Fitbit Inc (FIT) has reported a 43.01 percent plunge in profit for the quarter ended Oct. 01, 2016. The company has earned $26.12 million, or $0.11 a share in the quarter, compared with $45.83 million, or $0.19 a share for the same period last year. On the other hand, adjusted net income for the quarter stood at $45.74 million, or $0.19 a share compared with $59.22 million or $0.24 a share, a year ago.
Revenue during the quarter grew 23.10 percent to $503.80 million from $409.26 million in the previous year period. Gross margin for the quarter contracted 13 basis points over the previous year period to 47.77 percent. Total expenses were 91.17 percent of quarterly revenues, up from 83.55 percent for the same period last year. That has resulted in a contraction of 762 basis points in operating margin to 8.83 percent.
Operating income for the quarter was $44.48 million, compared with $67.31 million in the previous year period.
However, the adjusted operating income for the quarter stood at $71.06 million compared to $80.88 million in the prior year period. At the same time, adjusted operating margin contracted 566 basis points in the quarter to 14.10 percent from 19.76 percent in the last year period.
"I am pleased to see positive reception for our new products launched in the third quarter. We are attracting new customers while our existing ones are upgrading their devices, underscoring the strength of the Fitbit brand and growing relevancy of wearables as part of consumers’ everyday lives," said James Park, Fitbit co-founder and CEO. "We continue to grow and are profitable, however not at the pace previously expected. We are focused on improving the utility of our products and integrating more deeply into the healthcare ecosystem and believe we can leverage our brand and community to unlock new avenues and adjacencies of growth."
For financial year 2016, Fitbit Inc expects revenue to be in the range of $2,320 million to $2,345 million. The company projects diluted earnings per share to be in the range of $0.55 to $0.59 on adjusted basis.
For the fourth-quarter, Fitbit Inc expects revenue to be in the range of $725 million to $750 million. On an adjusted basis, the company projects diluted earnings per share to be in the range of $0.14 to $0.18.
Working capital increases sharply
Fitbit Inc has recorded an increase in the working capital over the last year. It stood at $915.39 million as at Oct. 01, 2016, up 28.05 percent or $200.52 million from $714.87 million on Sep. 30, 2015. Current ratio was at 2.76 as on Oct. 01, 2016, up from 2.56 on Sep. 30, 2015.
Cash conversion cycle (CCC) has decreased to 24 days for the quarter from 45 days for the last year period. Days sales outstanding went up to 64 days for the quarter compared with 56 days for the same period last year.
Days inventory outstanding has decreased to 37 days for the quarter compared with 100 days for the previous year period. At the same time, days payable outstanding went down to 77 days for the quarter from 111 for the same period last year.
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