Good day, ladies and gentlemen and welcome to the GoPro's First Quarter 2016 Earnings Call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Mr. Peter Salkowski, Head of Investor Relations. Please go ahead, sir.

Thank you. Good afternoon and welcome to GoPro's first quarter 2016 earnings conference call. With me today are GoPro's CEO, Nicholas Woodman; our President, Tony Bates; and our Chief Financial Officer, Brian McGee. Before we begin, I would like to remind you that statements on this call, including, but not limited to our projected future financial results, including revenue and expenses, economic and market trends, our future plans, prospects and growth opportunities, the continued adoption of our products, the anticipated benefits of our long-term strategy, our customers, competitive position, market share and leadership position in various markets constitute forward-looking statements. These forward-looking statements and all other statements that may be made on this call that are not historical facts are subject to a number of risks and uncertainties that may cause actual results to differ materially. These forward-looking statements speak only as of today's call, and we do not undertake any obligation to update these forward-looking statements. We refer you to our Annual Report on Form 10-K for the year ended December 31, 2015, which is on file with the Securities and Exchange Commission, in particular to the section entitled Risk Factors, and to other reports that we may file from time-to-time with the SEC for additional information on factors that can cause additional results to differ materially from our current expectations. We report net profit and loss, and basic and diluted net profit and loss per share, in accordance with GAAP and additionally on a non-GAAP basis. We believe that non-GAAP information is useful because it can enhance the understanding of our ongoing economic performance. We use non-GAAP reporting internally to evaluate and manage our operations. We have chosen to provide this information to enable investors to perform comparisons of operating results in a manner similar to how we…

Thank you, Tony, and thanks to all of you for joining us today. If you've not already done so, I would encourage you to download from the investors' section of our website the financial slides we posted concurrent with our press release earlier today. Our prepared remarks will be focused on the financial overview of Q1, as well as our related business trends. I will then provide an update to our guidance. Our first quarter revenue of $183.5 million was above our guidance range of $160 million to $180 million and down 49% year-over-year and 58% sequentially. We shipped 701,000 cameras in the quarter. As Nick noted, in our first quarter, global unit sell-through was approximately 50% higher than global unit sell-in, allowing our global channel inventory to decline by over 20%. Looking ahead to the second quarter, we again expect channel sell-through to be significantly higher than sell-in, enabling our global channels to further reduce their inventory ahead of our new product launches. Regionally, the Americas accounted for the largest portion of our revenue, making up 46% of Q1 revenue, followed EMEA at 33% and APAC at 21%. Looking at our channels, direct and distribution revenue made up 46% and 54% of Q1 revenue, respectively, in line with the percentages of revenue we reported in the prior-year quarter. Based on retail price points, our $399 and above cameras combined to make-up over 50% of our units shipped in the quarter. In addition, our $199 and below cameras accounted for over 40% of units shipped. HERO4 Session's performance greatly improved during the quarter, accounting for over 50% of units shipped at the $199 and below retail price point. The average selling price of units shipped increased 16% sequentially, this is defined as total revenue divided by camera unit shipments and…

Your first question will come from Paul Coster with JPMorgan.

Yeah. Thanks for taking my question. First off, you've depleted the channel inventory in readiness for the next HERO launch later this year. Can you just talk to us little bit about what the plan would be for the HERO4 product that will be in the channel, because one of the problems you had last year was that you had a lot of products on sale at the same time. As you bring out HERO5, I assume that you'll try and retire the HERO4 products probably more quickly this time. And the other question is on HERO Session, which is obviously doing much better, it is doing much better, but it's doing so at a price point and gross margin that was not originally intended. Is it sustainable as you look at the portfolio rolling forward? Thank you.

Hi, Paul. This is Brian McGee. Let me take a kind of swing. Yeah, clearly with HERO4, we will transition it. I think, we have a very effective transition plan for the product. We've already reduced channel inventories for HERO4 line-up, as well as our own inventory. So, that one I think we have pretty well in hand. I think we've learned the lessons from the last time. As far as Session goes, we've actually done a pretty good job of cost reducing that product. A more expensive product was sold in Q1 and a less expensive – cost per unit product will be introduced in Q2. So, we've actually taken a pretty good cut at the product costs for Session to drive up margins. Anthony J. Bates - President & Director: Yeah. And Paul, just to add, it's Tony, just to clarify, what Brian said is, that you'll actually see the HERO Session in the marketplace and not the HERO4 Session.

So, as we approach this new product cycle, I think, last summer, you named four or five factors that you got wrong, too many products, differentiation wasn't right, there wasn't enough marketing, et cetera. Do you feel like all of the boxes have been ticked off this time? If you can just summarize your degree of confidence going into this product cycle? Nicholas Woodman - Chairman & Chief Executive Officer: Hi, Paul. This is Nick speaking. Yeah, we're feeling very good about lessons learned from last year. And traditionally GoPro has succeeded with a good, better, best product strategy, that has the right products for customers at three clear and easy to understand price points. Three has been a magic number for us in the past and it will be a magic number for us moving forward and we're already seeing the benefits of our simplified product lineup in the market today. Sell-through is improving and we're seeing beneficial changes to SKU mix. So, so far, it seems that our strategy is working. Anthony J. Bates - President & Director: Yeah. And Paul, the other lesson learned and we touched on it before, was really making sure we're putting the right level of emphasis on the marketing spend, and I touched on that in prepared remarks, but we really have seen that increasing sell-through that we described. So that will be a key part and key element moving forward as well.

Got it. Thank you.

Next, we'll hear from Joseph Wolf with Barclays.

Hey, guys. It's Brian on for Joe. Just a quick question on Karma, now that you've come to decision to delay the launch, does that have any impact on the HERO5 timing or could those be launched in conjunction for the holidays? Thanks. Nicholas Woodman - Chairman & Chief Executive Officer: Good question, and just the simple answer is no. Karma's schedule does not have any effect on or relation to HERO5.

Okay. Great. And then can you guys give any more color on the margin profile of Karma or how we should think about layering it into our model in 2017 and 2018?

No. This is Brian again. We didn't do that. And quite frankly, we've got Karma built in to our model and we talked about margins in prepared remarks. We did say that Q1 would be kind of the low point for the quarter excluding the charges. Anthony J. Bates - President & Director: For the year.

That's for the year – this year 2016.

Okay. Thanks guys.

Thank you.

From Goldman Sachs, Simona Jankowski. Doug Clark - Goldman Sachs & Co.: Hi. This is actually Doug Clark on behalf of Simona. First question going back to the channel inventory and sell-in versus sell-through. I understand sell-through is supposed to be higher again in the second quarter. Can you give us a sense of where we are in absolute levels or where you expect to be exiting second quarter in terms of that inventory reduction?

Yeah. This is Brian again. I think we would expect to see inventories come down pretty substantially in the channel in Q2, order of magnitude, I think in the range of 35% to 50% down on the weeks of inventory basis in the channel, which is pretty substantial, and our inventory will come down as well. Doug Clark - Goldman Sachs & Co.: Okay. That's helpful. And then second question was, and I think you talked about this in terms of the backend loaded year, but I want to revisit the monetization of software products. Now it sounds like VR products. Can you talk a little bit about your current strategy with a broader portfolio and some of the acquisitions that you've made? Anthony J. Bates - President & Director: Yeah. In terms of, as you mentioned, we have a much broader portfolio, including mobile now. I wouldn't say that you should focus heavily on a monetization strategy at this stage. What we're really trying to do is put the best possible portfolio of products across an ecosystem ranging from desktop to mobile, both for our traditional capture devices as well as VR. There is a small amount of revenue that does come from the VR side of it. As you know, we acquired Kolor, but I wouldn't say it's going to be material in this year. Doug Clark - Goldman Sachs & Co.: Okay. Great. Thanks for taking my questions.

From Dougherty & Company, Charlie Anderson. Charlie Lowell Anderson - Dougherty & Co. LLC: Yeah. Thanks for taking my question. I'm sorry. I was jumping between calls and missed the script, so maybe this has been answered. But on Karma, I wondered now that you have the benefit of time, is anything going to change there as far as pricing or the way it's being engineered, look and feel, anything like that? And then, I also wonder, just your views on the drone market. Is this something we're going to have to annually refresh like the big competitor there? Where does pricing look like it's going to shake out by the time we get to Q4? Just any color there would be helpful. Thanks. Nicholas Woodman - Chairman & Chief Executive Officer: Hey Charlie, this is Nick. Those are good questions. We can't share any information about how Karma may or may not evolve as we get closer to launch, but what I can share is that we are incredibly excited about this product. And that the upside to the delay is that it does allow us to launch Karma at a terrific time of the year and we do expect it to benefit from the holidays. And then additionally, as it relates to product refreshes moving forward, again it's something that we can't share and we historically don't share information about our roadmap or changes that may occur. Charlie Lowell Anderson - Dougherty & Co. LLC: Okay. Thanks so much. Nicholas Woodman - Chairman & Chief Executive Officer: Thank you.

Next, we'll hear from Andrew Uerkwitz with Oppenheimer. Andrew Uerkwitz - Oppenheimer & Co., Inc. (Broker): Yeah. Hey, thanks for taking my call. Question, just could you talk a little bit about the strategy of integrating the mobile apps? Is there a way to monetize that? And if you could share number of active users and how you view that fit into everything? Thank you. Nicholas Woodman - Chairman & Chief Executive Officer: Sure. We are really excited about our acquisition of both Replay and Splice. They are both best-in-class mobile editors, Splice being a more manual edit experience and Replay, now Quik, being a more automated edit experience. And what we shared on the call was that we plan to unite those two experiences into one combined app over time that will make it easy for our customers, and for smartphone users as well to more easily create terrific engaging edits in a matter of seconds. This is an interesting and important evolution of our strategy. We see GoPro as a content enabling platform, but historically, we've seen it as a content enabling platform for people that own a GoPro. And now moving forward, we've expanded our view to look at GoPro as a platform to enable anyone with a GoPro or with a smartphone to help them create terrific content. So, I invite you to download and try the Quik and Splice apps. And whether you own a GoPro or not, you can create awesome footage using the content you already have on your smartphone and you can see how the strategy extends our brand and extends our solutions in a meaningful way to smartphone users so that we can prove GoPro to them and over time potentially up-sell them on our other products and services. And so, that's an opportunity for us to leverage our software to grow our core business. Anthony J. Bates - President & Director: And Andrew, just I'll address couple of other parts of your question, one, you just said, do you have any updates on usage. What we can tell you right now is, both of these apps coming in were over 1 million MIUs type of number. The other thing, just to give you a real time update, as Nick mentioned earlier, we just put the new apps in the App Store and we've been really, really pleased with the overall ratings and just the level of interest and downloads. So, we feel really good about what's going on there. And you asked monetization again. Yeah, in the short-term, the plan is really to create the best editing solution out there that will drive more engagement, that will drive more people to get excited about GoPro and that's the best strategy for now. Andrew Uerkwitz - Oppenheimer & Co., Inc. (Broker): Perfect guys. I appreciate that. Thanks, guys.

From Robert Baird, we'll hear from Will Power. Will V. Power - Robert W. Baird & Co., Inc. (Broker): Great. Thanks for taking the question. Yeah, I guess a couple of questions. I know you've maintained full year guidance, and that I guess was despite the delay of the Karma. So, I guess I'm wondering what you expect to offset, any other color there would be helpful? Nicholas Woodman - Chairman & Chief Executive Officer: Sorry. Could you ask the question again? I'm sorry. Will V. Power - Robert W. Baird & Co., Inc. (Broker): Yeah. Okay. Sorry, if you couldn't hear me. So, you've maintained the full year guidance despite the delay of the Karma and I guess I'm trying to understand what might be offsetting that to give you confidence in the full year number?

Yeah. Sure, Will. This is Brian. Well, first of all, I think, we've done a great job in Q1 hitting our numbers, I think we have pretty good visibility coming into the next quarter and the back half of the year with the next launch. It's going to be both capture devices as well as Karma. So both are in the mix, we expect to be shipping both and we're going stay in the guidance range. Will V. Power - Robert W. Baird & Co., Inc. (Broker): Okay. And maybe just along those lines, if you could comment on your confidence around the Q2 guidance calling for sequential increase without new products, I assume that's just normal seasonality, any other color there would be helpful?

No. We said it would be up, but modestly for Q2 and actually Q2 tends to be seasonally a bit lower quite frankly. But we have pretty good sense for where that's going to come out at. Anthony J. Bates - President & Director: The other thing just to touch on in terms of confidence level, as we talked about couple of times in the remarks, we have seen very effective response vis-à-vis the marketing spend, particularly the product marketing, so that just gives us an added level of confidence in terms of execution. Will V. Power - Robert W. Baird & Co., Inc. (Broker): Okay. Thank you.

And moving on, from Pacific Crest Securities, we'll hear from Brad Erickson.

Hi. Thanks for taking my questions. Obviously, since it's been I guess two years now since your last high-end launch with HERO Black and Silver. How should we think about your expectation, I guess the HERO5 consumer mix and between replacement sales versus new buyers for the category? Just would be curious to get your expectations for the portion of each for that product? Nicholas Woodman - Chairman & Chief Executive Officer: That's a good question. I think we feel very good about HERO5, its value proposition, both to core existing customers as well as new more mass-market customers. We've been very open about our desire and focus on a broader customer base for the last couple of years, and you're seeing it now in terms of the types of software that we're developing and the experiences we're creating, and how we're now positioning GoPro as a content enabling solution for smartphone users and casual users, as well as our existing core customer base. And you're going to see that approach continue in our hardware design as well.

Got it. And then could you maybe talk a little bit about the distribution plan for Karma and any hints there. Is this something that's going to get into the majority of your doors where you're already at for cameras initially? And I guess any specific geographies that's may be included or excluded at first? Thanks. Nicholas Woodman - Chairman & Chief Executive Officer: Again, a good question. We can't share specifics, but what we can share is that we do believe that Karma is going to benefit from our global distribution. It's going to benefit from the global strength of our brand and Karma is very much in line with the types of value proposition that have resonated with consumers so far from GoPro. So, expect consistency there, but beyond that, we can't share any information about our distribution plans for Karma.

Anything further Mr. Erickson?

No, that was all. Thank you very much.

And moving on, from Stifel we'll hear from Jim Duffy. Jim Duffy - Stifel, Nicolaus & Co., Inc.: Hello, guys. Couple of questions from me around the software platform and the strategy. Firstly, are you on track for the content management platform introduction later this year? Anthony J. Bates - President & Director: Yeah. I think what we can tell you without going into specifics that we really do feel good about the progress we've made in software, both in the recent evolution of the application side of it and continued progress on the content management side. In fact, I would point you to even some of the work we've done in the recent GoPro for Desktop app where you see the first sort of vision of what a great unified media management platform can look like. So, we haven't really disclosed details or timing, but we feel very good about the progress. Jim Duffy - Stifel, Nicolaus & Co., Inc.: Okay. And then, you touched on this some, but I'm going to dig in a little more on it. Can you help us a little more on the decision process and strategic rationale for supporting smartphone footage? You mentioned over time up-sell opportunities to these customers. How about a little more shape around just how that generates revenue? Nicholas Woodman - Chairman & Chief Executive Officer: Sure. That's a good question. Specifically, we believe that smartphone users and GoPro users alike, there is obviously a lot of overlap. All have a shared interest in creating short and engaging videos to share. So, for example, if you go on holiday with your family and if you are just using your smartphone and you capture 15 different videos and 30 photos, it's difficult for smartphone users to synthesize that into a…

From Piper Jaffray, we'll hear from Erinn Murphy. Erinn E. Murphy - Piper Jaffray & Co. (Broker): Great. Thanks. Good afternoon. Couple of questions. First, Nick, for you, I was hoping you can maybe speak to the decision to bring Danny Coster from Apple. And how do you plan to work alongside with him? And then, I can't remember when he starts, so when he starts, what product or what future product pipeline will he already be working on? Thanks. Nicholas Woodman - Chairman & Chief Executive Officer: Sure. Danny has been here a couple of weeks now, and he is acting as my right hand in design across all of the company. And the rationale for bringing Danny in is that we are constantly looking to advance and enhance our approach to business and our approach to design. We are a customer, consumer facing business, and we recognize the need to continue to push the limits of what we're capable on all fronts, and really that means bringing in the best possible people to help expand the potential of our team. We have an incredible team here at GoPro. I think over the last couple of years, you've seen outstanding advancements in the design and presentation of GoPro's products and brand, and Danny is just a fabulous addition to that. Erinn E. Murphy - Piper Jaffray & Co. (Broker): And then in terms of the products that he'll be working on, are you guys kind of working on 2017, 2018 at this point or is he able to affect some of the product launches that could even be or that you've already talked about for the back half of this year? Nicholas Woodman - Chairman & Chief Executive Officer: Yes to both aspects of your question. We're certainly working on products that go years out, but where there are opportunities to affect more near-term products, Danny and the rest of the design team are making improvements there as well. Erinn E. Murphy - Piper Jaffray & Co. (Broker): Okay. And then I guess just in terms of just overall retail ASPs during the quarter, can you just speak to the trends of the capture devices in the quarter itself? If you just kind of do back of the envelope math, I think it's a little bit better than we were anticipating. but if you could just provide any color for the pricing trends during the quarter that would be great.

Yeah. This is Brian, Erinn. Yeah, the pricing trends were favorable because of mix in part and also with Session replacing the HERO $129 product. So, more Silver, Black, more Session, less of the $129 product, and quite frankly, seasonal impacts from accessories also helps as well. And we saw really no pricing pressure in the market. And you see that even on the year-over-year comparison where ASPs were essentially unchanged year-over-year. Erinn E. Murphy - Piper Jaffray & Co. (Broker): Okay. Thanks. Anthony J. Bates - President & Director: And Erinn, it's Tony, I'd just add, one way maybe to look at it is, with the clearing of the inventory, what you're seeing is obviously the sell-in and that's why it's much similar to last year. It's much more like the good, better, best portfolio strategy that we had before, right. So that's why it's kind of playing out that way. Erinn E. Murphy - Piper Jaffray & Co. (Broker): Thanks, Tony for that. And then not to beat a dead horse on the Karma. But I guess what I'm trying to understand is, as you guys have obviously pushed it back to the back half of the year, what maybe would the revenue guidance in Q2 potentially have looked like? I mean, you're looking for a little bit of an acceleration versus Q1. How much more would it have been in Q2? And then I guess with just less of a runway at the end of the year when you do start shipping it into the channel, closer to holiday, I guess I still am struggling to understand the confidence that you guys have. Is it just more units you're shipping in, more retailers that are taking commitments? Because you just don't have that runway on the back end of the launch to really see the sell-through rates necessarily materialize this year. So, any kind of context around that would just be helpful for our models.

Yeah. Erinn, I think for the most part, most of the revenue we've had has been second half anyway quite frankly. So that's I think the way you need to think about it. And we don't really give guidance on specific products either, but in this case it's really second half driven and principally has been anyway. Erinn E. Murphy - Piper Jaffray & Co. (Broker): Thank you, guys. Best of luck. Nicholas Woodman - Chairman & Chief Executive Officer: Thank you.

From Morgan Stanley, we'll go to James Faucette. Yuuji Anderson - Morgan Stanley & Co. LLC: Hi. This is Yuuji Anderson on for James. Thanks for taking my question. Just a question on the APAC growth. Was that mostly China there? I'm specifically curious to hear what the contribution was like from the Tmall relationship, or is there any other region sort of on the up there? And how should we think about product mix in APAC generally? Anthony J. Bates - President & Director: Yeah. No actually, it was actually a broad set of countries that contributed. We still feel very good about China, but they won't necessarily be standout, so it was a broad set across APAC. And can't really give you too much color on the overall mix, but the mix in general is very, very similar to what we're seeing in the rest of our business. Yuuji Anderson - Morgan Stanley & Co. LLC: Got it. And then so when we think about, just as a follow-up on the channel reduction, how much of what is left is weighted towards the legacy products versus perhaps like some other reduction for your core lineup there?

This is Brian. We've actually reduced inventories pretty much across the board quite frankly, I think the Silver, Black, Session have maybe come down a little bit quicker. We should be mostly through the HERO, HERO+ by end of second quarter from a sell-through perspective and HERO+ LCD take a little bit longer, but they're all moving pretty well. Yuuji Anderson - Morgan Stanley & Co. LLC: Great. Thanks so much.

Next question will come from Rob Stone with Cowen & Co. Robert Stone - Cowen & Co. LLC: Hi, guys. Thanks for taking my questions. First one for Brian. Could you just comment on how we should think about the effective tax rate for this year? The rate that equates to the benefit for this quarter was a little lower than I was expecting and I do have a follow-up. Thanks.

Sure. We expect the non-GAAP tax rate to be approximately 11% for the year. Robert Stone - Cowen & Co. LLC: Okay. That's helpful. And then a high level question, maybe for Nick. You've got a lot of horsepower in VR for professionals. How are you thinking about the consumer VR and VR capture market? Nicholas Woodman - Chairman & Chief Executive Officer: We think that GoPro has an opportunity to be a leader in consumer VR just as it has been a leader in its current market, enabling new perspectives that weren't possible before in differentiated forms of capture. We think that our brand and our reputation translate directly into virtual reality and it's something that we're extremely excited about. And you can see our interest and our dedication through the acquisition of Kolor and through our advancements in more professional capture solutions like Odyssey and now Omni. And as you see those products get smaller, more compact and simplified, you can see what direction we're headed in for consumers. Robert Stone - Cowen & Co. LLC: Great. I won't ask you when a consumer product is coming. Thanks. Nicholas Woodman - Chairman & Chief Executive Officer: Thanks for not asking.

From Sterne Agee we'll hear from Rob Cihra.

Great. Thanks very much. I just want to go back to the software strategy and investments if I could just for a second, which is just I'm trying to figure out what the key goal is, because if you look at video pile-up is always been a big pain point for video and it's always been relatively easy to shoot a ton of video and hard to do something with it. So, I'm trying to figure out what GoPro is looking to do? I mean is it the Replay, now the Quik, or is it automation, is that kind of a key? And whether it is or not, I guess is that how you differentiate your product, get value add and sell more cameras in it. So, how do you do that by making it openly available as was asked earlier? Thanks. Anthony J. Bates - President & Director: Yeah. I mean, I think we've been very consistent on the vision for software in general, which has been always one of the biggest pain points as you mentioned is, it's easy to capture a lot of content. But how do you first manage it in an easy way and then get to that great edit quickly, and then have the ability to share it and that fuels the whole virtuous cycle. Because if you see this great content that's been shot by your friends or on social media and someone, then you are more excited to go out and do that and buy GoPro capture devices. And so we really believe we need to bring the whole solution. And we see in particular, as you are probably aware, mobile is the key aspect of that because people are snacking quickly and thought sharing and so that's the premise of the strategy. And the most important thing for us to do is really make that as seamless, as easy as possible. And to address what you asked, one of the things that we saw with doing the two acquisitions is, it's not one or the other per se. You said is it automatic. You are always going to have users who would like to have something very quick and get you to a very quick story that you can share and that's more on the automatic side. But one of the things we loved about Splice in particular, think of it as a fairly advanced editor with a lot of control for the creator to do. And so, really, as Nick alluded to, I think it is a very powerful strategy of bringing those two things together.

All Right. Thanks.

And at this time, I would like to turn the conference back over to Mr. Woodman for any additional or concluding remarks. Nicholas Woodman - Chairman & Chief Executive Officer: Well, I would just like to thank everybody for joining the call. We appreciate it very much. And on behalf of all of GoPro, this is team GoPro signing off.

Ladies and gentlemen, that does conclude today's presentation. We do thank everyone for your participation.