Q3’17 EARNINGS DECK - s2.q4cdn.com17-Earnings-Presentation_final.pdf · Q3’17 EARNINGS DECK ... results are included under the caption “Risk Factors” in our Annual Report

Q3’17 EARNINGS DECKNovember 1, 2017

Safe Harbor StatementThis presentation contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties, including

statements regarding our financial outlook for the fourth quarter 2017 and the full year of 2017, the quality of our smartwatch user experience, expected trends in quality

improvements, gross margin and free cash flow, our investments in research and development, sales and marketing, and general and administrative and the impact of those

investments, the timing of marketing spend, our performance in the remainder of the year, and our long-term market opportunity. These forward-looking statements are only

predictions and may differ materially from actual results due to a variety of factors, including: the effects of the highly competitive market in which we operate, including

competition from much larger technology companies; our ability to anticipate and satisfy consumer preferences in a timely manner; our ability to successfully develop and timely

introduce new products and services or enhance existing products and services; retail and customer acceptance of existing and new products; any inability to accurately

forecast consumer demand and adequately manage our inventory; our ability to ship products on the timelines we anticipate and unexpected delays; our ability to detect,

prevent or fix quality issues in our products or services; uncertain ability to retain employees; our reliance on third-party suppliers, contract manufacturers, and logistics

providers, and our limited control over such parties; delays in procuring components and product from these third parties or their suppliers; the ability of third parties to

successfully manufacture and ship in a timely manner quality products; seasonality; product liability issues, security breaches or other defects, which may adversely affect

product performance, our reputation and brand awareness and overall market acceptance of our products and services; ability to integrate acquired technologies and

employees into our operations, particularly in new geographies; warranty claims; the fact that the market for connected health and fitness devices is relatively new and

unproven; the ability of our channel partners to sell our products; litigation and related costs; privacy; and other general market, political, economic and business conditions.

Additional risks and uncertainties that could affect our financial results are included under the caption “Risk Factors” in our Annual Report on Form 10-K for the full year ended

December 31, 2016, and our most recently filed Quarterly Report on Form 10-Q, which are available on our Investor Relations website at investor.fitbit.com and on the SEC

website at www.sec.gov. All forward-looking statements contained herein are based on information available to us as of the date hereof and we do not assume any obligation to

update these statements as a result of new information or future events. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking

statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future

acquisitions, mergers, dispositions, joint ventures, or investments we may make.

This presentation also includes certain financial measures that are not calculated in accordance with U.S. generally accepted accounting principles, or GAAP. These non-GAAP

financial measures are in addition to, and not as a substitute for or superior to measures of financial performance prepared in accordance with GAAP. There are a number of

limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. For example, other companies may calculate non-GAAP financial

measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for

comparison. We have provided a reconciliation of those measures to the most directly comparable GAAP measures, which is available in the appendix.

Trademarks: Fitbit and the Fitbit logo are trademarks or registered trademarks of Fitbit, Inc. in the United States and other countries. Additional Fitbit trademarks can be found at

www.fitbit.com/legal/trademark-list. Third-party trademarks are the property of their respective owners.

2

investor.fitbit.com

http://www.sec.gov/

http://www.fitbit.com/legal/trademark-list

©2017 Fitbit, Inc. All rights reserved. Proprietary & Confidential.

Fitbit’s Vision:

To Make Everyone in the

World Healthier.

3

©2017 Fitbit, Inc. All rights reserved. Proprietary & Confidential.4

Wearable

Brand

Globally

#1Devices

Sold to Date70MWIDE RANGE of

devices and price pointsStores46K

Countries78Health & Fitness

app on iOS

and Android

(U.S.)

Best customer

reviews of any

Fitbit device in

1st month of

sales

(Amazon)

Ionic“Smartwatches”

sold on

Amazon in the

U.S.

#1#1/#2

hours of heart rate data

90B

One of the Largest Activity, Exercise, and Sleep Databases

nightsof sleep

5.4B

steps

85T

167Bminutes of exercisetracked

5

Diabetes

Heart Disease

Sleep Apnea

Get More Active & Fit

Sleep Better

Reduce Stress

Research Focus on Outcomes and Conditions

Wellness Health

Mental Health

Eat Better / Manage Weight

6

Track your health

and wellness with

easy to use hardware

Use data along with

compelling content to provide

insights and guidance

Reward and motivate

people with gamified

features and a

supportive social network

How We Drive Positive Outcomes

7

Q3 2017 Highlights

• 3.6 million devices sold, #1 Health & Fitness app downloaded on iOs and Android (U.S.)

• Launched Ionic, entering the smartwatch category, entered adjacent wireless headphone market with the launch of Flyer, announced refreshed scale.

• Average selling price up 4% and devices sold up 7% sequentially. Delivered on revenue guidance, beat earnings and adjusted ebitdaguidance.

• Revenue of $393 million, non–GAAP EPS of ($0.01) per share. Adjusted ebitda of $6 million.

• Cash flow from operations $5M, $659 million in cash, cash equivalents, and marketable securities on the balance sheet as of the quarter end.

8

Growing User Community & Brand Relevancy

• Devices sold grew 7% sequentially.

• Leading global wearable brand with 70 million devices sold

since inception.

• Since March 2017 launch: more than 15 million users have

utilized Feed, generating ~1.1 billion views, and 3.7 million

Group joins.

• Supportive environment: 71% of posts receive

positive affirmations.

• Re-branded Fitstar, launched Fitbit Coach personal

training app, featuring more than 90 video and audio

workouts. While still immaterial, premium customer

growth up 75% y/y.

60

0

10

20

30

40

50

60

70

80

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Total Devices Sold

(Units in millions)

70

2014 2015 2016 2017

9

Revenue

($ in millions)

• Revenue down 22% y/y.

- Difficult year over year comparison with 2 new

products introduced in ‘16 and excess inventory in the

channel vs. 1 device launched in ’17.

- EMEA continued to be the fastest growing region, up

10% y/y.

• Average selling price increased 12% y/y and 4%

sequentially to $104.72.

• Accessory and other sales added an additional $3.60 in

revenue per device.

• New products introduced over the past 12 months

represented 32% of the revenue.

-Charge 2 remains our best selling product.

-Focused on manufacturing quality & measured

roll-out of Ionic devices. To be on shelf for

holiday.

• Repeat consumers represented 42% of activations in the

quarter, with 39% of these repeat purchases coming from

reactivations.

10

$503.8

$392.5

Q3 2016 Q3 2017

- 22%

$20.8 $21.1

$34.4

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

Q1 2017 Q2 2017 Q3 2017

APAC

$87.8

$108.6

$88.7

Q1 2017 Q2 2017 Q3 2017

EMEA

$20.0

$24.4 $25.3

$10

$20

$30

Q1 2017 Q2 2017 Q3 2017

Americas, excl. USA

Transitioning Business – Sequential Growth Improving

($ in millions) 11

• Revenue growth up 11% sequentially.

• Clean channel, U.S. market showing sequential

acceleration in revenue growth and representing 62% of

revenue to $244M.

• International revenue was $148 million, representing 38%

of revenue.

• APAC continued its turnaround with strong contribution

from markets like Japan. New enterprise customer Fujitsu.

• EMEA sequential growth impacted by weakness in U.K.

partially offset by strong growth in Germany.

• Driven by the strength in the Euro, we experienced a loss

of $6 million dollars on our hedging portfolio in Q3,

impacting our y/y international growth by 4 points.

$170.4

$199.2

$244.2

$50

$100

$150

$200

$250

Q1 2017 Q2 2017 Q3 2017

United States

+23%

-18%

+63%

+4%

Non-GAAP Gross Margin and Operating Expenses

• Decreased 290bpts y/y driven by 2 discrete items.

- Extended warranty terms in some countries

- Changed replacement policy for legacy device.

• Increased 220bpts sequentially; favorably impacted by mix, higher ASP.

• On-track to achieve targeted 42.5-44% FY2017 gross margin.

• Defective parts per million down 36% in past 9 mo. Expect to trend lower.

($ in millions)

• Up 5% y/y, driven by bankruptcy filing of largest distributor.

• Tracking below full-year $850m operating expense target.

• Headcount increased by 67 heads to 1,652; have empowered teams to

focus on overall costs. Expect to continue to grow global footprint.

12

48.1%45.2%

Q3 2016 Q3 2017

Non-GAAP Gross Margin

$171.1

$180.0

Q3 2016 Q3 2017

+5%

Non-GAAP OpEx

(290bpts)

Non-GAAP Operating Expenses Detail

• Continued investment in

innovation.

• Increased headcount spending

offset by expansion in lower cost

global regions to support

international growth.

• Some spend shifted to Q4, aligned with

the availability of Ionic supply.

• Continued shift towards digital and

direct consumer solicitation.

• Increase primarily driven by Wynit

bankruptcy filing. Resulted in a one

time increase of bad debt expense by

~$8 million.

($ in millions) 13

$76.8 $73.9

0

25

50

75

100

Q3 2016 Q3 2017

S&M

$70.7 $71.2

$0

$25

$50

$75

$100

Q3 2016 Q3 2017

R&D

$23.6

$35.0

0

25

50

75

100

Q3 2016 Q3 2017

G&A

+1% -4%

+48%

Balance Sheet & Cash Flow

Inventory $215.0 $230.4 $200.3 $141.5 $138.8

Inventory Turns 5.2 8.0 3.4 4.8 6.3

Accounts Receivables $461.4 $477.8 $194.8 $216.3 $261.0

Days Sales Outstanding 86 85 71 74 67

Capital Expenditures $30.1 $11.8 $28.2 $11.7 $18.4

Cap Expenditures as % of

Revenue6.0% 2.1% 9.4% 3.3% 4.9%

Free Cash Flow ($88.8) $61.2 $21.0 ($57.6) ($12.9)

Cash & Marketable Securities $672.1 $706.0 $726.1 $675.8 $659.2

• Good working capital management led to a decrease in cash consumption in the quarter. Exited the quarter with $659M in cash and short-term assets and no debt, giving us significant balance sheet flexibility.

• A/R increased due to increased sales. Other current assets increased to $96M to reflect anticipated cash refunds related to taxes paid in prior years.

Q3’16 Q4’16 Q1’17

($ in millions) 14

Q2’17 Q3’17

($ in millions, except percentages and per share amounts)

4Q’17 Guidance

Guidance Context:

• Shifted some Ionic Sales & Marketing spend from Q3 to align

with availability of supply.

• Expect Q4 free cash flow to be breakeven.

15

Revenue $570 $600

y/y decline (1%) 5%

Non-GAAP EPS ($0.03) $0.01

Adjusted ebitda ($1M) $18M

Non-GAAP tax rate ~44%

Stock-based compensation $23 $25

Non-GAAP share count (basic/ diluted) ~238M ~252M

Low High

FY ’17 Guidance

($ in millions, except percentages and per share amounts)

FY’17 Guidance

Revenue $1.615B $1.645B

y/y decline (26%) (24%)

Non-GAAP gross margin 42.5% 44%

Non-GAAP free cash flow ($50) ($30)

Non-GAAP EPS ($0.27) ($0.23)

Non-GAAP tax rate ~44%

Stock-based compensation $90 $100

Non-GAAP share count (basic) ~238M

Low High

16

Guidance Context:

• Changed approach to new product shipments, focused on

reducing defective parts per million vs. maximizing supply.

• Improvement to DPPM will reduce warranty cost, lower

customer contact expense, and strengthen brand

preference though higher levels of customer satisfaction.

GAAP to Non-GAAP Reconciliation

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP

financial measures in this presentation: non-GAAP gross profit, non-GAAP gross margin; non-GAAP operating expenses, non-GAAP net income (loss),

non-GAAP diluted net income or loss per share, adjusted EBITDA, revenue on a constant currency basis, and non-GAAP free cash flow. The presentation

of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented

in accordance with GAAP.

We use non-GAAP measures to internally evaluate and analyze financial results. We believe these non-GAAP financial measures provide investors with

useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain

items may vary independent of business performance, and enable comparison of our financial results with other public companies, many of which present

similar non-GAAP financial measures.

There are limitations associated with the use of non-GAAP financial measures as an analytical tool. In particular, many of the adjustments to our GAAP

financial measures reflect the exclusion of items, specifically stock-based compensation expense, amortization of intangible assets, and the related

income tax effects of the aforementioned exclusions, that are recurring and will be reflected in our financial results for the foreseeable future. In addition,

these measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes. A

reconciliation of our non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables

included in this presentation, and investors are encouraged to review the reconciliation.

Guidance for non-GAAP financial measures excludes Jawbone litigation costs, stock-based compensation, impact of restructuring, amortization of

acquired intangible assets, and tax effects associated with these items. We have not reconciled guidance for non-GAAP financial measures to their most

directly comparable GAAP measures because certain items that impact these measures are uncertain, out of our control and/or cannot be reasonably

predicted. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measures is not available without

unreasonable effort.

17


The following are explanations of the adjustments that are reflected in one or more of our non-GAAP financial measures:

• Stock-based compensation expense relates to equity awards granted primarily to our employees. We exclude stock-based compensation expense

because we believe that the non-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational

performance. In particular, companies calculate stock-based compensation expense using a variety of valuation methodologies and subjective

assumptions.

• In January 2017, the Company conducted a reorganization of its business, including a reduction in workforce. The restructuring costs impacted our

results for the first quarter of 2017. Restructuring costs primarily included severance-related costs. We believe that excluding the is expenses

provides great visibility to the underlying performance of our business operations, facilitates comparison of our results with other periods, and may

also facilitate comparison with the results of other companies in our industry.

• Litigation expense relates to legal costs incurred due to litigation with Aliphcom, Inc. d/b/a Jawbone. We exclude these expenses because we do not

believe these expenses have a direct correlation to the operations of our business and because of the singular nature of the claims underlying the

Jawbone litigation matters. We began excluding Jawbone litigation costs in the second quarter of 2016 as these costs significantly in 2016, and may

continue to be material for the remainder of 2017. Although not excluded in reporting for the first quarter of 2016, these litigation expenses were $9.1

million in that quarter.

18


The following are explanations of the adjustments that are reflected in one or more of our non-GAAP financial measures:

• In March 2014, we recalled the Fitbit Force after some of our users experienced allergic reactions to adhesives in the wristband. This recall primarily

impacted our results for the fourth quarter of 2013, the first quarter of 2014 and the fourth quarter of 2015.

• Amortization of intangible assets relates to our acquisitions of FitStar, Pebble and Vector. We exclude these amortization expenses because we do not

believe these expenses have a direct correlation to the operation of our business.

• Income tax effect of non-GAAP adjustments relates to the tax effect of the adjustments that we incorporate into non-GAAP financial measures such as

stock-based compensation, amortization of intangibles, restructuring and valuation allowance in order to provide a more meaningful measure of non-

GAAP net income (loss).

• Purchase of property and equipment is deducted from net cash provided by (used in) operating activities to arrive at non-GAAP free cash flow, which

reflects the amount of cash generated that is available to be used for investments in the business.

• We translated revenue from non-US dollar based transactions for the three and nine months ended September 30, 2017 using the exchange rates that

were effective in the comparable prior year period to calculate revenue to exclude the effect of changes in foreign exchange rates.

19


GAAP to Non-GAAP Reconciliation(In thousands, except percentages and per share amounts)

GAAP gross profit

20

Three Months Ended Nine Months Ended

September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016

Non-GAAP gross profit:

GAAP gross profit $ 174,760 $ 240,658 $ 442,304 $ 719,382

Stock-based compensation expense 1,379 1,014 2,889 3,407

Impact of restructuring — — 37 —

Intangible assets amortization 1,319 451 3,957 1,354

Non-GAAP gross profit $ 177,458 $ 242,123 $ 449,187 $ 724,143

Non-GAAP gross margin:

GAAP gross margin 44.5% 47.8% 42.3% 45.1%

Stock-based compensation expense 0.4 0.2 0.3 0.2

Impact of restructuring — — — —

Intangible assets amortization 0.3 0.1 0.4 0.1

Non-GAAP gross margin 45.2% 48.1% 43.0% 45.4%



21



Non-GAAP research and development:

GAAP research and development $ 84,170 $ 82,972 $ 252,471 $ 235,129

Stock-based compensation expense (12,947) (12,314) (39,939) (34,432)

Impact of restructuring — — (2,744) —

Non-GAAP research and development $ 71,223 $ 70,658 $ 209,788 $ 200,697

Non-GAAP sales and marketing:

GAAP sales and marketing $ 77,536 $ 79,872 $ 269,442 $ 305,061



Non-GAAP sales and marketing $ 73,857 $ 76,842 $ 256,528 $ 296,569

Non-GAAP general and administrative:

GAAP general and administrative $ 40,690 $ 33,333 $ 102,815 $ 106,297



Litigation expense - Jawbone (874) (6,062) (2,293) (17,620)

Intangible assets amortization (62) (61) (177) (224)

Non-GAAP general and administrative $ 34,962 $ 23,563 $ 85,965 $ 76,609



22



Non-GAAP operating expenses:

GAAP operating expenses $ 202,396 $ 196,177 $ 624,728 $ 646,487



Litigation expense - Jawbone (874) (6,062) (2,293) (17,620)

Intangible assets amortization (62) (61) (177) (224)

Non-GAAP operating expenses $ 180,042 $ 171,063 $ 552,281 $ 573,875



23



Non-GAAP net income (loss) and net income (loss) per share:

Net income (loss) $ (113,403) $ 26,120 $ (231,722) $ 43,496


Impact of restructuring — — 6,375 —

Litigation expense - Jawbone 874 6,062 2,293 17,620

Intangible assets amortization 1,381 512 4,134 1,578

Income tax effect of non-GAAP adjustments 85,574 (6,955) 95,909 (21,081)

Non-GAAP net income (loss) $ (2,777) $ 45,744 $ (56,483) $ 99,788

GAAP diluted shares 234,242 243,687 230,918 242,652

Other dilutive equity awards — — — —

Non-GAAP diluted shares 234,242 243,687 230,918 242,652

Non-GAAP diluted net income (loss) per share $ (0.01) $ 0.19 $ (0.24) $ 0.41



24



Non-GAAP Free cash flow: (1)

Net cash provided by (used in) operating activities $ 5,489 $ (58,709) $ 8,718 $ 65,718

Purchase of property and equipment (18,380) (30,053) (58,199) (66,798)

Non-GAAP free cash flow $ (12,891) $ (98,029) $ (49,481) $ (1,080)

Net cash used in investing activities $ (40,366) $ (74,863) $ (32,913) $ (330,870)

Net cash provided by financing activities $ (3,084) $ 1,728 $ 3,089 $ 13,852

(1) - The Company's adoption of ASU 2016-09 on January 1, 2017 resulted in excess tax benefits for share-based payments recorded as a reduction of income tax expense and reflected within operating cash flows, rather than recorded within equity and reflected within financing cash flows. The Company elected to adopt this new standard retrospectively, which impacted the presentation for all periods prior to the adoption date.



25



26



Adjusted EBITDA:

Net income (loss) $ (113,403) $ 26,120 $ (231,722) $ 43,496


Impact of restructuring — — 6,375 —

Litigation expense - Jawbone 874 6,062 2,293 17,620

Depreciation and intangible assets amortization 10,520 11,275 32,472 25,461

Interest income, net (1,162) (970) (2,451) (2,391)

Income tax expense 86,227 18,294 51,883 31,858

Adjusted EBITDA $ 5,853 $ 80,786 $ (74,622) $ 174,219

THANK YOU

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Q3’17 EARNINGS DECK - s2.q4cdn.com17-Earnings-Presentation_final.pdf · Q3’17 EARNINGS DECK ... results are included under the caption “Risk Factors” in our Annual Report