Nicholas Woodman - Chief Executive Officer Tony Bates - President Jack Lazar - Chief Financial Officer Jeff Brown - Vice President of Communications.

Paul Coster - JP Morgan Erinn Murphy - Piper Jaffray Joseph Wolf - Barclays Steven Becker - Robert W. Baird Tavis McCourt - Raymond James Charlie Anderson - Dougherty & Company James Faucette - Morgan Stanley Alex Gauna - JMP Securities Gus Richard - Northland Jeremy David - Citi Brad Erickson - Pacific Crest Securities Rob Stone - Cowen and Company.

Good day and welcome to the GoPro, First Quarter 2015 Financial Results Conference Call. Today's conference is being recorded. At this time I would like to turn the conference over to Mr. Jeff Brown, Vice President of Communications. Please go ahead, sir..

Thank you. Good afternoon and welcome to GoPro's, first quarter 2015 earnings conference call. With me today are GoPro's CEO, Nicholas Woodman; our President, Tony Bates; and our Chief Financial Officer, Jack Lazar.

Before we begin, I would like to remind you that statements on this call including, but not limited to those about our projected future and financial results, including revenue and expenses, economic and market trends, our future plans, prospects and growth opportunities, the continued adoption of our products, the anticipated benefits of our long-term strategy, our customers, competitive position, market share and leadership position in various markets constitute forward-looking statements.

These forward-looking statements and all other statements that may be made on this call, that are not historical facts are subject to a number of risks and uncertainties that may cause actual results to differ materially.

These forward-looking statements speak only to today's call and we do not undertake any obligation to update these forward-looking statements.

We refer you to the annual report on Form 10-K of the year ended December 31, 2014 which is on file with the Securities and Exchange Commission, in particular, to the section entitled Risk Factors and to other reports that we may file from time to time with the SEC for additional information on factors that can cause actual results to differ materially from our current expectations.

We report net income and basic and diluted net income per share in accordance with GAAP, and additionally on a non-GAAP basis. We believe that non-GAAP information is useful because it can enhance the understanding of our ongoing economic performance. We use non-GAAP reporting internally to evaluate and manage our operations.

We have chosen to provide this information to enable investors to perform comparisons of operating results in a manner similar to how we analyze our own operating results. A reconciliation of GAAP to non-GAAP financial data can be found in earnings press release we issued today. We ask that you review this information in conjunction with this call.

All numbers that are disclosed in today's conference call other than revenue are non-GAAP unless otherwise noted. In addition to the earnings press release, we have posted slides containing detailed financial data and metrics for the first quarter of 2015.

Both of those documents and a link to the webcast for today's earnings conference call are posted on the events and presentations page of GoPro’s Investor Relations website for your reference. In the interest of time, I would like to remind those participating in the Q&A portion of the call to please limit yourself to one question each.

Now, I’ll turn the call over to GoPro's CEO, Nicholas Woodman. Nick..

Good afternoon and thanks for joining us. Today I will provide a recap of GoPro’s key accomplishments during the first quarter. Tony will discuss our software and entertainment media initiatives, along with an update on our international expansion.

Jack will then provide a more detailed update on our financials, as well as guidance for the second quarter. The three of us will then take your questions. We kicked off 2015 with another well executed quarter and delivered great results. The first quarter was the second highest revenue quarter in GoPro’s history.

Year-over-year first quarter revenue grew 54% to $363 million. Gross margin was 45.2% and operating income increased 135% to $49 million. Revenue from EMEA and APAC was up 66% year-over-year with international sales contributing more than 50% of our revenue in the first quarter.

Generating these results in a non-holiday quarter is something we are particularly proud of. We view GoPro as a content enabling business and we believe there is a strong correlation between viewership of GoPro content and sales of our products. We refer to this as our Virtuous Cycle.

Our investments in product development efforts center around reducing the friction associated with capturing, editing and sharing engaging content, which goes on to virally drive awareness of our brand and adoption of our products.

In the first four months of 2015 we introduced new products, acquired new teams and technology, signed new partnerships and made sizable R&D investments for GoPro’s future, all with the intention of fueling our content driven business model.

In January we announced HEROCast, a breakthrough solution that allows networks to include exciting GoPro perspectives in their live broadcasts. HEROCast simultaneously enhances the viewing experience for fans, while prompting GoPro’s brand, products and perspectives.

We think HEROCast is a big future in the broadcasting of live events, and we’ve seen strong interest since announcing this exciting new solution. GoPro also invests in athletics and events that lead to some of the most popular content on the internet today.

Currently we partner with over 130 athletes and sponsor more than 80 events, such as the X Games, the World Surfing League Championship and the GoPro Mountain Game. This month we invested in a long term partnership with MotoGP, the world’s premier Motorcycle Racing Championship.

Similar to Formula 1, MotoGP attracts tens of millions of passionate fans from around the world. GoPro will provide MotoGP viewers with unique points of view that put them directly into the action, enhancing their viewing experience while authentically promoting our brands and products.

Also this month GoPro held its Annual Winter Athletic Summit in British Colombia. Athlete generated content is a vital component of our marketing strategy.

Our summits provide us the opportunity to build relationships with some of the world’s premier athletics and train them on how to capture and share compelling GoPro content that derives viewership and appreciation of our mutual brands.

This year’s even in British Colombia drew top athletes including Travis Rice, Lynsey Dyer and Olympic gold medal winners Ted Ligety and Shaun White. In three days our athletes posted almost 800 photos and videos mentioning GoPro, reaching an audience of over 6.5 million people.

Travis Rice, one of the world’s top snowboarders posted a 15 second GoPro video to Facebook that generated nearly half a million views within 24 hours. Distribution of GoPro content drives social engagement and our social media metrics are an indication of our brand strength.

Facebook followers now total more than 8 million and on You Tube GoPro subscribers are up 48% year-over-year to roughly 3 million. Twitter followers are up 49% year-over-year to 1.4 million and we remain one of the top 10 brands on Instagram with more than 4.5 million followers, up 141% year-over-year.

Building off of this momentum, we are investing in talent and technology to capitalize on where we see content moving in the future. Today we are excited to announce our plans to acquire Kolor, a French company that has distinguished itself as a leader in virtual reality and spherical media solutions.

Kolor software enables immersive high resolution spherical content that can be viewed on SmartPhones or virtual reality head mounted displays for entertainment, education and other uses. Kolor is one of the several strategic investments we are making.

We are passionate about innovation and we love taking a Formula 1 approach, pushing the limits of design and engineering to wow our customers. We believe the strength of our brand and the breadth of our content driven model gives us the ability to expand into new and exciting product categories over time.

Our content driven model continues to scale GoPro as an aspirational movement. Millions of people share their content on our brand platform and their shared experiences inspire millions of others to live bigger and more active lives to capture and share their own experiences.

Helping the world to express and celebrate itself in such a motivational manner is one of the most satisfying aspects of our business and we believe it instills our brand with an invaluable degree of good will and good karma. Now, I’ll hand it over to our President, Tony Bates..

Thanks Nick. I’m going to take the next few minutes to provide some details on our software and entertainment media initiatives, as well as our international expansions and how our investments in these areas help fuel the GoPro movement. I’ll start with software; the tools we offer to help consumers edit and share their content continue to grow.

Creating better tools for editing and sharing content is a top priority for GoPro. The resulting increase in user generated content will serve as a catalyst for our continued virtuous cycle and GoPro entertainment opportunities. We are making significant investments in software, related operating expenses around 125% year-over-year.

The results of this investment can already be seen in terms of the numbers. The GoPro Studio App for PC and Mac was installed 1.7 million times in Q1, up 138% year-over-year and the GoPro Mobile App was downloaded 2.6 million times in Q1, totaling 16 million cumulative downloads. Consumer engagement has been equally impressive.

GoPro Studio exports have reached 40,000 per day, a 68% year-over-year increase and content submission the GoPro Video of the Day and Photo of the Day program increased 50% sequentially. We are very pleased with our progress in growing the distribution network for GoPro entertainment.

In March, we signed an agreement with Vessel, a new premium video service and last week the GoPro Channel was introduced to more than 10 million viewers on Roku. In Q1 we passed a big milestone on Microsoft’s Xbox with more than 1 million installs of the GoPro App with users watching on average 25 minutes of GoPro videos during each viewing session.

Overall viewership of GoPro content remains incredibly strong. One of our top viewed videos from Q1 was pole vaulting with Allison Stokke, which was posted in February and currently has more than 5 million combined views on YouTube and Facebook. The only iSeries which the NHL was posted in late January and currently has over 6.5 million views.

Videos published on the GoPro Channel on YouTube were up 93% year-over-year and views were up 46%. GoPro is tied to the number one spot on YouTube’s 2015 Ads Leaderboard.

Our entertainment division is the key area of investment and services as a creative engine of GoPro marketing, both creating and acquiring content that drives demand for our products. Investment in GoPro Entertainment is up 95%.

Next I’ll focus on our global sales results and opportunities for regional expansion aimed at further realizing our total addressable market. According to NPD, on a unit basis GoPro’s five captured devices modules accounted for the top five products in the combined Digital Camera and Camcorder category.

In the same category on a dollar share basis GoPro accounted for three of the top five products, including the number one spot. GoPro was also the leader in accessory unit sales with seven of the top 10 selling accessories. Now, let me turn to International Expansion.

Last year EMEA and APAC accounted for than 500 million of the $1.4 billion of GoPro generated revenue. This quarter combined revenue from EMEA and APAC was up 66% and accounted for 50% of revenue. Clearly our investments in worldwide marketing and distribution are paying off.

A recent study conducted for GoPro by IT Source hold consumers in nine countries across five continents. The study show a 70 year-over-year increase in aided awareness of the GoPro brand.

In addition, the number one used space for the GoPro capture device sighted by almost 50% of survey respondents was for making family videos, further evidence that GoPro is increasingly becoming part of documenting everyday of your life. In Europe we opened our first sales and marketing office in Munich last year.

And more recently established an office in Amsterdam. These offices bring us closer to the distributors to sell our products and millions of new consumers. We know that Europe is a set of distinct markets and expect localization of content to suite regional needs.

Today GoPro products are solid in thousands of locations across EMEA, including specialty stores and the large retail chain such as Media Markt, Dixons and Fnac.

In the months ahead there will be continued investment, more localization of channel market and more news about events and athlete partnerships, all of which will help unlock the natural affinity millions of European consumers have for the GoPro movement. Now let’s turn our focus to the APAC region.

While much of our success to-date has been in English speaking countries such as Australia, we are now focusing on opportunities in Japan, Korea and of course China. We introduced GoPro to the China market in January.

To-date we have built strong relationships with key online retailers such as Tmall, JD, Amazon and Xiaomi, as well as more than 300 premier consumer electronics, lifestyle and outdoor stores across China. Based on strong initial sales, we are expanding our retail presence across China.

Similar to our approach in Europe we are going to drive our brand and products to the local content strategy that inspires consumers, Chinese consumers to capture and share their passion via key social communities like WeChat, Viber, YouTube and others.

By the end of the current quarter we plan to capitalize on our China momentum by offering a wider area of GoPro products, from our low opening price point HERO model to our top of the line HERO4 Black. We are confident and excited about our China market strategy.

Finally, I’d like to reflect on the growing ecosystem of partners that contribute to GoPro’s business.

Last year we announced partnerships with BMW to integrate a GoPro App with their iDrive control platform and just recently BMW unveiled two factory integrated GoPro mounting options of their cars, and this month Toyota announced that GoPro amounts would be factory installed in all of their 2016 Tacoma trucks.

Also this month 3D robotics unveiled Solo, a new quadcopter that will ship with the GoPro's frame mount, optimizing its design for use of HERO3 and HERO4 capture devices. These are just three instances where we’ve seen GoPro independently adopted as a de facto capture solution.

We are extremely proud of everything we have accomplished in the quarter and truly appreciate the support from our customers and partners. And with that, I’ll hand over to Jack..

Americas was $180.1 million or 50% of revenue; EMEA was $139.1 million or 38% of revenue and APAC was $43.9 million or 12% of revenue. The combined EMEA and APAC regions made up 50% of our Q1 revenue, up from the 47% recorded in Q1, 2014.

First quarter gross margin increased 410 basis points year-over-year to 45.2%, due primarily to favorable mix shift to our new HERO4 black and silver capture devices. Q1 gross margin was once again above our long term target model range of 42% to 44%.

ASPs declined slightly due to strong EMEA and APAC revenue, which is primarily served through our distribution channel, coupled with the expansion of our product lines to include a lower ASP entry level HERO capture device. This was partially offset by a year-over-year increase in revenue from products sold at $399 and above.

We did not experience any noticeable pricing pressure during the quarter. Operating expenses of $115.1 million were up 51% year-over-year and 4% sequentially. Sales and marketing expenses were up 34% year-over-year, a rate less than our overall expense growth, demonstrating continued operating leverage from these efforts.

Consistent with prior periods, our R&D investments drove the overall expense increase and were up 68% year-over-year and 15% sequentially. Our continued aggressive investment in R&D reflects our long term focus on the development of next generation devices, our software and entertainment initiatives and international expansion.

GAAP net income for the first quarter were $16.8 million or $0.11 per diluted share and this compares with GAAP net income of $11 million or $0.08 per diluted share for Q1 of 2014.

Our Q1, 2015 GAAP results reflect a charge of $15.8 million in stock based compensation related to the achievement of market based conditions for certain restricted stock units.

Turning to the balance sheet, we ended the quarter with cash, cash equivalents and marketable securities of $491.9 million, up $69.6 million or 16% sequentially, due primarily to cash flow from operations. Cash increased $380.7 million year-over-year and at the end of the first quarter represented over 50% of GoPro’s total assets.

Cash flow from operations for Q1, 2015 was $66.3 million. Accounts receivable of $106 million decreased $78 million or 42% sequentially due to collections of Q4 seasonally strong receivables. DSOs of 26 days were flat sequentially and inventory increased by $11 million sequentially and turns were 5.0.

Our capital expenditures were $5.2 million and our depreciation and amortization was $5.4 million. I'll now move on to our guidance for the second quarter. After a great start to the year, we’re also quite optimistic about our second quarter. Channel inventory levels, both in the U.S.

and abroad look healthy and we continue to see positive sell-through trends. In Q2 we expect an increase in revenue from both our distribution and direct channels, with the dollar increase in the latter being more significant. Geographically we expect the largest dollar increase in revenue to come from the Americas, followed then by APAC.

Accordingly we currently anticipate revenue of between $380 million and $400 million for the second quarter and at the midpoint of our guidance this represents an increase of 59% year-over-year and is greater than the 54% year-over-year growth we just recorded in Q1.

In the second quarter we expected our product and channel mix to remain favorable and our HERO4 black and silver devices to continue making up over 50% of our revenue.

Given these expectations we expect gross margin will continue to be at or above our long term target and accordingly we for the second quarter anticipate our gross margin will be 45% plus or minus 50 basis points and at the midpoint up 280 basis points from the 42.2% we recorded in the prior year comparable quarter.

We will continue to invest prudently in the people, product and infrastructure necessary to pursue both our growth and our vision.

To support our ongoing investments and broadening our family of capture devices, accessories, software and entertainment, we anticipate our operating expenses will be $125 million plus or minus $2.5 million, with the majority of the growth coming from R&D.

We estimate our effective tax rate to be approximately 25% with fully diluted shares outstanding of approximately $150 million. Accordingly, we anticipate EPS to be in the range of $0.24 to $0.26. So with that operator, we’re ready to take questions..

[Operator Instructions] And we’ll take our first question from Paul Coster with JP Morgan..

Thanks for taking my question. My curious mind wants to know whether Nick used a body double in the American Express ad, but that is not my question. My main question is really we’ve seen a little bit of price action if you look on Amazon in Europe for instance. It looks like the price has been cut a little bit.

Is this because of the strength of the U.S. dollar and for that matter, as we sort of roll into the middle of the year when traditionally we approach perhaps what might be a product refresh, we expect after this very exciting second quarter that perhaps gross margins dip and ASPs has come down a bit before the next product iteration..

That is one large question Paul. Now since I think the first part of that question is – very well, then Nick would you like to answer the question about Amex..

I did not use a body double, but at a certain point during the shoot, I wish I had been..

So onto the quarter, regarding the – I think you referred to it as price action in Amazon and I think from our perspective what we do is we put product out there and we set a recommended retail price and the retailers go and they are all competitive and I think that’s just kind of the way it plays out.

I don’t think we really saw a significant impact of FX in the most recent quarter. I know that’s a pretty popular topic this quarter, but we generally sell our products through distribution in dollars and then the distributors in turn convert to the local currencies when they sell to the retailers.

So I wouldn’t say that it had much of an impact on us.

As far as gross margins, I think the best thing to comment on is at this point we’re extremely happy obviously with what we reported in the last quarter at 45.2% and the guide of 45% plus or minus 50 basis points I think just continues to reflect that people really see the value in our products and the high end of the product line seems to be doing quite well.

So how that plays out over time we’ll see, but right now I think we’re just quite happy with the way things are working out..

Great, thanks very much..

Thanks Paul..

Our next question comes from Erinn Murphy with Piper Jaffray..

Great. Thank you, good afternoon and congrats on a very solid quarter. I guess just strategically for Nick, if you could just maybe walk through the color acquisition a little bit more, how do you see the team’s integrating just from a cultural perspective.

Maybe just help us think about what that business looks like today and then ultimately how you’re thinking about some of the longer term opportunities this could add. And I do have a house keeping question for Jack as well if that’s possible..

Sure, terrific question. I think from a cultural perspective there’s fabulous parallels between Kolor, their passion for enabling immersive and engaging content, spherical content tailored for virtual reality viewing experiences. That marries really well with our passion for enabling – similarly engaging an immersive content.

So the DNA of the two companies marries really well. Kolor is based in the French Alps, which is also another plus. They are going to be a really fun office to visit and I’m headed out there this week to welcome them to the family.

And as far as relating to future roadmap, we see the incredible opportunity for GoPro to be at the forefront of the virtual reality movement and enabling spherical content for viewing and other use cases in virtual reality.

Given that GoPro is already the most widely used capture device for capturing life experiences in an immersive manner, it’s only natural that we have a seat at the table in the virtual reality movement moving forward. .

Erin, its Tony, just had a couple of things. One thing I would encourage everyone, investors and anyone on the call to go down low to colorize that, we just released a great piece of content.

As Nick mentioned, we have already been seeing many people using GoPro’s in different kind of three dimensional risks to really capture the beginning of the spherical media content. I really l encourage you to take a look at that, until you really experienced it, it sort of hobs [ph] totally understandable what’s put forward.

We are at the beginning with the right piece of technology, but we’re ready with the market and leadership is coming towards us..

You can download the app via a link at GoPro.com/spherical and we have a demonstration video that we’ve published that will be included with the app download; its land, sea and air and it gives you a fantastic immersive experience of what’s possible capturing the spherical, virtual reality content with GoPro and viewing it with Kolor software..

And Erinn I think you had a housekeeping I will let you slip in..

Thank you so much. So Jack, this is for you. Inventory up about 82% year-over-year. I mean clearly the second quarter guidance very strong at 59% from a sales perspective. Could you just help us marry those two together? How you see inventory tracking throughout the balance of the year relative to sales? Thank you..

Sure. So I can comment on inventory. It’s up $11 million sequentially, which is kind of the way I look at it and that’s actually by plant.

One of the reasons we went public was to create working capital to be able to better serve our customers and one of the main reasons, one of the main ways in which we wanted to serve the customers was have a better availability of inventory. So I think we’ve been conscientiously growing that inventory.

Our products generally have pretty long product lives actually. For example, we’re still selling the HERO3 White from several years back. I think in the end what’s probably most relevant here is that our inventory this quarter is up less than the guide we just gave you.

So I think that it’s a rational growth in inventory that we think is designed to take care of our customers..

Fantastic. Thank you gentlemen..

Our next question comes from Joseph Wolf with Barclays..

Thank you. I have a couple of questions. I just wanted to go – on the acquisition that you made, was there any internal development on the spherical video on the software side or the hardware side that you’ve been working on that you could now coordinate with Kolor or is this a add on completely to what you guys have been working on. .

Yes, we don’t talk generally about sort of internal developments and roadmaps, but I’ll just reiterate, GoPro is currently today pretty much to the fact those standard of folks capturing spherical media content.

We see a lot of rigs with 3D printers and so on and so with Kolor being essentially the leading player in terms of ways the people view that part of the media, there’s been a natural connection for a long time and as Nick mentioned the DNA, it brings these things together. So we’ve been the default capture device for quite some time..

And then just as you talked about the geography and if we look at the mix going forward, how do you think that that plays out and then I guess if you look at the demographic of the buyer internationally with that big bump in the first quarter, are the people buying the camera globally the same.

Is it a broad mix? Do you have the same kind of mix? What can you tell us about the customers?.

So regarding the GO revenue Joe, I think what we’ve pointed out is what we’ve been pointing out for quite a long time. We think there’s a tremendous cam opportunity worldwide for our products.

In some quarters its will be stronger in international, in some quarters it will be stronger in Americas, but overall our job is to just grow it everywhere and we think we’re really just starting to touch on the beginnings of that cam.

We need to go out and execute, we need to make the experience better for the consumer and we need to continue developing and delivering new capture devices.

So I don’t think we really set the targets that we would share outside, mostly because honestly we’re going after new ground here and we’re going to grow in certain regions each quarter more quickly than others and I think the overall goal is just continue to get more and more devices sold into the market..

When we invest we see results. We see that in terms of the aided awareness.

I talked about the 70% year-over-year increase, but I think the other one that we thought to see and this is on a broad basis, but certainly international is the way that people think about using their GoPro to see a server respond in such a way where 50% number one use case was around capturing moments with family.

It’s a big shift and that’s an important shift that we can help to capitalize as well the opportunity in our cam. And I’d say the other thing that I outlined a little bit was we have a lot of investment globally and internationally and we’re going to continue that.

That gives us a couple of things normally getting very close with the visibility and more understanding of our customer base and then also really starts for us to start to think about where we want to invest in terms of localized content as I addressed and both those things I think will really fuel expansion in our cam..

Thank you. That’s very helpful..

Thanks Joe..

Our next question comes from Steven Becker with Robert W. Baird..

Hi guys, thanks for taking the question. I apologize if this has already been asked, but could you tell us a little bit more about the geographic revenue mix. EMEA in particular was very strong this quarter. What drove that relative outperformance versus Americas and Asia Pac. Thanks..

I think the combined EMEA and APAC as we mentioned was 50% in this last quarter and if you look at overall, that’s up from last year. I think what we’re seeing is this effort that we’ve been making. We put feet on the street in Europe throughout last year and I think that we’re seeing some nice results from that.

We’re also much closer to the overall customer. At this point last year we barely had a relationship with the end retailer and now we’re constantly in discussions with them. In fact we get weekly data from a variety of these guys. So this is all part of the long term investment we’re making.

We’re very aware that people worldwide, not just in North America want to use GoPro and our job is to get closer to them and provide them the opportunity to do that..

Yes, like I said Steven, this is really a strategy that we have in place and frankly it’s a matter of executing in the right rhythm and cadence. We know it works and we put folks out there. We talked about the Munich office and all the investments we put there and is paying dividends and we’re going to continue on that.

I think one other thing I would add, as we think about international, we also have opportunities to reach wide audiences with the type of content that people love. I’ll just take you back.

At the MotoGP announcement that we just did, it really gives us an opportunity to reach a very large global audience and so you’ll see us investing in those types of opportunities along the way and as well it helps with the awareness and helps us grow in the national footprint..

Great, I appreciate the color..

Thank you..

Our next question comes from Tavis McCourt with Raymond James..

Right, thanks for taking my question and great quarter. Tony, a couple for you. You mentioned in your prepared comments that you’re tied to number one on the ad leader board now.

Talk a little bit about what that means for those without a media background and kind of maybe an overview of the timing of the monetization strategy as it relates to the media..

Yes, maybe just to step back in terms of the media strategy. We’re going to continue to invest heavily. I talked about it in the prepared comments. We’re almost 95% year-over-year in terms of the investments we’re making within the media entertainment group.

Really happy with the distribution channel that we put in place, I want to reiterate that but continued strong ability for folks to view our content. We are much more focused on increasing the content that we produce.

We’re up almost 93% year-over-year in terms of the content that we produce on our GoPro Channel and more importantly we’re seeing this ground swell in terms of uses or stunts submit their content to us. We have a couple of programs. I mentioned video of the day and part of the day sequentially up 50%, a huge increase. Those will create opportunity.

In terms of the revenue and the monetization, we’re still in the very early days of that. While it’s not significant in the overall size of the revenue today, we are seeing an increase in revenue from entertainment and media activities. It’s still small relative to other businesses, but we have seen an increase.

The main thing that we are focused on overall though is continuing to drive the virtual cycle. We know the multi order to see the great content that we produce, all that we generate from users submitted, it drives people to be interest in GoPro. We’ve seen a shift in terms of the way that people think about GoPro.

Some of that is actually to do with the way that we generate the content, but more importantly the way that users remain in the content. So we’re going to continue on the strategy. We feel really good about it. We’re going to still invest and so that we’re really on track..

Thanks. And Jack a follow-up. On the capital statement you indicate about a $5 million acquisition in Q1.

What was that?.

So we do periodically some small acquisitions that are just frankly materials actually disclosed and so from time to time you’ll see things like that and we hope to bring you things in the future..

Okay. Thanks very much..

Our next question comes from Charlie Anderson with Dougherty & Company..

Thank you so much for taking my question and congrats on the great results and guide. I wanted to ask about the HERO4; it’s obviously been a spectacular launch. I wonder if you have any data yet on how many of the HERO4 buyers are repeat buyers that are coming from a HERO3 or HERO3 plus and also some of the user statistics.

Do you know if they are using it more than the HERO3 and HERO3 plus users were?.

Yes, I’ll take a stab at addressing that. I think Charlie, we don’t have deep data. One of the things we have been focusing on is we are adding more analytics. I’ll give you a couple of stats that we do see.

We see a lot more folks using the camera, particularly the new HERO devices, not just for capturing great videos but also the amount of photo usage. So we are really becoming a strong leader in terms of capturing real that’s representing the NPD data I’d shared with you earlier. In terms of repeat buyers, I think there is a couple of things I’d offer.

One, we now have a full line of products. Part of our strategy was absolutely to make sure that we have full price point and coverage across the full range. We now have the top five products in terms of the camera and the camcorder category.

So I think that we see a combination of our core buyers, but we also see an expansion in terms of folks adopting the product. .

And just to add on to that, this full line of product I think really goes understated to certain extent, because there is nobody who has a set of products that go from a $129 to $499 and I think that’s really important, and I think what’s equally as important is we’ve got all those products and we’ve made our business model better, and so I think that it’s a key part of this overall growth.

Because look, we know we are going to find people who just want $129 products and yes, the vast majority do today want products that are $399 and above and allow you to do some pretty amazing things.

But there is a combination of people out there and we are trying to address them all and I think so far the product launch from last year has really done exceptionally well. .

Thanks so much. .

Our next question comes from James Faucette with Morgan Stanley..

Thank you. Just two quick questions from me. First, in conjunction with the HERO4 launches, you also had the new lower price products and to-date we’ve seen your ASP has been better and have been better than expected on a flip side of it, because it seems like there is not enough channel inventory of the new lower price products.

I’m just wondering if and when we may start to see the channel get as much of the lower price products as they’d like and how should we think about the impact of ASPs, at least in the near term as that happens.

And then my second question is, around the acquisition of Kolor, does – like it’s pretty clear the value that this software solution will provide for professional media creation, but is there an opportunity or how do you think about the attraction of that for more of the consumer and where are the points of the leverage that you can get with that team into the consumer market.

Thank you very much..

James, I’ll take the first part of that and so regarding the channel, one of the things I think Aaron asked earlier about inventory. So you will obviously hear inventory is up $11 million, quarter-over-quarter and again by design, because we are trying to get more product into the channels.

So I think that mostly as you go you will find the products on shelf and that’s what we are trying to do. We are also seeing healthy sell through, so I think the machine is working pretty well right now.

You do have to remember that it is more attractive for a retailer to actually sell the HERO4 Black and Sliver products and so they tend to carry those over and above some of the lower price products like the $129 HERO and so some of what you might be seeing, is that’s just simply a reflection of the inventory mix that they choose to sell.

We’ve got lots of products for you. If you want to sell it, we want to sell it to you and we think that we should continue to see some good sell through numbers. As far as the impact on ASP is going forward, we are just guided to margins of 45% plus or minus 50 bips.

That’s obviously pretty good and I think that reflects the fact that we are not expecting any significant decline in ASPs and I did comment in my prepared remarks that we did not see any discernable pricing pressure over the last quarter.

So I think our job is to go out and continue to innovate, put out our great products and make a better ecosystem, much of which we are making great progress in and I think there’s a lot more to do. .

And then Nick here.

A good question as it relates to Kolor and adapting their technology combined with our existing hardware technology to enable I think what you are getting at is consumer spherical content, consumer virtual reality content and I think that virtual reality content production today is largely done by processionals or Prosumer power users who are combining six or more GoPro’s using 3D printed rigs to capture incredible content and then they are using Kolor software to stitch that together and Kolor Player to play it back.

And I think that as we see more and more a fantastic VR content being produced using our products and as we make it easier for professionals and Prosumers to do that, there is going to be natural trickle down desire at the consumer level where people are going to want to capture this type of experience for themselves.

And I think that because the consumer is already looking to GoPro as an enabler of self capture, the type of content we are known for today.

Its only naturally to think that they would look to GoPro for virtual reality, personal virtual reality, spherical content capture solutions in the future and I think that we are well poised to be a leader in that area. .

We’ll take our next question from Alex Gauna with JMP Securities..

Thanks for taking my question. Just curious, coming back to the investments you are making in software and in virtual reality right now.

How should we think about your commitment to R&D and SG&A spending as we roll forward here and by that I mean, in the past we’ve seen some throttling of your spend seasonally and right know we are seeing an increased spend which is somewhat epithetical to seasonality.

Should we think now in terms of kind of steady linier increases to your investments or will there still potentially be some softening, maybe seasonally in the back half of the year in the summer months, thanks..

Hey Alex, this is Jack. So on the overall OpEx spend I think what we really focus in is two primary areas.

Number one, what does it take to achieve our vision and how fast can we do that and to the extent that we have revenue that’s growing at a rate that’s at or better than what we are planning on, then that gives us the ability to kind of flex the spending in order to achieve those goals faster.

And so from our perspective, we got a lot of projects going on here, a lot of things. Well obviously a lot of them are in R&D and we feel like making these investments now is the right thing to do. And we are doing that most importantly while still delivering really good financial results.

I mean all of these results are up significantly both on dollars and a percentages basis, for the most part year-over-year. And when we are able to operate in a Q1 where we were able to do operating margins like we did, I think that’s really kind of our goal.

At the same time we’ve got to invest in the future, and going after new efforts like what we are going with Kolor, like some of the other areas that are less public at this point, I think these are the things that help us grow a great tan and really give us a better opportunity.

So as far as the trends going forward, I think we are just going to have to wait and see, it’s really going to depend on the opportunities here in front of us, but we are certainly dedicated to both investing and having a solid financial model for our investors. .

I’d like to just add to that too, that we feel very good about the areas that we are investing in, the bets that we are placing.

They are just so organic to GoPro and where we’ve come from and where we see content going tomorrow, that as we say we see GoPro as an athlete and we’d like to stay over our center of gravity and our investments in R&D and the future products are absolutely in our wheelhouse. We are feeling very good about these investments. .

Alex, I’d just add one bit to Kolor. You started off around software and I’ve given in my opening remarks the big increase. I’d say the other thing that we are focused on is makings sure that whatever we do accretes to the ecosystem.

And that’s particularly true in the software area, and one other just piece of that, right now we are certainly investing in software R&D a greater rate than hardware R&D, but as Jack said, overall very large increase in R&D. .

That’s great. Thank you, congratulations. Powerful quarter. .

Thank you very much. .

Next question comes from Gus Richard with Northland..

Thanks for taking my question. In order to expand your market opportunity, what sort of applications use models look most promising. I think you mentioned in the call family videos were like our number one use and what sorts of products and enhancements capabilities do you need the most to exploit those opportunities. .

That’s a good question. I think the biggest opportunity is to make it easier for people, not only to capture incredible experiences, but also to manage that.

That data, that content and mass to access it using their mobile device and then giving them easy tools for creating and sharing content and that hasn’t changed since we went public, it hasn’t changed over the four years of our vision.

GoPro is focused on enabling great content and the beauty is when you pair that vision with a capture device which is versatile as a GoPro is, the range of use is limitless and we see our customers showing us new used cases and new market opportunities all the time and as you see the growing ecosystem of other companies that are developing solutions that involve a GoPro, you can see that we are able to enter new markets and succeed, thanks to our parents efforts, often independent of any dialog with GoPro.

And you have seen BMW with their new mounting options in their cars and Toyota as well and then 3D Robotics choosing to incorporate a frame mount for the HERO3, HERO3 plus and HERO4 cameras in box with their new Solo quad drone. It’s terrific to see that ecosystem growing and our market opportunity expanding as well. .

The next question is from Jeremy David with Citi..

Hi, good afternoon, thanks for taking my questions team GoPro. I wanted to ask you about China and the investments you need to make to grow the business and as you look for the next couple of years, you think China could get to 10% of your sales or even maybe more and how long would it take for you to get there. Thank you..

Hey Jeremy, great question. We are not certainly giving guidance and forecast about mix at this stage. I pretty much outline the investments we are going to make. We are going to continue to expand our retail presence, as I talked about it. China is different.

We do need to not only localize content, but you do need to make sure your heavily integrated in to the social networks, the way the young community is much more mobile moving forward and we feel really good about those investments that we are making.

So candidly, based on the those initial strong sales that we got with our initial approach, which is both in online and offline approach, which is very unique in China as many people know, with a much broader mix in terms of online commerce.

The results are good and we will continue to invest across the board, both in terms of retail, but also in the way we integrate with the social communities. .

Yes, just to add on to that, Jack here, I would say that China is really is a unique opportunity and when we look at it, there are some similarities though, feet on the street is one of them. So we are putting a lot of feet on the street, we know that we need to localize content, right.

There is a recipe for doing this stuff and we think we have a pretty good path for doing that. And frankly, there is a lot of demand for premium brands in China and we think we fit that bill pretty well. Bring a couple of this stuff together, it really makes for a good, certainly a good market opportunity for us that’s in front of us.

Last thing I’d point out is its very important that people remember that it’s not just about the online opportunity there. We actually are seeing good sell through from the POPs that we are putting in palace in China too and various retail locations.

So it’s a complex opportunity, the good news is its relatively small to date and we think that makes for some nice growth going forward. .

Thank you. .

Thanks Jeremy..

The next question is from Brad Erickson with Pacific Crest Securities..

Hi, thanks for taking my questions. Just kind of a follow on to what you were just talking about.

I mean just, how are you finding customer awareness for the sort of broader action camera category in China this far? I mean is this something you are really having to create from scratch or is it more just gaining this incremental distribution you talked about and sort of capitalizing on low hanging fruit so to speak. .

Yes great question Brad, I would first if I might I’d float an action cam. Just the type of feedback we are seeing on a global basis, I already talked about some of survey results we got back. People at GoPro are much broader based than just Action Cams.

I think in China one of the unique opportunities is frankly that people already give a feedback they will use it in a lot of different ways. So really to sort of address what you said, I think it is about executing on all the things I talked about, which is part of our strategy.

Making sure we have the right affinity, localized content and then driving the distribution. To Jack’s point, we know that folks are very focused on premium brand. We see this with other folks out there. And so we feel pretty good if we execute, and the way that I described and we continue to grow the opportunity well in China. .

Yes, and I would also add that to see the success straight out of the gates that we’ve seen in China, just validates that our content driven model works over there.

GoPro content arrived in China but before our products and so it paves the way and we know from developing momentum in the offline retail channel that it takes time and that on a sell through basis we see things ramp up slowly over time and that the sell through performance that we are seeing tells that people have been aware of GoPro for some time in China and that there was pent up demand there.

So the content driven model works and that’s encouraging. .

And just – since I guess we all have to get on this one, since we are pretty excited about the opportunity, I do want to hit the first point that Tony mentioned which was the action camera point. Please remember in the data that we provided today, it was the top five cameras and camcorders.

It wasn’t action cameras, it wasn’t camcorders and this was NPD, so this was U.S., but its top five cameras and camcorders and that’s a great accomplishment, because that’s the market that we are really going after today which we think that that creates some pretty good opportunities for us. .

Got it, that’s helpful, thank you. .

Thanks Brad..

Your last question comes from Rob Stone with Cowen and Company..

Hi guys, thanks for fitting me in. So I had a question, maybe technical/philosophical around spherical video capture.

Do you expect that’s going to continue to be based on multiple devices, or do you see a role for some of these spherical video approaches that are using a single sensor and then some kind of mirror attachment to that?.

Good question. I think that for anything to achieve mass market adoption it’s got to get easier and that’s all I’ll say about that..

Okay, well that’s just a quick answer, I’ll flip in one follow-on. The VR head gear or some other category. .

Can you say that again Rob?.

Is the VR headgear a potential GoPro accessory or is that some other category?.

That’s a good question and I just have to be again short and say that we don’t comment on potential or future product categories. .

Okay, thank you..

Thanks Rob..

Thanks Rob..

Okay. Well, thanks everybody for joining the call.

As you heard today, our investments are paying off and we continue to execute against our vision, the vision that we shared with you and as I said in my annual shareholder letter, we've never had more fun growing this business and we are very grateful for your enthusiasm and support as we take GoPro to the next level in 2015 and beyond.

On behalf of our nearly 1,100 employees, this is team GoPro signing off. .

Thank you for your participation. This concludes today’s call..