0001500435-23-000049.txt : 20230509 0001500435-23-000049.hdr.sgml : 20230509 20230509170347 ACCESSION NUMBER: 0001500435-23-000049 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 77 CONFORMED PERIOD OF REPORT: 20230331 FILED AS OF DATE: 20230509 DATE AS OF CHANGE: 20230509 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: 23903172 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-20230331.htm 10-Q gpro-20230331
GPRO000150043512/3110-Q3/31/20232023Q1FALSEClass A common stock, $0.0001 par valueNASDAQ Global Select MarketDelaware77-06294743025 Clearview WaySan Mateo,California94402(650)332-7600129,394,63026,258,546falseYes715,511P1YP2Y
VALUATION AND QUALIFYING ACCOUNTS
For the year ended December 31, 2023, 2022 and 2021
(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 March 31, 2023$700 $— $(294)$— $(16)$390 
Year ended March 31, 2022492 — 393 — (185)700 
year ended December 31, 2022830 — (24)— (314)492 
Valuation allowance for deferred tax assets:
Year ended March 31, 2023$— $— $— $— $— $— 
Year ended March 31, 2022287,276 — (284,551)— (2,725)— 
year ended December 31, 2022277,693 — 16,762 (7,179)— 287,276 
7002941639049239318570083024314492287,276284,5512,725277,69316,7627,179287,276
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
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
goprologoa23.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 (§ 232.405 of this chapter) 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 May 8, 2023, 129,394,630 and 26,258,546 shares of Class A and Class B common stock were outstanding, respectively.


1


GoPro, Inc.
Index

2


Special Note About Forward-Looking Statements

This Quarterly Report on Form 10-Q of GoPro, Inc. (GoPro or we or the Company) includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding guidance, industry prospects, product and marketing plans, or future results of operations or financial position, made in this Quarterly Report on Form 10-Q are forward-looking. To identify forward-looking statements, we use words such as “expect,” “anticipate,” “believe,” “may,” “will,” “estimate,” “intend,” “target,” “goal,” “plan,” “likely,” “potentially,” or variations of such words and similar expressions. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their date. If any of management's assumptions prove incorrect or should unanticipated circumstances arise, the Company's actual results could materially differ from those anticipated by such forward-looking statements. The differences could be caused by a number of factors or combination of factors including, but not limited to, those factors identified and detailed in Risk Factors in Part II, Item 1A. of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2023. Forward-looking statements include, but are not limited to, statements regarding our plans to expand and improve product offerings; projections of results of operations, research and development plans, marketing plans, plans for international expansion and revenue growth drivers, plans to reduce operating expenses and drive profitability, including our restructuring plans and the improved efficiencies in our operations that such plans may create; the impact of negative macroeconomic factors including rising interest rates and inflation, market volatility, and economic recession concerns; the ability for us to grow camera sales; our ability to acquire and retain subscribers; the effects of global conflicts and geopolitical issues such as the war in Ukraine or China-Taiwan relations; plans to settle the note conversion in cash; expectations regarding the volatility of the Company’s tax provision and resulting effective tax rate and projections of results of operations; the outcome of pending or future litigation and legal proceedings; the continuing impact of the ongoing COVID-19 pandemic and the economic recovery there from on our business, operations, liquidity and capital resources, employees, customers, supply chain, financial results, inflation, currency fluctuations and the world economy, and the scope and duration thereof; and any discussion of the trends and other factors that drive our business and future results, as discussed in Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations, and other sections of this Quarterly Report on Form 10-Q, including but not limited to Item 1A. Risk Factors. Readers are strongly encouraged to consider the foregoing including those factors when evaluating any forward-looking statements concerning the Company. The Company does not undertake any obligation to update any forward-looking statements in this Quarterly Report on Form 10-Q to reflect future events or developments.
3


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GoPro, Inc.
Condensed Consolidated Balance Sheets
(unaudited)

(in thousands, except par values)
March 31, 2023December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$157,826 $223,735 
Marketable securities
136,814 143,602 
Accounts receivable, net
56,988 77,008 
Inventory
154,804 127,131 
Prepaid expenses and other current assets
30,078 34,551 
Total current assets
536,510 606,027 
Property and equipment, net
12,160 13,327 
Operating lease right-of-use assets
20,336 21,819 
Goodwill
146,459 146,459 
Other long-term assets
307,101 289,293 
Total assets
$1,022,566 $1,076,925 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$80,032 $91,648 
Accrued expenses and other current liabilities
105,247 118,877 
Short-term operating lease liabilities
9,301 9,553 
Deferred revenue
55,948 55,850 
Total current liabilities
250,528 275,928 
Long-term taxes payable
10,557 9,536 
Long-term debt
141,255 141,017 
Long-term operating lease liabilities
31,048 33,446 
Other long-term liabilities
4,028 5,439 
Total liabilities
437,416 465,366 
Commitments, contingencies and guarantees (Note 9)


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, 129,699 and 128,629 shares issued and outstanding, respectively; 150,000 Class B shares authorized, 26,259 and 26,659 shares issued and outstanding, respectively
969,363 960,903 
Treasury stock, at cost, 17,567 and 16,677 shares, respectively
(158,231)(153,231)
Accumulated deficit
(225,982)(196,113)
Total stockholders’ equity
585,150 611,559 
Total liabilities and stockholders’ equity
$1,022,566 $1,076,925 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4


GoPro, Inc.
Condensed Consolidated Statements of Operations
(unaudited)

Three months ended March 31,
(in thousands, except per share data)
20232022
Revenue
$174,720 $216,705 
Cost of revenue
122,218 126,229 
Gross profit
52,502 90,476 
Operating expenses:
Research and development
38,185 31,598 
Sales and marketing
38,055 35,373 
General and administrative
16,076 15,343 
Total operating expenses
92,316 82,314 
Operating income (loss)(39,814)8,162 
Other income (expense):
Interest expense
(1,153)(2,209)
Other income (expense), net2,845 (319)
Total other income (expense), net1,692 (2,528)
Income (loss) before income taxes(38,122)5,634 
Income tax benefit(8,253)(51)
Net income (loss)$(29,869)$5,685 
Net income (loss) per share:
Basic$(0.19)$0.04 
Diluted$(0.19)$0.04 
Shares used to compute net income (loss) per share:
Basic155,402 156,864 
Diluted155,402 188,737 
The accompanying notes are an integral part of these condensed consolidated financial statements.

5


GoPro, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Three months ended March 31,
(in thousands)
20232022
Operating activities:
Net income (loss)$(29,869)$5,685 
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization
1,809 2,302 
Non-cash operating lease cost
1,483 1,678 
Stock-based compensation
10,314 9,836 
Deferred income taxes
(9,921)2,931 
Other
(1,240)1,004 
Changes in operating assets and liabilities:
Accounts receivable, net
19,947 43,501 
Inventory
(27,673)(32,987)
Prepaid expenses and other assets
(3,337)14,925 
Accounts payable and other liabilities
(27,627)(123,247)
Deferred revenue
(988)965 
Net cash used in operating activities(67,102)(73,407)
Investing activities:
Purchases of property and equipment, net
(483)(520)
Purchases of marketable securities(25,782)(23,111)
Maturities of marketable securities
34,000 15,900 
Net cash provided by (used in) investing activities7,735 (7,731)
Financing activities:
Proceeds from issuance of common stock2,324 2,599 
Taxes paid related to net share settlement of equity awards(4,251)(7,175)
Repurchase of outstanding common stock(5,000)(10,000)
Net cash used in financing activities(6,927)(14,576)
Effect of exchange rate changes on cash and cash equivalents385 (54)
Net change in cash and cash equivalents(65,909)(95,768)
Cash and cash equivalents at beginning of period223,735 401,087 
Cash and cash equivalents at end of period$157,826 $305,319 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6


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, 2021156,474 $1,008,872 $(113,613)$(279,345)$615,914 
Common stock issued under employee benefit plans, net of shares withheld for tax1,891 2,371 — — 2,371 
Taxes paid related to net share settlements— (7,175)— — (7,175)
Stock-based compensation expense— 9,836 — — 9,836 
Repurchase of outstanding common stock(1,120)— (10,000)— (10,000)
Cumulative effect of adoption of new accounting standard — (78,230)— 54,385 (23,845)
Net income— — — 5,685 5,685 
Balances at March 31, 2022157,245 $935,674 $(123,613)$(219,275)$592,786 
Balances at December 31, 2022154,888 $960,903 $(153,231)$(196,113)$611,559 
Common stock issued under employee benefit plans, net of shares withheld for tax1,960 2,397 — — 2,397 
Taxes paid related to net share settlements— (4,251)— — (4,251)
Stock-based compensation expense (Note 6)— 10,314 — — 10,314 
Repurchase of outstanding common stock(890)— (5,000)— (5,000)
Net loss— — — (29,869)(29,869)
Balances at March 31, 2023155,958 $969,363 $(158,231)$(225,982)$585,150 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7


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 and service 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) for financial information set forth in the Accounting Standards Codification (ASC), as published by the Financial Accounting Standards Board (FASB), and with the applicable rules and regulations of the Securities and Exchange Commission (SEC). The Company’s fiscal year ends on December 31, and its fiscal quarters end on March 31, June 30 and September 30.
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 in future periods. The Condensed Consolidated Balance Sheet at December 31, 2022, 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, 2022. There have been no material changes in the Company’s critical accounting policies and estimates from those disclosed in its Annual Report on Form 10-K.
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, 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. Actual results could differ materially from management’s estimates. To the extent 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, accessories, subscription and service, and implied post contract support to customers. The transaction price recognized as revenue represents the consideration the Company expects to be entitled to and is primarily comprised of product revenue, net of returns and variable consideration, which includes sales incentives provided to customers.
The Company’s camera sales contain multiple performance obligations that can include the following 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) a
8


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
subscription and service, c) the implied right for the customer to receive post contract support after the initial sale (PCS), and d) the implicit right to the Company’s downloadable free apps and software solutions. 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, chat and telephone support.
The Company recognizes revenue from its sales arrangements when control of the promised goods or services are transferred to its customers, in an amount that reflects the amount of consideration expected to be received in exchange for the transferred goods or services. For the sale of hardware products, including related firmware and free software solutions, revenue is recognized when transfer of control occurs at a point in time, which generally is at the time the hardware product is shipped and collection is considered probable. 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. For PCS, revenue is recognized ratably over 24 months, which represents the estimated period PCS is expected to be provided based on historical experience.
The Company’s subscription and service revenue is recognized primarily from our GoPro subscription and Quik subscription offerings, and is recognized ratably over the subscription term, with any payments received in advance of services rendered recorded as deferred revenue. The Company offers the GoPro subscription which offers a range of services, including unlimited cloud storage supporting source video and photo quality, camera replacement and damage protection, access to a high-quality live streaming service on GoPro.com as well as discounts on GoPro gear, mounts and accessories. The Company also offers the Quik subscription that provides access to a suite of simple single-clip and multi-clip editing tools.
For the Company’s camera sale arrangements with multiple performance obligations, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are based on observable prices at which the Company separately sells its products, subscription and service. If a standalone selling price is not directly observable, then the Company estimates the standalone selling prices considering market conditions and entity-specific factors. For example, the standalone selling price for PCS is determined based on a cost-plus approach, which incorporates the level of support provided to customers, estimated costs to provide such support, and the amount of time and costs that are allocated to efforts to develop the undelivered elements.
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.
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 sales commissions as incurred.
Deferred revenue as of March 31, 2023 and December 31, 2022, includes amounts related to the Company’s subscription and PCS. The Company’s short-term and long-term deferred revenue balances totaled $59.4 million and $60.4 million as of March 31, 2023 and December 31, 2022, respectively. During the three months ended March 31, 2023 and 2022, the Company recognized $16.5 million and $16.6 million of revenue that was included in the deferred revenue balance as of December 31, 2022 and 2021, respectively.
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. In the first quarter of 2023, the Company made a strategic pricing decision to reduce the manufacturer’s suggested retail price (MSRP) of its cameras effective May 2023. As a result, the Company recorded a $23.5 million price protection charge in the first quarter of 2023 based on estimated channel inventory levels as of the price drop date. Actual price protection claims may differ from the Company’s estimates.
9


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
Income taxes. The Company utilizes the asset and liability method for computing its income tax provision, under which, deferred tax assets and liabilities are recognized for the expected future consequences of temporary differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates. Management makes estimates, assumptions and judgments to determine the Company’s provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against deferred tax assets. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income in each tax jurisdiction and, to the extent the Company believes recovery is not likely, establishes a valuation allowance.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Interest and penalties related to unrecognized tax benefits are recognized within income tax expense.
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. Although there are several 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.

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:
March 31, 2023December 31, 2022
(in thousands)Level 1Level 2TotalLevel 1Level 2Total
Cash equivalents (1):
Money market funds$87,886 $ $87,886 $138,394 $ $138,394 
Total cash equivalents$87,886 $ $87,886 $138,394 $ $138,394 
Marketable securities:
U.S. treasury securities$ $28,407 $28,407 $ $14,716 $14,716 
Commercial paper 76,911 76,911  87,436 87,436 
Corporate debt securities 15,951 15,951  29,637 29,637 
Government securities 15,545 15,545  11,813 11,813 
Total marketable securities$ $136,814 $136,814 $ $143,602 $143,602 
(1)    Included in cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheets. Cash balances were $69.9 million and $85.3 million as of March 31, 2023 and December 31, 2022, respectively.
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 March 31, 2023 were all less than one year in duration. At March 31, 2023 and December 31, 2022, 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 March 31, 2023 and December 31, 2022, 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.
10


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
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 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 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 2025 Notes was $137.4 million and $130.1 million as of March 31, 2023 and December 31, 2022, 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 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.

3. Condensed consolidated financial statement details
The following section provides details of selected balance sheet items.
Inventory
(in thousands)
March 31, 2023December 31, 2022
Components
$29,531 $38,400 
Finished goods
125,273 88,731 
Total inventory
$154,804 $127,131 
Property and equipment, net
(in thousands)
March 31, 2023December 31, 2022
Leasehold improvements$32,572 $32,472 
Production, engineering and other equipment45,931 46,475 
Tooling8,588 9,033 
Computers and software17,564 17,258 
Furniture and office equipment4,879 4,879 
Tradeshow equipment and other1,746 1,664 
Construction in progress62 59 
Gross property and equipment
111,342 111,840 
Less: Accumulated depreciation and amortization(99,182)(98,513)
Property and equipment, net
$12,160 $13,327 
Other long-term assets
(in thousands)
March 31, 2023December 31, 2022
Long-term deferred tax assets
$288,867 $279,045 
Deposits and other
16,067 8,435 
Point of purchase (POP) displays
2,152 1,798 
Intangible assets, net15 15 
Other long-term assets$307,101 $289,293 
11


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
Intangible assets are comprised of purchased technology, which have a useful life between 20-72 months, and an indefinite life asset. Amortization expense was zero and $0.1 million for the three months ended March 31, 2023 and 2022 respectively. As of March 31, 2023, all of the Company’s purchased technology intangible assets were fully amortized.
Accrued expenses and other current liabilities
(in thousands)
March 31, 2023December 31, 2022
Accrued sales incentives$46,518 $41,662 
Accrued liabilities(1)
24,975 35,853 
Warranty liabilities6,963 7,825 
Employee related liabilities5,814 11,261 
Return liability4,416 6,002 
Customer deposits
2,380 3,428 
Inventory received
1,106 233 
Purchase order commitments
883 782 
Other
12,192 11,831 
Accrued expenses and other current liabilities$105,247 $118,877 
(1)    See Note 11 Restructuring charges for amounts associated with restructuring liabilities.
Product warranty
Three months ended March 31,
(in thousands)
20232022
Beginning balance
$8,319 $8,842 
Charged to cost of revenue
3,755 2,885 
Settlement of warranty claims
(4,829)(3,715)
Warranty liability
$7,245 $8,012 
At March 31, 2023 and December 31, 2022, $7.0 million and $7.8 million, respectively, of the warranty liability was recorded as a component of accrued expenses and other current liabilities, and $0.3 million and $0.5 million, respectively, was recorded as a component of other long-term liabilities.

4. Financing arrangements
2021 Credit Facility
In January 2021, the Company entered into a Credit Agreement which provides for a revolving credit facility (2021 Credit Facility) under which the Company may borrow up to an aggregate amount of $50.0 million. In March 2023, the Company amended the 2021 Credit Agreement (collectively, 2021 Credit Agreement). The 2021 Credit Agreement will terminate and any outstanding borrowings become due and payable on the earlier of (i) January 2027 and (ii) unless the Company has cash in a specified deposit account in an amount equal to or greater than the amount required to repay the Company’s 1.25% convertible senior notes due November 2025, 91 days prior to the maturity date of such convertible notes.
The amount that may be borrowed under the 2021 Credit Agreement may be based on a customary borrowing base calculation if the Company’s Asset Coverage Ratio is at any time less than 1.50. The Asset Coverage Ratio is defined as the ratio of (i) the sum of (a) the Company’s cash and cash equivalents in the United States plus specified percentages of other qualified debt investments (Qualified Cash) plus (b) specified percentages of the net book values of the Company’s accounts receivable and certain inventory to (ii) $50.0 million.
Borrowed funds accrue interest at the greater of (i) a per annum rate equal to the base rate plus a margin of from 0.50% to 1.00% depending on the Company’s Asset Coverage Ratio or (ii) a per annum rate equal to the Secured
12


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
Overnight Financing Rate plus a 10 basis point premium and a margin of from 1.50% to 2.00% depending on the Company’s Asset Coverage Ratio. The Company is required to pay a commitment fee on the unused portion of the 2021 Credit Facility of 0.25% per annum. Amounts owed under the 2021 Credit Agreement are guaranteed by certain of the Company’s United States subsidiaries and secured by a first priority security interest in substantially all of the assets of the Company and certain of its subsidiaries (other than intellectual property, which is subject to a negative pledge restricting grants of security interests to third parties).
The 2021 Credit Agreement contains customary representations, warranties, and affirmative and negative covenants. The negative covenants include restrictions on the incurrence of liens and indebtedness, certain investments, dividends, stock repurchases and other matters, all subject to certain exceptions. In addition, the Company is required to maintain Liquidity (the sum of unused availability under the credit facility and the Company’s Qualified Cash) of at least $55.0 million (of which at least $40.0 million shall be attributable to Qualified Cash), or, if the borrowing base is then in effect, minimum unused availability under the credit facility of at least $10.0 million. The 2021 Credit Agreement also includes customary events of default that include, among other things, non-payment of principal, interest or fees, inaccuracy of representations and warranties, violation of certain covenants, cross default to certain other indebtedness, bankruptcy and insolvency events, material judgments and change of control. Upon an event of default, the lender may, subject to customary cure rights, require the immediate payment of all amounts outstanding.
At March 31, 2023, the Company was in compliance with all financial covenants contained in the 2021 Credit Agreement. The Company has made no borrowings from the 2021 Credit Facility to date, however, there is an outstanding letter of credit of $5.2 million for certain duty related requirements. This was not collateralized by any cash on hand.
Convertible Notes
2025 Convertible Notes
In November 2020, the Company issued $125.0 million aggregate principal amount of 1.25% Convertible Senior Notes due 2025 and granted an option to the initial purchasers to purchase up to an additional $18.8 million aggregate principal amount of the 2025 Notes to cover over-allotments, of which $18.8 million was subsequently exercised during November 2020, resulting in a total issuance of $143.8 million aggregate principal amount of the 2025 Notes. The 2025 Notes are senior, unsecured obligations of the Company and mature on November 15, 2025, unless earlier repurchased or converted into shares of Class A common stock under certain circumstances. The 2025 Notes are convertible into cash, shares of the Company’s Class A common stock, or a combination thereof, at the Company’s election, at an initial conversion rate of 107.1984 shares of Class A common stock per $1,000 principal amount of the 2025 Notes, which is equivalent to an initial conversion price of approximately $9.3285 per share of common stock, subject to adjustment. The Company pays interest on the 2025 Notes semi-annually in arrears on May 15 and November 15 of each year.
The Company may redeem all or any portion of the 2025 Notes on or after November 20, 2023 for cash if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides the redemption notice, at a redemption price equal to 100% of the principal amount of the 2025 Notes to be redeemed, plus accrued interest and unpaid interest to, but excluding the redemption date. No sinking fund is provided for the 2025 Notes. The indenture includes customary terms and covenants, including certain events of default after which the 2025 Notes may be due and payable immediately.
Holders have the option to convert the 2025 Notes in multiples of $1,000 principal amount at any time prior to August 15, 2025, but only in the following circumstances:
during any calendar quarter beginning after the calendar quarter ending on March 31, 2021, if the last reported sale price of Class A common stock for at least 20 trading days (whether or not consecutive) during the last 30 consecutive trading days of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price of the 2025 Notes on each applicable trading day;
during the five-business day period following any five consecutive trading day period in which the trading price for the 2025 Notes is less than 98% of the product of the last reported sale price of Class A common
13


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
stock and the conversion rate for the 2025 Notes on each such trading day;
if the Company calls any or all of the 2025 Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately before the redemption date; or
upon the occurrence of specified corporate events.
At any time on or after August 15, 2025 until the second scheduled trading day immediately preceding the maturity date of the 2025 Notes on November 15, 2025, a holder may convert its 2025 Notes, in multiples of $1,000 principal amount. Holders of the 2025 Notes who convert their 2025 Notes in connection with a make-whole fundamental change (as defined in the indenture) are, under certain circumstances, entitled to an increase in the conversion rate. In addition, in the event of a fundamental change prior to the maturity date, holders will, subject to certain conditions, have the right, at their option, to require the Company to repurchase for cash all or part of the 2025 Notes at a repurchase price equal to 100% of the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the repurchase date. During the three months ended March 31, 2023, the conditions allowing holders of the 2025 Notes to convert were not met.
In connection with the offering of the 2025 Notes, the Company paid $10.2 million to enter into privately negotiated capped call transactions with certain financial institutions (Capped Calls). The Capped Calls have an initial strike price of $9.3285 per share, which corresponds to the initial conversion price of the 2025 Notes. The Capped Calls cover, subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the 2025 Notes, the number of Class A common stock initially underlying the 2025 Notes. The Capped Calls are generally expected to reduce potential dilution to the Company’s Class A common stock upon any conversion of the 2025 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 2025 Notes, as the case may be, with such reduction and/or offset subject to a cap, initially equal to $12.0925, and is subject to certain adjustments under the terms of the Capped Call transactions. The Capped Calls will expire in November 2025, if not exercised earlier.
The Capped Calls are subject to adjustment upon the occurrence of specified extraordinary events affecting the Company, including merger events, tender offers and announcement events. In addition, the Capped Calls are subject to certain specified additional disruption events that may give rise to a termination of the Capped Calls, including nationalization, insolvency or delisting, changes in law, failures to deliver, insolvency filings and hedging disruptions. For accounting purposes, the Capped Calls are separate transactions, and not part of the terms of the 2025 Notes. As these transactions meet certain accounting criteria, the Capped Calls are recorded in stockholders’ equity as a reduction to additional paid-in capital and will not be remeasured as long as they continue to meet certain accounting criteria.
As of March 31, 2023 and December 31, 2022, the outstanding principal on the 2025 Notes was $143.8 million, the unamortized debt issuance cost was $2.5 million and $2.8 million, respectively, and the net carrying amount of the liability was $141.3 million and $141.0 million, respectively, which was recorded as long-term debt within the Condensed Consolidated Balance Sheets. For the three months ended March 31, 2023 and 2022, the Company recorded interest expense of $0.4 million and $0.4 million, respectively, for contractual coupon interest, and $0.2 million and $0.2 million, respectively, for amortization of debt issuance costs.
2022 Convertible Notes
In April 2017, the Company issued $175.0 million aggregate principal amount of 3.50% Convertible Senior Notes due 2022 (2022 Notes), which were repaid in full by their April 15, 2022 maturity date. The 2022 Notes were senior, unsecured obligations of the Company that could be converted into cash, shares of the Company’s Class A common stock, or a combination thereof, at the Company’s election, based on conversion rates as defined in the indenture. Concurrently with the November 2020 issuance of the 2025 Notes, the Company used $56.2 million of the net cash proceeds from the 2025 Notes to repurchase $50.0 million principal amount of the 2022 Notes through a single, privately negotiated transaction. On April 15, 2022, the Company repaid the remaining $125.0 million of principal and $2.2 million of accrued interest in cash to the debt holders to fully settle the 2022 Notes on the maturity date. For the three months ended March 31, 2022 the Company recorded interest expense of $1.1 million for contractual coupon interest, and $0.2 million for amortization of debt issuance costs.
14


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements

5. Stockholders’ equity
Stock Repurchase Program. On January 27, 2022, the Company’s board of directors authorized the repurchase of up to $100 million of its Class A common stock, and on February 9, 2023, the Company’s board of directors authorized the repurchase of an additional $40 million of its Class A common stock. Stock repurchases under the program may be made periodically using a variety of methods, including without limitation, open market purchases, block trades or otherwise in compliance with all federal and state securities laws and state corporate law and in accordance with the single broker, timing, price, and volume guidelines set forth in Rule 10b-18 and Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, as such guidelines may be modified by the SEC from time to time. This stock repurchase program has no time limit and may be modified, suspended, or discontinued at any time. The Company currently intends to hold its repurchased shares as treasury stock.
As of March 31, 2023, the remaining amount of share repurchases under the program was $95.4 million. The following table summarizes share repurchases during the three months ended March 31, 2023 and 2022.

Three months ended March 31,
(in thousands, except per share data)20232022
Shares repurchased890 1,120 
Average price per share$5.62 $8.93 
Value of shares repurchased$5,000 $10,000 

6. Employee benefit plans
Equity incentive plans. The Company has outstanding equity grants from its three stock-based employee compensation plans: the 2014 Equity Incentive Plan (2014 Plan), the 2010 Equity Incentive Plan (2010 Plan) and the 2014 Employee Stock Purchase Plan (ESPP). No new options or awards have been granted under the 2010 Plan since June 2014. Outstanding options and awards under the 2010 Plan continue to be subject to the terms and conditions of the 2010 Plan. Options granted under the 2014 Plan generally expire within ten years from the date of grant and generally vest over one to four years. Restricted stock units (RSUs) granted under the 2014 Plan generally vest over two to four years based upon continued service and are settled at vesting in shares of the Company’s Class A common stock. Performance stock units (PSUs) granted under the 2014 Plan generally vest over three years based upon continued service and the Company achieving certain financial and operating targets, and are settled at vesting in shares of the Company’s Class A common stock. The Company accounts for forfeitures of stock-based payment awards in the period they occur. The ESPP allows eligible employees to purchase shares of the Company’s Class A common stock through payroll deductions at a price equal to 85% of the lesser of the fair market value of the stock as of the first date or the ending date of each six-month offering period. For additional information regarding the Company’s equity incentive plans, refer to the 2022 Annual Report.
15


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
Stock options
A summary of the Company’s stock option activity for the three months ended March 31, 2023 is as follows:
Shares
(in thousands)
Weighted-average exercise price
Weighted-average remaining contractual term (in years)
Aggregate intrinsic value (in thousands)
Outstanding at December 31, 20223,089 $9.37 5.30$467 
Granted  
Exercised  
Forfeited/Cancelled(57)15.73 
Outstanding at March 31, 20233,032 $9.25 5.15$493 
Vested and expected to vest at March 31, 20233,032 $9.25 5.15$493 
Exercisable at March 31, 20232,538 $9.68 4.60$343 
The aggregate intrinsic value of the stock options outstanding as of March 31, 2023 represents the value of the Company’s closing stock price on March 31, 2023 in excess of the exercise price multiplied by the number of options outstanding.
Restricted stock units
A summary of the Company’s RSU activity for the three months ended March 31, 2023 is as follows:
Shares
(in thousands)
Weighted-average grant date fair value
Non-vested shares at December 31, 20228,727 $7.19 
Granted5,322 5.96 
Vested(1,980)6.72 
Forfeited(97)7.36 
Non-vested shares at March 31, 202311,972 $6.72 
Performance stock units
A summary of the Company’s PSU activity for three months ended March 31, 2023 is as follows:
Shares
(in thousands)
Weighted-average grant date fair value
Non-vested shares at December 31, 2022686 

$7.93 
Granted1,254 5.79 
Vested(233)7.21 
Forfeited  
Non-vested shares at March 31, 20231,707 $6.46 
Employee stock purchase plan. For the three months ended March 31, 2023 and 2022, the Company issued 0.5 million and 0.3 million shares under its ESPP, respectively, at weighted-average prices of $5.09 and $7.70 per share, respectively.
Stock-based compensation expense. The Company measures compensation expense for all stock-based payment awards based on the estimated fair values on the date of the grant. The fair value of stock options
16


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
granted and ESPP issuance is estimated using the Black-Scholes option pricing model. The fair value of RSUs and PSUs are determined using the Company’s closing stock price on the date of grant. There have been no significant changes in the Company’s valuation assumptions from those disclosed in its 2022 Annual Report.
The following table summarizes stock-based compensation expense included in the Condensed Consolidated Statements of Operations:
Three months ended March 31,
(in thousands)
20232022
Cost of revenue
$466 $447 
Research and development
4,746 4,158 
Sales and marketing
2,178 2,123 
General and administrative
2,924 3,108 
Total stock-based compensation expense$10,314 $9,836 
The income tax benefit related to stock-based compensation expense was $2.3 million and $2.2 million for the three months ended March 31, 2023 and 2022, respectively. See Note 8, Income taxes, for additional details.
As of March 31, 2023, total unearned stock-based compensation of $79.7 million related to stock options, RSUs, PSUs and ESPP shares is expected to be recognized over a weighted-average period of 2.39 years.

7. Net income (loss) per share
The following table presents the calculations of basic and diluted net income (loss) per share:
Three months ended March 31,
(in thousands, except per share data)20232022
Numerator:
Net income (loss) - Basic$(29,869)$5,685 
Interest on convertible notes, income tax effected 1,521 
Net income (loss) - Diluted$(29,869)$7,206 
Denominator:
Weighted-average common shares - basic for Class A and Class B common stock155,402 156,864 
Effect of dilutive securities 31,873 
Weighted-average common shares - diluted for Class A and Class B common stock155,402 188,737 
Net income (loss) per share
Basic$(0.19)$0.04 
Diluted$(0.19)$0.04 
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GoPro, Inc.
Notes to Condensed Consolidated Financial Statements

The following potentially dilutive shares were not included in the calculation of diluted shares outstanding as the effect would have been anti-dilutive:
Three months ended March 31,
(in thousands)
20232022
Stock-based awards14,500 4,256 
Shares related to convertible senior notes15,410  
Total anti-dilutive securities29,910 4,256 
The Company calculated the potential dilutive effect of its 2022 Notes and 2025 Notes under the if-converted method. Under the if-converted method, diluted net income per share was determined by assuming all of the 2022 Notes and the 2025 Notes were converted into shares of the Company’s Class A common stock at the beginning of the reporting period. In addition, in periods of net income, interest charges on the 2022 Notes and 2025 Notes, which includes both coupon interest and amortization of debt issuance costs, were added back to net income on an after-tax effected basis.
The Company’s 2022 Notes matured on April 15, 2022 and the Company’s 2025 Notes will mature on November 15, 2025, unless earlier repurchased or converted into shares of Class A common stock under certain circumstances as described further in Note 4 Financing arrangements. The 2025 Notes are convertible into cash, shares of the Company’s Class A common stock, or a combination thereof, at the Company’s election.
The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion. 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. 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. Class A common stock is not convertible into Class B common stock. The computation of the diluted net income (loss) per share of Class A common stock assumes the conversion of Class B common stock.
8. Income taxes
The following table provides the income tax benefit amount:
Three months ended March 31,
(dollars in thousands)20232022
Income tax benefit$(8,253)$(51)
The Company recorded an income tax benefit of $8.3 million for the three months ended March 31, 2023 on pre-tax net loss of $38.1 million. The Company’s income tax benefit for the three months ended March 31, 2023 was composed of $8.8 million of tax benefit incurred on pre-tax loss, and discrete items that primarily included $0.3 million of nondeductible equity tax expense for employee stock-based compensation, and $0.1 million of tax expense related to the foreign provision to income tax return adjustments.
For the three months ended March 31, 2022, the Company recorded an income tax benefit of $0.1 million on pre-tax net income of $5.6 million. The Company’s income tax benefit for the three months ended March 31, 2022, was composed of $1.4 million of tax expense incurred on pre-tax income, and discrete items that primarily included a $1.4 million of net excess tax benefit for employee stock-based compensation.
At March 31, 2023 and December 31, 2022, the Company’s gross unrecognized tax benefits were $24.4 million and $23.4 million, respectively. If recognized, $10.6 million of these unrecognized tax benefits (net of United States federal benefit) at March 31, 2023 would reduce income tax expense. A material portion of the Company’s gross unrecognized tax benefits, if recognized, would increase the Company’s net operating loss carryforward.
18


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
The Company conducts business globally and as a result, files income tax returns in the United States and foreign jurisdictions. The Company’s unrecognized tax benefits relate primarily to unresolved matters with taxing authorities. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, the Company believes that its reserves reflect the more likely outcome. The Company believes, due to statute of limitations expiration, that within the next 12 months, it is possible that up to $2.4 million of uncertain tax position could be released. It is also reasonably possible that additional uncertain tax positions will be added. It is not reasonably possible at this time to quantify the net effect.
9. Commitments, contingencies and guarantees
Facility Leases. The Company leases its facilities under long-term operating leases, which expire at various dates through 2027.
The components of net lease cost, which were primarily recorded in operating expenses, were as follows:
Three months ended March 31,
(in thousands)20232022
Operating lease cost (1)
$3,358 $2,850 
Sublease income(723)(731)
Net lease cost$2,635 $2,119 
(1)    Operating lease cost includes variable lease costs, which are immaterial.

Supplemental cash flow information related to leases was as follows:
Three months ended March 31,
(in thousands)20232022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$3,791 $3,777 
Right-of-use assets obtained in exchange for operating lease liabilities186  

Supplemental balance sheet information related to leases was as follows:
March 31, 2023December 31, 2022
Weighted-average remaining lease term (in years) - operating leases3.613.81
Weighted-average discount rate - operating leases6.1%6.1%

19


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
As of March 31, 2023, maturities of operating lease liabilities were as follows:
(in thousands)
March 31, 2023
2023 (remaining 9 months)$8,483 
202412,350 
202511,903 
202611,727 
2027973 
Thereafter 
Total lease payments45,436 
Less: Imputed interest(5,087)
Present value of lease liabilities$40,349 
Other Commitments. In the ordinary course of business, the Company enters into multi-year agreements to purchase sponsorships with event organizers, resorts and athletes as part of its marketing efforts; software licenses related to its financial and IT systems; debt agreements; and various other contractual commitments. As of March 31, 2023, the Company’s total undiscounted future expected obligations under multi-year agreements described above with terms longer than one year was $222.5 million.
Legal proceedings and investigations. Since 2015, Contour IP Holdings LLC (CIPH) and related entities have filed lawsuits in various federal district courts alleging, among other things, patent infringement in relation to certain GoPro products. Following litigation in federal courts and the United States Patent and Trademark Office, CIPH’s patents were ruled invalid in March 2022. Judgment was then entered in favor of the Company and against CIPH. CIPH later appealed, and the appeal is pending at the Federal Circuit. The Company believes that the appeal lacks merit and intends to vigorously defend against CIPH's appeal.
The Company regularly evaluates the associated developments of the legal proceeding described above, as well as other legal proceedings that arise in the ordinary course of business. While litigation is inherently uncertain, based on the currently available information, the Company is unable to determine a loss or a range of loss, and does not believe the ultimate cost to resolve these matters will have a material adverse effect on its business, financial condition, cash flows or results of operations.
Indemnifications. The Company has entered into indemnification agreements with its directors and executive officers which requires the Company to indemnify its directors and executive officers against liabilities that may arise by reason of their status or service. In addition, in the normal course of business, the Company enters into agreements that contain a variety of representations and warranties, and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. It is not possible to determine the maximum potential amount under these indemnification agreements due to the Company’s limited history with indemnification claims and the unique facts and circumstances involved in each particular agreement. As of March 31, 2023, the Company has not paid any claims nor has it been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations.
10. Concentrations of risk and geographic information
Concentration of risk. Financial instruments which potentially subject the Company to concentration of credit risk includes cash and cash equivalents, marketable securities, accounts receivable, and derivative instruments, including the Capped Calls associated with the 2025 Notes. The Company places cash and cash equivalents with high-credit-quality financial institutions; however, the Company maintains cash balances in excess of the FDIC insurance limits. The Company believes that credit risk for accounts receivable is mitigated by the Company’s credit evaluation process, relatively short collection terms and dispersion of its customer base. The Company generally does not require collateral and losses on trade receivables have historically been within the Company’s expectations. The Company believes its counterparty credit risk related to its derivative instruments is mitigated by transacting with major financial institutions with high credit ratings.
20


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
Customers who represented 10% or more of the Company’s net accounts receivable balance were as follows:
March 31, 2023December 31, 2022
Customer A26%30%
Customer B11%11%
The following table summarizes the Company’s accounts receivables sold, without recourse, and factoring fees paid:
Three months ended March 31,
(in thousands)
20232022
Accounts receivable sold$16,678 $23,949 
Factoring fees260 53 
No third-party customer represented 10% or more of the Company's total revenue as of March 31, 2023 and 2022.
Supplier concentration. The Company relies on third parties for the supply and manufacture of its products, some of which are sole-source suppliers. The Company believes that outsourcing manufacturing enables greater scale and flexibility. As demand and product lines change, the Company periodically evaluates the need and advisability of adding manufacturers to support its operations. In instances where a supply and manufacture agreement does not exist or suppliers fail to perform their obligations, the Company may be unable to find alternative suppliers or satisfactorily deliver its products to its customers on time, if at all. The Company also relies on third parties with whom it outsources supply chain activities related to inventory warehousing, order fulfillment, distribution and other direct sales logistics. In instances where an outsourcing agreement does not exist or these third parties fail to perform their obligations, the Company may be unable to find alternative partners or satisfactorily deliver its products to its customers on time.
Geographic information
Revenue by geographic region was as follows:
Three months ended March 31,
(in thousands)
20232022
Americas
$89,519 $102,583 
Europe, Middle East and Africa (EMEA)46,016 61,531 
Asia and Pacific (APAC)
39,185 52,591 
Total revenue
$174,720 $216,705 
Revenue from the United States, which is included in the Americas geographic region, was $75.6 million and $85.2 million, for the three months ended March 31, 2023 and 2022, respectively. No other individual country exceeded 10% of total revenue for any period presented. The Company does not disclose revenue by product category as it does not track sales incentives and other revenue adjustments by product category to report such data.
As of March 31, 2023 and December 31, 2022, long-lived assets, which represent net property and equipment, located outside the United States, primarily in Hong Kong and mainland China, were $3.2 million and $4.0 million, respectively.
21


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
11. Restructuring charges
Restructuring charges for each period were as follows:
Three months ended March 31,
(in thousands)
20232022
Cost of revenue
$1 $18 
Research and development
11 152 
Sales and marketing
6 85 
General and administrative
3 49 
Total restructuring charges
$21 $304 
Fourth quarter 2022 restructuring
In December 2022, the Company approved a restructuring plan to reduce camera production-related costs by globally realigning its manufacturing footprint to concentrate production activities in two primary locations: China and Thailand. Under the fourth quarter 2022 restructuring, the Company recorded restructuring charges of $8.1 million including $7.0 million for camera production line closure costs and $1.1 million for related transitional costs to migrate production to the Company’s remaining manufacturing locations.
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 fourth quarter 2022 restructuring.
(in thousands)
Contract and Other Costs
Total
Restructuring liability as of December 31, 2022$7,833 $7,833 
Cash paid
(7,430)(7,430)
Restructuring liability as of March 31, 2023$403 $403 
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GoPro, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2022 included in our Annual Report on Form 10-K filed with the SEC. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading Special Note About Forward-Looking Statements in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading Risk Factors in this Quarterly Report on Form 10-Q for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements. Our MD&A is provided in addition to the accompanying condensed consolidated financial statements and accompanying notes to assist readers in understanding our results of operations, financial condition and cash flows.
This MD&A is organized as follows:
Overview. Discussion of our business, overall analysis of our financial performance and other highlights affecting the business in order to provide context for the remainder of the MD&A.
Results of Operations. Analysis of our financial results comparing the first quarter of 2023 to 2022.
Liquidity and Capital Resources. Analysis of changes in our balance sheets and cash flows, and discussion of our financial condition and potential sources of liquidity.
Critical Accounting Policies and Estimates. Accounting estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results and forecasts.
Non-GAAP Financial Measures. A reconciliation and discussion of our GAAP to non-GAAP financial measures.
Overview
GoPro helps the world capture and share itself in immersive and exciting ways. We are committed to developing solutions that create an easy, seamless experience for consumers to capture, create and share engaging personal content. When consumers use our products and services, they often generate and share content that organically increases awareness for GoPro, driving a virtuous cycle and a self-reinforcing demand for our products. We believe revenue growth may be driven by the introduction of new cameras, accessories, lifestyle gear, and software and subscription offerings. We believe new camera features drive a replacement cycle among existing users and attract new users, expanding our total addressable market. Our investments in image stabilization, mobile app editing and sharing solutions, modular accessories, auto-upload capabilities, local language user-interfaces and voice recognition in more than 12 languages drive the expansion of our global market.
In September 2022, we began shipping our HERO11 Black flagship camera that includes our GP2 processor, a larger image sensor and HyperSmooth 5.0 image stabilization. The larger image sensor provides 10-bit color video at up to 5.3K video at 60 frames per second, 27 megapixel (MP) photo resolution, 8:7 aspect ratio video for a larger vertical field of view, and Hyperview, which allows for a 16:9 field of view. HyperSmooth 5.0 image stabilization includes 360-degree Horizon Lock, which keeps video footage steady. The HERO11 Black also includes the Enduro Battery, which improves the camera performance in both cold and moderate temperatures, TimeWarp 3.0, Night Effects Time Lapse, and a front-facing and rear touch display. We also began shipping our HERO11 Black Creator Edition which is an all-in-one content capturing bundle that makes vlogging, filmmaking and live streaming easier than ever. Creator Edition combines the HERO11 Black, Volta, Enduro Battery, Media Mod, and Light Mod to create professional-quality videos.
In November 2022, we also began shipping our HERO11 Black Mini camera which has all the power of the HERO11 Black, but is smaller and lighter without a rear touch display, simpler with video only functionality, and
23


GoPro, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
features an easy one-button design. The HERO11 Black Mini includes our GP2 processor, the larger image sensor used in our HERO11 Black flagship camera, HyperSmooth 5.0 image stabilization and the Enduro Battery.
In the first half of 2022, we expanded our software solutions with the launch of our new GoPro Player + ReelSteady desktop app, which provides industry-leading video stabilization and 360-reframing tools in a single post-production app. Additionally, we began shipping HERO10 Black Bones which is a specifically built FPV (First Person View) drone camera that includes our GP2 processor, HyperSmooth 4.0, and the GoPro Player + ReelSteady desktop app. The camera delivers the same image quality and video frame rates as the HERO10 Black camera.
Our HERO11 Black, HERO11 Black Mini, HERO11 Black Creator Edition, HERO10 Black, HERO10 Black Creator Edition, HERO9 Black and MAX cameras are compatible with our ecosystem of mountable and wearable accessories.
We offer our GoPro subscription, which includes unlimited cloud storage supporting source video and photo quality, camera replacement and damage protection, highlight videos automatically delivered to you via the GoPro Quik app when footage is uploaded to your GoPro cloud account, access to a high-quality live streaming service on GoPro.com, as well as discounts on GoPro gear, mounts and accessories.
In addition to the GoPro subscription, we offer the Quik subscription which makes it easy for users to get the most out of their favorite photos and videos, captured on any phone or camera, through the use of the Quik mobile app’s editing tools. These editing tools include features such as trim, color, crop, filtering, auto-sync of edits to music, and the ability to change video speed. We believe the Quik subscription is an important step in expanding our total addressable market to those who may not own a GoPro camera. We also offer Open GoPro, an open API initiative that makes it easy for third-party developers to integrate their HERO camera into their own development efforts.
We continue to monitor the current evolving macroeconomic landscape. Increasing inflation and recession concerns places pressure on many areas of our business, including our product pricing, operating expenses, component pricing and consumer spending. In fiscal year 2022, the strength of the U.S. dollar relative to other foreign currencies largely impacted our revenue and gross margin. Although the U.S. dollar weakened slightly relative to other foreign currencies in the first quarter of 2023, the U.S. dollar remained strong compared to the first quarter of 2022. If the U.S. dollar strengthens relative to other foreign currencies in the future, our financial results will be negatively impacted. See Item 1A. Risk Factors for further discussion of the possible impact of inflation and the strong U.S. dollar on our business.
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GoPro, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is a summary of measures presented in our condensed consolidated financial statements and key metrics used to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions.