Perhaps investors weren’t too excited about Fitbit’s first public earnings calls. The reason behind might be the gross margins that had constantly been under pressure. Moreover, expectations were incredibly high heading into the reports where shares tapped all-time highs just hours before the release.
“An impressive 78% of the quarter’s revenue came from Fitbit’s latest and greatest Charge, Charge HR, and Surge products. In other words, that translates into a solid US$ 312.3 million in sales from the trio of activity trackers.” – CFO, Bill Zerella
Not to mention, these products are brand new; a factor that makes cost curves to remain at peak. This is common among all new tech gadgets where Fitbit is no exceptional. Moreover, there were also extra costs associated with ramping up manufacturing to meet demand for Charge HR.
Fortunately, good news is that Fitbit has already absorbed most of the fixed costs associated with expanding manufacturing. Here is Fitbit’s current product portfolio.
Also, Fitbit has made consistent progress driving up the average selling price of its devices over the past couple of years, coming in at a record US$ 88 last Q:
CEO James Park had made observations that the company is seeing an increased engagement devoted directly towards all these products, since they carry more sensors that can track more data and include features like caller ID.
Yes, Park will need to change up his phone etiquette for the sake of his company and its shareholders. But if Wall Street would like more of these high-growth startups to go public, perhaps it should also take a good, hard look in the mirror.