GoPro to GoPublic, S-1 shows a profitable, high growth, hardware-plus-media machine

By James Robinson and Michael Carney , written on May 19, 2014

From The News Desk

Early in February, GoPro announced that it had anonymously filed its paperwork ahead of its IPO. As we reported at the time, there was every reason to feel bullish about the company’s prospects.

In the 10 years since GoPro’s first camera had gone on sale, it had grown from a grassroots brand with $350,000 in sales in its first year to $512 million in 2012 revenue. When you factored in things like its burgeoning media brand, with content tie-ins with YouTube, Xbox and Virgin America, the future looked good.

This afternoon, GoPro’s revealed its S-1 publicly for the first time, stepping out from the protective shadows of JOBS Act Emerging Growth Company status and providing the first peak behind the company’s financial curtain. The company revealed plans to raise $100 million, although such figures are often updated before listing day. As many analysts had expected, there were very few skeletons in the closet to be wary of.

GoPro’s filing shows it to have profits in the tens of millions for three years running now ($60.5 million last year), with revenue that very nearly grazed $1 billion in 2013 ($985.7 million). It has sold 8.5 million cameras in its history, with almost three-quarters of those sales coming in the last two years. Also, the company generates more than 50 percent of its revenue from international sales, which is very impressive this early in a company's history, and generates just over half of its revenue from their 10 largest retailers, which isn't all that surprising but potentially problematic in its concentration.

The worst thing you could say about GoPro is that its once torrid growth is slowing, slightly, but given that it is an established brand with a 10 year retail track record it is hard to hold that against it. The past year was the first in which it posted less than an 100 percent increase in revenue and Q1 2014 revenue was actually down on the corresponding quarter in 2013, a fact that the company explains away based on supply chain delays.

The GoPro S-1 said that the company currently has 718 employees and will use the proceeds of its IPO to repay a $120 million term loan, while keeping a separate $50 million revolving credit facility. The stock offering with have a similar dual class structure as seen in the Facebook and Google IPOs, giving insiders have a 10:1 voting advantage over common shareholders. Co-founder Nicholas Woodman owns 38 percent percent of the company and controls a whopping 48.84 percent of the vote going into this offering.

Other major shareholders include: Riverwood Capital at 12.8 percent ownership and 16.27 percent vote; Foxconn at 8.17 percent ownership and 10.38 percent vote; Nicholas' father Dean Woodman at 5.06 percent ownership and 6.43 percent vote; and Sageview Capital at 4.8 percent ownership and 6.15 percent vote. Not listed among the 5 percent or greater stockholders is US Venture Partners, which invested $10 million in the company's first institutional round in 2011.

Acknowledging the looming, long term competition its cameras could one day face from smartphones, the filing talks up GoPro as not just a hardware company, but also a yet-to-be-monetized content platform. Its desktop application, GoPro Studio, and GoPro App, “reflect the early stages of our content management platform strategy,” the company writes. The filing further mentions that GoPro’s content has received 7.2 million likes on Facebook, while the brand itself has 2 million followers on Instagram, 950,000 on Twitter, and was the number one ranked brand on YouTube in Q1 2014, with 450 million video views and over 1.8 million subscribers. Crucially, the company said that as of the end of 2013 it had not derived a single piece of revenue from this content distribution but pursue new financial opportunities here in the “near term.”

It should be a matter of weeks until we see how Wall Street responds to GoPro's hardware plus media company narrative, but based solely on the numbers, it seems like a growth story investors will be inclined to see in high definition.