FY FY 20 2016 16 Ear Earning nings s Dec Deck February 22, - PowerPoint PPT Presentation

FY FY 20 2016 16 Ear Earning nings s Dec Deck February 22, 2017 1

Safe Harbor Statement This 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 first quarter 2017 and the full year of 2017, long term targets for operating expenses and gross margin, cash collections post holiday, anticipated tax liability, our investments in research and development, sales and marketing, and general and administrative and the impact of those investments, the potential for new and repeat customers to purchase our devices and the potential for future growth in the connected health and fitness market and adjacent markets. 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; 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; quarterly and seasonal fluctuations; 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; 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; 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; 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 o ur Annual Report on Form 10-K for the full year ended December 31, 2015 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. Additional information will also be set forth in our Annual Report on Form 10-K for the full year ended December 31, 2016. 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 US 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

Fitbit helps people lead healthier, more active lives by empowering them with data, inspiration, and guidance to reach their goals. 3

Full Full Year ear 2016 2016 Hi Highli ghlights ghts • 22.3 million units sold, leader in connected health and fitness devices. • Engaged, growing user base: – 23.2 million active users, up 37% y/y. – 50.2 million registered device users, up 70% y/y. • Launched 4 new products, including the #1 selling connected health and fitness device.* • Revenue grew 17% y/y to $2.2 billion. • Adjusted EBITDA of $30 million, non-GAAP EPS of ($0.12) per share. • $706 million in cash, cash equivalents, & marketable securities on the balance sheet as of year end. *Source: The NPD Group, Inc., Retail Tracking Service, Health & Fitness Trackers, Smart Watches, October – December 2016, Based on Units. 4

Q4 Q4 2016 2016 Summar Summary y • Revenue declined 19% y/y to $574 million. – Negatively impacted by $42 million in rebates and seller promotions. – Negatively impacted by $41 million increase in return reserve. • 6.5 million units sold. • Adjusted EBITDA of ($144) million, non-GAAP EPS of ($.56) per share. – Negatively impacted by $17 million increase in warranty reserves. – Negatively impacted by one-time charge of $78 million write down of tooling & component inventory. • Direct channel < 10% of sales, but grew 45% in Q4; Total U.S. sell-through better than sell-in, down marginally in dollars* including direct channel. *Source: Fitbit 5

Gr Growing wing Br Bran and d Rele eleva vanc ncy • Leader in connected health and fitness with Total Devices Sold 60.6 million devices sold since inception. 70 60.6 60 • New products Alta TM , Fitbit Blaze TM , Fitbit Charge 2 TM and Fitbit Flex 2 TM comprised 50 96% of revenue in Q4. 40 • Prophet Brand Relevance Index’s largest 30 gainer, up 230 spots to #29. Scored high trust, dependability, and purpose. 20 10 • Ranked #15 in the IPG D100 Index. 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015 2016 (Units in millions) 6

Gr Growing wing Use User r Commu Community nity • 46% of all registered device users since 70.0 inception were active in Q4. 60.6 60.0 50.2 • 26% of activations in 2016 came from repeat 50.0 customers, of which 20% came from 38.3 customers that reactivated. 40.0 29.0 30.0 Added 1.2m new Fitstar TM downloads since • 23.2 January, a positive indicator that deeper 16.9 16.9 20.0 insights and coaching have strong appeal. 11.0 6.7 10.0 0.0 2014 2015 2016 Active Users Registered Device Users Devices Sold* (in millions) *Cumulative Since Inception 7

Reven enue ue • 2016 devices sold up 4% y/y. 2016 Revenue Growth • Average selling price increased 10% in 2016 to $2,169.5 $94. • Accessory sales added an additional $3.36 in revenue per unit to $75 million, up 118% y/y. +17% • New product introductions represented 70% of full year revenue. • Q4 average revenue per device including $1,858.0 accessories was $88, up 2% y/y, but down from $95 in Q3. Revenue per device negatively impacted by increased rebate and channel promotions. On a normalized basis, average revenue per device was ~flat sequentially. 2015 2016 ( $ in millions ) 8

Non-GAAP Non GAAP Gr Gros oss s Mar Margin gin • Full-year gross margin down 9pts to 39.3%. 2016 Non-GAAP Gross Margin – Q4 one-time charge to write down tooling and 50% excessive inventory (3.6pts). 48.0% – Q4 rebate/channel pricing promotions (1.9pts) to -3.6% 40% -1.9% 40.0% clear excessive inventory, partially offset by 39.3% 0.7% -3.9% favorable negotiations with contract manufacturer. 30% – Full year increase in warranty costs due to quality issues primarily associated with legacy products 20% (3.9pts). • Long term gross margin target reduced to ~45% 10% – Q4 highlighted significant elasticity in demand. – Focus on maintaining leadership position in 0% wearables and expanding community of users. 9

2016 Non-GAAP 2016 No GAAP Oper Operating Expens ting Expense ($ in millions) R&D S&M G&A $479.7 +47% $325.3 $273.0 +107% $131.8 $105.9 +48% $71.3 FY15 FY16 FY15 FY16 FY15 FY16 • 2016 R&D expense 13% of revenue, up 6pts y/y. • 2016 S&M expense 22% of revenue, up 4pts y/y. • 2016 G&A expense 5% of revenue, up 1pt y/y. • R&D 61% of headcount, 2/3 software oriented. • S&M 32% of revenue in Q4, committed much of • Excludes $25m of Jawbone litigation expense. • Acquired engineering talent and center of • Long term target ~3-4%. spend in Q3 prior to reduction in outlook. • Long term target ~15%. excellence in low cost region. • Long term target ~10%. • Operating expenses totaled 49.6% of revenue in Q4, up 24%. • Operating expenses totaled 39.6% of revenue in 2016, up 62%. 10 10