Fitbit’s year-over-year device sales flatlined in Q3 2019, which combined with lower sales tag prices drove a decline in revenue, according to the wearables maker’s latest quarterly earnings.
The reporting — which was bereft of an investor’s call, Q&A and any forward-looking statements due to the company’s pending acquisition — is the latest look at a wearables business Google apparently values at $2.1 billion.
Many of the results this quarter were in line with the performance trends Fitbit has been signaling as of late. The company sold 3.5 million devices during Q3 2019, an amount that, while roughly on par with last year’s Q3, does bring calendar year 2019 device sales to a higher total of 10 million (compared to 8.4 million recorded at the same time last year).
However, revenue during Q3 dropped 12% year over year to $347.2 million, mirroring a 12% decrease in device pricing. This weakened the company’s margins and contributed to a net loss of $51.9 million for the quarter (from $2.1 million last year).
Still, the company highlighted specific business units and trends that appear to be at least somewhat on the up and up. Smartwatch revenue increased year over year to comprise 58% of Fitbit’s total revenue, whereas tracker revenue was down to 39% of the total, due to no new tracker devices shipping this quarter.
Fitbit Health Solutions — the enterprise health monitoring unit born of 2018’s Twine Health acquisition — continues to gain steam, bringing in $73 million in revenue during the quarter (up 31% year over year). Direct business with consumers via Fitbit.com was up 23% to $27 million in revenue, while the company’s total active users grew 9% over Q3 2018.
ON THE RECORD
“In Q3 we continued to make good progress shifting our business towards the faster growing smartwatch category with the introduction of Versa 2, expanding Fitbit Health Solutions, and deepening our relationship with consumers with the launch of Premium,” James Park, cofounder and CEO of Fitbit, said in a statement.
“The continued success of the Fitbit brand is built on the trust of our users, and our commitment to strong user privacy and security will not change. I’m excited about the combination of Fitbit and Google and look forward to closing the transaction and further advancing our vision and mission, accelerating innovation in the category and ultimately helping more people around the world get healthier.”
Fitbit's latest numbers are an extension of last quarter’s results, which also noted greater overall device sales and total revenue, but below expectation sales of the Versa Lite smartwatch released early in the year. Of note, however, was a new revenue stream launched by the company in late August called Fitbit Premium, a subscription service that logs users’ daily activities to fuel data-driven insights and coaching.
Of course, all eyes are on Fitbit’s upcoming move into the Google family, a shift that the companies have indicated will likely yield new “Made by Google” hardware bearing Fitbit’s DNA. And while there’s plenty of room to speculate on how the tech giant could utilize Fitbit’s tech, data and brand name, the company did highlight a few longer-term efforts in its latest earnings report. These include partnerships with Fibricheck and Bristol-Myers Squibb Pfizer Alliance targeting chronic disease detection and monitoring, and the expansion from 42 to 59 Medicare Advantage plans in which Fitbit devices will be fully covered in 2020.
THE LARGER TREND
Apple’s more comprehensive and increasingly healthcare-focused smartwatches continue to hold the top spot among consumers. With other device makers such as Garmin and Samsung continuing to vie for their own slice of the hardware market, only time will tell whether the consolidation of Fitbit's and Google's strengths will inflate the former’s business.