Fitbit's enterprise health unit hits Q1 stride, $122 million annual revenue run rate

Fitbit's enterprise health business delivered first quarter sales of $30.5 million with an annual revenue run rate of $122 million.

The company set a revenue target of $100 million for Fitbit Health Solutions for 2019. Fitbit Health Solutions revenue was up 70 percent from a year ago.

Overall, Fitbit's first quarter was better than expected on strong smartwatch sales. Fitbit reported a net loss of $79 million, or 31 cents a share, on revenue of $272 million. Non-GAAP loss for the first quarter was 15 cents a share.

Wall Street was looking for a non-GAAP loss of 22 cents a share on revenue of $259.7 million.

Also: Fitbit's second act: Can the original fitness band maker stage a comeback with healthcare?

CEO James Park said smartwatch device sales were up 117 compared to a year ago and the launch of Inspire and Inspire HR boosted growth. The company is leveraging affordable devices to attract more users onto the Fitbit platform and provide a base for potential subscription revenue.

On a conference call Park added:

Our strategy for long-term growth and profitability in the consumer business is to more effectively monetize our community of active users and customer acquisition is the first step. We do this today primarily through devices, which is why it's important we continue to deliver products that resonate with consumers, enterprise and health care customers.

Across products, we believe there is still a significant upgrade opportunity with approximately 70% of our active users on a legacy device. With growth in devices sold, we are succeeding in getting more users onto the Fitbit platform. This is also due to our innovation and software, ensuring it is front-end engaging to the end user. For example, a recent partnership would Snap to launch the first Bitmoji smartwatch clockface that dynamically changes with you and your activity is a good example of how our software experiences play an important role in keeping our users motivated and engaged. This clockface quickly became one of the top Fitbit clockfaces and was downloaded over 320,000 times in the first few weeks of availability.

Key Fitbit first quarter items include:

• Devices sold were 2.9 million with an average selling price of $91.
• US revenue was 50 percent of total sales.
• 67 percent of revenue was from devices launched in the last 12 months.
• Smartwatch devices were 42 percent of revenue.
• 39 percent of activations were from repeat users.

As for the outlook, Fitbit said it expects average selling prices to decline with revenue of $305 million to $320 million. Non-GAAP basic net loss will be between 20 cents a share to 17 cents a share.

For 2019, Fitbit expects revenue of $1.52 billion to $1.58 billion, up 1 percent to 4 percent from 2018. Fitbit expects gross margins to improve in the second half of 2019. "As the size of our Fitbit Health Solutions and software services business increases, we expect them to be gross margin accretive to overall company gross margin," the company said.

Hardware is hard: The tech products that fooled or failed us

Related stories:

• Versa Lite review: Fitbit's most affordable smartwatch gets the essentials right
• Fitbit Inspire HR review: Tiny activity tracker packs in a stunning amount of tech, adopted by health providers
• Fitbit announces Versa Lite, Inspire HR, and Inspire: User-friendly fitness trackers to help you achieve your goals
• Fitbit's healthcare unit to deliver $100 million in revenue in 2019