WEBVTT - Businessweek Extra - FitBit CEO James Park

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<v Speaker 1>Face is Bloomberg Business Week with Carol Masser and Jason

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<v Speaker 1>Kelly from Bloomberg Radio. Welcome to the Bloomberg Business Week

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<v Speaker 1>Extra podcast this weekend, joined by James Park, the CEO

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<v Speaker 1>of Fitbit. Great to have you with us. So much

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<v Speaker 1>going on with Fitbit right now. Bring us up to date.

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<v Speaker 1>New products out of news this Yeah, we just announced

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<v Speaker 1>a few new products. We announced Inspire and Inspire HR,

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<v Speaker 1>which are new low cost affordable trackers. We also announced

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<v Speaker 1>First to Light, which is a lower cost, more affordable

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<v Speaker 1>version of our top selling Versus smart watch, along with

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<v Speaker 1>Ace two, our successor to an amazing kids product that

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<v Speaker 1>we launched last year. Talk to us about the strategy

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<v Speaker 1>where you see kind of Fitbit going as a result

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<v Speaker 1>of some of the new products you're announcing this week. Absolutely,

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<v Speaker 1>a large focus for Fitbit is really about growing our

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<v Speaker 1>user community, what we call our active users. Last year

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<v Speaker 1>we grew active users ten to almost twenty eight million

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<v Speaker 1>active users. That's one of the largest online health and

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<v Speaker 1>fitness communities in the world. And our strategy is to

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<v Speaker 1>lower a SPS, increase the number of active users that

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<v Speaker 1>we have, and later this year uh launch and monetize

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<v Speaker 1>our user based with a paid premium offering. James, I'm

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<v Speaker 1>always curious about once you get a user, how sticky

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<v Speaker 1>is it? How how often do they stay with you?

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<v Speaker 1>Health and fitness is always a challenging thing for people

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<v Speaker 1>to stick with. But we've been incredibly happy with our

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<v Speaker 1>attention of our users and that's a testament to the

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<v Speaker 1>innovation that we're bringing in both our hardware and software.

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<v Speaker 1>Are active users are increasing every year? What's the retention rate?

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<v Speaker 1>We don't break that apt but you're happy with I'm

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<v Speaker 1>happy with it, and I think continue to improve It's

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<v Speaker 1>it's been improving over time as we roll out continuous

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<v Speaker 1>new features, both on hardwarens off. So let's talk about

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<v Speaker 1>the software side, because you know you mentioned this paid

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<v Speaker 1>premium product coming out later this year. I have a

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<v Speaker 1>fit bit, I'm wearing my ionic now. I do use

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<v Speaker 1>the app that you know fairly frequently to just sort

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<v Speaker 1>of check in being a data geek and all that.

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<v Speaker 1>Um what needs to come for that? How do you

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<v Speaker 1>get people even more addicted to to that app? Absolutely,

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<v Speaker 1>A lot of what we've delivered in the app historically

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<v Speaker 1>has just been data numbers, scores, graphs, etcetera. Um, what

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<v Speaker 1>we feel will bring a lot of value to our users,

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<v Speaker 1>is actually something beyond that? So what do I do

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<v Speaker 1>with the data? So it'll all be about coaching, guidance

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<v Speaker 1>and premium content around sleep, nutrition, exercise, mindfulness, etcetera. And

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<v Speaker 1>bringing together holistic solution that tells people what should I

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<v Speaker 1>do next? How do I improve? That's the next step

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<v Speaker 1>for us, And so do you develop all that organically

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<v Speaker 1>or their partnerships. We're going to get to another partnership

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<v Speaker 1>in in a second round the health arena. But you know,

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<v Speaker 1>there are so many apps out there. I feel like

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<v Speaker 1>I see a new one every day, whether especially on

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<v Speaker 1>the mindfulness side, whether it's Calm or headspace or others.

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<v Speaker 1>How do you make that work in this sort of

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<v Speaker 1>sea of opportunities. Absolutely, it'll be a combination of stuff

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<v Speaker 1>that we develop along with partner content as well. And

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<v Speaker 1>one of that more interesting things is we acquired a

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<v Speaker 1>company called twine Health last year that we be launches

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<v Speaker 1>fit bit Care that's bringing personalized human coaching to a

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<v Speaker 1>lot of these fitness and health goals. And you know,

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<v Speaker 1>at some point we'll be making that available to consumers

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<v Speaker 1>as well. You know, there's fitness and health and then

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<v Speaker 1>there is health and healthcare, and I know this has

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<v Speaker 1>been certainly a focus for you guys in terms of

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<v Speaker 1>kind of wrapping ramping up that health solutions business. Talk

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<v Speaker 1>to us a little bit about that, what's the growth

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<v Speaker 1>potential and where do you see that going? And because

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<v Speaker 1>you're doing collaborations right with a lot of healthcare companies. Absolutely,

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<v Speaker 1>We just announced a new partnership today with a company, Solera,

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<v Speaker 1>around diabetes management. So a lot of what we're doing

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<v Speaker 1>is focused on helping people with more serious chronic disease

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<v Speaker 1>conditions like diabetes, heart health, sleep disorders, mental health. And

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<v Speaker 1>we've partnered up with over six d eight clinical research partners,

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<v Speaker 1>over fift hundred employers, and over a hundred health plans

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<v Speaker 1>including Humana, United Healthcare, Blue Cross, Blue Shield. And that

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<v Speaker 1>healthcare portion of our business is growing incredibly well, eight

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<v Speaker 1>percent year over your growth last year, double digit growth

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<v Speaker 1>this year. We're projecting to be about hundred million dollar

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<v Speaker 1>business for us. How does that work though? When you

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<v Speaker 1>so when you hook up with an employer, um, is

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<v Speaker 1>it a case that all the employees get one of

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<v Speaker 1>your devices, one of your wearables or how does it work? Uh,

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<v Speaker 1>You're you're pretty close to the mark, so most of

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<v Speaker 1>the employers will either fully subsidize or partially subsidize a

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<v Speaker 1>device and software services for their employees. Similarly with health plans.

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<v Speaker 1>One of the more interesting developments is that we're actually

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<v Speaker 1>in a covered benefit in forty two Medicare advantage plans

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<v Speaker 1>in twenty seven states, and a lot of those cases

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<v Speaker 1>plan members are getting Fitbit devices for free. It's one

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<v Speaker 1>of the first times that you know, device like ours

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<v Speaker 1>has been part of a Medicare advantage plan. And then

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<v Speaker 1>what happens with the data I'm always curious about, right

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<v Speaker 1>because data is valuable and it can make a product

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<v Speaker 1>much more useful, but also very personal, but very personal,

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<v Speaker 1>So and I think right now we're in this environment

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<v Speaker 1>like who owns that data? Absolutely, the data is really

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<v Speaker 1>under the control of our use and so we've always

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<v Speaker 1>had a philosophy and it's enshrined in our privacy policy

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<v Speaker 1>that we will never sell data to third parties that's

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<v Speaker 1>not our business model, and only share your data with

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<v Speaker 1>your explicit opt in consent. So we're not an advertising

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<v Speaker 1>company like a lot of the tech giants out there.

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<v Speaker 1>So users have come to trust us with their data.

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<v Speaker 1>But James the healthcare companies that you work with, they

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<v Speaker 1>have access to that data or do they not. It's

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<v Speaker 1>only an anonymised data. They don't know exactly who you

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<v Speaker 1>are unless you share that an opt in explicitly. All right,

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<v Speaker 1>let's talk a little bit about the competitive landscape, because

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<v Speaker 1>we're sitting here across the table from you. I've got

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<v Speaker 1>my fitbit, Carol's now I have an Apple lot. What

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<v Speaker 1>does it look like out there right now? Because a

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<v Speaker 1>lot of the same things you're talking about, especially as

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<v Speaker 1>it relates to health We hear your counterpart Tim Cook

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<v Speaker 1>talk about as well, everybody's sort of going after this space.

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<v Speaker 1>How do you differentiate there? How do you differentiate in

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<v Speaker 1>general from the competitor. I think the great thing is

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<v Speaker 1>the healthcare industry is such a gard gan to an

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<v Speaker 1>industry that there's a lot of room from multiple play

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<v Speaker 1>is to take different approaches and compete and succeed. For

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<v Speaker 1>us in particular, um, you know, two years ago we

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<v Speaker 1>had no smart watch business. We launched Ionic, which you're

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<v Speaker 1>wearring and versa and today Versa Light. We announced the

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<v Speaker 1>product and you know, in a matter of two years,

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<v Speaker 1>we've become the number too smart watch player in the

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<v Speaker 1>United States, you know, beating out a lot of other

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<v Speaker 1>tech giants, whether it's Samsung, Android Ware, etcetera. So I

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<v Speaker 1>think we've become incredibly successful. And for us, you know,

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<v Speaker 1>it's not just the devices. It's about the devices, the

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<v Speaker 1>data that you mentioned, our active users or community, and

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<v Speaker 1>a lot of the work that we're doing with healthcare,

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<v Speaker 1>especially with large health plans. How tough is it there

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<v Speaker 1>are you're contantly looking over your shoulder because I do

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<v Speaker 1>feel like it's such a competitive space. Well, that's the

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<v Speaker 1>nature of technology, I think. You know, Uh, we'll be

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<v Speaker 1>celebrating our twelfth anniversary as a company in a few weeks,

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<v Speaker 1>so I think it's a testament to our ability to

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<v Speaker 1>continuously innovate. I think what's interesting too is this fitbit

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<v Speaker 1>ACE two and tapping into the into kids. That is

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<v Speaker 1>interesting to me, especially when you see um the childhood

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<v Speaker 1>obesity rates and so on. Tell me a little bit

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<v Speaker 1>about that market for absolutely, you know, adults are having

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<v Speaker 1>a lot of you know, chronic obcity rates in the

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<v Speaker 1>US are going up, not just for adults, but particularly

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<v Speaker 1>for kids in activity a lot of screen time, which

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<v Speaker 1>is reducing physical activity and physical play. And so we

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<v Speaker 1>launched a product last year called ACE. It was kind

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<v Speaker 1>of our tiptoe into this water of trying to help

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<v Speaker 1>kids become more healthy. It did a lot better than

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<v Speaker 1>we expected, and so we decided to invest in a

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<v Speaker 1>new product called ACE two, and we added a lot

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<v Speaker 1>more features which make the product much more fun and

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<v Speaker 1>engaging for kids. We've expanded the age range and made

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<v Speaker 1>the product available to younger kids by designing the band

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<v Speaker 1>in the appropriate way. So we're pretty excited about the product.

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<v Speaker 1>And it's really a passion of mind to see that

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<v Speaker 1>the innovations that we're bringing is not just available to uh,

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<v Speaker 1>you know, people of higher income, but that it's available

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<v Speaker 1>to a wide range of people and across a lot

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<v Speaker 1>of different ages. That's an interesting point because I feel

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<v Speaker 1>like Jason and I we talked, especially when a lot

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<v Speaker 1>of these gadgets the price point right, some of these

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<v Speaker 1>things can be so expensive that you automatically it's just

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<v Speaker 1>a certain sector of the consumer population that's out there.

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<v Speaker 1>It sounds like you guys are thinking about that a lot. Yeah.

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<v Speaker 1>For us, Uh, we think of fitbits should be available

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<v Speaker 1>for anyone and everybody, not just the most well off.

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<v Speaker 1>And you kind of see that in the smartphone category.

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<v Speaker 1>But these prices are just going through the roof. Um.

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<v Speaker 1>You know, there always be a room in our portfolio

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<v Speaker 1>for higher price products for the higher end athlete, etcetera.

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<v Speaker 1>But when it comes to people's health, it really needs

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<v Speaker 1>to be affordable nexcess, right, all right, So take us

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<v Speaker 1>inside the company a little bit. You know, we've talked

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<v Speaker 1>a little bit about the competitive landscape. How are you

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<v Speaker 1>leading hiring recruiting these days? Especially with that you know

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<v Speaker 1>you're a number two, You've got a little bit of

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<v Speaker 1>an underdog mentality maybe at times with with Apple specifically.

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<v Speaker 1>Take us inside headquarters there in San Francisco. Yeah, I

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<v Speaker 1>think the most important thing is that, you know, what

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<v Speaker 1>attracts people to work at fitbit is really the mission

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<v Speaker 1>of the company. It's to make everyone in the world

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<v Speaker 1>healthier through data, through inspiration and guidance. So it's a

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<v Speaker 1>self selecting group of people that choose to work for us.

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<v Speaker 1>Not only uh in San Francisco and Silicon Valley where

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<v Speaker 1>we're headquartered, but we have multiple offices around the world,

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<v Speaker 1>and so it's that mission that really resonates with the

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<v Speaker 1>people that work here. Um, is it tough? Funny employees

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<v Speaker 1>though at this point. Uh, you know, there's always that challenge,

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<v Speaker 1>but again it's that mission. People are attracted to the mission.

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<v Speaker 1>We're just not your standard run of the mill tech company.

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<v Speaker 1>Where do you guys go in terms of future products?

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<v Speaker 1>And I bring it out because there were some statistics

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<v Speaker 1>this week about wearables overall, and when they talk about wearables,

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<v Speaker 1>it's not just smart watches, they talk about EarPods and

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<v Speaker 1>so on and so forth. Ear biometrics. Is this something

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<v Speaker 1>that will ultimately be part of fitbit possible? You know,

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<v Speaker 1>alas can't talk about the future roadmap, but for us,

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<v Speaker 1>you know, we do think there's room for devices beyond

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<v Speaker 1>the wrist. We actually have a connected body fat and

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<v Speaker 1>weight scale that really helps people lose weight and keep

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<v Speaker 1>track of of their health. So um, for people to

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<v Speaker 1>be really successful, whether it's losing weight, becoming more active,

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<v Speaker 1>sleeping better, it's not just going to be about one device,

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<v Speaker 1>but it's going to be about multiple devices and more importantly,

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<v Speaker 1>software and a community of users that helps you along

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<v Speaker 1>the way. So, without giving away the roadmap, take us

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<v Speaker 1>around the corner a little bit. What have you discovered

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<v Speaker 1>about people's habits? What have you discovered about how people

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<v Speaker 1>use either their devices or the app. Uh that that

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<v Speaker 1>might have surprised you as you get to know your

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<v Speaker 1>users more and more in some ways. Uh. You know.

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<v Speaker 1>One interesting stat for us is that the power of

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<v Speaker 1>peer pressure and your friends and family really helps. So

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<v Speaker 1>what we've discovered is that people with over five friends

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<v Speaker 1>on Fitbit walk nineteen more steps per day than someone

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<v Speaker 1>with no friends on Fitbit. A e nineteen steps doesn't

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<v Speaker 1>sound a lot, but actually over the course of a month,

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<v Speaker 1>it adds up to over twelve miles additionally in that month,

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<v Speaker 1>so every little step helps. That is so funny. I

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<v Speaker 1>think about the story that was in the magazine recently

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<v Speaker 1>about the workout things that work is where you develop

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<v Speaker 1>some kind of community and doing it with friends. I

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<v Speaker 1>gotta ask you one more question, just because we're Bloomberg.

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<v Speaker 1>You guys recently were ordered earnings stacks sold off I

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<v Speaker 1>think about four. There was some disappointment on the street

0:11:05.160 --> 0:11:08.320
<v Speaker 1>about the forecast. What can you tell us? Yeah, so

0:11:08.400 --> 0:11:11.960
<v Speaker 1>for us, when we look at our results, we exceeded

0:11:11.960 --> 0:11:15.040
<v Speaker 1>our guidance both in revenue and EPs. Uh in Q

0:11:15.280 --> 0:11:18.280
<v Speaker 1>four Uh you know, so we continue to hit our

0:11:18.280 --> 0:11:20.560
<v Speaker 1>financial commitments. I think some of the highlights are the

0:11:20.600 --> 0:11:24.280
<v Speaker 1>fact that for US device shipments in Q four grew

0:11:24.800 --> 0:11:27.640
<v Speaker 1>year over year for the first time in two years.

0:11:27.640 --> 0:11:29.839
<v Speaker 1>So it's been a long journey for us to try

0:11:29.880 --> 0:11:32.680
<v Speaker 1>to turn around this company. In Q four, uh, you know,

0:11:32.720 --> 0:11:35.400
<v Speaker 1>we're starting to see the first signs of that turnaround,

0:11:35.440 --> 0:11:38.400
<v Speaker 1>and we when we look at our guidance for we're

0:11:38.440 --> 0:11:42.080
<v Speaker 1>projecting revenue growth or about one to four percent again,

0:11:42.400 --> 0:11:44.800
<v Speaker 1>revenue growth for the first time in two years, and

0:11:44.800 --> 0:11:47.320
<v Speaker 1>we're expecting to grow grow our unit shipments year over year.

0:11:47.400 --> 0:11:49.360
<v Speaker 1>Do you ever worry though about an economic downturn on

0:11:49.440 --> 0:11:50.840
<v Speaker 1>what it means for your business or do you feel

0:11:50.840 --> 0:11:52.400
<v Speaker 1>like these are the types of products that people have

0:11:52.400 --> 0:11:54.840
<v Speaker 1>no matter what. Look. I think that again goes into

0:11:54.840 --> 0:11:57.720
<v Speaker 1>their strategy of making sure that these products are affordable

0:11:57.720 --> 0:12:00.720
<v Speaker 1>and accessible to a lot more people, broad our reach

0:12:00.760 --> 0:12:03.200
<v Speaker 1>and our attractiveness, and I think that's a good hedge

0:12:03.240 --> 0:12:07.360
<v Speaker 1>and defensive measure against any you know, macro economic factors. James,

0:12:07.520 --> 0:12:09.640
<v Speaker 1>great to catch up with you. Congrats on the new

0:12:09.640 --> 0:12:12.520
<v Speaker 1>products and eager to see what comes next. Thanks for

0:12:12.559 --> 0:12:14.680
<v Speaker 1>having me. You've been listening to the Bloomberg Business Week

0:12:14.760 --> 0:12:17.760
<v Speaker 1>Extra podcast. Be sure to tune into Bloomberg Business Week

0:12:17.840 --> 0:12:20.760
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0:12:20.800 --> 0:12:23.920
<v Speaker 1>Street Time. I'm Carol Masser, and this is Bloomberg