For the second straight year, San-Francisco-based Fitbit Inc. reported lower-than-expected annual and fourth quarter earnings, prompting CEO James Park to say that the company will "focus on managing down expenses" in 2018.
In a Feb. 26 earnings report, Fitbit reported a $3 million decrease in 2017 fourth quarter revenue to $570.8 million, as well as a drop in 2017 annual revenue from $2.17 billion to $1.62 billion year-over-year. This marks Fitbit's lowest sales year since 2014.
The company also announced it expects a revenue decrease of at least 15 percent in the first quarter of 2018, as well as only $1.5 billion in 2018 year-end revenue. Park attributed these conservative projections to limited returns on new products and shifting consumer demand to smartwatches.
“We made important progress in 2017 under rapidly changing market conditions" Park said in the report. "We delivered on our full-year guidance and drove down operating expenses while continuing to invest in innovation. ... In 2018 we’ll focus on managing down expenses, continuing to expand in the smartwatch category and supporting our engaged global community on their health and fitness journeys."
Fitbit reported 5.4 million devices sold in the fourth quarter—the first full quarter in which its new Ionic watch was available—and 15.3 million devices for the year. Year-over-year, that compares to 6.5 million and 22.3 million, respectively.
The Ionic, Alta HR and Fitbit Aria 2 and accessory Fitbit Flyer represented 31 percent of the year's revenue. In today's highly competitive wearables market, Park noted that Ionic sales were hindered because it is not a "mass appeal watch," leaving the company to reconsider its commitment to strict activity trackers.
As of Dec. 31, 2017, Fitbit claimed 25.4 million active users, a 9 percent increase year-over-year.
"While I am optimistic about our progress, there is still a lot of work to do," Park said in the report. "We expect it to be a multiyear transition process and will leverage our core assets of brand, community and data to focus on four key areas: adapting to the changing wearable device market, deepening our reach into healthcare, increasing our agility and optimizing our cost structure, and transforming our business from an episodic-driven model centered around device sales in more recurring non-device revenue."
After closing at $5.54 on Feb. 26, Fitbit shares dropped 11.5 percent to $4.90 during after-hours trading on the NASDAQ.
As part of its new commitment to healthcare, Fitbit recently announced it will acquire health coaching platform Twine Health.