On yesterday’s Q1 earnings call, Fitbit CEO James Park spoke quite a bit about his product’s potential for a wider role in healthcare. He highlighted the device’s , the , and even the anecdote of the device being used to about a patient’s atrial fibrillation. But he didn’t stop there.
“We are learning that lack of consumer engagement is a critical missing element in many broad healthcare efforts such as population health and disease management,” he said, citing . “…Since our devices and services are already engaging, Fitbit has incredible opportunity to serve as the consumer healthcare engagement engine. I could argue that, better than anyone else, we can help people engage with their health, engage with their family’s health, engage with their insurer and employer and engage with the healthcare system.”
Asked point-blank in the Q&A whether the company was looking into regulated clinical devices, Park answered in a way that was just shy of affirmative.
“Look, I think it’s a pretty massive opportunity,” he said. “I think these devices are going to get increasingly more sophisticated over time, but there is obviously a lot of legal and regulatory challenges that we’re going to have to navigate. I think the great thing is that, due to our leadership position, we are very visible in Washington and I think we’re going to have a big seat at the table in driving those discussions, so it’s going to be a pretty big opportunity for us.”
On the sales side, Park emphasized that Fitbit’s newest devices are key sales drivers for the company: despite only being on sale for a month in the quarter, the and made up 47 percent of Q1 revenue. In general, Fitbit revenue was up 50 percent year-over-year this quarter. The company sold 4.8 million devices and brought in just over $500 million in revenue.
Park also shared data that contradicts the commonly-heard narrative that fitness tracker customers abandon their devices quickly, forcing the company to continually sell to new people.
“Our investments in software have resulted in increasing retention of our users over time,” Park said on the call. “We noted that out of 18 million new registered devices users added in 2015, 72 percent were still active users at year end.”
Retention is aided by Fitbit’s powerful network effect, he also argued.
“Our community continues to be both an accelerator of our growth and a powerful competitive mode that makes it difficult for new companies to gain meaningful traction,” Park said. “A significant portion of the Fitbit experience is the ability to compete and connect with friends and family across a variety of health and fitness metrics. Due to our breadth of users, people are more likely to buy a Fitbit device because their friends and family are already likely to be Fitbit owners and less likely to leave to a competitor due to the same dynamics.”
Park highlighted customer wins for Fitbit Corporate Wellness, which included University Hospitals in Cleveland, Beaumont Health in Michigan, and Ascension Health, which operates in 23 states and the District of Columbia.
“As one specific customer results example,” he added, “Emory Healthcare and Emory University launched their Move More challenge in September 2015 that utilized Fitbit devices and software. The Fitbit program had the highest participation of all of Emory’s health and wellbeing programs, with 92 percent reporting they are more active because of Fitbit and 96 percent believed it was a valuable benefit.”
Park also addressed the , who just left the company for a position at Oculus.
“Hans is an early stage builder and wants to do the same at Oculus,” Park reassured investors. “With the strength of his team, we are not planning on a replacement and we do not expect this change to negatively affect Fitbit's operational or financial trajectory. Hans has been a great partner and we wish him well.”
During the Q&A, Park didn’t shy away from a question about .
“Yeah, so the ITC case between Jawbone and Fitbit started with Jawbone asserting six patents against us,” he said. “We've knocked [out] all six of those patents which is pretty phenomenal. The case is still going forward on the trade secrets portion alone but it's pretty safe to say that we're optimistic with the direction that the case is heading.”