Q2 EARNINGS DECK...Q2 EARNINGS DECK July 2019 Safe Harbor Statement This presentation contains...

©2019 Fitbit, Inc. All rights reserved.

Q2 EARNINGS DECKJuly 2019

Safe Harbor StatementThis presentation contains forward-looking statements that involve risks and uncertainties, including statements regarding our outlook for the third quarter of 2019 and full year2019 and all underlying assumptions; expected growth in our Fitbit Health Solutions channel and revenue; trends in revenue, devices sold, device mix, average selling price,active users, non-GAAP net loss per share, capital expenditures, adjusted EBITDA, non-GAAP effective tax rate, stock-based compensation expense, basic/diluted share count,non-GAAP gross margins, non-GAAP operating expenses, free cash flow, promotional activity, E&O costs and returns; and all other statements that are not historical facts.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 competitivemarket in which we operate, including competition from much larger technology companies; our ability to anticipate and satisfy consumer preferences in a timely and cost-effective manner; our ability to successfully develop, timely introduce, and achieve retail and customer acceptance of new products and services, or enhance existing productsand services, including software and subscription services; our ability to accurately forecast consumer demand and adequately manage our inventory; our ability to shipproducts on the timelines we anticipate and avoid unexpected delays; our ability to detect, prevent or fix quality issues in our products and services; our ability to attract andretain employees; our reliance on third-party suppliers, contract manufacturers, and logistics providers and our limited control over such parties; delays in procuringcomponents and product from third parties or their suppliers; the ability of third parties to successfully manufacture and ship quality products in a timely manner; seasonality ofdemand; the concentrated nature of our retailer and distributor base; product liability issues, security breaches or other defects that may adversely affect product performanceand overall market acceptance of our products and services; our ability to integrate acquired technologies and employees of acquired businesses into our operations,particularly in new geographies; warranty claims; the relatively new and unproven market for trackers and wearable devices; the ability of our channel partners to sell ourproducts; litigation and related costs; the impact of privacy and data security laws; changes in tax laws; the impact of tariffs; and other general market, political, economic andbusiness 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 endedDecember 31, 2018 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 theSecurities and Exchange Commission (SEC) website at www.sec.gov. Once filed with the SEC, additional information will be set forth in our Quarterly Report on Form 10-Q forthe quarter ended June 29, 2019. All forward-looking statements are based on information available to us as of the date hereof, and we do not assume any obligation toupdate 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-lookingstatements and you should not place undue reliance on such 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-GAAPfinancial measures are in addition to, and not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. There are a number oflimitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. For example, other companies may calculate non-GAAP financialmeasures 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 forcomparison. We have provided a reconciliation of non-GAAP 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 foundat www.fitbit.com/legal/trademark-list. Third-party trademarks are the property of their respective owners.

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http://www.sec.gov/

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

Fitbit’s Vision:To Make Everyone in the

World Healthier.

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

Diabetes

Heart Health

Sleep Apnea

Manage Weight

Get More Active & Fit

Sleep Better

Reduce Stress

Focus on Outcomes and Conditions

Wellness Health

Across All Ages

Mental Health

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• Revenue grew 5% y/y to $314 million, non-GAAP net loss per share of $(0.14).

• Devices sold increased 31% y/y. Average selling price declined 19% y/y to $86 per device due to the introduction of more affordable devices.

• Adjusted EBITDA of $(31) million.

• Non-GAAP gross margin decreased 530 basis points y/y to 35.6% driven by lower warranty benefit and reduction in average selling price, partially offset by improved yield loss and efficiencies.

• Non-GAAP operating expenses decreased 18% y/y to $160 million.

• $565 million in cash, cash equivalents, and marketable securities on the balance sheet as of the quarter end.

Financial Highlights

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Business Highlights

• Tracker revenue increased 51% y/y and grew to 59% of total revenue.

• Smartwatch revenue decreased 27% y/y and declined to 38% of total revenue driven by weaker than expected Versa Lite sales.

• 41% of activations came from repeat users in Q2. Of the repeat users, 53% came from users who were previously inactive for 90 days or more.

• New products introduced in the last 12 months represented 68% of revenue vs. 59% a year ago.

• Fitbit Health Solutions (FHS) revenue grew 16% to $24 million in Q2 and was $54 million in H1’19. On-track to deliver ~$100M FY19 revenue goal.

• Sales from Fitbit.com, our direct channel, was $33 million.

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• Revenue up 5% y/y.

• Devices sold up 31% y/y.

• New products introduced in the last 12 months represented 68% of revenue in Q2’19.

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Revenue Trends

$299

$394

$571

$272

$314

-15%

0% 0%

10%

5%

-0.2

-0.15

-0.1

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$0

$100

$200

$300

$400

$500

$600

Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

Chart Title

Revenue Revenue Growth y/y

($ in millions)

• Q2’19 total devices sold grew 31% y/y.

• ASP declined 19% to $86 driven by the introduction of more affordable devices.

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44%

51%

57%57% 61%

56%

49%43%

43% 39%

-20%

-2% 3%

36%

31%

-0.3

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0%

Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019

% Tracker % Smartwatch Growth in Devices Sold y/y

(Columns as a % of total revenue)

Growing Devices Sold Year-over-Year

• FHS revenue grew 16% to $24 million, driven by strength overseas. Delivered $54 million in revenue in H1’19.

• FHS revenue on-track to FY19 revenue goal of ~$100 million.

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$74.4

$80.6

$100.0

$0

$20

$40

$60

$80

$100

2017 2018 2019 Forecast

Fitbit Health Solutions Global Revenue ($M)

Fitbit Health Solutions On-Track to ~$100M Revenue

($ in millions)

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• Q2 2019 revenue was up 5% y/y

• Smartwatch revenue was 38% of total revenue

down from 54% a year ago.

• International revenue grew 14% y/y to $133

million.

-EMEA grew 33% y/y to $88 million.

-APAC declined 26% y/y to $26 million.

-Americas excl. U.S. grew 21% y/y to $19 million.

• U.S. revenue declined 1% y/y to $181 million.

• FHS revenue grew 16% y/y to $24 million, or 7% of

revenue.

• Accessory and non-device revenue represented 3%

of revenue.

$299.3$313.6

5%

0%

1%

1%

2%

2%

3%

3%

4%

4%

5%

5%

100

150

200

250

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Q2 2018 Q2 2019

Axis

Title

Axis Title

Quarterly Revenue

Revenue

• Gross margin decreased by 530 bpts y/y:- Due to NPI lower gross margin.- Prior year included one-time warranty benefits.

• Achieved 18% reduction:- lower employee costs (125 decrease in headcount y/y), lower

prototype expenses and consulting costs.- lower POP, media spend, and customer support consulting spend with

lower cost per case.- lower legal fees.

• Reflects effort to drive efficiency and redeployment of capital to grow FHS and consumer non-device revenue.

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Non-GAAP Gross Margin and Opex

40.9%

35.6%

Q2 2018 Q2 2019

Non-GAAP Gross Margin

-530 bpts$193.7

$159.6

-18%

100

150

200

Q2 2018 Q2 2019

Non-GAAP Opex

($ in millions)

$72.0

$59.0

-18%

-20%

-15%

-10%

-5%

0%

$0

$25

$50

$75

$100

Q2 2018 Q2 2019

R&D$96.5

$79.7-17%

-20%

-15%

-10%

-5%

0%

$0

$25

$50

$75

$100

Q2 2018 Q2 2019

S&M

$25.3$20.8

-18%

-20%

-15%

-10%

-5%

0%

$0

$25

$50

$75

$100

Q2 2018 Q2 2019

G&A

• Lower employee costs.

• Lower prototype expenses

and consulting spend.

• Lower POP.

• Lower CS consulting spend.

• Lower media spend.

• Lower employee costs.

• Lower legal fees.

12($ in millions)

Non-GAAP Opex Detail

Balance Sheet & Cash Flow Summary

Cash, Cash Equivalents & Marketable Securities $580.5 $623.3 $723.4 $644.2 $564.9

Accounts Receivables $242.0 $326.0 $414.2 $250.6 $258.6

Days Sales Outstanding 70 72 70 64 65

Inventory $140.4 $195.1 $124.9 $174.5 $163.2

Inventory Turns 5.0 5.6 8.9 4.8 4.9

Accounts Payable $156.0 $233.0 $251.7 $165.5 $157.2

Capital Expenditures (capex) $15.9 $11.7 $12.7 $6.1 $4.7

Capex as % of Revenue 5.3% 3.0% 2.2% 2.2% 1.5%

Free Cash Flow excl. Tax Refund ($83.3) ($25.1) $95.6 ($73.7) ($81.2)

Q2’18 Q3’18 Q4’18 Q1’19 Q2’19($ in Millions)

• Cash, Cash Equivalents & Marketable Securities is at $565 million, down $79 million sequentially.

• Change in working capital consumed $54 million, driven by decreases in accounts payable and accrued liabilities.

• Free Cash Flow of $(81) million, negatively impacted by linearity of sales in Q2’19.

Q3’19 Guidance

Guidance Context:

• Expect an increase in devices sold y/y driven by smartwatch growth and a decline in average selling price y/y.

• Expect non-GAAP gross margin to trend lower from Q2’19.

• Non-GAAP effective tax rate driven by geography of revenue, tax credits. Expect quarterly volatility.

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Guidance

Revenue $335M $355M

y/y decline -15% -10%

Non-GAAP net loss per share $(0.11) $(0.09)

Capex as a % of revenue 5%

Adjusted EBITDA $(27M) $(19M)

Non-GAAP effective tax rate ~25%

Stock-based compensation expense ~$19M

Basic share count ~260M

Low High

Revenue $1,430M $1,480M

y/y growth -5% -2%

Non-GAAP Opex $640M

Non-GAAP net loss per share $(0.38) $(0.31)

Capex as a % of revenue 3%

Adjusted EBITDA $(85M) $(60M)

Free Cash Flow $(150M) $(120M)

Non-GAAP effective tax rate ~25%

Stock-based compensation expense ~$80M

Basic share count ~260M

FY ’17 GuidanceFY’19 Guidance

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Low High Guidance Context:• Expect revenue to decline to a range of $1.43 billion to $1.48 billion.

• Expect to grow devices sold in 2019, but ASP to decline y/y driven by the introduction of more affordable devices.

• Expect non-GAAP gross margin to be ~35%, a decline y/y due to decrease in revenue, higher returns, higher promotions and higher E&O costs.

• Expect to grow community of active users.

• Expect FHS revenue to be ~$100 million.

• Expect to reduce non-GAAP Opex by 9% y/y to ~$640 million.

• Expect full-year non-GAAP effective tax rate to be volatile driven by geographic mix of revenue, tax credits, and our shift to profitability.

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

GAAP to Non-GAAP ReconciliationTo supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we may use the following non-GAAP financial measures in

this presentation: non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP income (loss) before

income taxes, effective non-GAAP tax rate, non-GAAP net income (loss), non-GAAP basic/diluted net income (loss) per share, free cash flow, non-GAAP research and

development expenses, non-GAAP sales and marketing expenses, non-GAAP general and administrative expenses, adjusted EBITDA. 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 certain items, specifically stock-based compensation expense, depreciation, amortization of intangible assets, impairment of equity investment, interest

income, net, and the related income tax effects of the aforementioned exclusions, that may be recurring and will be reflected in our financial results for the foreseeable future. Our

adjustments to our non-GAAP financial measures previously included the exclusion of litigation expense related to matters with Aliphcom, Inc. d/b/a Jawbone. 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 press release, and investors are

encouraged to review the reconciliation.

Guidance for non-GAAP financial measures excludes stock-based compensation, 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.

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GAAP to Non-GAAP Reconciliation

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.

• Restructuring costs primarily included severance-related costs. We believe that excluding this expense provides greater 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 Jawbone. We exclude these expenses because we do not believe they have a direct correlation to the

operations of our business and because of the singular nature of the claims underlying the Jawbone litigation matters.

• Amortization of intangible assets relates to our acquisition of FitStar, Pebble, Vector and Twine Health. We exclude these amortization expenses because we do not believe they

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).

• We define free cash flow as net cash provided by (used in) operating activities adjusted for purchase of property and equipment. We consider free cash flow to be a liquidity

measure that provides useful information to management and investors about the amount of cash generated by the business that can possibly be used for investing in our business

and strengthening the balance sheet, but it is not intended to represent the residual cash flow available for discretionary expenditures.

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GAAP to Non-GAAP Reconciliation(In thousands)

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Three Month Ended Six Months Ended

June 29, 2019 June 30, 2018 June 29, 2019 June 30, 2018

Non-GAAP gross profit:

GAAP gross profit $ 108,214 $ 119,015 $ 197,667 $ 233,138

Stock-based compensation expense 1,521 2,032 2,951 3,130

Impact of restructuring — — 190 —

Intangible assets amortization 1,853 1,516 3,707 3,032

Non-GAAP gross profit $ 111,588 $ 122,563 $ 204,515 $ 239,300

Non-GAAP gross margin as a percentage of revenue:

GAAP gross margin 34.5% 39.8% 33.8% 42.6%

Stock-based compensation expense 0.5 0.7 0.5 0.6

Impact of restructuring — — — —

Intangible assets amortization 0.6 0.5 0.6 0.6

Non-GAAP gross margin 35.6 40.9 34.9 43.7



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Three Months Ended Six Months Ended


Non-GAAP research and development:

GAAP research and development $ 70,919 $ 87,047 $ 147,958 $ 176,383

Stock-based compensation expense (11,892) (15,090) (23,880) (29,762)

Impact of restructuring — — (1,550) —

Non-GAAP research and development $ 59,027 $ 71,957 $ 122,528 $ 146,621

Non-GAAP sales and marketing:

GAAP sales and marketing $ 83,060 $ 100,845 $ 151,676 $ 172,897


Impact of restructuring — — (589) —

Intangible assets amortization (136) (470.0) (271) (630.0)

Non-GAAP sales and marketing $ 79,749 $ 96,464 $ 144,503 $ 164,909

Non-GAAP general and administrative:

GAAP general and administrative $ 24,865 $ 30,211 $ 51,557 $ 66,299


Litigation expense — — — (765)

Impact of restructuring — — (129) —

Intangible assets amortization (72) (71) (143) (143)

Non-GAAP general and administrative $ 20,834 $ 25,316 $ 43,338 $ 56,142



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Non-GAAP operating expenses:

GAAP operating expenses $ 178,844 $ 218,103 $ 351,191 $ 415,579


Litigation expense — — — (765)

Impact of restructuring — — (2,268) —

Intangible assets amortization (208) (541) (414) (773)

Non-GAAP operating expenses $ 159,610 $ 193,737 $ 310,369 $ 367,672



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Non-GAAP operating loss before income taxes:

GAAP operating loss $ (70,630) $ (99,088) $ (153,524) $ (182,441)


Litigation expense — — — 765

Impact of restructuring — — 2,458 —


Non-GAAP operating loss (48,022) (71,174) (105,854) (128,373)

Interest income, net 2,622 2,177 6,088 3,527

Other income, net 461 2,258 1,734 2,775

Non-GAAP operating loss and loss before income taxes $ (44,939) $ (66,739) $ (98,032) $ (122,071)


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

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Non-GAAP net loss and net loss per share:

Net loss $ (68,518) $ (118,268) $ (147,983) $ (199,145)





Income tax effect of non-GAAP adjustments 10,139 36,121 26,474 49,888

Non-GAAP net loss $ (35,771) $ (54,233) $ (73,839) $ (95,189)

GAAP diluted shares 256,160 242,898 254,659 241,227

Other dilutive equity awards — — — —

Non-GAAP diluted shares 256,160 242,898 254,659 241,227

Non-GAAP diluted net loss per share $ (0.14) $ (0.22) $ (0.29) $ (0.39)



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Free cash flow:

Net cash used in operating activities $ (76,423) $ (67,375) $ (144,076) $ (57,217)

Purchases of property and equipment (4,731) (15,908) (10,827) (28,524)

Non-GAAP Free cash flow $ (81,154) $ (83,283) $ (154,903) $ (85,741)

Net cash provided by (used in) investing activities $ (475) $ 12,193 $ 10,123 $ 43,363

Net cash provided by (used in) financing activities $ 1,314 $ 4,938 $ (4,774) $ 4



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Adjusted EBITDA:

Net loss $ (68,518) $ (118,268) $ (147,983) $ (199,145)




Depreciation and intangible assets amortization 18,792 15,173 34,225 27,377

Interest income, net (2,622) (2,177) (6,088) (3,527)

Income tax expense 971 23,615 2,281 23,006

Adjusted EBITDA $ (30,830) $ (55,800) $ (74,016) $ (102,026)

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