With a focus on employee health, Fitbit reported a 10% year-over-year increase in revenue this past quarter, coming in at $272 million. This quarterly uptick in revenue is part of an upward trend for the wearable company that was once spiraling in losses.
While smartwatches and trackers remained the bulk of the wearable company’s business, its Health Solutions program, a service catering to employers and payers, continues to see significant revenue growth.
In fact, this segment saw a 70% revenue growth up to $30.5 million. However, CEO James Park noted on the company's earnings call that this business is front-end heavy because of the enrollment cycle, unlike consumer device sales, which tends to be back-end heavy.
In January, Fitbit launched a new pair of wearable activity trackers exclusively sold through Fitbit Health Solutions. The first device, called the Fitbit Inspire, includes sleep tracking, call, text and calendar alerts, and a calories burned meter. The second, the Fitbit Inspire HR, includes the functionalities of the former but also includes a heart rate monitor, sleep stage monitoring and pace tracking.
Park remarked that this business is primarily device-centric but is growing its Fitbit Care software service platform that is aimed at helping people change behaviors.
During the call Park discussed the opportunities in the payer market, specifically naming the CMS programs.
“So, right now our revenue for our healthcare business is predominantly devices,” Park said in the call. “And our strategy there has been really about trying to increase the affordability of those devices and you saw that with Inspire and Inspire HR. And that drive towards affordability as I mentioned before has allowed employers and health plans to heavily or fully subsidize these devices to their employees with their health plan members including our win in a lot of the Medicare Advantage plans in the space.”
Additionally, the company’s bet on smartwatches continued to pay off, accounting for 42% of its total revenue, up from 30% year over year. Park attributed much of this device growth to new products on the market.
“The 36% growth of devices sold was driven in part by the launch of our new products, Inspire HR, Inspire and Fitbit Versa Lite,” Park said in the called. “Trackers have always been key to our portfolio and we continue to see a clear segment of users who prefer this form factor.”
WHY IT MATTERS
The earnings report shows an upward trend in Fitbit’s earning calls. The fourth quarter of 2018 Park announced the company’s first year-over-year increase in sold devices since 2016. In fact, overall 2018 marked a positive turn of events for the company that was struggling for several years.
It’s clear Fitbit has been investing in the payer market recently. This earnings call gives some context to the wearable giant's moves. It heavily bolstered its Fitbit Health Solutions business last year with the acquisition of Twine Health.
The company announced a new deal involving Solera Health’s integrated digital diabetes prevention plans in March.
Additionally, over the last few years Fitbit has inked a number of partnerships with high-profile plans and payers including Blue Cross Blue Shield, Humana and UnitedHealthcare. However, it’s also seeing competition from other device makers sensing an open market — just last week saw news of Apple’s negotiations with private Medicare plans to subsidize the cost of Apple Watches.