New product rollouts and increased consumer demand contributed to the sale of 5.3 million Fitbit products and revenue of $503.8 million in the third quarter of 2016 for the company, according to financials released by Fitbit on Friday.
Although Fitbit's operating expenses are outpacing its projected growth, the company saw a 24 percent increase in third quarter earnings to $503.8 million. (Photo courtesy Fitbit.)
Fitbit Inc., San Francisco, reported third quarter earnings of $503.8 million, an increase of 24 percent over this period last year, according to financials released Friday. Company CEO James Park attributed the growth to increased consumer demand for Fitbit’s new products, leading to the sale of 5.3 million units.
New products such as the Charge 2 and Flex 2 were recently released to positive reception, Park said in an earnings call with analysts, with the Charge 2 succeeding Fitbit's top-seller, the Charge HR. He also noted the company's largely positive Amazon online sales reviews (an average of 4.2 out of 5 stars).
Total steps walked, a statistic tracked by users within the Fitbit social community, grew by more than 50 percent this period, Park said in the call. Repeat buyers also accounted for 40 percent of device activations in the quarters.
“Due to desire to participate in the social experience in the Fitbit app, we believe people are more likely to buy Fitbit over a competitor because their friends and family are more likely to be users already, and people are less likely to leave their competitor due to similar dynamics,” Park said in Friday’s earnings call.
He further indicated the company's intention to increasingly focus on penetrating corporate and medical wellness markets.
"Employers are also embracing connected health and fitness technology, as they recognize its ability to improve health outcomes and lower costs," Park said in the call. "This usage by employers has the potential to advance a category into a must-have and a vital piece of everyone's lives. Employers have a direct vested interest in improving the health and fitness of their employees."
Fitbit executives expect between $725 million and $750 million in fourth quarter earnings, according to the report. For 2016, they expect between $2.320 billion and $2.345 billion, representing at least a 25 percent increase.
These projections are lower than initially expected, CFO William Zerella said during the call. He called out a few stunting factors, such as operating expenses outpacing growth. (Operating expenses in this period grew from $128 million to $196 million.) Executives also noted Fitbit’s advertising efforts (an expenditure of $237 million so far this year) may be ineffective.
The financials report said: “While we seek to structure our advertising campaigns in the manner that we believe is most likely to encourage people to use our products and services, we may fail to identify advertising opportunities that satisfy our anticipated return on advertising spend as we scale our investments in marketing, accurately predict user acquisition, or fully understand or estimate the conditions and behaviors that drive user behavior.”