Fitbit said that its Fitbit Health Solutions unit, which caters to healthcare providers and enterprises, will deliver $100 million in revenue in 2019. The company also plans to add more software and services features and launch paid premium service later this year.
The company gave its first outlook on its healthcare unit, which has been built out over the last two years just as device sales have fallen.
James Park, CEO of Fitbit, said "we expect our Fitbit Health Solutions revenue growth to accelerate to approximately $100 million and to grow non-device consumer revenue."
Park added that the company expects to offer more affordable devices and features to reach more users, but ultimately Fitbit is going to be about the data. He said on an earnings conference call:
We believe there is a significant opportunity to leverage investments that we make in our consumer-facing business to drive B2B revenue to our Fitbit Health Solutions business, or FHS. Globally, health care costs are rising to an unsustainable rate. We have an opportunity to change that equation by leveraging our work with more than 1,500 enterprise customers, 100 health plans scaling our solution for behavior change to population level. We are steadily building momentum in our FHS business. More than 6.8 million Fitbit users including employees of several Fortune 500 companies have connected their data into the population health management platform. And most recently, Fitbit devices have been included as a covered benefit of 42 Medicare Advantage programs in 2019 plan year in 27 states across the country which means that Fitbit devices are provided to many planned members for free. We have introduced 2 new devices, Fitbit Inspire and Fitbit Inspire HR, wearable devices specifically designed to the needs of our health care customers complement this opportunity and we have observed good customer adoption from the Medicare Advantage market.
Add it up and it's clear Fitbit is aiming to use the data from its 27.6 million active users, up 9 percent in the fourth quarter, to create more applications and embed itself into the healthcare system. Park said:
Our strategy for growth and profitability in our consumer business has more effectively monetized an ever-growing community of users. We are bringing new users into the platform with new products and we are successfully retaining our existing customers. Nine percent growth to 27 million active users, a testament to our constant innovation and investments in both hardware and software, gives us confidence in our consumer monetization strategy where we plan to launch and enhance paid premium service offering in the second half of 2019.
Even as Fitbit grows its non-device revenue it still needs its wearable business to fare well. In 2018, Fitbit sold 13.9 million wearables, down 9 percent from a year ago. Average selling prices for 2018 were up 4 percent from a year ago to $105 per device. In the fourth quarter, Fitbit Versa, Fitbit Ace and Fitbit Charge 3 represented 79 percent of revenue.
For the fourth quarter, Fitbit delivered net income of $15.4 million, or 6 cents a share, on revenue of $571.2 million, flat compared to a year ago. Gross margins fell to 38 percent in the fourth quarter, down from 43.6 percent a year ago. Non-GAAP fourth quarter earnings were 14 cents a share.
Wall Street was expecting non-GAAP earnings of 7 cents a share on revenue of $569 million.
For 2018, Fitbit reported a net loss of $185.8 million on revenue of $1.51 billion, down from $1.61 billion in 2017.
Fitbit's first quarter would see more devices sold at lower average selling prices as it aims to expand its user base. Revenue will be between $250 million to $268 million in the first quarter. For 2019, Fitbit expects revenue to be $1.52 billion to $1.58 billion.
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