Brian McGee: Yes. So, we didn’t give guidance for the whole year just because of the macro complexity that’s going on in the market. We do expect subscribers to be up. It will be up about 100,000 in Q1. We expect to end that. We’re not going to give guidance for the year, but we do expect to have growth. I think the other thing we’ll point out is we expect to have at least $100 million of revenue from subscription and service in 2023 that will be up from about $82 million or so in 2022. So we’ll see nice revenue growth. We’ll still have a subscriber growth, and we’ll be adding to the subscriber tiers. As Nick had said, which will have a nice upsell, generate a higher subscription dollar amount and better margin. So, looking forward to that.
Unidentified Analyst: Great. Thank you. And then just as a follow-up, how would you kind of characterize the pricing environment from the December quarter? And do you expect that to continue trending into the March quarter, or how do you see that the pricing environment?
Brian McGee: Yeah. I think the pricing environment were promotional in Q4 and we’re able to come in within our numbers. I think Q1 will it’s not as promotional in Q4. That’s only the more promotional period. But the margins, we expect about 36%, plus or minus a bit, and 39% in constant currency in the first quarter. That takes into account, the pricing environment we expect in the quarter.
Unidentified Analyst: Great. Thank you.
Operator: Thank you for your question. The next question is from the line of Jim Suva with Citi. Your line is now open.
Jim Suva: Thank you. Brian and Nick, the December quarter also was pretty challenged in terms of like weather and airports and people being stuck and canceling vacations, and just getting from point A to point B. I’m wondering, if that has some impact. And also, post-COVID, now that people are starting to travel again €“ are there behaviors turning back to pre-COVID purchasing of GoPro, like when they go on big exciting trips, whether it be skiing, scuba diving or any changes in behavior? Thank you.
Brian McGee: I could, Jim. Let me start and then do you want to go, Nick, or do you want me to?
Nicholas Woodman: I’ll take the second half, take the first half.
Brian McGee: All right. On the first half, Jim, I think we saw really good travel and sales in like September, October. November as a lot of people were traveling to Europe. So our business has been really strong there. It kind of ebbed off a bit in December. I think the bigger issue, quite honestly, is the North America and the consumer followed by retail coming back on their inventory that’s had, I think, a bigger impact than necessarily travel? And then China kind of in the fourth quarter was going through ebbs and flows, with COVID. They’re trying to come out of that. But as people want to travel in China, or out of China, they’re being restricted in a number of countries. As a matter of fact, I saw flights to, I think, into Europe and UK have basically been reduced dramatically from China, just given the current COVID situation.
So, and China represents about 20% of that €“ or historically have 20% of the travel market. So that’s been an area that’s been a little bit more challenged, but the North America places, Europe places kind of propped up, I would say, from a travel perspective and use the GoPro.
Nicholas Woodman: Yeah. And on the behavioral front, we’re definitely seeing an increase usage of customers using their GoPro’s, connecting with the GoPro app since the start of COVID when travel shut down. We shared that, in 2022, we had approximately 15 million unique GoPro cameras connect to the GoPro Quik app during the year, which is great, because in 2020, that number was about $12.1 million. And we’ve seen it steadily climbing back since. So that’s really encouraging to see the correlation between people’s increased activity, increased travel and increased camera and app usage. We think we’re also benefiting from the improved overall GoPro experience and how well the camera works with the app, how your GoPro now auto uploads, your most recent footage to your GoPro cloud account while the camera is charging.
If you’re a GoPro subscriber, now you’re SD card is automatically cleared after that upload is complete, and you can now access, edit, share and enjoy your content without ever offloading to a computer or dealing with previous complexities. So we’re seeing overall improved engagement, improved user success rates. And that’s also, we believe, contributing to that 15 million active camera connects in 2022. But to your question, Jim, there’s a direct correlation between people getting out more and people getting more use of and seeing more value in their GoPros. And we’re seeing that through purchases as well. And unfortunately, that’s somewhat tempered by the macroeconomic challenges and consumer confidence as it relates to their spending, but it’s really good to see the overall GoPro community becoming more and more active as we move further and further from the pandemic.
Jim Suva: Thanks for the color. And my last question is, the equilibrium of retailers working down basically everything on their shelves, not just GoPro, but everything. But can you comment on when we’re going to hit the equilibrium for the GoPro product on the channel side, you feel?
Nicholas Woodman: Yes. I know that there’s some retailers who are hitting out of stock too, and we can see that. So they’re getting down to a point where they’re going to have to sort up the inventory balances. I think we’ll get to Q1 with our guide, and we’ll pull channel inventory down another 50,000 units. And I think at that point, we’re probably pretty darn close to the equilibrium level. So, I think, it starts to normalize in Q2.
Jim Suva: Thank you, Brian, and thank you, Nick, so much for the details.
Operator: Thank you for your question. The next question is from the line of Martin Yang with Oppenheimer. Your line is now open.
Martin Yang: Hi. Good afternoon. Thank you for taking my question. My first question is on margins. Do you expect any non-foreign exchange related headwinds to dissipate in the rest of 2023 that could potentially improve your margins?
Brian McGee: Yes. We’re — we — in our management commentary, took down what our current assumptions are for FX and we’re just holding to that. I’m not hedging one way or the other on FX and trying to provide a directional element. I can say in Q1, and I’ll repeat it, we think we’ll be at 36%, plus or minus 5, 0.05, but that equates to about 39% margins relative to 2022, actually, if you went back to 2021, it’d be even better. So margins have still been a headwind for the company at these levels.
Martin Yang: So does that imply inflation or component costs associated margin headwinds was roughly two points?
Brian McGee: Yes. I mean if we — you mean from 2021, no, it’d be more on currency to and then a little bit on the component pricing. So it’s 1% to 2%. So components have come up — that’s an area that is probably, at some point, going to come under pressure too, and you’ll start to see components coming down. I haven’t seen that yet other than maybe memory. But I think that’s some tailwind probably given the current environment as we get through look our way to 2022
Martin Yang: Got it. Thank you. My next question is about the direct-to-consumer or GoPro.com sales contribution in the fourth quarter. Usually, in the previous years, we see during the December quarter, GoPro.com have a slight dip in revenue contribution relative to previous quarters, maybe from high 30s or 40% down to mid-30s. This quarter, it was really strong. Is there any particular factors that is driving up the GoPro.com sales in 4Q?
