q3 2018 earnings deck• average selling price up 3% y/y to $108 per device. accessory and other...

Q3 2018 EARNINGS DECKOctober 2018

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

Safe Harbor StatementThis presentation contains forward-looking statements that involve risks and uncertainties, including statements regarding our outlook for the fourth quarter 2018 and full year 2018; the rate of decline intracker sales; expected device mix; and trends in revenue, average selling price, operating expenses, capital expenditures, free cash flow, gross margins, non-GAAP basic net (loss) income per share,stock-based compensation expense and non-GAAP effective tax rate. 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 atimely 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, preventor 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 oversuch 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 productsand 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 fitnessdevices is relatively new and unproven; the ability of our channel partners to sell our products; litigation and related costs; privacy; the impact of changes in tax law; the impact of tariffs; and other generalmarket, 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, 2017,which is 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 Quarterly Report on Form 10-Q forthe quarter ended September 29, 2018. 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 thesestatements 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 unduereliance 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 maymake.

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 inaddition 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-GAAPfinancial measures versus their nearest GAAP equivalents. For example, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate theirperformance, 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 comparableGAAP 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 atwww.fitbit.com/legal/trademark-list. Third-party trademarks are the property of their respective owners.

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TO MAKE EVERYONE IN THE WORLD HEALTHIER

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Our Assets

Brand:#1 Wearables Brand Globally

Community:Large Social Fitness Network with 25 million active users*

Data:One of the largest activity, exercise, & sleep databases

*(As of 12/31/17)4

84M

39K WIDE RANGE of devices and

price pointsStores

Health & Fitness app on iOS and Android (U.S.)*

86 CountriesWearable brand globally

1#

1# Devices sold to date

All measures are as of Q3 2018, except #1 app(*As of 12/31/17)

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©2017 Fitbit, Inc. All rights reserved. Proprietary & Confidential. ©2017 Fitbit Inc. All rights reserved. 6

DiabetesHeart HealthSleep Apnea

Manage WeightGet More Active & FitSleep BetterReduce Stress

Focus on Outcomes and Conditions

Wellness Health

Across All Ages

Mental Health

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• Generated $394 million of revenue, non-GAAP net income per share of $0.04.

• Average selling price up 3% y/y to $108 per device. Accessory and other revenue added an additional $3.04 per device.

• Non-GAAP gross margin decreased 510 basis points y/y to 40.1% driven by the change in mix towards smartwatches and end of life promotions of legacy tracker offerings, partially offset by improved warranty costs and lower customer support costs.

• Non-GAAP operating expenses decreased 17% y/y to $150 million.

• $623 million in cash, cash equivalents, and marketable securities on the balance sheet as of the quarter end.

Q3 Financial Highlights

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Q3 Business Highlights• Smartwatch revenue grew to 49% of revenue, up from 9% on a

year-over-year basis.

• Diversified wearable device revenue from predominately trackers to smartwatches and trackers. #2 smartwatch company in the U.S.

• Refreshed product line up and launched Charge 3 tracker device, our most advanced health & fitness tracker. Strong initial POS, #1 selling device in the U.S. in the 1st two weeks post launch.

• Fitbit VersaTM , Fitbit’s first “mass-appeal” smartwatch, remained strong and outsold competitive offerings of each of Samsung, Garmin and Fossil smartwatches in the U.S.

• Deepening reach into healthcare: launched Fitbit Care and expanded strategic partnership with Humana.

• Fitbit Health Solutions revenue grew 26% year-over-year.

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• Global wearable brand with approximately 84 million devices sold since inception.

• In Q3, 58% of activations came from new users, while 42% came from repeat buyers. Of the repeat buyers, 49% were previously inactive for 90 days or greater, up from 39% in Q3 2017, driven by smartwatches.

• 55% of active users viewed the Fitbit Feed in the quarter.

• Fitbit Health Solutions has the ability to provide solutions to over 100 health plans across the U.S., including Blue Cross Blue Shield and Humana.

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0

10

20

30

40

50

60

70

80

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

Total Devices Sold84

2015 2016 2017 2018

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Growing User Community & Brand Relevancy

(units in millions)

$392.5

$299.3

$393.6

Q3 2017 Q2 2018 Q3 2018

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Flat y/ y

Revenue• Q3 revenue of $394 million flat y/y.

• Sequential growth in both tracker and smartwatch units.

• Smartwatch revenue comprised 49% of revenue, 38% of units.

• Average selling price increased 3% y/y to $108, devices sold declined 2% y/y (less of a decline as compared with Q2 2018).

• U.S. revenue represented 58%, down 6% y/y.

• International revenue represented 42%, up 10% y/y. • APAC revenue remained flat at $34 million.• EMEA revenue grew 17% to $104 million.• Americas ex. U.S. declined 2% to $25 million.

• Fitbit.com revenue of $22 million, or 6% of revenue.

($ in millions)

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Improving Units & Stable/Rising ASP

96%

92%

81% 61%62%

4%

8%

19% 39%

38%

$105

$102

$112

$106 $108

$55

$70

$85

$100

$115

0

1

2

3

4

5

6

Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018

ASP

Smar

twat

ch &

Tra

cker

Uni

ts (M

)

Tracker Smartwatch Units Sold ASP

3.6 3.5

2.72.2

5.4

$180.0

$149.5

Q3 2017 Q3 2018

Non-GAAP Opex

• Gross margin decreased by 510 pts y/y.- Driven by the growing mix of smartwatch revenue and end

of life promotions of legacy tracker offerings, partially offset by lower warranty costs and lower customer support costs.

• On-track to achieve 7% expense reduction in ’18, decrease driven by lower R&D costs, lower marketing and media spend, and one-time costs related to bankruptcy of Wynit in prior year.

• Decrease reflects effort to drive efficiency in devices and redeployment of capital to grow international sales footprint, FHS and software. 12

-17%

Non-GAAP Gross Margin and Opex

45.2%40.1%

Q3 2017 Q3 2018

Non-GAAP Gross Margin

-5.1%

($ in millions)

$73.9$63.4

0

25

50

75

100

Q3 2017 Q3 2018

S&M

$71.2 $65.7

$0

$25

$50

$75

$100

Q3 2017 Q3 2018

R&D

$35.0$20.4

0

25

50

75

100

Q3 2017 Q3 2018

G&A

• Continued investment in innovation.

• Lower consulting costs.

• Lower media and marketing spend and lower POP spend.

• Benefitted from improved device quality and lower customer support spend.

• Excluding one-time costs related to the bankruptcy of Wynit in Q3 ’17, costs down 24%.

• Lowered litigation and outside consulting costs.

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-8% -14%

-42%

Non-GAAP Opex Detail

($ in millions)

• A/R up y/y due to linearity of sales. Inventory higher as we build ahead of holiday selling season.

• Expect to receive $6 million in additional tax refund payments.

• Includes $72 million income tax refund payment received in the three months ended September 29, 2018. Non-GAAP free cash flow excluding this amount would have been ($25.1) million.

Q4’16 Q1’17 Q2’17

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Q3’17 Q4’17Inventory $138.8 $123.9 $145.4 $140.4 $195.1

Inventory Turns 6.3 9.8 4.0 5.0 5.6

Accounts Receivables $261.0 $406.0 $214.4 $242.0 $326.0

Days Sales Outstanding 67 76 61 70 72

Capital Expenditures (capex) $18.4 $31.0 $12.6 $15.9 $11.7

Capex as % of Revenue 4.7% 5.4% 5.1% 5.3% 3.0%

Free Cash Flow ($12.9) $24.6 ($2.5) ($83.3) $47.1

Cash & Marketable Securities $659.2 $679.3 $658.4 $580.5 $623.3

Q3’17 Q4’17 Q1’18 Q2’18

Balance Sheet and Cash Flow

($ in millions, except percentages, inventory turns and DSO)

Q3’18

Q4’18 Guidance

Guidance Context:

• Q4’18 results are expected to benefit from the lessening of the y/y decline of tracker revenue and continued growth of the smartwatch franchise.

• Expect gross margins to trend slightly higher from Q3’18.

• Tax rate driven by geography of revenue, tax credits. Expect quarterly volatility.

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Revenue Greater than $560M

y/y change Roughly flatNon-GAAP net income per share Greater than $0.07

Capex as a % of revenue 5%

Free cash flow ~$90M

Non-GAAP tax rate ~25%

Stock-based compensation ~$24M

Non-GAAP share count (diluted) ~260M

Guidance

FY ’17 GuidanceFY’18 Guidance

Revenue ~$1.5 BillionNon-GAAP OPEX $740MCapex as % of revenue 4%Non-GAAP free cash flow including benefits of the tax refund payment $52M

Non-GAAP free cash flow excluding benefits of the tax refund payment ($20M)

Non-GAAP tax rate 25%Stock-based compensation ~$98MNon-GAAP share count (basic/diluted) 248M/260M

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Guidance Context:

• Expect ASP to rise driven by mix shift, offset by a decline in device sales.

• Expect to reduce non-GAAP opex by ~$60 million y/y to $740 million.

• Expect full-year tax rate to vary due to geographic mix of revenue and shift to profitability / tax credits.


GAAP to Non-GAAP ReconciliationTo supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures inthis press release: non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income (loss), non-GAAP operating income(loss) before income taxes, non-GAAP net income (loss), non-GAAP diluted net income (loss) per share, non-GAAP free cash flow, revenue on a constant currency basis,and 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 informationprepared 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 usefulsupplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may varyindependent of business performance, and enable comparison of our financial results with other public companies, many of which present similar non-GAAP financialmeasures.

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 financialmeasures reflect the exclusion of certain items, specifically stock-based compensation expense, depreciation, amortization of intangible assets, impairment of equityinvestment, 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 forthe 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 comparisonpurposes. A reconciliation of our non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tablesincluded 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 measuresare uncertain, out of our control and/or cannot be reasonably predicted. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the correspondingGAAP measures is not available without unreasonable effort.

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GAAP to Non-GAAP ReconciliationThe 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 thenon-GAAP financial measures excluding this item provide meaningful supplemental information regarding operational performance. In particular, companies calculatestock-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 firstquarter of 2017. Restructuring costs primarily included severance-related costs. We believe that excluding this expense provides greater visibility to the underlyingperformance of our business operations, facilitates comparison of our results with other periods, and may also facilitate comparison with the results of other companies inour industry.

Litigation expense relates to legal costs incurred due to litigation with Jawbone. We exclude these expenses because we do not believe these expenses have a directcorrelation to the operations of our business and because of the singular nature of the claims underlying the Jawbone litigation matters. We began excluding Jawbonelitigation costs in the second quarter of 2016 as these costs significantly increased in 2016.

Amortization of intangible assets relates to our acquisition of FitStar, Pebble, Vector and Twine Health. We exclude these amortization expenses because we do notbelieve these expenses have a direct correlation to the operation of our business.

A non-recurring impairment charge of $6 million to reflect the write-down of a minority equity investment.

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-basedcompensation, amortization of intangibles, restructuring and valuation allowance in order to provide a more meaningful measure of non-GAAP net income (loss).

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

GAAP gross profit

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Three Months Ended Nine Months EndedSeptember 29, 2018 September 30, 2017 September 29, 2018 September 30, 2017

Non-GAAP gross profit:GAAP gross profit $ 153,514 $ 174,760 $ 386,652 $ 442,304Stock-based compensation expense 1,999 1,379 5,129 2,889Impact of restructuring — — — 37Intangible assets amortization 2,304 1,319 5,336 3,957Non-GAAP gross profit $ 157,817 $ 177,458 $ 397,117 $ 449,187

Non-GAAP gross margin (as a percentage of revenue):GAAP gross profit 39.0% 44.5% 41.1% 42.3%Stock-based compensation expense 0.5 0.4 0.5 0.3Impact of restructuring 0.0 0.0 0.0 0.0Intangible assets amortization 0.6 0.3 0.6 0.4Non-GAAP gross profit 40.1% 45.2% 42.2% 43.0%


GAAP to Non-GAAP Reconciliation

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Non-GAAP research and development:GAAP research and development $ 79,840 $ 84,170 $ 256,223 $ 252,471Stock-based compensation expense (14,097) (12,947) (43,858) (39,939)Impact of restructuring — — — (2,744)Non-GAAP research and development $ 65,743 $ 71,223 $ 212,365 $ 209,788

Non-GAAP sales and marketing:GAAP sales and marketing $ 66,676 $ 77,536 $ 239,573 $ 269,442Stock-based compensation expense (3,638) (3,679) (10,996) (10,914)Impact of restructuring — — — (2,000)Intangible assets amortization 315 — (316) —Non-GAAP sales and marketing $ 63,353 $ 73,857 $ 228,261 $ 256,528

Non-GAAP general and administrative:GAAP general and administrative $ 24,812 $ 40,690 $ 91,111 $ 102,815Stock-based compensation expense (4,381) (4,792) (13,630) (12,786)Litigation expense — (874) (765) (2,293)Impact of restructuring — — — (1,594)Intangible assets amortization (71) (62) (214) (177)Non-GAAP general and administrative $ 20,360 $ 34,962 $ 76,502 $ 85,965

(In thousands)



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Three Months Ended Nine Months Ended

September 29, 2018 September 30, 2017 September 29, 2018 September 30, 2017Non-GAAP operating expenses:GAAP operating expenses $ 171,328 $ 202,396 $ 586,907 $ 624,728Stock-based compensation expense (22,116) (21,418) (68,484) (63,639)Litigation expense — (874) (765) (2,293)Impact of restructuring — — — (6,338)Intangible assets amortization 244 (62) (530) (177)Non-GAAP operating expenses $ 149,456 $ 180,042 $ 517,128 $ 552,281

(In thousands)



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Non-GAAP operating income (loss) and operating income (loss) before income taxes:GAAP operating loss $ (17,814) $ (27,636) $ (200,255) $ (182,424)Stock-based compensation expense 24,115 22,797 73,613 66,528Litigation expense — 874 765 2,293Impact of restructuring — — — 6,375Intangible assets amortization 2,060 1,381 5,866 4,134Non-GAAP operating income (loss) 8,361 (2,584) (120,011) (103,094)Interest income, net 2,072 1,162 5,599 2,451Other income (expense), net (5,141) (702) (2,366) 134Non-GAAP operating income (loss) before income taxes $ 5,292 $ (2,124) $ (116,778) $ (100,509)

(In thousands)


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

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Non-GAAP net income (loss) and net income (loss) per share:Net loss $ (2,056) $ (113,403) $ (201,201) $ (231,722)Stock-based compensation expense 24,115 22,797 73,613 66,528Litigation expense — 874 765 2,293Impact of restructuring — — — 6,375Impairment of equity investment 6,000 — 6,000 —Intangible assets amortization 2,060 1,381 5,866 4,134Income tax effect of non-GAAP adjustments (20,077) 85,574 29,810 95,909Non-GAAP net income (loss) $ 10,042 $ (2,777) $ (85,147) $ (56,483)

GAAP diluted shares 245,838 234,242 242,746 230,918Other dilutive equity awards 14,509 — — —Non-GAAP diluted shares 260,347 234,242 242,746 230,918Non-GAAP diluted net income (loss) per share $ 0.04 $ (0.01) $ (0.35) $ (0.24)



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Non-GAAP free cash flow:Net cash provided by operating activities $ 58,741 $ 5,490 $ 1,524 $ 8,718Purchases of property and equipment (11,650) (18,382) (40,174) (58,199)Non-GAAP free cash flow * $ 47,091 $ (12,892) $ (38,650) $ (49,481)Net cash provided by (used in) investing activities $ 20,174 $ (40,368) $ 63,537 $ (32,913)Net cash provided by (used in) financing activities $ (4,794) $ (3,084) $ (4,790) $ 3,089* Includes $72 million income tax refund payment received in the three months ended September 29, 2018. Non-GAAP free cash flow excluding this amount would have been $(25.1) million.

(In thousands)


GAAP to Non-GAAP Reconciliation(In thousands, except percentages)

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Three Months Ended Nine Months EndedSeptember 29,

2018September 30,

2017September 29,

2018September 30,

2017Revenue on a Constant Currency BasisInternational GAAP Revenue $ 163,404 $ 148,318 $ 388,666 $ 430,938Foreign exchange effect (6,737) (24,196)International revenue excluding foreign exchange effect $ 156,667 $ 364,470International GAAP revenue year-over-year change 10% (10)%International GAAP revenue excluding foreign exchange effect year-over-over change 6% (15)%

US GAAP revenue $ 230,171 244,204 $ 552,118 $ 613,825US GAAP revenue year-over-year change (6)% (10)%



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Adjusted EBITDA:Net loss $ (2,056) $ (113,403) $ (201,201) $ (231,722)Stock-based compensation expense 24,115 22,797 73,613 66,528Litigation expense — 874 765 2,293Impact of restructuring — — — 6,375Impairment of equity investment 6,000 — 6,000 —Depreciation and intangible assets amortization 13,877 10,520 41,254 32,472Interest income, net (2,072) (1,162) (5,599) (2,451)Income tax expense (benefit) (18,827) 86,227 4,179 51,883Adjusted EBITDA $ 21,037 $ 5,853 $ (80,989) $ (74,622)

* A portion of stock-based compensation expense for the nine months ended September 30, 2017 was allocated to and included in "Impact of restructuring," thus explaining the difference between the total by function presented in this table compared to the amounts presented in the above tables.

(In thousands)

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q3 2018 earnings deck• average selling price up 3% y/y to $108 per device. accessory and other...

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