income (loss) before income taxes5,282 (49,906)(3,667)(111,035)
Income tax expense (benefit)(11,670)1,069 (10,451)3,468 
Net income (loss)$16,952 $(50,975)$6,784 $(114,503)
Net income (loss) per share:
Basic$0.11 $(0.34)$0.04 $(0.77)
Diluted$0.10 $(0.34)$0.04 $(0.77)
Shares used to compute net income (loss) per share:
Basic153,634 148,497 152,911 148,028 
Diluted164,857 148,497 162,455 148,028 
The accompanying notes are an integral part of these condensed consolidated financial statements.

4


GoPro, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Six months ended June 30,
(in thousands)
20212020
Operating activities:
Net income (loss)$6,784 $(114,503)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization
6,228 10,693 
Non-cash operating lease cost
2,446 4,158 
Stock-based compensation
18,898 13,513 
Deferred income taxes
(9)53 
Non-cash restructuring charges
(99)3,299 
Non-cash interest expense
6,945 4,850 
Other
(831)1,199 
Changes in operating assets and liabilities:
Accounts receivable, net
10,095 131,889 
Inventory
(8,837)2,085 
Prepaid expenses and other assets
(2,719)3,137 
Accounts payable and other liabilities
(46,790)(169,944)
Deferred revenue
5,571 (2,457)
Net cash used in operating activities(2,318)(112,028)
Investing activities:
Purchases of property and equipment, net
(2,018)(2,163)
Purchases of marketable securities(32,890) 
Maturities of marketable securities
 14,830 
Asset acquisition (438)
Net cash provided by (used in) investing activities(34,908)12,229 
Financing activities:
Proceeds from issuance of common stock4,200 1,909 
Taxes paid related to net share settlement of equity awards(7,975)(2,354)
Proceeds from borrowings 30,000 
Net cash provided by (used in) financing activities(3,775)29,555 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(847)(378)
Net change in cash, cash equivalents and restricted cash(41,848)(70,622)
Cash, cash equivalents and restricted cash at beginning of period327,654 150,301 
Cash, cash equivalents and restricted cash at end of period$285,806 $79,679 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5


GoPro, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited)
Common stock and additional paid-in capitalTreasury stockAccumulated
deficit
Stockholders’ equity
(in thousands)SharesAmountAmount
Balances at December 31, 2019146,818 $930,875 $(113,613)$(583,733)$233,529 
Common stock issued under employee benefit plans, net of shares withheld for tax1,542 1,863 — — 1,863 
Taxes paid related to net share settlements— (2,003)— — (2,003)
Stock-based compensation expense— 7,637 — — 7,637 
Net loss— — — (63,528)(63,528)
Balances at March 31, 2020148,360 938,372 (113,613)(647,261)177,498 
Common stock issued under employee benefit plans, net of shares withheld for tax278 30 — — 30 
Taxes paid related to net share settlements— (351)— — (351)
Stock-based compensation expense— 5,876 — — 5,876 
Net loss— — — (50,975)(50,975)
Balances at June 30, 2020148,638 $943,927 $(113,613)$(698,236)$132,078 
Balances at December 31, 2020151,119 $980,147 $(113,613)$(650,516)$216,018 
Common stock issued under employee benefit plans, net of shares withheld for tax2,214 2,998 — — 2,998 
Taxes paid related to net share settlements— (6,246)— — (6,246)
Stock-based compensation expense— 8,869 — — 8,869 
Net loss— — — (10,168)(10,168)
Balances at March 31, 2021153,333 985,768 (113,613)(660,684)211,471 
Common stock issued under employee benefit plans, net of shares withheld for tax717 1,442 — — 1,442 
Taxes paid related to net share settlements— (1,729)— — (1,729)
Stock-based compensation expense (Note 5)— 10,029 — — 10,029 
Net income— — — 16,952 16,952 
Balances at June 30, 2021154,050 $995,510 $(113,613)$(643,732)$238,165 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements

1. Summary of business and significant accounting policies
GoPro, Inc. and its subsidiaries (GoPro or the Company) make it easy for the world to capture and share itself in immersive and exciting ways, helping people get the most out of their photos and videos. The Company is committed to developing solutions that create an easy, seamless experience for consumers to capture, create, manage and share engaging personal content. To date, the Company’s cameras, mountable and wearable accessories, and subscription services have generated substantially all of its revenue. The Company sells its products globally on its website, and through retailers and wholesale distributors. The Company’s global corporate headquarters are located in San Mateo, California.
Basis of presentation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (GAAP). The Company’s fiscal year ends on December 31, and its fiscal quarters end on March 31, June 30 and September 30.
The Company’s operating results, financial position and cash flows for fiscal year 2020 were negatively impacted by the COVID-19 pandemic. As the global impact of the pandemic began to emerge in the first quarter of 2020, the Company accelerated a shift in its sales channel strategy to focus more on direct-to-consumer sales through GoPro.com, and implemented a restructuring plan in April 2020, which primarily impacted the Company’s global workforce, sales and marketing expenses, and leased facilities. These actions were reflected in the Company’s financial results starting in the second quarter of 2020 by reducing on-going operating expenses and helped accelerate its ability to achieve profitability in the second half of 2020. In 2020, the Company also issued additional convertible senior notes and entered into a new credit facility thus providing sufficient resources to continue as a going concern for at least one year from the date of issuance of the condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q.
The condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, that management believes are necessary for the fair statement of the Company's financial statements, but are not necessarily indicative of the results expected for any other future period. The Condensed Consolidated Balance Sheet at December 31, 2020 has been derived from the audited financial statements at that date, but does not include all the disclosures required by GAAP. This Quarterly Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K (Annual Report) for the year ended December 31, 2020. There have been no material changes in the Company’s critical accounting policies and estimates from those disclosed in its Annual Report.
Principles of consolidation. These condensed consolidated financial statements include all the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of estimates. The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the Company’s condensed consolidated financial statements and accompanying notes. Significant estimates and assumptions made by management include those related to revenue recognition and the allocation of the transaction price (including sales incentives, sales returns and implied post contract support), inventory valuation, product warranty liabilities, the valuation, impairment and useful lives of long-lived assets (property and equipment, operating lease right-of-use assets, intangible assets and goodwill), fair value of convertible senior notes, and income taxes. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances, including but not limited to the potential impacts arising from the COVID-19 pandemic, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The extent and continued impact of COVID-19 has been taken into account by management in making the significant assumptions and estimates related to the above; however, if the duration and spread of the outbreak, the impact on our customers, and the effect on our contract manufacturers, vendors and supply chain is different from the Company’s estimates and assumptions, then actual results could differ materially. Given the uncertainty with respect to COVID-19, the Company’s estimates and assumptions may evolve as conditions change. To the extent
7


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
there are material differences between the estimates and the actual results, future results of operations could be affected.
Comprehensive income (loss). For all periods presented, comprehensive income (loss) approximated net income (loss). Therefore, the Condensed Consolidated Statements of Comprehensive Income (Loss) have been omitted.
Revenue recognition. The Company derives substantially all of its revenue from the sale of cameras, mounts and accessories, the related implied post contract support to customers and subscription services. The transaction price recognized as revenue represents the amount the Company expects to be entitled to and is primarily comprised of product revenue, net of returns and variable consideration, including sales incentives provided to customers.
The Company’s camera sales contain multiple performance obligations that can include four separate obligations: a) a camera hardware component (which may be bundled with hardware accessories) and the embedded firmware essential to the functionality of the camera component delivered at the time of sale, b) the implicit right to the Company’s downloadable free apps and software solutions, c) the implied right for the customer to receive post contract support after the initial sale (PCS), and d) a subscription service. The Company’s PCS includes the right to receive, on a when and if available basis, future unspecified firmware upgrades and features as well as bug fixes, and email and telephone support. The Company allocates a portion of the transaction price to the PCS performance obligation based on a cost-plus methodology and recognizes the associated revenue on a straight-line basis over the estimated term of the support period, which is estimated to be 24 months based on historical experience. The transaction price allocated to subscription services is based on the standalone selling price and is recognized ratably over the subscription term, with payments received in advance of services being rendered recorded in deferred revenue. The transaction price is allocated to the remaining performance obligations on a residual value methodology. The transaction price allocated to the delivered hardware, related embedded firmware and free software solutions are recognized as revenue at the time of sale, provided the conditions for recognition of revenue have been met.
The Company’s process to allocate the transaction price considers multiple factors that may vary over time depending upon the unique facts and circumstances related to each deliverable, including: the level of support provided to customers, estimated costs to provide the Company’s support, the amount of time and cost that is allocated to the Company’s efforts to develop the undelivered elements, market trends in the pricing for similar offerings and the standalone selling price.
The Company's standard terms and conditions of sale for non-web-based sales do not allow for product returns other than under warranty. However, the Company grants limited rights of return, primarily to certain large retailers. The Company reduces revenue and cost of sales for the estimated returns based on analyses of historical return trends by customer class and other factors. An estimated return liability along with a right to recover assets are recorded for future product returns. Return trends are influenced by product life cycles, new product introductions, market acceptance of products, product sell-through, the type of customer, seasonality and other factors. Return rates may fluctuate over time but are sufficiently predictable to allow the Company to estimate expected future product returns.
For customers who purchase products directly from GoPro.com, the Company retains a portion of the risk of loss on these sales during transit, which are accounted for as fulfillment costs. The Company provides sales commissions to internal and external sales representatives which are earned in the period in which revenue is recognized. As a result, the Company expenses such costs as incurred.
Deferred revenue as of June 30, 2021 and December 31, 2020 also included amounts related to the Company’s subscription services. The Company’s short-term and long-term deferred revenue balances totaled $34.9 million and $29.3 million as of June 30, 2021 and December 31, 2020, respectively. Of the deferred revenue balance as of December 31, 2020 and 2019, the Company recognized $9.3 million and $4.0 million of revenue during the three months ended June 30, 2021 and 2020, respectively, and $21.0 million and $9.8 million of revenue during the six months ended June 30, 2021 and 2020, respectively. Of the deferred revenue balance as of March 31, 2021 and 2020, the Company recognized $13.7 million and $5.5 million of revenue during the three months ended June 30, 2021 and 2020, respectively.
8


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
Sales incentives. The Company offers sales incentives through various programs, including cooperative advertising, price protection, marketing development funds and other incentives. Sales incentives are considered to be variable consideration, which the Company estimates and records as a reduction to revenue at the date of sale. The Company estimates sales incentives based on historical experience, product sell-through and other factors.
Segment information. The Company operates as one operating segment as it only reports financial information on an aggregate and consolidated basis to its Chief Executive Officer, who is the Company’s chief operating decision maker.
Recent accounting standards
StandardDescriptionExpected date of adoption
Effect on the condensed consolidated financial statements or other significant matters
Standards not yet adopted
Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)
ASU No. 2020-06

This standard simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible debt instruments and contracts on an entity’s own equity. Specifically, the standard removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments, requiring bifurcation only if the convertible debt feature qualifies as a derivative under ASC 815 or if the convertible debt was issued at a substantial premium. This standard also removes certain settlement conditions required for equity contracts to qualify for the derivative scope exception. Lastly, entities are required to use the if-converted method for convertible instruments in the diluted earnings per share calculation. Early adoption is permitted, but no earlier than the fiscal year beginning after December 15, 2020. The standard can be applied using a full or modified retrospective approach.January 1, 2022
Upon adoption, the Company expects a decrease to additional paid in capital, an increase in the carrying value of its convertible notes and an increase to retained earnings. After adoption, the Company expects a reduction in its reported interest expense but does not expect a material income tax impact due to a full valuation allowance on the United States net deferred tax assets. Additionally, the Company expects the use of the if-converted method for calculating diluted earnings per share will result in an increase in weighted-average shares outstanding. The Company will continue to evaluate the effect that the adoption of this standard will have on its financial statements.
Although there are several other new accounting standards issued or proposed by the FASB, which the Company has adopted or will adopt, as applicable, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its condensed consolidated financial statements.

9


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
2. Fair value measurements
The Company’s assets that are measured at fair value on a recurring basis within the fair value hierarchy are summarized as follows:
June 30, 2021December 31, 2020
(in thousands)Level 1Level 2TotalLevel 1Level 2Total
Cash equivalents (1):
Money market funds$188,516 $ $188,516 $19,445 $ $19,445 
Total cash equivalents$188,516 $ $188,516 $19,445 $ $19,445 
Marketable securities:
Commercial paper$ $26,355 $26,355 $ $ $ 
Corporate debt securities 6,534 6,534    
Total marketable securities$ $32,889 $32,889 $ $ $ 
(1)    Included in cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheets. Cash balances were $97.3 million as of June 30, 2021 and $308.2 million, including $2.0 million of restricted cash, as of December 31, 2020.
Cash equivalents are classified as Level 1 because the Company uses quoted market prices to determine their fair value. Marketable securities are classified as Level 2 because the Company uses alternative pricing sources and models utilizing market observable inputs to determine their fair value. The contractual maturities of available-for-sale marketable securities as of June 30, 2021 were all less than one year in duration. At June 30, 2021 and December 31, 2020, the Company had no financial assets or liabilities measured at fair value on a recurring basis that were classified as Level 3, which are valued based on inputs supported by little or no market activity.
At June 30, 2021 and December 31, 2020, the amortized cost of the Company’s cash equivalents and marketable securities approximated their fair value and there were no material realized or unrealized gains or losses, either individually or in the aggregate.
In April 2017, the Company issued $175.0 million principal amount of Convertible Senior Notes due 2022 (2022 Notes). In November 2020, the Company issued $143.8 million principal amount of Convertible Senior Notes due 2025 (2025 Notes) (see Note 4 Financing arrangements). The estimated fair value of the 2022 Notes and 2025 Notes is based on quoted market prices of the Company’s instruments in markets that are not active and are classified as Level 2 within the fair value hierarchy. The Company estimated the fair value of the 2022 Notes and 2025 Notes by evaluating quoted market prices and calculating the upfront cash payment a market participant would require to assume these obligations. The calculated fair value of the 2022 Notes was $163.4 million and $146.0 million as of June 30, 2021 and December 31, 2020, respectively, while the calculated fair value of the 2025 Notes was $202.7 million and $166.8 million as of June 30, 2021 and December 31, 2020, respectively. The calculated fair value is highly correlated to the Company’s stock price and as a result, significant changes to the Company’s stock price will have a significant impact on the calculated fair value of the 2022 Notes and 2025 Notes.
For certain other financial assets and liabilities, including accounts receivable, accounts payable and other current assets and liabilities, the carrying amounts approximate their fair value primarily due to the relatively short maturity of these balances.
The Company also measures certain non-financial assets at fair value on a nonrecurring basis, primarily goodwill, intangible assets and operating lease right-of-use assets, in connection with periodic evaluations for potential impairment.

10


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
3. Condensed consolidated financial statement details
The following sections and tables provide details of selected balance sheet items.
Inventory
(in thousands)
June 30, 2021December 31, 2020
Components
$9,913 $13,229 
Finished goods
96,838 84,685 
Total inventory
$106,751 $97,914 
Property and equipment, net
(in thousands)
June 30, 2021December 31, 2020
Leasehold improvements$33,771 $35,180 
Production, engineering and other equipment44,829 48,908 
Tooling17,539 17,635 
Computers and software22,461 22,385 
Furniture and office equipment5,609 6,315 
Tradeshow equipment and other5,589 5,860 
Construction in progress42 22 
Gross property and equipment
129,840 136,305 
Less: Accumulated depreciation and amortization(109,321)(112,594)
Property and equipment, net
$20,519 $23,711 
Intangible assets
June 30, 2021
(in thousands)Gross carrying valueAccumulated amortizationNet carrying value
Purchased technology $51,066 $(50,878)$188 
Domain name15 — 15 
Total intangible assets
$51,081 $(50,878)$203 

December 31, 2020
(in thousands)Gross carrying valueAccumulated amortizationNet carrying value
Purchased technology $51,066 $(49,867)$1,199 
Domain name15 15 
Total intangible assets
$51,081$(49,867)$1,214
11


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements

Amortization expense was $0.3 million and $1.0 million for the three months ended June 30, 2021 and 2020, respectively, and $1.0 million and $2.9 million for the six months ended June 30, 2021 and 2020, respectively. At June 30, 2021, expected amortization expense of intangible assets with definite lives for future periods was as follows:
(in thousands)
Total
Year ending December 31,
2021 (remaining 6 months)$141 
202247 
$188