GoPro announced on April 15, 2020, that it would eliminate more than 200 jobs—over 20% of its global workforce—as the COVID-19 pandemic disrupted its distribution network and sales outlook. The layoffs were part of a broader restructuring that included a $100 million reduction in 2020 operating expenses, smaller office footprints, lower sales and marketing spending, and a shift toward selling directly through GoPro.com.
GoPro also withdrew its first-quarter and full-year 2020 financial guidance, saying the pandemic made forecasting too uncertain.
What GoPro announced
GoPro described the action as a global restructuring rather than an isolated round of layoffs. The company planned to:
- Reduce its workforce by more than 200 employees, or more than 20% globally.
- Cut approximately $100 million from 2020 non-GAAP operating expenses.
- Reduce office space in five geographies.
- Lower sales and marketing spending.
- Target approximately $250 million in operating expenses for 2021.
- Withdraw its first-quarter and full-year 2020 guidance.
Chief Executive Nicholas Woodman said he would forgo the remainder of his 2020 salary, while GoPro’s board said its members would forgo the remainder of their 2020 cash compensation. GoPro also appointed Aimée Lapic as chief digital officer to lead its direct-to-consumer strategy.
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The company initially estimated total restructuring charges of approximately $31 million to $49 million, including about $5 million in cash costs during the second quarter related to the workforce reduction. GoPro’s announcement said additional costs would mainly involve office reductions and other non-cash charges.
Why the pandemic affected GoPro
GoPro said COVID-19 had negatively affected its global distribution network. Retail-store closures, disrupted distribution and weaker consumer demand made it harder to sell cameras through the company’s traditional retail and distributor channels.
The pandemic was the immediate trigger GoPro identified for the restructuring, but it did not create every underlying business challenge. The company was also using the disruption to accelerate a longer-term effort to reduce costs and rely more heavily on direct sales through GoPro.com.
That distinction matters. GoPro was responding to a sudden pandemic shock while also redesigning how it sold cameras, subscriptions and accessories.
The financial warning signs
GoPro’s April announcement included preliminary first-quarter figures, not final reported results. The company expected approximately:
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- $119 million in first-quarter revenue.
- A non-GAAP loss in the mid-$0.30-per-share range.
- 700,000 cameras sold through to customers.
- A nearly 30% reduction in channel inventory.
- $125 million in cash and equivalents as of March 31, 2020.
GoPro withdrew its 2020 guidance because the pandemic created too much uncertainty around retail activity, distribution and consumer spending.
What the direct-to-consumer shift meant
GoPro planned to emphasize sales through GoPro.com while continuing to work with selected major retailers in regions where consumers preferred buying offline or through indirect channels.
Selling directly can give a company more control over pricing, promotions, inventory and the customer relationship. It also creates more opportunities to bundle cameras with subscriptions, software and accessories. A direct channel can reduce dependence on physical stores, which was especially valuable when stores were closed.
But the model has trade-offs. GoPro had to generate its own online traffic, manage fulfillment and customer support, and replace some of the product discovery and broad reach provided by retailers. GoPro later warned that moving away from other channels could affect profitability.
Sales volume fell, but online sales became more important
GoPro’s later results showed how sharply the pandemic affected camera volume. In the second quarter of 2020, the company shipped 448,000 cameras, compared with 1.1 million in the second quarter of 2019. However, its average selling price rose to $300, an 11% year-over-year increase.
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The online channel expanded dramatically. GoPro.com generated 44% of total revenue in the second quarter of 2020, compared with 9% a year earlier. For the first half of the year, GoPro.com represented 33% of revenue, compared with 11% in the first half of 2019. These figures show why revenue and unit sales should not be treated as identical measures: fewer cameras were shipped, but the company sold a larger share through its own website and at a higher average selling price.
The product roadmap continued
GoPro said the restructuring would not affect its 2020 product roadmap, which included new hardware, software, subscription products and services for camera owners and smartphone users.
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The company also said reductions in research and development would be limited to protect product development. That was a management statement, not proof that the cuts had no effect on innovation, but the restructuring was not announced as a product-development shutdown. GoPro later launched the HERO9 Black, and its 2020 filing said second-half revenue improved significantly after that launch and strong holiday sales through GoPro.com.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What happened to headcount and restructuring costs
GoPro reported 741 employees at the end of the second quarter of 2020, describing that as its lowest headcount since 2014. That figure is the company’s total headcount at that date; it should not be treated as the precise number of people dismissed under the April plan.
GoPro later reported approximately $25.5 million in restructuring charges for the second-quarter plan:
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- $12.5 million for a right-of-use asset impairment, primarily involving its headquarters campus.
- $7.3 million in severance costs.
- $5.8 million in accelerated depreciation and other charges.
The initial $31 million-to-$49 million estimate and the later $25.5 million recorded charge are different figures because one was an early estimate of aggregate costs and the other reflected charges recorded for the plan during the second quarter.
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Did the restructuring work?
The later evidence is mixed, with clear progress in GoPro’s sales mix but continued pandemic damage to the overall business.
For 2020, GoPro reported:
- $891.9 million in revenue, down from $1.195 billion in 2019.
- 2.8 million cameras shipped, down from 4.3 million in 2019.
- $282.6 million in GoPro.com revenue, representing 31.7% of total revenue, compared with $141.1 million and 11.8% in 2019.
- A gross margin of 35.3%, compared with 34.6% in 2019.
- 761,000 paying subscribers at year-end, up 145% year over year.
GoPro also reported stronger second-half performance, helped by the HERO9 Black, holiday demand and direct online sales. Its 2020 Form 10-K provides the full-year figures.
Those results do not support calling the restructuring an unqualified success. GoPro became much more dependent on its own website and subscription business, but full-year revenue and camera shipments remained substantially below 2019 levels. The restructuring improved the channel mix and reduced the cost base while the pandemic continued to weigh on demand.
The bottom line
GoPro’s April 15, 2020 announcement was more than a report that 200 people had lost their jobs. The company eliminated more than 200 positions, withdrew its 2020 guidance and pursued a $100 million operating-expense reduction as COVID-19 disrupted retail and distribution.
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