Renowned portable video camera maker GoPro, Inc. (GPRO - Snapshot Report) reported strong third-quarter 2014 earnings with non-GAAP earnings coming in at 12 cents a share, way above the earnings of 1 cent reported in the prior-year quarter. The figure also highlights a 50% sequential improvement.

Profits in the quarter were primarily driven by strong demand for the company’s Hero 4 line of cameras and accessories. Further, during the reported quarter, the company witnessed notable increase in volume of quality content generated by the users, leading to a whopping 92% year-over-year increase in video views on YouTube.

Revenues

For the third quarter, GoPro reported a 45.7% year-over-year increase in revenues to $280 million from $192.1 million garnered in the year-earlier quarter. On a sequential basis, revenues surged 14.5% from $244.6 million. The revenue figure also surpassed the Zacks Consensus Estimate of $263 million. Strong debut by the company’s HERO4 line of cameras, just before the onset of the holiday season, contributed significantly to the top line.  

Margins

For the third quarter, the company reported gross profit (non-GAAP) of $124.0 million while gross margin stood at 44.5% compared with 33.5% in the third quarter of 2013 and 42.2% in the second quarter of 2014.

Operating income (non-GAAP) in the third quarter was $13.5 million compared to an operating loss of $672 million posted in the third quarter of 2013 and operating loss of $16.7 million in the second quarter of 2014.

During the third quarter, the company invested heavily in its research & development activities which amounted to $42.4 million compared with $19.6 million incurred in the prior-year quarter.

Cash and Balance Sheet

Exiting the quarter, the company had cash and cash equivalents worth $237.7 million compared with $101.4 million as on Dec 31, 2013. Also, the company cleared its long-term debt successfully.

Meanwhile, GoPro received net cash proceeds of $200.8 million from closing of its initial public offering on Jul 1, 2014. Therefore, the proceeds are not included in the Jun 30, 2014 cash balance.

Zacks Rank

GoPro currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include Skullcandy, Inc. (SKUL - Snapshot Report), Audience, Inc. (ADNC- Snapshot Report) and Vuzix Corporation (VUZI). All three companies carry a Zacks Rank #2 (Buy).

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