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Fitbit produces a large number of health and fitness tracking devices that attract a lot of fitness
enthusiasts and health-conscious individuals. The revolution of new Tracker wearable activity
monitors to the market had helped Fitbit gain massive growth from 2009 to 2015. However, as a
result of the increased availability of substitutes from a number of competitors such as the Apple
Watch, Xiaomi and Garmin with superior products, Fitbit lost its popularity and experienced a
significant downturn in 2016. Fitbit’s financial performance from 2014 to the February, 2016 will
be analyzed as below to see whether the company achieves their strategy successfully or not.
From the year 2014 to 2015, there was a dramatic increase in company’s revenue from
$745.4 million to nearly 1.858 billion – the growth of 149% year-over-year. However, on
February 22, 2016, Fitbit reported revenue just with a slight rise – $1.86 billion resulting from
that the numerous new substitute products from competitors were widely available and the
launching of two new products: Fitbit Blaze and Fitbit Alpha cost too much on manufacturing.
800,000 EBITDA
600,000
400,000
200,000
0
2014 2015 22/02/2016
This increasing trend is also similar to adjusted EBITDA figures (Earnings before Interest,
Taxes, Depreciation and Amortization). FY15 Operating Income increased 104% compared to
the year 2014 (from $112.05 million in 2014 to $332.74 million in 2015). And the number saw
an augment to $389.9 million on February 22, 2016.
Although there was an enormous acceleration of the revenue from 2014 to 2015, the net
income only experienced a moderately improvement of 33.3% from $131.78 billion to $175.68
billion. This was the result of combination of relatively higher expenses on operating: Research
and development, Sales and marketing and General and Administrative. In 2014, the sum of
operating expense was about $200 million, however, this amount jumped to $552.9 million in
2015 – nearly tripled with an attempt to develop new products that can develop their sales in the
future. The big concern is the climb in sales and marketing expenses ($332.74 billion in 2015) -
Fitbit spent a large amount of money in order to sell products effectively as a result of pressure
from serious rivalry among the marketplace.
Cash Position
Cash, cash equivalents and marketable security totaled $664.5 million at December 31,
2015, compared to $195.6 million at December 311, 2014 and $573.5 million at September 30,
2015. In 2014, the total current liabilities of Fitbit were $461.31 million that mostly doubled the
amount of cast the company owned at that time. Therefore, the company would struggle to pay
off its debts. However, in 2015, the cash increased dramatically into $535.85 billion higher than
the current liabilities of $508.26 billion so the company was not in any danger of going bankrupt.
Take the formula, the working capital of Fitbit in 2014 equals $-265.68 million and in
2015 equals $27.59 billion. This change resulted from the company sales of activity monitors
had increased from 5,000 units to 21.4 billion connected health and fitness devices by year-end
2015. The working capital ratio (Current ratio) in 2015 is 1.05 ($535,846 ÷ $508,257) indicated
that Fitbit has enough assets (cash, marketable securities, inventory, accounts receivable) to
pay back its liabilities (debt and accounts payable) and good financial health.
Quick Ratio
535,846 −469,200
Quick Ratio (2015) = = 0.13 below 1
508,257
While Fitbit may have the potential to turn the business around with their significant spending on
operation especially Research & Development and Sales & Marketing - whatever it may take to
drive sales and grow the company, Fitbit’s strategic performance seems insubstantial. Fitbit's
net current assets will likely continue to drop and the strong financial base that the company had
enjoyed will continue to weaken. Moreover, Fibit’s dominance in the present market diminishes
as a result of the presence of Apple Watch, Xiaomi and Samsung. These result from both
internal and external factors such as their mediocre products’ features; the fluctuation of stock
price (from $20 to $35 then fallen to $14); the lack of group of developers or a way to generating
income; the limitation in differentiating products and severe competitions from rivals.