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Sales to healthcare plans helped wearable maker Fitbit surprise Wall Street in the latest quarter and lift its shares from the basement.
Revenue from healthcare customers, which the company has yet to disclose by dollar amount, grew 26% in the third quarter from the same period a year ago. The business includes sales of Fitbit’s wearable devices, as well as software and services, to health plan providers and directly to some employers.
But overall revenue rose a mere 0.3%, as the company is still working to get back on track after sales of its main product, simple fitness trackers, stalled out over the past few years.
Nevertheless, investors were pleased that the company’s sales were at least stable after declining in the first half of the year. Fitbit’s (fit) shares, which hit an all-time low of $ 4.23 earlier this week, gained 7% in Wednesday’s regular trading and another 10% in extended trading after the earnings report, to $ 5.18.
Fitbit CEO James Park tells Fortune that the company will offer more details about its healthcare segment in coming quarters. “We’re calling it out now because it’s demonstrating a lot of traction and growth,” he said. Many plans use the fitness trackers to help users who have chronic diseases stay on top of their health and medication, he explained. “We’re really capitalizing on that growing need.”
About 1,600 health plans and other organizations are buying Fitbit products already. Last month, Humana (hum) expanded a partnership with Fitbit to include Fitbit Care, the company’s new virtual health coaching service built off of technology it acquired by buying Twine Health in February. Coaches can offer users health advice via an app, on the phone, and in person.
Still sales of simple fitness trackers, Fitbit’s original business, peaked several years ago. The drop has pummeled the company’s revenue.
Although the extra growth from healthcare helped Fitbit’s overall third quarter sales, they remained essentially flat at $ 394 million. But that was enough to beat the $ 381 million that analysts had expected as did adjusted profits of 4 cents per share, which were modestly higher than the 1 cent loss that had been expected.
In terms of profit on the basis of generally accepted accounting principles, Fitbit lost 1 cent per share, or $ 2.1 million.
Fitbit’s healthcare effort comes as some studies have recognized that wearables and the “gamification” of wellness can prompt people to exercise more and live healthier lives. That in turn has prompted some health plans and large employers to partner with the company and buy fitness trackers for workers along with software and services to track their progress. Apple (aapl) is also aiming at that segment with its Apple Watch.
Park’s decision to get Fitbit into the smartwatch market last year also paid big dividends. The company’s strong-selling Versa smartwatch, along with its less popular Ionic watch, grabbed $ 193 million of revenue, almost half of the total for the quarter and up from $ 165 million in the second quarter. Fitbit smartwatches outsold all other vendors except Apple in the U.S. market in the quarter, Park said.
Apple this year added several new health features, including an EKG reader and a fall detection system, to its smartwatch. Park wouldn’t say exactly how Fitbit would match Apple’s moves, but hinted the company had some new healthcare features of its own, coming soon.
“We are very focused on adding more advanced health capability to our products over time,” he said. “We are in clinical studies and validation for a few deeper health conditions such as sleep apnea and (Atrial fibrillation) and we’re working with the proper regulatory agencies to get that into the hands of consumers. as soon as we can.”
NEW YORK (Reuters) – Twitter Inc posted revenue and profit ahead of Wall Street estimates on Thursday, as higher advertising sales offset a drop in monthly users to push the company’s shares up nearly 12 percent before the opening bell.
People holding mobile phones are silhouetted against a backdrop projected with the Twitter logo in this illustration picture taken in Warsaw September 27, 2013. REUTERS/Kacper Pempel/Illustration/File Photo
Quarterly advertising revenue jumped 29 percent from a year earlier to $ 650 million, boosted by advertiser interest in broadcasts from media companies including Live Nation Entertainment, Major League Baseball and Major League Soccer.
That drove a similar rise in overall revenue from a year earlier to $ 758 million, beating an average analyst estimate of $ 702.6 million, according to Refinitiv data. The company reported adjusted profit of 21 cents per share, well above an average forecast of 14 cents.
However, Twitter posted a larger-than-expected decline in monthly active users in the third quarter, its second straight quarterly drop, and predicted the figure would fall again in the fourth quarter.
It blamed the declines in users on efforts to clean up the site from suspicious users, including accounts used in political influence operations, as well as its response to new privacy regulations in the European Union.
Monthly active users fell to 326 million in the third quarter, below the average analyst forecast of 331.5 million, according to FactSet. Twitter said it expects them to drop below 326 million in the current quarter, missing the average forecast of 333.4 million.
Twitter is fighting for its reputation by cutting and blocking fake users, but the toll on traffic is undermining faith in is ability to grow. Recent business progress has focused on getting current users to click on more ads, which has helped Twitter turn to a profit.
Analysts have warned that Twitter needs to stem declines in user growth so it can better compete for ad spending with rivals including Alphabet Inc’s Google, and Facebook Inc. Investors pay close attention to monthly user data because it is seen as a key indicator of future revenue, the bulk of which comes from ad sales.
Twitter’s usage has been stagnant for more than a year, causing analysts to worry that growth may have peaked.
Those concerns have been somewhat offset by increases in advertising sales from video which suggest the company is succeeding in efforts to generate more cash from each user.
Investors are looking to understand the financial impact of Twitter’s moves to clean up its platform by deleting accounts used for fraud, hate speech and election interference.
Twitter has removed millions of suspicious accounts this year including those that belong to Alex Jones and his conspiracy site Infowars.
“We’re doing a better job detecting and removing spammy and suspicious accounts at sign-up,” Chief Executive Jack Dorsey said in a statement.
Twitter said the number of its daily active users rose by 9 percent year-on-year, weaker than an 11 percent jump in the previous quarter and its slowest growth rate in two years. The company does not disclose the total number of daily users.
Twitter shares tumbled 19 percent when the company reported quarterly results on July 27. Its stock has fallen 36 percent since that earnings report, compared to a 6.4 percent decline in the S&P 500 index.
Of the 40 analysts polled by FactSet, 10 have a buy rating on the stock while 24 have a hold rating. Six have a sell rating. The average target price is at $ 32.91, about 16 percent higher Tuesday’s close of $ 27.54.
Reporting by Angela Moon and Munsif Vengattil; Editing by Jim Finkle and Patrick Graham
SAN FRANCISCO (Reuters) – Chief Executive Elon Musk said on Tuesday he is considering taking Tesla Inc private in what would be the largest deal of its type, moving the electric car maker out of the glare of Wall Street as it goes through a period of rapid growth under tight financial constraints.
“Am considering taking Tesla private at $ 420. Funding secured,” Musk said on Twitter bit.ly/2Om3gn3. At $ 420 per share, a deal would be worth $ 72 billion overall.
In a letter to Tesla employees published more than an hour later on the company’s blog here, Musk explained that going private would be “the best path forward.” Such a move – over which no final decision had been made – would let Tesla “operate at its best, free from as much distraction and short-term thinking as possible,” he wrote.
Tesla shares closed up 11 percent at $ 379.57, slightly below their all-time high.
Asked on Twitter whether Musk would continue to be CEO under such a scenario, he replied there would be “no change.”
Musk has been under intense pressure this year to turn his money-losing, debt-laden company into a profitable higher-volume manufacturer, a prospect that has sent Tesla’s valuation higher than that of General Motors Co.
The company is still working its way out of what Musk called “production hell” at its home factory in Fremont, California, where a series of manufacturing challenges delayed the ramp-up of production of its new Model 3 sedan, on which the company’s profitability rests.
The Silicon Valley company faces a make-or-break moment in its eight-year history as a public company as competition from European automakers is poised to intensify with new electric vehicles from Audi and Jaguar, with more rivals to follow suit next year.
Meanwhile, Tesla has announced plans to build a factory in Shanghai, China, and another in Europe, but details are scarce and funding unknown.
Going private is one way to avoid close scrutiny by the public market as Musk and the company face those challenges. Musk has feuded publicly with regulators, critics, short sellers and reporters, and some analysts suggested that less transparency would be welcomed by Musk.
“Musk does not want to run a public company,” said Gene Munster of Loup Ventures, as Tesla’s ambitious mission makes it “difficult to accommodate investors’ quarterly expectations.”
Musk owns nearly 20 percent of the company. He said in his letter to employees he did not seek to expand his ownership.
A price of $ 420 per share would represent a nearly 23 percent premium to Tesla’s closing price on Monday, which gave the company a market value of about $ 58 billion.
In his letter, Musk suggested a choice for shareholders of selling their shares for $ 420 each or remaining investors in a private Tesla. He said he hoped all current investors would remain were the company to go private.
He made no mention in his tweets nor his letter where the funding for a deal would come from, and the letter did not discuss funding for the plan.
Like any other investor, Musk is beholden to securities laws and several securities attorneys told Reuters he potentially could face lawsuits if it was proven he did not have secure financing at the time of his tweet.
(GRAPHIC-Market value of Tesla, Ford, GM: tmsnrt.rs/2n4mFjh)
BIGGEST GO-PRIVATE DEAL
If Musk were to succeed in taking Tesla private, it would be the largest leveraged buyout of all time, beating the record set by the $ 45 billion deal for Texas power utility Energy Future Holdings, which ended in bankruptcy in 2014.
Raising both the debt and equity required for such a deal would be a challenge. Many major Wall Street bankers contacted by Reuters said on condition of anonymity they were not aware of Musk’s plans ahead of his tweets, and several expressed skepticism that a leveraged buyout of Tesla could be financed given the company’s negative cash flow.
“It’s unfathomable to me that anyone would finance the acquisition of such a liability-laden company that is losing so much money and have massive capex requirements going forward,” said Mark Spiegel, portfolio manager of hedge fund Stanphyl Capital Partners, who holds a short position in Tesla and has been a vocal critic of Musk on Twitter.
The most obvious equity partners for Musk would be a sovereign wealth fund such as Saudi Arabia’s Public Investment Fund (PIF) or major technology investment funds such as SoftBank Group Corp’s Vision Fund, bankers said.
China’s Tencent Holdings, which took a 5 percent stake in Tesla last year, is another possible partner.
Such foreign sources of capital would be subject to scrutiny by the Committee on Foreign Investment in the United States (CFIUS), which looks closely at deals for potential national security risks.
Earlier on Tuesday, a source familiar with the matter said Saudi Arabia’s PIF had bought a minority stake of just below 5 percent in Tesla.
The U.S. Securities and Exchange Commission declined to comment on Musk’s tweet, but the agency allows companies to use social media outlets like Twitter to announce key information in compliance with its fair disclosure rules if investors are alerted about which social media outlets will be used.
Tesla alerted investors in a 2013 SEC filing that they should follow Musk’s Twitter feed for “additional information” about the company. There is no reference to Musk’s Twitter account on the company’s investor relation page under “investor communication,” although Tesla’s Twitter feed is included.
In his letter to employees, Musk wrote that, “as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company.”
A short squeeze is a trading scenario that occurs from time to time in heavily shorted stocks, when bearish traders are forced to buy shares to avoid big losses – something that ends up pushing the stock only higher.
Short interest in Tesla on Tuesday stood at nearly $ 13 billion, according to S3 Partners, a financial analytics firm.
(GRAPHIC-Tesla shares jump 10 percent, near record high: tmsnrt.rs/2MbzJin)
Reporting by Sonam Rai in Bengaluru, Alexandria Sage in San Francisco, Carl O’Donnell, Liana Baker, David Randall in New York and Pete Schroeder in Washington; editing by Saumyadeb Chakrabarty, Bill Rigby and Chris Reese
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