GPRO000150043512/3110-Q3/31/20212021Q1FALSEClass A common stock, $0.0001 par valueNASDAQ Global Select MarketDelaware77-06294743025 Clearview WaySan Mateo,California94402(650)332-7600125,070,40228,285,046false0.50.82436nine years12.512234.167.373.015.0Stockholders’ equity
Common stock. The Company has two classes of authorized common stock: Class A common stock with 500 million shares authorized and Class B common stock with 150 million shares authorized. As of March 31, 2021, 124.8 million shares of Class A stock were issued and outstanding and 28.5 million shares of Class B stock were issued and outstanding. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting power and conversion rights. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to ten votes per share. Each share of Class B common stock is convertible at any time at the option of the stockholder into one share of Class A common stock and has no expiration date. The Class B common stock is also convertible into Class A common stock on the same basis upon any transfer, whether or not for value, except for “permitted transfers” as defined in the Company’s restated certificate of incorporation. Each share of Class B common stock will convert automatically into one share of Class A common stock upon the date when the outstanding shares of Class B common stock represent less than 10% of the aggregate number of shares of common stock then outstanding. As of March 31, 2021, the Class B stock continued to represent greater than 10% of the overall outstanding shares.
The Company had the following shares of common stock reserved for issuance upon the exercise of equity instruments as of March 31, 2021:
(in thousands)
March 31, 2021
Stock options outstanding
3,431 
Restricted stock units outstanding
10,639 
Performance stock units outstanding
1,319 
Common stock available for future grants
32,795 
Total common stock shares reserved for issuance48,184 
500150124.8124.828.528.5onetenoneone3,43110,6391,31932,79548,184P1YP2Y10010041.41.44.0126.15.4-6.10.50.50.570,57228,233110,3188,6159,1632,643107,675164522,82184481754,3944,8764,3951,748248503363750333894,4281,35913,01121.04,00521.022,61221.016,76727.14,71724.742,77239.75,0108.13,94920.73,2853.16961.11,7319.110,97410.26821.11,8729.82,9972.89,6879.018,69417.43,5385.75,12326.85,9965.61230.23051.63,7863.55390.9240.15280.64,42823.21,3591.313.623.2177,987163,83279,69475,6245,1925,7102,4924,1505,4535,38414,10416,60211,68719,493296,609290,795287,276277,6939,33313,1021,1127,25512,2388,36712,2389668649.6287.316.87.2680.2239.7234.745.842.9680.28.11.715.312.517.313.027,17832,55658,5842,5412504831,6814453,9295,62826,95627,47127,17832,5561,05945019,1656,3611,8821187,279128,0731,7971,797145,322Restructuring charges
Restructuring charges for each period were as follows:
Year ended December 31,
(in thousands)
202120202019
Cost of revenue
$1,201 $54 $1,379 
Research and development
8,062 585 12,794 
Sales and marketing
10,684 314 5,291 
General and administrative
5,449 501 3,279 
Total restructuring charges
$25,396 $1,454 $22,743 
Second quarter 2020 restructuring plan
On April 14, 2020, the Company approved a restructuring plan to reduce future operating expenses, optimize its business model and address the impact of the COVID-19 pandemic. The restructuring provided for a reduction of the Company’s global workforce by approximately 20% and the consolidation of certain leased office facilities. Under the second quarter 2020 restructuring plan, the Company recorded restructuring charges of $25.5 million, including a $12.5 million right-of-use asset impairment primarily related to its headquarters campus, $7.3 million related to severance, and $5.8 million related to accelerated depreciation and other charges.
The Company ceased using a portion of its headquarters campus in the third quarter of 2020 as part of the second quarter 2020 restructuring plan. The unused portion of the Company’s headquarters campus has its own identifiable expenses and is not dependent on other parts of the Company, and thus was considered its own asset group. As a result, the Company impaired a part of the carrying value of the related right-of-use asset to its estimated fair value using the discounted future cash flows method. The discounted future cash flows were determined based on future sublease rental rates, future sublease market conditions and a discount rate based on the weighted-average cost of capital. Based on the results of the Company’s assessment, the Company recognized a $12.3 million impairment, which was reflected as a restructuring expense, primarily in the operating expense financial statement line items in the Condensed Consolidated Statements of Operations.
The following table provides a summary of the Company’s restructuring activities and the movement in the related liabilities recorded in accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets under the second quarter 2020 restructuring plan.
(in thousands)
Severance
Other
ROU Asset Impairment
Total
Restructuring liability as of December 31, 2019
$— $— $— $— 
Restructuring charges
7,287 5,800 12,460 25,547 
Cash paid
(7,238)(1,592)— (8,830)
Non-cash reductions
— (4,169)(12,460)(16,629)
Restructuring liability as of December 31, 2020$49 $39 $— $88 
First quarter 2017 restructuring plan
On March 15, 2017, the Company approved a restructuring plan to reduce future operating expenses and further align resources around its long-term business strategy. The restructuring provided for a reduction of the Company’s global workforce by approximately 17% and the consolidation of certain leased office facilities. Under the first quarter 2017 restructuring plan, the Company recorded restructuring charges of $23.1 million, including $10.3 million related to severance, and $12.8 million related to accelerated depreciation and other charges. The actions associated with the first quarter 2017 restructuring plan were substantially completed by the fourth quarter of 2017.
The following table provides a summary of the Company’s restructuring activities and the movement in the related liabilities recorded in accrued expenses and other current liabilities, and other long-term liabilities on the Condensed Consolidated Balance Sheets under the first quarter 2017 restructuring plan.
(in thousands)
Severance
Other
Total
Restructuring liability as of December 31, 2017— 3,550 3,550 
Restructuring charges (1)
— 4,783 4,783 
Cash paid
— (3,293)(3,293)
Non-cash charges
— 627 627 
Restructuring liability as of December 31, 2018
— 5,667 5,667 
Restructuring charges (1)
— 1,395 1,395 
Cash paid
— (2,257)(2,257)
Non-cash reductions
— (335)(335)
Restructuring liability as of December 31, 2019$— $4,470 $4,470 
Restructuring charges (1)
— (57)(57)
Cash paid
— (3,559)(3,559)
Restructuring liability as of December 31, 2020$— $854 $854 
(1)     Includes lease termination charges, which is included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheets, and totaled $0.9 million as of March 31, 2021.
Restructuring charges for each period were as follows:
Year ended December 31,
(in thousands)
202120202019
Cost of revenue
$1,201 $54 $1,379 
Research and development
8,062 585 12,794 
Sales and marketing
10,684 314 5,291 
General and administrative
5,449 501 3,279 
Total restructuring charges
$25,396 $1,454 $22,743 
1,201541,3798,06258512,79410,6843145,2915,4495013,27925,3961,45422,7432025.512.57.35.812.37,2875,80012,46025,5477,2381,5928,8304,16912,46016,6294939881723.110.312.8
The following table provides a summary of the Company’s restructuring activities and the movement in the related liabilities recorded in accrued expenses and other current liabilities, and other long-term liabilities on the Condensed Consolidated Balance Sheets under the first quarter 2017 restructuring plan.
(in thousands)
Severance
Other
Total
Restructuring liability as of December 31, 2017— 3,550 3,550 
Restructuring charges (1)
— 4,783 4,783 
Cash paid
— (3,293)(3,293)
Non-cash charges
— 627 627 
Restructuring liability as of December 31, 2018
— 5,667 5,667 
Restructuring charges (1)
— 1,395 1,395 
Cash paid
— (2,257)(2,257)
Non-cash reductions
— (335)(335)
Restructuring liability as of December 31, 2019$— $4,470 $4,470 
Restructuring charges (1)
— (57)(57)
Cash paid
— (3,559)(3,559)
Restructuring liability as of December 31, 2020$— $854 $854 
3,5503,5504,7834,7833,2933,2936276275,6675,6671,3951,3952,2572,2573353354,4704,47057573,5593,5598548540.9
VALUATION AND QUALIFYING ACCOUNTS
For the year ended December 31, 2021, 2020 and 2019
(in thousands)Balance at Beginning of YearCharges to RevenueCharges (Benefits) to ExpenseCharges to Other Accounts - EquityDeductions/Write-offsBalance at End of Year
Allowance for doubtful accounts receivable:
Year ended March 31, 2021$830 $— $(24)$— $(314)$492 
Year ended March 31, 2020500 — 616 — (286)830 
Year ended December 31, 2019750 — 199 — (449)500 
Valuation allowance for deferred tax assets:
Year ended March 31, 2021$277,693 $— $16,762 $(7,179)$— $287,276 
Year ended March 31, 2020271,374 — 4,717 1,602 — 277,693 
Year ended December 31, 2019226,458 — 42,772 2,144 — 271,374 
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
þ        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________

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

Large accelerated filer        þ                        Smaller reporting company        ☐
Accelerated filer             ☐                        Emerging growth company        ☐
Non-accelerated filer        ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of May 3, 2021, 125,070,402 and 28,285,046 shares of Class A and Class B common stock were outstanding, respectively.


1


GoPro, Inc.
Index

Page
PART I. FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
2


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GoPro, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except par values)
March 31, 2021December 31, 2020
Assets
Current assets:
Cash and cash equivalents
$296,754 $325,654 
Restricted cash 2,000 
Accounts receivable, net
68,625 107,244 
Inventory
111,833 97,914 
Prepaid expenses and other current assets
28,861 23,872 
Total current assets
506,073 556,684 
Property and equipment, net
21,703 23,711 
Operating lease right-of-use assets
30,640 31,560 
Intangible assets, net
491 1,214 
Goodwill
146,459 146,459 
Other long-term assets
11,519 11,771 
Total assets
$716,885 $771,399 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$77,283 $111,399 
Accrued expenses and other current liabilities
93,184 113,776 
Short-term operating lease liabilities
8,999 9,369 
Deferred revenue
32,044 28,149 
Total current liabilities
211,510 262,693 
Long-term taxes payable
18,238 18,099 
Long-term debt
221,931 218,172 
Long-term operating lease liabilities
50,091 51,986 
Other long-term liabilities
3,644 4,431 
Total liabilities
505,414 555,381 
Commitments, contingencies and guarantees (Note 8)


Stockholders’ equity:
Preferred stock, $0.0001 par value, 5,000 shares authorized; none issued
  
Common stock and additional paid-in capital, $0.0001 par value, 500,000 Class A shares authorized, 124,848 and 122,233 shares issued and outstanding, respectively; 150,000 Class B shares authorized, 28,485 and 28,885 shares issued and outstanding, respectively
985,768 980,147 
Treasury stock, at cost, 10,710 and 10,710 shares, respectively
(113,613)(113,613)
Accumulated deficit
(660,684)(650,516)
Total stockholders’ equity
211,471 216,018 
Total liabilities and stockholders’ equity
$716,885 $771,399 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3


GoPro, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
Three months ended March 31,
(in thousands, except per share data)
20212020
Revenue
$203,680 $119,400 
Cost of revenue
124,984 80,973 
Gross profit
78,696 38,427 
Operating expenses:
Research and development
32,430 32,281 
Sales and marketing
35,790 43,502 
General and administrative
13,988 18,758 
Total operating expenses
82,208 94,541 
Operating loss(3,512)(56,114)
Other income (expense):
Interest expense
(5,880)(4,843)
Other income (expense), net443 (172)
Total other expense, net
(5,437)(5,015)
Loss before income taxes(8,949)(61,129)
Income tax expense1,219 2,399 
Net loss$(10,168)$(63,528)
Basic and diluted net loss per share$(0.07)$(0.43)
Weighted-average number of shares outstanding, basic and diluted152,181 147,560 
The accompanying notes are an integral part of these condensed consolidated financial statements.

4


GoPro, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Three months ended March 31,
(in thousands)
20212020
Operating activities:
Net loss$(10,168)$(63,528)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
3,534 5,983 
Non-cash operating lease cost
920 2,035 
Stock-based compensation
8,869 7,637 
Deferred income taxes
(2)6 
Non-cash restructuring charges
(99) 
Non-cash interest expense
3,433 2,373 
Other
112 672 
Changes in operating assets and liabilities:
Accounts receivable, net
37,998 149,263 
Inventory
(13,919)(27,786)
Prepaid expenses and other assets
(3,537)1,272 
Accounts payable and other liabilities
(56,132)(144,517)
Deferred revenue
3,499 (1,694)
Net cash used in operating activities(25,492)(68,284)
Investing activities:
Purchases of property and equipment, net
(1,068)(795)
Maturities of marketable securities
 7,330 
Asset acquisition (438)
Net cash provided by (used in) investing activities(1,068)6,097 
Financing activities:
Proceeds from issuance of common stock2,998 1,887 
Taxes paid related to net share settlement of equity awards(6,246)(2,003)
Proceeds from borrowings 30,000 
Net cash provided by (used in) financing activities(3,248)29,884 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(1,092)(563)
Net change in cash, cash equivalents and restricted cash(30,900)(32,866)
Cash, cash equivalents and restricted cash at beginning of period327,654 150,301 
Cash, cash equivalents and restricted cash at end of period$296,754 $117,435 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5


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


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements

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


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
Comprehensive income (loss). For all periods presented, comprehensive income (loss) approximated net income (loss). Therefore, the Condensed Consolidated Statements of Comprehensive Income (Loss) have been omitted.
Revenue recognition. The Company derives substantially all of its revenue from the sale of cameras, mounts and accessories, the related implied post contract support to customers and subscription services. The transaction price recognized as revenue represents the amount the Company expects to be entitled to and is primarily comprised of product revenue, net of returns and variable consideration, including sales incentives provided to customers.
The Company’s camera sales contain multiple performance obligations that can include four separate obligations: a) a camera hardware component (which may be bundled with hardware accessories) and the embedded firmware essential to the functionality of the camera component delivered at the time of sale, b) the implicit right to the Company’s downloadable free apps and software solutions, c) the implied right for the customer to receive post contract support after the initial sale (PCS), and d) a subscription service. The Company’s PCS includes the right to receive, on a when and if available basis, future unspecified firmware upgrades and features as well as bug fixes, and email and telephone support. The Company allocates a portion of the transaction price to the PCS performance obligation based on a cost-plus methodology and recognizes the associated revenue on a straight-line basis over the estimated term of the support period, which is estimated to be 15 months based on historical experience. The transaction price allocated to subscription services is based on the standalone selling price and is recognized ratably over the subscription term, with payments received in advance of services being rendered recorded in deferred revenue. The transaction price is allocated to the remaining performance obligations on a residual value methodology. The transaction price allocated to the delivered hardware, related embedded firmware and free software solutions are recognized as revenue at the time of sale, provided the conditions for recognition of revenue have been met.
The Company’s process to allocate the transaction price considers multiple factors that may vary over time depending upon the unique facts and circumstances related to each deliverable, including: the level of support provided to customers, estimated costs to provide the Company’s support, the amount of time and cost that is allocated to the Company’s efforts to develop the undelivered elements, market trends in the pricing for similar offerings and the standalone selling price.
The Company's standard terms and conditions of sale for non-web-based sales do not allow for product returns other than under warranty. However, the Company grants limited rights of return, primarily to certain large retailers. The Company reduces revenue and cost of sales for the estimated returns based on analyses of historical return trends by customer class and other factors. An estimated return liability along with a right to recover assets are recorded for future product returns. Return trends are influenced by product life cycles, new product introductions, market acceptance of products, product sell-through, the type of customer, seasonality and other factors. Return rates may fluctuate over time but are sufficiently predictable to allow the Company to estimate expected future product returns.
For customers who purchase products directly from GoPro.com, the Company retains a portion of the risk of loss on these sales during transit, which are accounted for as fulfillment costs. The Company provides sales commissions to internal and external sales representatives which are earned in the period in which revenue is recognized. As a result, the Company expenses such costs as incurred.
Deferred revenue as of March 31, 2021 and 2020 also included amounts related to the Company’s subscription services. The Company’s short-term and long-term deferred revenue balances totaled $32.8 million and $14.8 million as of March 31, 2021 and 2020, respectively. Of the deferred revenue balance as of December 31, 2020 and 2019, the Company recognized $11.7 million and $5.8 million of revenue during the quarter ended March 31, 2021 and 2020, 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.
8


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
Segment information. The Company operates as one operating segment as it only reports financial information on an aggregate and consolidated basis to its Chief Executive Officer, who is the Company’s chief operating decision maker.
Recent accounting standards
StandardDescriptionExpected date of adoption
Effect on the condensed consolidated financial statements or other significant matters
Standards not yet adopted
Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)
ASU No. 2020-06

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

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, 2021December 31, 2020
(in thousands)Level 1Level 2TotalLevel 1Level 2Total
Cash equivalents (1):
Money market funds$21,396 $ $21,396 $19,445 $ $19,445 
Total cash equivalents$21,396 $ $21,396 $19,445 $ $19,445 
(1)    Included in cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheets. Cash balances were $275.4 million as of March 31, 2021 and $308.2 million, including $2.0 million of restricted cash, as of December 31, 2020.
Cash equivalents are classified as Level 1 because the Company uses quoted market prices to determine their fair value. At March 31, 2021 and December 31, 2020, the Company had no financial assets or liabilities measured at fair value on a recurring basis that were classified as Level 3, which are valued based on inputs supported by little or no market activity.
At March 31, 2021 and December 31, 2020, the amortized cost of the Company’s cash equivalents approximated their fair value and there were no material realized or unrealized gains or losses, either individually or in the aggregate.
9


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
In April 2017, the Company issued $175.0 million principal amount of Convertible Senior Notes due 2022 (2022 Notes). In November 2020, the Company issued $143.8 million principal amount of Convertible Senior Notes due 2025 (2025 Notes) (see Note 4 Financing Arrangements). The estimated fair value of the 2022 Notes and 2025 Notes is based on quoted market prices of the Company’s instruments in markets that are not active and are classified as Level 2 within the fair value hierarchy. The Company estimated the fair value of the 2022 Notes and 2025 Notes by evaluating quoted market prices and calculating the upfront cash payment a market participant would require to assume these obligations. The calculated fair value of the 2022 Notes was $165.6 million and $146.0 million as of March 31, 2021 and December 31, 2020, respectively, while the calculated fair value of the 2025 Notes was $205.9 million and $166.8 million as of March 31, 2021 and December 31, 2020, respectively. The calculated fair value is highly correlated to the Company’s stock price and as a result, significant changes to the Company’s stock price will have a significant impact on the calculated fair value of the 2022 Notes and 2025 Notes.
For certain other financial assets and liabilities, including accounts receivable, accounts payable and other current assets and liabilities, the carrying amounts approximate their fair value primarily due to the relatively short maturity of these balances.
The Company also measures certain non-financial assets at fair value on a nonrecurring basis, primarily goodwill, intangible assets and operating lease right-of-use assets, in connection with periodic evaluations for potential impairment.

3. Condensed consolidated financial statement details
The following sections and tables provide details of selected balance sheet items.
Inventory
(in thousands)
March 31, 2021December 31, 2020
Components
$11,135 $13,229 
Finished goods
100,698 84,685 
Total inventory
$111,833 $97,914 
Property and equipment, net
(in thousands)
March 31, 2021December 31, 2020
Leasehold improvements$35,180 $35,180 
Production, engineering and other equipment48,378 48,908 
Tooling17,907 17,635 
Computers and software22,438 22,385 
Furniture and office equipment6,273 6,315 
Tradeshow equipment and other5,789 5,860 
Construction in progress22 22 
Gross property and equipment
135,987 136,305 
Less: Accumulated depreciation and amortization(114,284)(112,594)
Property and equipment, net
$21,703 $23,711 
10


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
Intangible assets
March 31, 2021
(in thousands)Gross carrying valueAccumulated amortizationNet carrying value
Purchased technology $51,066 $(50,590)$476 
Domain name15 — 15 
Total intangible assets
$51,081 $(50,590)$491 

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

Amortization expense was $0.7 million and $1.9 million for the three months ended March 31, 2021 and 2020, respectively. At March 31, 2021, expected amortization expense of intangible assets with definite lives for future periods was as follows:
(in thousands)
Total
Year ending December 31,
2021 (remaining 9 months)$429 
202247 
$476 
Other long-term assets
(in thousands)
March 31, 2021December 31, 2020
Point of purchase (POP) displays
$3,209 $3,612 
Long-term deferred tax assets
930 966 
Deposits and other
7,380 7,193 
Other long-term assets$11,519 $11,771 
11


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
Accrued expenses and other current liabilities
(in thousands)
March 31, 2021December 31, 2020
Accrued liabilities$31,922 $39,444 
Accrued sales incentives
25,405 30,609 
Employee related liabilities7,650 7,067 
Return liability
5,988 10,817 
Warranty liability
7,126 7,997 
Inventory received
2,067 1,709 
Customer deposits
2,737 2,347 
Purchase order commitments
1,695 1,921 
Income taxes payable
214 221 
Other
8,380 11,644 
Accrued expenses and other current liabilities$93,184 $113,776 

Product warranty
Three months ended March 31,
(in thousands)
20212020
Beginning balance
$8,523 $11,398 
Charged to cost of revenue
2,655 1,717 
Settlement of warranty claims
(3,726)(4,161)
Warranty liability
$7,452 $8,954 
At March 31, 2021 and December 31, 2020, $7.1 million and $8.0 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 (2021 Credit Agreement) with a certain bank 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. The 2021 Credit Facility will terminate and any outstanding borrowings become due and payable on the earlier of (i) January 2024 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 convertible notes due April 2022, 91 days prior to the maturity date of such convertible notes. Concurrently with the execution of the 2021 Credit Agreement in January 2021, the Company terminated its previous 2016 Credit Agreement, which would otherwise have matured in March 2021.
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.
At the Company’s option, borrowed funds accrue interest at either (i) a floating rate per annum 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 rate at which dollar deposits are offered in the London interbank market plus a margin of from 1.50% to 2.00% depending on the Company’s Asset Coverage Ratio. The Company is required to pay a
12


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
commitment fee on the unused portion of the 2021 Credit Facility of 0.375% to 0.50% per annum, based on the level of utilization of the 2021 Credit Facility. 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, 2021, the Company was in compliance with all financial covenant contained in the 2021 Credit Agreement. The Company has made no borrowings from the 2021 Credit Facility to date.
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). The 2022 Notes are senior, unsecured obligations of GoPro and mature on April 15, 2022, unless earlier repurchased or converted into shares of Class A common stock under certain circumstances. The 2022 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 94.0071 shares of Class A common stock per $1,000 principal amount of the 2022 Notes, which is equivalent to an initial conversion price of approximately $10.64 per share of common stock, subject to adjustment. Based on current and projected liquidity, the Company has the intent and ability to deliver cash up to the principal amount of the 2022 Notes then outstanding upon conversion. The Company pays interest on the 2022 Notes semi-annually in arrears on April 15 and October 15 of each year.
The $175.0 million of proceeds received from the issuance of the 2022 Notes were allocated between long-term debt (liability component) of $128.3 million and additional paid-in-capital (equity component) of $46.7 million on the Condensed Consolidated Balance Sheets. The fair value of the liability component was measured using rates determined for similar debt instruments without a conversion feature. The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the aggregate face value of the 2022 Notes. The liability component will be accreted up to the face value of the 2022 Notes of $175.0 million, which will result in additional non-cash interest expense being recognized in the Condensed Consolidated Statements of Operations through the 2022 Notes’ maturity date. The accretion of the 2022 Notes to par and debt issuance cost recorded to long-term debt is amortized into interest expense over the term of the 2022 Note using an effective interest rate of approximately 10.5%. The equity component will not be remeasured as long as it continues to meet the conditions for equity classification.
The Company incurred approximately $5.7 million of issuance costs related to the issuance of the 2022 Notes, of which $4.2 million and $1.5 million were recorded to long-term debt and additional paid-in capital, respectively. The $4.2 million of issuance costs recorded as long-term debt on the Condensed Consolidated Balance Sheets are being amortized over the five-year contractual term of the 2022 Notes using the effective interest method.
The Company may not redeem the 2022 Notes prior to the maturity date and no sinking fund is provided for the 2022 Notes. The indenture includes customary terms and covenants, including certain events of default after which the 2022 Notes may be due and payable immediately.
Holders have the option to convert the 2022 Notes in multiples of $1,000 principal amount at any time prior to January 15, 2022, but only in the following circumstances:
13


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
during any calendar quarter beginning after the calendar quarter ending on September 30, 2017, 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 2022 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 2022 Notes is less than 98% of the product of the last reported sale price of Class A common stock and the conversion rate for the 2022 Notes on each such trading day; or
upon the occurrence of specified corporate events.
At any time on or after January 15, 2022 until the second scheduled trading day immediately preceding the maturity date of the 2022 Notes on April 15, 2022, a holder may convert its 2022 Notes, in multiples of $1,000 principal amount. Holders of the 2022 Notes who convert their 2022 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 2022 Notes at a repurchase price equal to 100% of the principal amount of the 2022 Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the repurchase date. During the three months ended March 31, 2021, the conditions allowing holders of the 2022 Notes to convert were not met.
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 an individual, privately negotiated transaction. The $56.2 million net cash proceeds were allocated between long-term debt (liability component) of $50.6 million and additional paid-in capital (equity component) of $5.4 million on the Condensed Consolidated Balance Sheets, and the remaining $0.2 million was related to the payment of interest. The fair value of the liability component was measured using rates determined for similar debt instrument without a conversion feature. The Company’s effective interest rate of 2.4% was based on the trading details of the 2022 Notes immediately prior to the repurchase date to determine the volatility of the 2022 Notes, and their remaining term. The cash consideration allocated to the equity component was calculated by deducting the fair value of the liability component and interest payment from the total aggregate cash consideration. The difference between the fair value of the 2022 Notes repurchased and the carrying value of $45.2 million resulted in a $5.4 million loss on extinguishment of debt.
As of March 31, 2021 and December 31, 2020, the outstanding principal on the 2022 Notes was $125.0 million, the unamortized debt discount was $8.4 million and $10.2 million, respectively, the unamortized debt issuance cost was $0.6 million and $0.8 million, respectively, and the net carrying amount of the liability component was $116.0 million and $114.0 million, respectively, which was recorded as long-term debt within the Condensed Consolidated Balance Sheets. For the three months ended March 31, 2021 and 2020, the Company recorded interest expense of $1.1 million and $1.5 million for contractual coupon interest, respectively, $1.9 million and $2.4 million, respectively, for amortization of the debt discount, and $0.1 million and $0.2 million, respectively, for amortization of debt issuance costs.
In connection with the 2022 Notes offering, the Company entered into a prepaid forward stock repurchase transaction (Prepaid Forward) with a financial institution (Forward Counterparty). Pursuant to the Prepaid Forward, the Company used approximately $78.0 million of the net proceeds from the offering of the 2022 Notes to fund the Prepaid Forward. The aggregate number of shares of the Company’s Class A common stock underlying the Prepaid Forward was approximately 9.2 million. The expiration date for the Prepaid Forward is April 15, 2022, although it may be settled earlier in whole or in part. Upon settlement of the Prepaid Forward, at expiration or upon any early settlement, the Forward Counterparty will deliver to the Company the number of shares of Class A common stock underlying the Prepaid Forward or the portion thereof being settled early. The shares purchased under the Prepaid Forward are treated as treasury stock on the Condensed Consolidated Balance Sheets (and not outstanding for purposes of the calculation of basic and diluted income (loss) per share), but will remain outstanding for corporate law purposes, including for purposes of any future stockholders’ votes, until the Forward Counterparty delivers the shares underlying the Prepaid Forward to the Company. The Company’s Prepaid Forward hedge transaction exposes the Company to credit risk to the extent that its
14


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
counterparty may be unable to meet the terms of the transaction. The Company mitigates this risk by limiting its counterparty to a major financial institution.
In the fourth quarter of 2020, 8.8 million shares out of the 9.2 million shares of Class A common stock underlying the Prepaid Forward entered into as part of the Company’s 2022 Notes were early settled and delivered to the Company. In April 2021, the remaining 0.4 million shares of Class A common stock underlying the Prepaid Forward were early settled and delivered to the Company. There was no financial statement impact due to the return of shares; however, shares outstanding for corporate law purposes are reduced by the early settlements.
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 GoPro 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. Based on current and projected liquidity, the Company has the intent and ability to deliver cash up to the principal amount of the 2025 Notes then outstanding upon conversion. The Company pays interest on the 2025 Notes semi-annually in arrears on May 15 and November 15 of each year.
The $143.8 million of proceeds received from the issuance of the 2025 Notes were allocated between long-term debt (liability component) of $106.9 million and additional paid-in-capital (equity component) of $36.9 million on the Condensed Consolidated Balance Sheets. The fair value of the liability component was measured using rates determined for similar debt instruments without a conversion feature. The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the aggregate face value of the 2025 Notes. The liability component will be accreted up to the face value of the 2025 Notes of $143.8 million, which will result in additional non-cash interest expense being recognized in the Condensed Consolidated Statements of Operations through the 2025 Notes’ maturity date. The accretion of the 2025 Notes to par and debt issuance cost recorded to long-term debt is amortized into interest expense over the term of the 2025 Note using an effective interest rate of approximately 7.5%. The equity component will not be remeasured as long as it continues to meet the conditions for equity classification.
The Company incurred approximately $4.7 million of issuance costs related to the issuance of the 2025 Notes, of which $3.5 million and $1.2 million were recorded to long-term debt and additional paid-in capital, respectively. The $3.5 million of issuance costs recorded as long-term debt on the Condensed Consolidated Balance Sheets are being amortized over the five-year contractual term of the 2025 Notes using the effective interest method.
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 our 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;
15


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
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 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, 2021, the conditions allowing holders of the 2025 Notes to convert were not met.
As of March 31, 2021 and December 31, 2020, the outstanding principal on the 2025 Notes was $143.8 million, the unamortized debt discount was $34.6 million and $36.1 million, respectively, the unamortized debt issuance cost was $3.3 million and $3.4 million, respectively, and the net carrying amount of the liability component was $105.9 million and $104.2 million, respectively, which was recorded as long-term debt within the Condensed Consolidated Balance Sheets. For the three months ended March 31, 2021, the Company recorded interest expense of $0.4 million for contractual coupon interest, $0.2 million for amortization of debt issuance costs, and $1.6 million for amortization of the debt discount.
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.

5. 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 2