Fitbit's Q2 results show weak smartwatch sales due to weak Versa Lite sales

Fitbits revenue and device sales were up but the average price of the devices was down.

Image: Fitbit

Fitbit’s earnings call for Q2 2019 show that the company’s revenue and device sales were up but the average price of the devices was down. This has led to Fitbit to lower its revenue guidance by $95 million.

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The company reported revenue of $314 million, GAAP net loss per share of $(0.27), non-GAAP net loss per share of $(0.14), GAAP net loss of $(69) million, non-GAAP net loss of $(36) million, cash used in operations of $(76) million and free cash flow of $(81) million for its second quarter of 2019.

“While we are disappointed to lower guidance for the year, we remain confident in our long-term transformation strategy and have demonstrated good results across key areas of the business. We saw growth in devices sold, increased active users and continued growth in our Fitbit Health Solutions channel, up 42% in the first half of 2019,” said James Park, co-founder and CEO. “In addition, we have made progress in diversifying our revenue towards building more predictable, recurring revenue streams with the launch of our premium services in two test markets. We are pleased with the initial results and expect a full launch this fall. Coupled with innovative hardware and software offerings, we believe we’re well positioned to bring more users to the Fitbit platform and continue to grow our business.”

Fitibit is seeing growth in its Fitbit Health Services (FHS), which increased to 16% to $24 million (Image: Fitbit)

The wearable giant also experienced poor sales on its Versa Lite, which was released in Q1. CFO Ronald Kisling said these sales were $150 million below the initial expectation, reports MobiHealthNews.

“We subsequently reduced our Versa Lite sales expectations for the remainder of the year and are lowering our full-year 2019 revenue gross margin guidance,” James Park, CEO of Fitbit, said during the earnings call. “We attribute the Versa weakness to our pricing go-to-market strategy.”

Fitibit is seeing growth in its Fitbit Health Services (FHS), which increased to 16% to $24 million, bringing the company’s total revenue in 2019 to $54 million. According to Park, part of the success is due to partnerships with payers.

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“So one of the factors in our growth and the increased performance of FHS is our Fitbit Care business and the pipeline, and Fitbit Care again is our health coaching offering that allows health plans and employees and their employers and members to manage chronic disease conditions like diabetes,” Park said. “So that pipeline is continuing to grow, and we've already started the rollout of bundled offerings, where our devices are actually coupled with Fitbit Care and its associated digital interventions along with a coach.”

Sam Draper
August 14, 2019

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