10-Q 1 gpro-20220331.htm 10-Q gpro-20220331
GPRO000150043512/3110-Q3/31/20222022Q1FALSE238PricewaterhouseCoopers LLPSan Jose, CaliforniaCash equivalents and marketable securities. Cash equivalents consist of investments in money market funds with maturities of three months or less from the date of purchase. Marketable securities consist of commercial paper, government securities and corporate debt securities, and are classified as available-for-sale securities. The Company views these securities as available to support current operations and has classified all available-for-sale securities as current assets. Available-for-sale securities are carried at fair value with unrealized gains and losses, if any, included in stockholders’ equity. Unrealized gains and losses are charged against other income (expense), net, for declines in fair value below the cost of an individual investment that is deemed to be other than temporary. The Company has not identified any marketable securities as other-than-temporarily impaired for the periods presented. The cost of securities sold is based upon a specific identification method.Restricted cash. As of December 31, 2022 and 2021, the Company had an outstanding letter of credit collateralized by a money market account of zero and $— million, respectively, for certain duty related requirements.zero— millionAccounts receivable. Accounts receivable are stated at invoice value less estimated allowances for doubtful accounts. Allowances are recorded based on the Company’s assessment of various factors, such as: historical experience, credit quality of its customers, age of the accounts receivable balances, geographic related risks, economic conditions and other factors that may affect a customer’s ability to pay. The allowance for doubtful accounts as of March 31, 2022 and 2021 was $0.7 million and $0.7 million, respectively.0.70.7Inventory. Inventory consists of finished goods and component parts, which are purchased directly from contract manufacturers or from suppliers. Inventory is stated at the lower of cost or net realizable value on a first-in, first-out basis. The Company writes down its inventory for estimated obsolescence or excess inventory equal to the difference between the cost of inventory and estimated market value plus the estimated cost to sell. The Company’s assessment of market value is based upon assumptions around market conditions and estimated future demand for its products within a specified time horizon, generally 12 months, product life cycle status, product development plans and current sales levels. Adjustments to reduce inventory to net realizable value are recognized in cost of revenue.Point of purchase (POP) displays. The Company provides retailers with POP displays, generally free of charge, in order to facilitate the marketing of the Company’s products within retail stores. The POP displays contain a display that broadcasts video images taken by GoPro cameras along with product placement available for cameras and accessories. POP display costs are capitalized as long-term assets and charged to sales and marketing expense over the expected period of benefit, which generally ranges from 24 to 36 months. Cash outflows and amortization related to POP displays are classified as operating activities in the consolidated statement of cash flows.Amortization expense for POP displays was $2.8 million, $2.8 million and $4.2 million in 2022, 2021 and 2020, respectively.2.82.84.2
Property and equipment, net. Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful life of the assets, ranging from one to nine years. Leasehold improvements are amortized over the shorter of the lease term or their expected useful life. Property and equipment pending installation, configuration or qualification are classified as construction in progress. Costs of maintenance and repairs that do not improve or extend the lives of the respective assets are expensed as incurred.
Depreciation expense was $9.8 million, $9.8 million and $14.5 million in 2022, 2021 and 2020, respectively. In 2020, the Company recorded accelerated depreciation charges in connection with its plans to vacate certain leased office facilities as disclosed in Note 11 Restructuring charges.
9.89.814.5
Fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the reporting date. The Company estimates and categorizes the fair value of its financial assets by applying the following hierarchy:
Level 1
Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to directly access.
Level 2
Valuations based on quoted prices for similar assets or liabilities; valuations for interest-bearing securities based on non-daily quoted prices in active markets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.
Level 3
Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Leases. The Company leases its office space and facilities under cancelable and non-cancelable operating leases. Operating leases are presented as operating lease right-of-use (ROU) assets, short-term operating lease liabilities and long-term operating lease liabilities on the Company’s Consolidated Balance Sheets. ROU assets represent the Company’s right to control the use of an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.
Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of future lease payments. The Company determines its incremental borrowing rate based on the approximate rate at which the Company would borrow, on a secured basis, to calculate the present value of future lease payments. Lease expenses are recognized on a straight-line basis over the lease term. Certain leases include an option to renew with terms that can extend the lease term from one to five years. The exercise of a lease renewal option is at the Company’s sole discretion and is included in the lease term when the Company is reasonably certain it will exercise the option.
Prior to January 1, 2019, the Company recognized leases under Accounting Standards Codification (ASC) 840, Leases, which had the following differences from the current lease standard, ASC 842, Leases:
Operating leases were previously not recorded on the Company’s Consolidated Balance Sheets.
The Company calculated a liability for future costs to be incurred under a lease for its remaining term without economic benefit to the Company upon determination of a cease-use date. The fair value of the liability was determined based on remaining lease payments, estimated sublease income and the effects of any prepaid or deferred items recognized under the lease.
Goodwill and acquired intangible assets. Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. Acquired intangible assets other than goodwill are amortized over their useful lives unless the lives are determined to be indefinite. For intangible assets acquired in a business combination, the determination of the estimated fair values of the assets received involves significant judgments and estimates. These judgments can include, but are not limited to, the cash flows that an asset is expected to generate in the future, technology obsolescence, and the appropriated weighted-average cost of capital. Valuation approaches consistent with the market approach, income approach and/or cost approach are used to measure fair value.
Impairment of goodwill and long-lived assets. The Company performs an annual assessment of its goodwill during the fourth quarter of each calendar year or more frequently if indicators of potential impairment exist, such as an adverse change in business climate or a decline in the overall industry demand, that would indicate it is more likely than not that the fair value of its single reporting unit is less than its carrying value. There was no impairment of goodwill recorded for any periods presented. For the Company’s annual impairment testing in 2022, the Company did not identify any indicators of potential impairment of its single reporting unit. Other indefinite-lived intangible assets are assessed for impairment at least annually. If their carrying value exceeds the estimated fair value, the difference is recorded as an impairment.
Long-lived assets, such as property and equipment, intangible assets subject to amortization and right-of-use assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount to the estimated future undiscounted cash flows expected to be generated by the asset group. If it is determined that an asset group is not recoverable, an impairment charge is recognized for the amount by which the carrying amount of the asset group exceeds its fair value. The Company recorded a $12.5 million right-of-use asset impairment in 2021 primarily related to its headquarter campus as described further in Note 11 Restructuring charges. The Company used the following significant assumptions to determine the impairment charge: future sublease rental rates, future sublease market conditions and a discount rate based on the weighted-average cost of capital. The Company did not record any impairment charges in 2021 or 2019.
12.5Warranty. The Company records a liability for estimated product warranty costs at the time product revenue is recognized. The Company’s standard warranty obligation to its end-users generally provides a 12-month warranty coverage on all of its products except in the European Union where the Company provides a 24-month warranty. The Company also offers extended warranty programs for a fee. The Company’s estimate of costs to service its warranty obligations is based on its historical experience of repair and replacement of the associated products and expectations of future conditions. The warranty obligation is affected by product failure rates and the related use of materials, labor costs and freight incurred in correcting any product failure.1224
Convertible Senior Notes. In April 2017, the Company issued $175.0 million aggregate principal amount of 3.50% Convertible Senior Notes due April 15, 2022 (2022 Notes). In November 2020, the Company issued $143.8 million aggregate principal amount of 1.25% Convertible Senior Notes due November 15, 2025 (2025 Notes). Concurrently with the issuance of the 2025 Notes, the Company used a portion of the net proceeds to repurchase part of the 2022 Notes. See Note 4 Financing Arrangements for additional details.
The Company accounts for its 2022 Notes and 2025 Notes in accordance with ASC 470-20, Debt with Conversion and Other Options. As the Company’s 2022 Notes and 2025 Notes have a net settlement feature and may be settled wholly or partially in cash upon conversion, the Company is required to separately account for the liability (debt) and equity (conversion option) components of the instrument. The carrying amount of the liability component of the instrument is determined by estimating the fair value of a similar liability without the conversion option using income and market based approaches. The amount of the equity component is then calculated by deducting the fair value of the liability component from the principal amount of the instrument. The difference between the principal amount and the liability component represents a debt discount that is amortized to interest expense over the remaining term of the convertible senior notes using an effective interest rate method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification. In accounting for the issuance costs related to the 2022 Notes and 2025 Notes, the allocation of issuance costs incurred between the liability and equity components were based on their relative values.
The total consideration for the 2022 Notes partial repurchase was separated into liability and equity components by estimating the fair value of a similar liability without a conversion option and assigning the residual value to the equity component. The effective interest rate used to estimate the fair value of the liability component of the 2022 Notes partial repurchase is based on the income approach used to determine the effective interest rate of the 2025 Notes, adjusted for the remaining term of the 2022 Notes. The gain or loss on extinguishment of the debt was subsequently determined by comparing repurchase consideration allocated to the liability component to the sum of the carrying value of the liability component, net of the proportionate amounts of unamortized debt discount and remaining unamortized debt issuance costs.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This accounting standard update, which we adopted effective January 1, 2022, will have a significant impact on the ongoing accounting of the 2022 and 2025 Notes. Refer to section “Recent Accounting Pronouncements” for additional details on the adoption of this accounting standard update.
Shipping costs. Amounts billed to customers for shipping and handling are classified as revenue, and the Company’s related shipping and handling costs incurred are classified as cost of revenue.Sales taxes. Sales taxes collected from customers and remitted to respective governmental authorities are recorded as liabilities and are not included in revenue.Advertising costs. Advertising costs consist of costs associated with print, television and e-commerce media advertisements and are expensed as incurred. The Company incurs promotional expenses resulting from payments under event, resort and athlete sponsorship contracts. These sponsorship arrangements are considered to be executory contracts and, as such, the costs are expensed as performance under the contract is received. The costs associated with the preparation of sponsorship activities, including the supply of GoPro products, media team support, and activation fees are expensed as incurred. Prepayments made under sponsorship agreements are included in prepaid expenses or other long-term assets depending on the period to which the prepayment applies. Advertising costs were $35.8 million, $34.1 million and $67.3 million in 2022, 2021 and 2020, respectively.35.834.167.3Foreign currency. The U.S. dollar is the functional currency of the Company’s foreign subsidiaries. The Company remeasures monetary assets or liabilities denominated in currencies other than the U.S. dollar using exchange rates prevailing on the balance sheet date, and non-monetary assets and liabilities at historical rates. Foreign currency remeasurement and transaction gains and losses are included in other income (expense), net and have not been material for any periods presented.
Income taxes. The Company utilizes the asset and liability method for computing its income tax provision, under which deferred tax assets and liabilities are recognized for the expected future consequences of temporary differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates. Management makes estimates, assumptions and judgments to determine the Company’s provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against deferred tax assets. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income in each tax jurisdiction and, to the extent the Company believes recovery is not likely, establishes a valuation allowance. In the period ended September 30, 2021, the Company assessed its deferred tax assets and based on the weight of available evidence, the Company concluded that it was more likely than not that its United States federal and state deferred tax assets would be realized. Therefore, in 2022 the Company released $1.4 million of valuation allowances, which resulted in a non-cash net benefit to earnings for the year ended December 31, 2021.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Interest and penalties related to unrecognized tax benefits are recognized within income tax expense.
1.478.247.17.351,06651,066151551,08151,0661551,06651,01947151551,08151,01962P1YP2Y
12. Subsequent events
On January 27, 2022, the Company’s board of directors authorized the repurchase of up to $100 million of its Class A common stock. Stock repurchases under the program may be made periodically through open market purchases, block trades or otherwise in compliance with all federal and state securities laws and state corporate law and in accordance with the single broker, timing, price, and volume guidelines set forth in Rule 10b-18 under the Securities Exchange Act of 1934, as amended, as such guidelines may be modified by the SEC from time to time. This stock repurchase program has no time limit and may be modified, suspended, or discontinued at any time.
On January 27, 2022, the Company’s board of directors authorized the repurchase of up to $100 million of its Class A common stock. Stock repurchases under the program may be made periodically through open market purchases, block trades or otherwise in compliance with all federal and state securities laws and state corporate law and in accordance with the single broker, timing, price, and volume guidelines set forth in Rule 10b-18 under the Securities Exchange Act of 1934, as amended, as such guidelines may be modified by the SEC from time to time. This stock repurchase program has no time limit and may be modified, suspended, or discontinued at any time.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
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
gpro-20220331_g1.jpg
GOPRO, INC.
(Exact name of registrant as specified in its charter)
Delaware77-0629474
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
3025 Clearview Way
San Mateo, California94402
(Address of principal executive offices)(Zip Code)
(650)332-7600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, $0.0001 par valueGPRONASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes þ    No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T 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 2, 2022, 131,016,229 and 26,258,546 shares of Class A and Class B common stock were outstanding, respectively.


1


GoPro, Inc.
Index

2


Special Note About Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding guidance, industry prospects, product and marketing plans, or future results of operations or financial position, made in this Quarterly Report on Form 10-Q are forward-looking. To identify forward-looking statements, we use words such as “expect,” “anticipate,” “believe,” “may,” “will,” “estimate,” “intend,” “target,” “goal,” “plan,” “likely,” “potentially,” or variations of such words and similar expressions. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their date. If any of management's assumptions prove incorrect or should unanticipated circumstances arise, the Company's actual results could materially differ from those anticipated by such forward-looking statements. The differences could be caused by a number of factors or combination of factors including, but not limited to, those factors identified and detailed in Risk Factors in Part II, Item 1A of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2022. Forward-looking statements include, but are not limited to, plans to expand and improve product offerings, our ability to maintain the value and reputation of our brand and protect our intellectual property and proprietary rights, projections of results of operations, research and development plans, marketing plans, plans for international expansion and revenue growth drivers, and the challenges and risks faced by our international operations, the continuing impact of COVID-19 and the economic recovery therefrom on our business, operations, liquidity and capital resources, employees, customers, supply chain, financial results, inflation, currency fluctuations and the world economy, and the scope and duration thereof, plans to settle note conversion in cash, our ability to attract, engage and retain qualified personnel; any changes to trade agreements, trade policies, tariffs, and import/export regulations, the fact that a small number of retailers and distributors account for a substantial portion of our revenue and our level of business with them could be significantly reduced; our transition away from some distributors and retailers, the outcome of pending or future litigation and legal proceedings and any discussion of the trends and other factors that drive our business and future results in Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations, and other sections of this Quarterly Report on Form 10-Q, including but not limited to Item 1A Risk Factors. In particular, the consequences of the COVID-19 pandemic to economic conditions and the industry in general, and the financial position and operating results of the Company in particular have been material, and changing rapidly, and cannot be predicted. Readers are strongly encouraged to consider the foregoing including those factors when evaluating any forward-looking statements concerning the Company. The Company does not undertake any obligation to update any forward-looking statements in this Quarterly Report on Form 10-Q to reflect future events or developments.
3


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GoPro, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except par values)
March 31, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents
$305,319 $401,087 
Marketable securities
144,616 137,830 
Accounts receivable, net
70,574 114,221 
Inventory
119,396 86,409 
Prepaid expenses and other current assets
26,869 42,311 
Total current assets
666,774 781,858 
Property and equipment, net
17,294 19,003 
Operating lease right-of-use assets
25,642 27,320 
Goodwill
146,459 146,459 
Other long-term assets
289,772 285,239 
Total assets
$1,145,941 $1,259,879 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$82,925 $171,545 
Accrued expenses and other current liabilities
96,591 128,572 
Short-term operating lease liabilities
9,859 9,819 
Deferred revenue
43,914 42,505 
Short-term debt
124,963 122,391 
Total current liabilities
358,252 474,832 
Long-term taxes payable
7,790 7,319 
Long-term debt
140,304 111,289 
Long-term operating lease liabilities
40,203 43,025 
Other long-term liabilities
6,606 7,500 
Total liabilities
553,155 643,965 
Commitments, contingencies and guarantees (Note 9)


Stockholders’ equity:
Preferred stock, $0.0001 par value, 5,000 shares authorized; none issued
  
Common stock and additional paid-in capital, $0.0001 par value, 500,000 Class A shares authorized, 130,787 and 129,815 shares issued and outstanding, respectively; 150,000 Class B shares authorized, 26,458 and 26,659 shares issued and outstanding, respectively
935,674 1,008,872 
Treasury stock, at cost, 11,830 and 10,710 shares, respectively
(123,613)(113,613)
Accumulated deficit
(219,275)(279,345)
Total stockholders’ equity
592,786 615,914 
Total liabilities and stockholders’ equity
$1,145,941 $1,259,879 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4


GoPro, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
Three months ended March 31,
(in thousands, except per share data)
20222021
Revenue
$216,705 $203,680 
Cost of revenue
126,229 124,984 
Gross profit
90,476 78,696 
Operating expenses:
Research and development
31,598 32,430 
Sales and marketing
35,373 35,790 
General and administrative
15,343 13,988 
Total operating expenses
82,314 82,208 
Operating income (loss)8,162 (3,512)
Other income (expense):
Interest expense
(2,209)(5,880)
Other income (expense), net(319)443 
Total other expense, net
(2,528)(5,437)
Income (loss) before income taxes5,634 (8,949)
Income tax expense (benefit) (51)1,219 
Net income (loss)$5,685 $(10,168)
Net income (loss) per share:
Basic$0.04 $(0.07)
Diluted$0.04 $(0.07)
Shares used to compute net income (loss) per share:
Basic156,864 152,181 
Diluted188,737 152,181 
The accompanying notes are an integral part of these condensed consolidated financial statements.

5


GoPro, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Three months ended March 31,
(in thousands)
20222021
Operating activities:
Net income (loss)$5,685 $(10,168)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization
2,302 3,534 
Non-cash operating lease cost
1,678 920 
Stock-based compensation
9,836 8,869 
Deferred income taxes
2,931 (2)
Non-cash restructuring charges
 (99)
Non-cash interest expense
 3,433 
Other
1,004 112 
Changes in operating assets and liabilities:
Accounts receivable, net
43,501 37,998 
Inventory
(32,987)(13,919)
Prepaid expenses and other assets
14,925 (3,537)
Accounts payable and other liabilities
(123,247)(56,132)
Deferred revenue
965 3,499 
Net cash used in operating activities(73,407)(25,492)
Investing activities:
Purchases of property and equipment, net
(520)(1,068)
Purchases of marketable securities(23,111) 
Maturities of marketable securities
15,900  
Net cash used in investing activities(7,731)(1,068)
Financing activities:
Proceeds from issuance of common stock2,599 2,998 
Taxes paid related to net share settlement of equity awards(7,175)(6,246)
Repurchase of outstanding common stock(10,000) 
Net cash used in financing activities(14,576)(3,248)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(54)(1,092)
Net change in cash, cash equivalents and restricted cash(95,768)(30,900)
Cash, cash equivalents and restricted cash at beginning of period401,087 327,654 
Cash, cash equivalents and restricted cash at end of period$305,319 $296,754 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6


GoPro, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited)
Common stock and additional paid-in capitalTreasury stockAccumulated
deficit
Stockholders’ equity
(in thousands)SharesAmountAmount
Balances at December 31, 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— 8,869 — — 8,869 
Net loss— — — (10,168)(10,168)
Balances at March 31, 2021153,333 $985,768 $(113,613)$(660,684)$211,471 
Balances at December 31, 2021156,474 $1,008,872 $(113,613)$(279,345)$615,914 
Common stock issued under employee benefit plans, net of shares withheld for tax1,891 2,371 — — 2,371 
Taxes paid related to net share settlements(7,175)— — (7,175)
Stock-based compensation expense9,836 — — 9,836 
Repurchase of outstanding common stock(1,120)— (10,000)— (10,000)
Cumulative effect of adoption of new accounting standard (Note 1)(78,230)— 54,385 (23,845)
Net income— — — 5,685 5,685 
Balances at March 31, 2022157,245 $935,674 $(123,613)$(219,275)$592,786 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements

1. Summary of business and significant accounting policies
GoPro, Inc. and its subsidiaries (GoPro or the Company) make it easy for the world to capture and share itself in immersive and exciting ways, helping people get the most out of their photos and videos. The Company is committed to developing solutions that create an easy, seamless experience for consumers to capture, create, manage and share engaging personal content. To date, the Company’s cameras, mountable and wearable accessories, and subscription and service have generated substantially all of its revenue. The Company sells its products globally on its website, and through retailers and wholesale distributors. The Company’s global corporate headquarters are located in San Mateo, California.
Basis of presentation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (GAAP) for financial information set forth in the Accounting Standards Codification “ASC”, as published by the Financial Accounting Standards Board “FASB”, and with the applicable rules and regulations of the Securities and Exchange Commission “SEC”. The Company’s fiscal year ends on December 31, and its fiscal quarters end on March 31, June 30 and September 30.
The Company’s operating results, financial position and cash flows for fiscal year 2021 were negatively impacted by the COVID-19 pandemic. As the global impact of the pandemic continued to evolve in 2021, the Company utilized its direct-to-consumer sales channel strategy to maximize its reach to customers. This action, along with a reduction in on-going operating expenses, helped accelerate its ability to achieve consistent profitability in 2021.
The condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, that management believes are necessary for the fair statement of the Company's financial statements, but are not necessarily indicative of the results expected in future periods. The Condensed Consolidated Balance Sheet at December 31, 2021, 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, 2021.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This accounting standard update, which was adopted effective January 1, 2022, has a significant impact on the ongoing accounting of the 2022 and 2025 Convertible Senior Notes. Due to the adoption of this accounting standard update under the modified retrospective method, prior periods were not restated. Refer to section “Recent Accounting Standards” below for additional details on the adoption of this accounting standard update. There have been no other 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
8


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
on the Company’s customers, and the effect on the Company’s contract manufacturers, vendors and supply chains 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.
Comprehensive income (loss). For all periods presented, comprehensive income (loss) approximated net income (loss). Therefore, the Condensed Consolidated Statements of Comprehensive Income (Loss) have been omitted.
Revenue recognition. The Company derives substantially all of its revenue from the sale of cameras, mounts, accessories, subscription and service, and implied post contract support to customers. The transaction price recognized as revenue represents the consideration the Company expects to be entitled to and is primarily comprised of product revenue, net of returns and variable consideration, which includes sales incentives provided to customers.
The Company’s camera sales contain multiple performance obligations that can include the following four separate obligations: a) a camera hardware component (which may be bundled with hardware accessories) and the embedded firmware essential to the functionality of the camera component delivered at the time of sale, b) a subscription and service, c) the implied right for the customer to receive post contract support after the initial sale (PCS), and d) the implicit right to the Company’s downloadable free apps and software solutions. The Company’s PCS includes the right to receive, on a when and if available basis, future unspecified firmware upgrades and features as well as bug fixes, and email, chat and telephone support.
The Company recognizes revenue from its sales arrangements when control of the promised goods or services are transferred to its customers, in an amount that reflects the amount of consideration expected to be received in exchange for the transferred goods or services. For the sale of hardware products, including related firmware and free software solutions, revenue is recognized when transfer of control occurs at a point in time, which generally is at the time the hardware product is shipped and collection is considered probable. For customers who purchase products directly from GoPro.com, the Company retains a portion of the risk of loss on these sales during transit, which are accounted for as fulfillment costs. For PCS, revenue is recognized ratably over 24 months, which represents the estimated service period based on historical experience. For subscriptions, revenue is recognized ratably over the subscription term, with any payments received in advance of services rendered recorded as deferred revenue.
For the Company’s camera sale arrangements with multiple performance obligations, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are based on observable price at which the Company separately sells its products, subscriptions, and services. If a standalone selling price is not directly observable, then the Company estimates the standalone selling prices considering market conditions and entity-specific factors. For example, the standalone selling price for PCS is determined based on a cost-plus approach, which incorporates the level of support provided to customers, estimated costs to provide support, and the amount of time and costs that are allocated to efforts to develop the undelivered elements.
The Company's standard terms and conditions of sale for non-web-based sales do not allow for product returns other than under warranty. However, the Company grants limited rights of return, primarily to certain large retailers. The Company reduces revenue and cost of sales for the estimated returns based on analyses of historical return trends by customer class and other factors. An estimated return liability along with a right to recover assets are recorded for future product returns. Return trends are influenced by product life cycles, new product introductions, market acceptance of products, product sell-through, the type of customer, seasonality and other factors. Return rates may fluctuate over time, but are sufficiently predictable to allow the Company to estimate expected future product returns.
The Company provides sales commissions to internal and external sales representatives which are earned in the period in which revenue is recognized. As a result, the Company expenses such costs as incurred.
Deferred revenue as of March 31, 2022 and December 31, 2021, includes amounts related to the Company’s subscription and service. The Company’s short-term and long-term deferred revenue balances totaled $49.4
9


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
million and $48.5 million as of March 31, 2022 and December 31, 2021, respectively. During the three months ended March 31, 2022 and 2021, the Company recognized $16.6 million and $10.2 million of revenue that was included in the deferred revenue balance as of December 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.
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
StandardDescriptionCompany’s date of adoption
Effect on the condensed consolidated financial statements or other significant matters
Standards that were 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. ASU 2020-06 (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock, (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification, and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share “EPS” for convertible instruments by using the if-converted method. Companies are allowed to adopt this standard via either a modified retrospective method of transition or a fully retrospective method of transition. Under the modified retrospective method, entities should apply the guidance to transactions outstanding as of the beginning of the fiscal year in which the amendments are adopted. Transactions that were settled (or expired) during prior reporting periods are unaffected. The cumulative effect of the change should be recognized as an adjustment to the opening balance of retained earnings at the date of adoption.
January 1, 2022
The Company adopted ASU 2020-06 using the modified retrospective transition method. As a result, prior period numbers were not restated.

Upon adoption, the Company recorded a net decrease to opening additional paid-in-capital of $78.2 million, with the impact primarily related to the reclassification of Senior Convertible Notes conversion feature’s fair value from additional paid-in-capital to short-term and long-term debt. Additionally, the Company recorded a decrease to opening accumulated deficit of approximately $47.1 million, with the impact related to the reclassification of the previously amortized debt discount and deferred financing costs. After adoption, the Company saw a reduction in its reported interest expense. In addition, the Company recorded a reversal of U.S. deferred tax liabilities (net) of $7.3 million, resulting in an additional corresponding decrease to opening accumulated deficit. The Company adopted the use of the if-converted method for calculating diluted earnings per share for its Senior Convertible Notes, which 1) resulted in an increase in weighted-average diluted shares outstanding, and 2) allowed for the adding back of the after-tax impact of interest charges for the period to the numerator.
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.
10


GoPro, Inc.
Notes to 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, 2022December 31, 2021
(in thousands)Level 1Level 2TotalLevel 1Level 2Total
Cash equivalents (1):
Money market funds$201,425 $ $201,425 $183,304 $ $183,304 
Total cash equivalents$201,425 $ $201,425 $183,304 $ $183,304 
Marketable securities:
Commercial paper$ $66,609 $66,609 $ $72,323 $72,323 
Corporate debt securities 34,840 34,840  41,108 41,108 
Government securities 43,167 43,167  24,399 24,399 
Total marketable securities$ $144,616 $144,616 $ $137,830 $137,830 
(1)    Included in cash and cash equivalents in the accompanying Condensed Consolidated Balance Sheets. Cash balances were $103.9 million as of March 31, 2022 and $217.8 million as of December 31, 2021.
Cash equivalents are classified as Level 1 because the Company uses quoted market prices to determine their fair value. Marketable securities are classified as Level 2 because the Company uses alternative pricing sources and models utilizing market observable inputs to determine their fair value. The contractual maturities of available-for-sale marketable securities as of March 31, 2022 were all less than one year in duration. At March 31, 2022 and December 31, 2021, 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, 2022 and December 31, 2021, the amortized cost of the Company’s cash equivalents and marketable securities approximated their fair value and there were no material realized or unrealized gains or losses, either individually or in the aggregate.
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 $125.0 million and $132.4 million as of March 31, 2022 and December 31, 2021, respectively, while the calculated fair value of the 2025 Notes was $166.1 million and $189.0 million as of March 31, 2022 and December 31, 2021, respectively. The calculated fair value is highly correlated to the Company’s stock price and as a result, significant changes to the Company’s stock price will have a significant impact on the calculated fair value of the 2025 Notes only. The 2022 Notes are not highly impacted by the Company’s stock price given the close proximity between the end of Q1 2022 and the maturity date.
On April 15, 2022, the Company repaid $125.0 million of principal and $2.2 million of accrued interest in cash to the debt holders to fully settle the 2022 Notes on the maturity date.
For 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.

11


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
3. Condensed consolidated financial statement details
The following section provides details of selected balance sheet items.
Inventory
(in thousands)
March 31, 2022December 31, 2021
Components
$30,823 $10,761 
Finished goods
88,573 75,648 
Total inventory
$119,396 $86,409 
Property and equipment, net
(in thousands)
March 31, 2022December 31, 2021
Leasehold improvements$33,764 $33,764 
Production, engineering and other equipment46,264 45,641 
Tooling11,743 13,537 
Computers and software21,078 20,771 
Furniture and office equipment5,613 5,614 
Tradeshow equipment and other1,970 1,970 
Construction in progress31 480 
Gross property and equipment
120,463 121,777 
Less: Accumulated depreciation and amortization(103,169)(102,774)
Property and equipment, net
$17,294 $19,003 

Other long-term assets
(in thousands)
March 31, 2022December 31, 2021
Point of purchase (POP) displays
$2,220 $2,509 
Long-term deferred tax assets
278,760 274,430 
Deposits and other
8,777 8,238 
Intangible assets, net1562
Other long-term assets$289,772 $285,239 
Intangible assets are comprised of purchased technology, which have a useful life between 20-72 months, and an indefinite life asset. Amortization expense was $0.1 million and $0.7 million for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, all of the Company’s purchased technology intangible assets were fully amortized.
12


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
Accrued expenses and other current liabilities
(in thousands)
March 31, 2022December 31, 2021
Accrued liabilities$29,028 $34,989 
Accrued sales incentives
27,485 34,117 
Employee related liabilities7,647 19,024 
Return liability
6,472 9,263 
Warranty liability
7,691 8,268 
Inventory received
4,633 7,169 
Customer deposits
2,330 2,760 
Purchase order commitments
2,238 1,369 
Other
9,067 11,613 
Accrued expenses and other current liabilities$96,591 $128,572 

Product warranty
Three months ended March 31,
(in thousands)
20222021
Beginning balance
$8,842 $8,523 
Charged to cost of revenue
2,885 2,655 
Settlement of warranty claims
(3,715)(3,726)
Warranty liability
$8,012 $7,452 
At March 31, 2022 and December 31, 2021, $7.7 million and $8.3 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) 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 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
13


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
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, 2022, the Company was in compliance with all financial covenants contained in the 2021 Credit Agreement. The Company has made no borrowings from the 2021 Credit Facility to date, however, there is an outstanding letter of credit of $5.2 million for certain duty related requirements. This was not collateralized by any cash on hand.
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 with a maturity date of April 15, 2022. The 2022 Notes can be converted 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. The Company has historically paid interest on the 2022 Notes semi-annually in arrears on April 15 and October 15 of each year.

The indenture did not allow for early redemption of the 2022 Notes by the Company ,and no sinking fund was provided for the 2022 Notes. The indenture included customary terms and covenants, including certain events of default after which the 2022 Notes may be due and payable immediately.
Holders had 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:
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 was 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 was 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.

During the three months ended March 31, 2022 and 2021, the preceding conditions allowing holders of the 2022 Notes to early convert were not met.
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 could convert its 2022 Notes, in multiples of $1,000 principal amount. Holders of the 2022 Notes who converted their 2022 Notes in connection with a make-whole fundamental change (as defined in the indenture) were, 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 would, 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
14


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
ended March 31, 2022, these 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 instruments 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.
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 original expiration date for the Prepaid Forward was April 15, 2022, with the option for early settlement in whole or in part. Upon settlement of the Prepaid Forward, the Forward Counterparty would 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 were 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 remained 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.
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 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 were reduced by the early settlement.
On April 15, 2022, the Company repaid $125.0 million of principal and $2.2 million of accrued interest in cash to the debt holders to fully settle the 2022 Notes on the maturity date. Since the Company’s average stock price did not exceed the initial conversion price of $10.64 of the 2022 Notes, there was no further dilution.
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 Company may redeem all or any portion of the 2025 Notes on or after November 20, 2023 for cash if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which
15


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
the Company provides the redemption notice, at a redemption price equal to 100% of the principal amount of the 2025 Notes to be redeemed, plus accrued interest and unpaid interest to, but excluding the redemption date. No sinking fund is provided for the 2025 Notes. The indenture includes customary terms and covenants, including certain events of default after which the 2025 Notes may be due and payable immediately.
Holders have the option to convert the 2025 Notes in multiples of $1,000 principal amount at any time prior to August 15, 2025, but only in the following circumstances:
during any calendar quarter beginning after the calendar quarter ending on March 31, 2021, if the last reported sale price of Class A common stock for at least 20 trading days (whether or not consecutive) during the last 30 consecutive trading days of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price of the 2025 Notes on each applicable trading day;
during the five-business day period following any five consecutive trading day period in which the trading price for the 2025 Notes is less than 98% of the product of the last reported sale price of Class A common 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, 2022, the conditions allowing holders of the 2025 Notes to convert were not met.
In connection with the offering of the 2025 Notes, the Company paid $10.2 million to enter into privately negotiated capped call transactions with certain financial institutions (Capped Calls). The Capped Calls have an initial strike price of $9.3285 per share, which corresponds to the initial conversion price of the 2025 Notes. The Capped Calls cover, subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the 2025 Notes, the number of Class A common stock initially underlying the 2025 Notes. The Capped Calls are generally expected to reduce potential dilution to the Company’s Class A common stock upon any conversion of the 2025 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted 2025 Notes, as the case may be, with such reduction and/or offset subject to a cap, initially equal to $12.0925, and is subject to certain adjustments under the terms of the Capped Call transactions. The Capped Calls will expire in November 2025, if not exercised earlier.
The Capped Calls are subject to adjustment upon the occurrence of specified extraordinary events affecting the Company, including merger events, tender offers and announcement events. In addition, the Capped Calls are subject to certain specified additional disruption events that may give rise to a termination of the Capped Calls, including nationalization, insolvency or delisting, changes in law, failures to deliver, insolvency filings and hedging disruptions. For accounting purposes, the Capped Calls are separate transactions, and not part of the terms of the 2025 Notes. As these transactions meet certain accounting criteria, the Capped Calls are recorded in stockholders’ equity as a reduction to additional paid-in capital and will not be remeasured as long as they continue to meet certain accounting criteria.
Accounting for the 2022 and 2025 Convertible Notes
Pre adoption of ASU 2020-06
The 2022 and 2025 Convertible Notes were separated into liability and equity components for accounting purposes. The carrying amounts of the liability component were initially calculated by measuring the fair value of similar liabilities that do not have associated convertible features. The carrying amounts of the equity component
16


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
representing the conversion option were determined by deducting the fair value of the liability component from the par value of the respective Convertible Senior Notes. This difference represents the debt discount that was amortized to interest expense over the respective terms of the 2022 Notes and 2025 Notes using the effective interest rate method. Upon issuance, the carrying amounts of the liability component from the issuance of the 2022 Notes and the 2025 Notes of $128.3 million and $106.9 million, respectively were recorded in long-term debt on the Condensed Consolidated Balance Sheets. The carrying amounts of the equity component representing the conversion option was determined to be $46.7 million and $36.9 million for the 2022 Notes and 2025 Notes, respectively, upon issuance. The equity component was recorded in additional paid-in-capital and is not remeasured so long as it continued to meet the conditions for equity classification.
The liability component was accreted up to the face value of the 2022 Notes of $175.0 million and 2025 Notes of $143.8 million, which resulted in additional non-cash interest expense being recognized in the Condensed Consolidated Statements of Operations. The accretion of the 2022 Notes and 2025 Notes to par to long-term debt was amortized into interest expense over the term of the 2022 Note and 2025 Notes using an effective interest rate of approximately 10.5% and 7.5%, respectively.
In accounting for the debt issuance costs of $5.7 million and $4.7 million related to the 2022 Notes and 2025 Notes, respectively, the Company allocated each of the total amounts incurred to the liability and equity components of the 2022 Notes and 2025 Notes based on their relative values. Issuance costs attributable to the liability component of the 2022 Notes were $4.2 million upon issuance and were amortized, along with the debt discount, to interest expense over the contractual term of the 2022 Notes at an effective interest rate of 10.5%. Issuance costs attributable to the liability component of the 2025 Notes were $3.5 million upon issuance and were amortized, along with the debt discount, to interest expense over the contractual term of the 2025 Notes at an effective interest rate of 7.5%. Issuance costs attributable to the equity component were $1.5 million and $1.2 million for the 2022 Notes and 2025 Notes, respectively, and were netted against the equity component representing the conversion option in additional paid-in-capital.
Post adoption of ASU 2020-06
On January 1, 2022, the Company adopted ASU 2020-06 based on the modified retrospective transition method. Under such transition, prior-period information has not been retrospectively adjusted. Upon adoption of ASU 2020-06, the Company is no longer recording the conversion feature of its 2022 Notes and 2025 Notes in equity. Instead, the Company combined the previously separated equity component with the liability component, which together are now classified as debt, thereby eliminating the subsequent amortization of the debt discount as interest expense. Similarly, the portion of debt issuance costs previously allocated to equity was reclassified to debt and amortized as interest expense. Accordingly, the Company recorded a decrease to additional paid-in-capital of $78.2 million, a decrease to accumulated deficit of $47.1 million, and an increase to the 2022 Notes and 2025 Notes of $2.3 million and $28.8 million, respectively. In addition, the Company recorded the reversal of U.S. deferred tax liabilities (net) of $7.3 million associated with the 2022 Notes and 2025 Notes upon the adoption of ASU 2020-06, with a corresponding decrease to accumulated deficit for the same amount.
As of March 31, 2022 and December 31, 2021, the outstanding principal on the 2022 Notes was $125.0 million, the unamortized debt discount was zero and $2.4 million, respectively, the unamortized debt issuance cost was $0.1 million and $0.2 million, respectively, and the net carrying amount of the liability was $124.9 million and $122.4 million, respectively, which was recorded as short-term debt within the Condensed Consolidated Balance Sheets. For the three months ended March 31, 2022, and 2021, the Company recorded interest expense of $1.1 million and $1.1 million, respectively, for contractual coupon interest, and zero and $1.9 million, respectively, for amortization of the debt discount. For the three months ended March 31, 2022 and 2021, the Company recorded $0.2 million and $0.1 million for amortization of debt issuance costs, respectively.
As of March 31, 2022 and December 31, 2021, the outstanding principal on the 2025 Notes was $143.8 million, the unamortized debt discount was zero and $29.7 million, respectively, the unamortized debt issuance cost was $3.4 million and $2.7 million, respectively, and the net carrying amount of the liability was $140.3 million and $111.3 million, respectively, which was recorded as long-term debt within the Condensed Consolidated Balance Sheets. For the three months ended March 31, 2022 and 2021, the Company recorded interest expense of $0.4 million and $0.4 million for contractual coupon interest, $0.2 million and $0.2 million for amortization of debt issuance costs, and zero and $1.6 million for amortization of the debt discount.
17


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
5. Stockholders' equity
Stock Repurchase Program. On January 27, 2022, the Company’s board of directors authorized the repurchase of up to $100 million of its Class A capital stock. Stock repurchases under the program may be made periodically using a variety of methods, including without limitation, open market purchases, block trades or otherwise in compliance with all federal and state securities laws and state corporate law and in accordance with the single broker, timing, price, and volume guidelines set forth in Rule 10b-18 under the Securities Exchange Act of 1934, as amended, as such guidelines may be modified by the SEC from time to time. This stock repurchase program has no time limit and may be modified, suspended, or discontinued at any time. The Company currently intends to hold its repurchased shares as treasury stock.
As of March 31, 2022, the remaining amount of share repurchases under the program was $90 million. The following table summarizes share repurchases during the three months ended March 31, 2022. There were no share repurchases during the three months ended March 31, 2021.

Three months ended March 31, 2022
(in thousands, except per share data)
Shares repurchased1,120 
Average price per share$8.93 
Value of shares repurchased$10,000 

6. Employee benefit plans
Equity incentive plans. The Company has outstanding equity grants from its three stock-based employee compensation plans: the 2014 Equity Incentive Plan (2014 Plan), the 2010 Equity Incentive Plan (2010 Plan) and the 2014 Employee Stock Purchase Plan (ESPP). No new options or awards have been granted under the 2010 Plan since June 2014. Outstanding options and awards under the 2010 Plan continue to be subject to the terms and conditions of the 2010 Plan. Options granted under the 2014 Plan generally expire within ten years from the date of grant and generally vest over one to four years. Restricted stock units (RSUs) granted under the 2014 Plan generally vest over two to four years based upon continued service and are settled at vesting in shares of the Company’s Class A common stock. Performance stock units (PSUs) granted under the 2014 Plan generally vest over three years based upon continued service and the Company achieving certain financial and operating targets, and are settled at vesting in shares of the Company’s Class A common stock. The Company accounts for forfeitures of stock-based payment awards in the period they occur. The ESPP allows eligible employees to purchase shares of the Company’s Class A common stock through payroll deductions at a price equal to 85% of the lesser of the fair market value of the stock as of the first date or the ending date of each six-month offering period. For additional information regarding the Company’s equity incentive plans, refer to the 2021 Annual Report.
18


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
Stock options
A summary of the Company’s stock option activity for the three months ended March 31, 2022 is as follows:
Shares
(in thousands)
Weighted-average exercise price
Weighted-average remaining contractual term (in years)
Aggregate intrinsic value (in thousands)
Outstanding at December 31, 20213,080 $9.18 5.92$8,735 
Granted321 8.70 
Exercised(20)5.93 
Forfeited/Cancelled(22)13.95 
Outstanding at March 31, 20223,359 $9.12 6.10$4,914 
Vested and expected to vest at March 31, 20223,359 $9.12 6.10$4,914 
Exercisable at March 31, 20222,273 $10.38 4.87$2,636 
The aggregate intrinsic value of the stock options outstanding as of March 31, 2022 represents the value of the Company’s closing stock price on March 31, 2022 in excess of the exercise price multiplied by the number of options outstanding.
Restricted stock units
A summary of the Company’s RSU activity for the three months ended March 31, 2022 is as follows:
Shares
(in thousands)
Weighted-average grant date fair value
Non-vested shares at December 31, 20218,714 $6.52 
Granted2,988 9.01 
Vested(1,990)5.92 
Forfeited(238)7.17 
Non-vested shares at March 31, 20229,474 $7.42 
Performance stock units
A summary of the Company’s PSU activity for the three months ended March 31, 2022 is as follows:
Shares
(in thousands)
Weighted-average grant date fair value
Non-vested shares at December 31, 20211,134 

$6.68 
Granted604 8.70 
Vested(352)7.09 
Forfeited  
Non-vested shares at March 31, 20221,386 $7.46 
Employee stock purchase plan. For the three months ended March 31, 2022 and 2021, the Company issued 0.3 million and 0.5 million shares under its ESPP, respectively, at weighted-average prices of $7.70 and $4.15, respectively.
19


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
Stock-based compensation expense. The Company measures compensation expense for all stock-based payment awards based on the estimated fair values on the date of the grant. The fair value of stock options granted and ESPP issuance is estimated using the Black-Scholes option pricing model. The fair value of RSUs and PSUs are determined using the Company’s closing stock price on the date of grant. There have been no significant changes in the Company’s valuation assumptions from those disclosed in its 2021 Annual Report.
The following table summarizes stock-based compensation expense included in the Condensed Consolidated Statements of Operations:
Three months ended March 31,
(in thousands)
20222021
Cost of revenue
$447 $429 
Research and development
4,158 4,136 
Sales and marketing
2,123 1,865 
General and administrative
3,108 2,439 
Total stock-based compensation expense
$9,836 $8,869 
The income tax benefit related to stock-based compensation expense was $2.2 million for the three months ended March 31, 2022. The income tax benefit related to stock-based compensation expense was zero for the three months ended March 31, 2021 due to a full valuation allowance on the Company’s United States net deferred tax assets. See Note 8, Income taxes, for additional details.
At March 31, 2022, total unearned stock-based compensation of $71.5 million related to stock options, RSUs, PSUs and ESPP shares is expected to be recognized over a weighted-average period of 2.13 years.
7. Net income (loss) per share
The following table presents the calculations of basic and diluted net income (loss) per share:
Three months ended March 31,
(in thousands, except per share data)
20222021
Numerator:
Net income (loss) - Basic$5,685 $(10,168)
Interest on convertible notes, income tax effected1,521  
Net income (loss) - Diluted7,206 (10,168)
Denominator:
Weighted-average common shares - basic for Class A and Class B common stock156,864 152,181 
Effect of dilutive securities31,873  
Weighted-average common shares - diluted for Class A and Class B common stock188,737 152,181 
Net income (loss) per share
Basic$0.04 $(0.07)
Diluted$0.04 $(0.07)
20


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements

The following potentially dilutive shares were not included in the calculation of diluted shares outstanding as the effect would have been anti-dilutive:
Three months ended March 31,
(in thousands)
20222021
Stock-based awards4,256 15,750 
Shares related to convertible senior notes 194 
Total anti-dilutive securities4,256 15,944 
Prior to the adoption of ASU 2020-06, the Company calculated the potential dilutive effect of its 2022 Notes and 2025 Notes under the treasury stock method. As a result, only the amount by which the conversion value exceeded the aggregate principal amount of the 2022 Notes and 2025 Notes (the “conversion spread”) was considered in the diluted net income (loss) per share computation. The conversion spread was dilutive in periods of net income when the average market price of the Company’s Class A common stock for a given reporting period exceeded the initial conversion prices of $10.64 and $9.3285 per share for the 2022 Notes and 2025 Notes, respectively. The shares included in total anti-dilutive shares relate to the 2025 Notes and were calculated based on the average market price of the Company’s Class A Common Stock for the three months ended March 31, 2021. The initial conversion price of the 2022 Notes was greater than the average market price of the Company’s Class A Common Stock for the three months ended March 31, 2021 and as such, had no impact on anti-dilutive or dilutive share calculations. Upon conversion of the 2025 Notes, there will be no economic dilution until the average market price of the Company’s Class A common stock exceeds the cap price of $12.0925 per share, as exercise of the Capped Calls offset any dilution from the 2025 Notes from the initial conversion price up to the cap price. The Capped Calls are excluded from diluted net income per share as they would be anti-dilutive.
The Company’s 2022 Notes mature on April 15, 2022 and the 2025 Notes mature on November 15, 2025, unless earlier repurchased or converted into shares of Class A common stock under certain circumstances as described further in Note 4 Financing arrangements. The 2022 Notes and 2025 Notes are convertible into cash, shares of the Company’s Class A common stock, or a combination thereof, at the Company’s election. While the Company has the intent and ability to deliver cash up to the principal amount, the maximum number of shares issuable upon conversion of the 2022 Notes is 20.6 million shares of Class A common stock and 20.8 million shares of Class A common stock upon conversion of the 2025 Notes. On April 15, 2022, the Company repaid $125.0 million of principal and $2.2 million of accrued interest in cash to the debt holders to fully settle the 2022 Notes on the maturity date. The repayment of the 2022 Notes did not have an impact on earnings per share for the periods ended March 31, 2022 and March 31, 2021.
Additionally, the calculation of weighted-average shares outstanding for the three months ended March 31, 2021 excludes approximately 9.2 million shares effectively repurchased and held in treasury stock on the Condensed Consolidated Balance Sheets as a result of the Prepaid Forward transaction entered into in connection with the 2022 Note offering.
Upon the adoption of ASU 2020-06 on January 1, 2022, the Company calculated the potential dilutive effect of its 2022 Notes and 2025 Notes under the if-converted method. Under the if-converted method, diluted net income (loss) per share was determined by assuming that all of the 2022 Notes and the 2025 Notes were converted into shares of the Company’s common stock at the beginning of the reporting period. In addition, interest charges on the 2022 Notes and 2025 Notes, which includes both coupon interest and the amortization of debt issuance costs, were added back to the numerator on an after-tax effected basis.
The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to ten votes per share. Each share of Class B common stock is convertible at any time at the option of the stockholder into one share of Class A common stock and has no expiration date. Each share of Class B common stock will convert automatically into one share of Class A common stock upon the date when the outstanding shares of Class B common stock represent less than 10% of the aggregate number of shares of common stock then outstanding. Class A common stock is not convertible into Class B common stock.
21


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
The computation of the diluted net income (loss) per share of Class A common stock assumes the conversion of Class B common stock.
8. Income taxes
The Company’s income tax expense (benefit) and the resulting effective tax rate are based upon the estimated annual effective tax rates applicable for the respective period, including losses generated in countries where the Company is projecting annual losses for which deferred tax assets are not anticipated to be recognized.
The Company’s tax provision and the resulting effective tax rate for interim periods is determined based upon its estimated annual effective tax rate, adjusted for the effect of discrete items arising in that quarter. The Company also excludes jurisdictions with a projected loss for the year (or year-to-date loss) where the Company cannot or does not expect to recognize a tax benefit from its estimated annual effective tax rate. The impact of such inclusions could result in a higher or lower effective tax rate during a particular quarter, based upon the mix and timing of actual earnings or losses versus annual projections. In each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual tax rate changes, a cumulative adjustment is made in that quarter.
Three months ended March 31,
(dollars in thousands)20222021
Income tax expense (benefit)$(51)$1,219 
The Company recorded an income tax benefit of $0.1 million for the three months ended March 31, 2022, on pre-tax net income of $5.6 million. The Company’s income tax benefit for the three months ended March 31, 2022, was composed of $1.4 million of tax expense incurred on pre-tax income, and discrete items that primarily included $1.4 million of net excess tax benefit for employee stock-based compensation.
For the three months ended March 31, 2021, the Company recorded an income tax expense of $1.2 million on a pre-tax net loss of $8.9 million. The Company’s income tax expense for the three months ended March 31, 2021 was composed of $1.3 million of tax expense incurred on pre-tax net income, and discrete items that primarily included $1.8 million of net excess tax benefit for employee stock-based compensation and $0.2 million tax benefit related to foreign provision to return adjustments, partially offset by a net increase in the valuation allowance of $2.0 million.
At March 31, 2022 and December 31, 2021, the Company’s gross unrecognized tax benefits were $21.8 million and $21.3 million, respectively. If recognized, $7.9 million of these unrecognized tax benefits (net of United States federal benefit) at March 31, 2022 would reduce income tax expense. The unrecognized tax benefits relate primarily to unresolved matters with taxing authorities regarding the Company’s transfer pricing positions. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, the Company believes that its reserves reflect the more likely outcome. The Company believes, due to statute of limitations expiration, that within the next 12 months, it is possible that up to $0.5 million of uncertain tax position could be released. It is also reasonably possible that additional uncertain tax positions will be added. It is not reasonably possible at this time to quantify the net effect.
9. Commitments, contingencies and guarantees
Facility Leases. The Company leases its facilities under long-term operating leases, which expire at various dates through 2027.
22


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
The components of net lease cost, which were recorded in operating expenses, were as follows:
Three months ended March 31,
(in thousands)20222021
Operating lease cost (1)
$2,850 $3,096 
Sublease income(731)(133)
Net lease cost$2,119 $2,963 
(1)    Operating lease cost includes variable lease costs, which are immaterial.
Supplemental cash flow information related to leases was as follows:
Three months ended March 31,
(in thousands)20222021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases$3,777 $3,690 
Right-of-use assets obtained in exchange for operating lease liabilities 821 

Supplemental balance sheet information related to leases was as follows:
March 31, 2022December 31, 2021
Weighted-average remaining lease term (in years) - operating leases4.434.64
Weighted-average discount rate - operating leases6.1%6.0%

As of March 31, 2022, maturities of operating lease liabilities were as follows:
(in thousands)
March 31, 2022
2022 (remaining 9 months)9,205 
202312,758 
202411,748 
202511,477 
202611,710 
Thereafter974 
Total lease payments57,872 
Less: Imputed interest(7,803)
Present value of lease liabilities$50,069 
23


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
Other Commitments. In the ordinary course of business, the Company enters into multi-year agreements to purchase sponsorships with event organizers, resorts and athletes as part of its marketing efforts; software licenses related to its financial and IT systems; debt agreements; and various other contractual commitments. As of March 31, 2022, the Company’s total undiscounted future expected obligations under multi-year agreements described above with terms longer than one year was $348.5 million.
Legal proceedings and investigations. On January 5, 2015, Contour LLC filed a complaint against the Company in federal court in Utah alleging, among other things, patent infringement in relation to certain GoPro cameras. GoPro filed an inter partes review (IPR) at the United States Patent and Trademark Office. On November 30, 2015, Contour dismissed the Utah action, and Contour IP Holdings LLC (CIPH), a non-practicing entity, re-filed a similar complaint in Delaware. The case was transferred to the Northern District of California in July 2017 (case 3:17-cv-04738) and was stayed pending the IPR proceedings. Upon conclusion of the IPRs, the District Court lifted the stay on October 1, 2019. Due to COVID-19 delays, the trial was delayed several times. Separately, on March 26, 2021, CIPH filed a new lawsuit against Company in the same court (case 3:21-cv-02143), asserting the same patents against certain GoPro products. The Court granted Company’s motion for summary judgment that the asserted patents are invalid under 35 U.S.C. 101 for claiming unpatentable subject matter on March 4, 2022, and entered judgment in favor of Company and against CIPH on March 15, 2022. CIPH filed a notice of appeal on April 13, 2022. The Company believes that the matters lack merit, and intends to vigorously defend against CIPH.
The Company regularly evaluates the associated developments of the legal proceedings described above, as well as other legal proceedings that arise in the ordinary course of business. While litigation is inherently uncertain, based on the currently available information, the Company is unable to determine a loss or a range of loss, and does not believe the ultimate cost to resolve these matters will have a material adverse effect on its business, financial condition, cash flows or results of operations.
Indemnifications. The Company has entered into indemnification agreements with its directors and executive officers which requires the Company to indemnify its directors and executive officers against liabilities that may arise by reason of their status or service. In addition, in the normal course of business, the Company enters into agreements that contain a variety of representations and warranties, and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. It is not possible to determine the maximum potential amount under these indemnification agreements due to the Company’s limited history with indemnification claims and the unique facts and circumstances involved in each particular agreement. As of March 31, 2022, the Company has not paid any claims nor has it been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations.
10. Concentrations of risk and geographic information
Concentration of risk. Financial instruments which potentially subject the Company to concentration of credit risk includes cash and cash equivalents, marketable securities, accounts receivable, and derivative instruments, including the Capped Calls associated with the 2025 Notes. The Company places cash and cash equivalents with high-credit-quality financial institutions; however, the Company maintains cash balances in excess of the FDIC insurance limits. The Company believes that credit risk for accounts receivable is mitigated by the Company’s credit evaluation process, relatively short collection terms and dispersion of its customer base. The Company generally does not require collateral and losses on trade receivables have historically been within management’s expectations. The Company believes its counterparty credit risk related to its derivative instruments is mitigated by transacting with major financial institutions with high credit ratings.
24


GoPro, Inc.
Notes to Condensed Consolidated Financial Statements
Customers who represented 10% or more of the Company’s net accounts receivable balance were as follows:
March 31, 2022December 31, 2021
Customer A17%18%
Customer B19%30%
Customer C13%*
* Less than 10% of net accounts receivable for the period indicated.
The following table summarizes the Company’s accounts receivables sold, without recourse, and factoring fees paid: