Operator: Good day, everyone, and welcome to Fitbit's Second Quarter Financial Results Conference. Today's program is being recorded. At this time, I would like to turn things over to Tom Hudson, SVP of Finance. Please go ahead, sir.

Thomas Hudson: Good afternoon and welcome. Fitbit distributed a press release detailing its quarterly results earlier this afternoon. It's posted on our website at www.fitbit.com and available from normal financial news sources. This conference call is being webcast live on the Investor Relations page of our website where a replay will be archived. On this call, all financial measures are presented on a non-GAAP basis, except for revenue, which is a GAAP measure. A reconciliation of GAAP to non-GAAP financial measures is provided in our posted earnings release or in other earnings presentation materials posted on the IR webpage. Both references will be to a year-over-year comparison unless specified otherwise. This conference call will contain forward-looking information, which is subject to risks and uncertainties described in Fitbit's filings with the SEC and in today's press release. Actual results or events may differ materially. We will begin with a commentary from James and Ron and will then open up the call to questions. Let me introduce Fitbit's Chairman and CEO, James Park. James?

James Park: Thanks, Tom, and thank you to everyone for joining today's call. In Q2, we made progress transforming our business and generated revenue of $314 million, up 5%. However, our sales mix was different than we anticipated. Versa Lite sales did not meet our expectations, leading to a contraction in quarterly smartwatch revenue growth. We subsequently reduced our Versa Lite sales expectations for the remainder of the year and are lowering our full-year 2019 revenue gross margin guidance. We attribute the Versa weakness to our pricing go-to-market strategy. We added Versa Lite to our product lineup in Q1. The intention of lowering the barrier to entry for consumers to purchase a quality smartwatch with certain core features and shifted to an everyday low pricing strategy from a promotional. This resulted in lower promotional dollars spent the less outfit. While Versa Lite received good press in consumer reviews, we saw that consumers are willing to pay more for smartwatch with additional features or look for discounting versus everyday value. All of this said, we believe that Fitbit brand remains strong. Versa sales exceeded our expectation, benefiting from the trade-up scenario that I mentioned earlier where consumers are willing to pay more for more features. Tracker sales accelerated in the quarter, growing 51% to $186 million. And using the last four weeks of sales through July 20 in the U.S. as a proxy, Fitbit had four out of the five top spots in the wearables category where Versa smartwatch outsold each Samsung and Garmin. We feel confident. We are taking the steps needed to ensure what happened with Versa Lite has not happened again and that we reduced the sales impact for the single product. First, we are reevaluating our pricing and promotional strategy for future hardware launches. In addition, we are accelerating our hardware product development cadence on annual cycle. This will not only enable us to adapt faster to changing market conditions, it should make our business more predictable on a year-over-year basis since new product introductions comprise the majority of our sale. In order to execute the strategy as efficiently as possible and with lower capital expenditures and operating expense that we do today, we are accelerating our migration to a joint development model where manufacturers will bear more of this cost burden. Looking ahead, we continue to transform our business from an episodic one centered around the device sale to a lifetime value-driven model centered around behavior change. We will continue to invest in our premium service, Fitbit Health Solutions channel, both of which have the benefit of diversifying revenue and more predictable higher gross margin revenue. This can create a more valuable longer lasting relationship with our users while changing the perception of our products and services from a nice to have or need to have. As part of this transformation, customer acquisition begins with a sale of the device. Trackers have always been key to our portfolio and we continue to see a clear segment of users prefer this form factor. This is further validated by the interest we've seen from payers, life insurance companies, governments and businesses embracing wearables, specifically trackers as a key strategy for behavior change for their members and employees. With tracker devices sold up 36% in the first half of 2019, we believe the strength in tracker growth is evidence that this category of the wearable market and expand with innovation. We believe smartwatches will continue to drive wearable growth and we are excited by the innovation we can bring to the category and expect to continue our product mix for this segment of the wearables market. We think there's a large segment of the world's population that cannot afford a $400 for smartwatch, but once the opportunity become more informed and take control of their overall health and wellbeing with more accessible solutions from a trusted brand such as Fitbit. We are confident, there is a real opportunity to deliver a device innovation at more affordable and accessible price point and we continue to focus on bringing devices to market in the $50 to $300 price range that are easy to use. Beyond customer acquisition, the next step is providing additional value to the community with premium service. I'm proud to say that we are on track to launch our premium service this fall. In two countries with more than one million combined existing active users, we have launched initial version of the service. While it's early, the initial attach rates and consumer receptivity have been encouraging. Our premium service delivers a dynamic and personalized experience that will provide everyday consumers with data tools, program, guidance and support, they need to reach their health goals, whether its activity, nutrition, sleep, or mindfulness, our premium service helps users understand the correlation between their behavior and their health and provides them with tools to improve it, all in one centralized place. We also plan to further accelerate our premium strategy and revenue by bundling our devices with our premium services starting in the fall. We believe this will enable us to both sell more devices and to grow our revenue per user. Our community of more than 27 million active users serves as a key foundation from which to launch successful premium revenue. Our Fitbit Health Solutions channel has been another bright spot in the quarter and key to our long-term strategy. Revenue grew 16% to $24 million. With $54 million in revenue in the first half of 2019 up 42% it is on track deliver its $100 million revenue goal in 2019. In addition, our work with the leading health plans in the U.S. or health coaching pipeline continues to grow. We are committed to returning the business to profitability and are focused on taking steps to ensure the long-term success of Fitbit. It is not business as usual. We have lowered our 2019 operating expense – expectations to approximately $640 million, down 9% year-over-year. However, we do not believe cost cutting alone will allow us to succeed. Instead, we believe success will come from lowering our capital investment, bringing more devices to market faster with more predictability and growing our gross margin accretive, Fitbit Health Solutions channel and premium services revenue stream. We saw 31% increases in devices sold along with encouraging early results from our premium service, confirming our belief that our strategy to introduce more accessible devices grow our community of active users and provide them with additional services that generate recurring revenue stream continues to be the right one. With that, let me turn the call over to Ron to discuss the quarter in more detail.

Ronald Kisling: Thanks, James. Before I go to the details, I would like to remind investors that all financial references are non-GAAP measures except for revenue and growth references represent year-over-year changes unless I specify otherwise. As James indicated, personalized sales were lower than we had expected, resulting in smartwatch practicing as a percentage of revenue in the second quarter relative to the first quarter. Channel inventory levels increased an annual basis, primarily resulting from more normalized first inventory levels after being supply constrained in 2018 and to support expected summer promotional activity through the portion of the increase driven by weaker sell-through of Versa Lite. Q2 gross margin was also adversely impacted by higher excess inventory charges, resulting from lower personalized sales. Following the historically seasonal patterns of our business and with Versa Lite having launched at the end of the quarter, we expect Versa Lite sales to be skewed to the second half of the year, resulting in a greater reduction to our sales guidance in the second half of 2019 relative to the first half. With lower product sell-through, we also expect higher discounting and promotional activity. This creates downward pressure on second half gross margins as compared to prior expectations. Recapping Q2, we generated $314 million of revenue, up 5%, as a 31% growth in devices sold was partially offset by a decline in the average selling price to $86. New products introduced in the past 12 months, represented 68% in 2Q revenue, which strengths and charge three and the Inspire family. We also saw less cannibalization on Versa than anticipated. As James mentioned, our Fitbit Health Solutions channel grew 16% to $24 million and represented 7% of our revenue. Fitbit Health Solutions revenue remains skewed toward hardware, but we have begun the rollout of bundle offering or our devices are coupled with digital intervention and a Coach. Fitbit.com our direct-to-consumer business generated $33 million in revenue and representative 10% of our sales. Now let me turn in address our guidance. For full-year 2019 we are lowering our revenue guidance by $95 million at the midpoint versus our prior guidance driven by the weaker than expected Versa Lite sale. This reflects a reduction in our Versa Lite sales expectations by more than $150 million, partially offset by increased demand for our tracker products and increased sales of Versa. Revenue growth in the second half will be impacted by the successful charge three launch the second half of 2018, resulting in a challenging year-over-year comparison. As a result, we expect tracker growth to decelerate significantly from the first half, the second half of 2019. In contrast, we expect smartwatch revenue growth to accelerate driven by innovation in the category and to exceed 50% of our total revenue the second half of 2019. We expect average selling price to be down year-over-year, but to improve from the second quarter driven by new product introduction. Our revenue for 2019 is now forecasted to be between $1.43 to $1.48 billion representing a decline of 2% to 5%. The trajectory of revenue decline has improved from each year from 2017 through today. So with the anticipated deceleration of revenue growth in the second half of 2019, our revenue trajectory is not where we want it to be. With the reduction in revenue guidance and higher than expected promotional activity, excess inventory charges and product return, we are lowering our 2019 gross margin guidance to approximately 35% from approximately 40%. In addition, we expect higher hosting costs in 2019 resulting our transition to Google Cloud and from increased amounts of data driven by the growth of more complex devices sold. We are also lowering our 2019 operating expense expectation to approximately $640 million, down 9% year-over-year. While we reduced our OpEx by over $200 million on an annual basis 2016 we have not fully offset the decline in revenue gross margin dollars during this period. We believe cost cutting alone will not allow us to see. As James said earlier, we believe successful come from lowering the capital investment and how we bring devices to market and growing our gross margins who are creative Fitbit Health Solutions channel and non-device revenue stream. We expect adjusted EBITDA to be in the range of negative $85 million and negative $60 million. In despite the anticipated improvement in operating loss in the second half and lower capital expenditures in 2019, the change in working capital is a headwind rather than the tailwind to our free cash flow. As we discussed on our Q1 call, we entered 2019 with the accounts receivable of approximately $100 million lower than we entered 2018. As a result, we expect free cash flow to be in the range of approximately negative $150 million and negative $120 million and to end the year for the approximately $570 million to $600 million cash. But 2018 we expect our free cash flow to be back-end loaded and anticipate consuming cash in the first three quarters of the year before generating cash and Q4 or seasonally strongest quarter. We expect our capital expenditures to decline year-over-year to approximately 3% of revenue for the full-year. As we focus on leveraging product roadmap synergy and continue to consolidate our real estate footprint. Moving to taxes, we expect our full-year effective tax rate to be approximately 25%. So this could fluctuate substantially depending on the geographic footprint of our earnings. We expect stock-based compensation expense to be approximately $80 million and the basic share count approximately $260 million. Our balance sheet remains robust. We will remain disciplined on the M&A front, but we'll look to utilize our balance sheet to augment organic investments, while looking to accelerate the transformation of our business to our digital health premium services. Turning to Q3. Our guidance reflects and anticipated deceleration in the revenue growth rate of trackers and the rebound in smartwatch revenue growth. We expect AST to be down year-over-year, but up sequentially from Q2. With a more aggressive pricing and promotional strategy, we expect revenues to decline in Q3 and our forecasting arrange of $335 million to $355 million. The revenue range also reflects the timing of our shipments and of the holiday period. We expect third quarter gross margin to be similar to the second quarter. We expect adjusted EBITDA to be in the range of a loss of $27 million, $19 million and we expect a net loss of $0.11 to $0.09 per share. Our guidance reflects in effective tax rate of approximately 25%, which will vary depending on the geographic mix. Our anticipated stock compensation expense and basic share count are approximately $19 million and $260 million respectively. To close, despite the disappointing Versa Lite revenue trajectory, we have made steady progress on the transformation of our business. Active users continue to grow on a year-over-year basis. Our Fitbit Health Services business is on track to deliver approximately $100 million revenue and we successfully introduced our premium service [indiscernible]. We expect a typical fall product launch and are confident in our product pipeline. We have adjusted our Versa Lite expectations and promotion strategy and are encouraged by the strength of the remainder of our portfolio. With that, let me turn the call back to the operator to answer your question. Operator?

Operator: [Operator Instructions] We'll hear first today from Alex Fuhrman with Craig-Hallum Capital Group.

Alex Fuhrman: Great. Thanks very much for taking my question. Wanted to ask a little bit about the guidance and what you're seeing with the Versa Lite. I mean, it looks like, if I'm interpreting this correctly, you're guiding at the midpoint revenues for Q3 to be down around 12% or 13% and then Q4, down somewhat less around 8% or 9%. Just curious what you're seeing in terms of your planned path of product launches and sales over the next couple of quarters that gives you the confidence that things should get a little bit better in the fourth quarter. And then, if I could ask, just last time a few years ago, sales turned negative, they were very negative for about four quarters down in the 30% range. If you can just give us some explanation of perhaps why this looks similar or different to the last downturn a few years ago and maybe some confidence as to why sales won't be down quite so much over the next four quarters?

Ronald Kisling: Yes. Well, a couple of things. I think as you see the trajectory in the second half, again, I think the big change really is lower Versa Lite sales. And as we indicated, Versa Lite is – a more significant portion of sales in the second half given the holiday period as well as the launch kind of in the middle of the first half. So that's what reflecting the drop. What we're seeing generally across the course of the year on our guidance with Versa Lite, over $150 million below what our initial expectations were. We're bringing down guidance at the midpoint by about $95 million. And that reflects really an offset by increased demand for our trackers, which were particularly strong in the first half and in Q2 growing 51% on a year-over-year basis as well as lower cannibalization of the Versa. So that should offset some of the decline we saw in Versa Lite. And then I think the second question, could you repeat that?

Alex Fuhrman: Yes. Just thinking about how few years ago when sales turned from positive to negative, it was obviously a very steep decline in sales for the next four quarters or so. And it sounds like you're not expecting the next four quarters to be nearly as bad as they were a few years ago. Just wondering if you could tell us a little bit about some of the similarities and differences between this slowdown here with the Versa Lite versus what you saw a few years ago?

Ronald Kisling: Yes. So some of the difference, I think in 2016, the market was really transitioning very quickly to smartwatches. And so what we really saw was significant declines year-over-year in our sale of trackers as we got ready to launch our smartwatch offering. I think in this year, we see the change really around Versa Lite with continued strength in both trackers and smartwatches on a year-over-year basis. So 2016 was really about the transition in the market from trackers to smartwatches. We didn't have a smartwatch then, whereas in this year, it really has to do with our go-to-market strategy around the Versa Lite product with strengths both across trackers and our other smartwatch offering.

James Park: And as Ron mentioned, Versa continues to do better than expected, which is a big confidence booster in the future of our smartwatch franchise. And that leads into excitement about our overall lineup.

Alex Fuhrman: Great. That’s really helpful. Thank you very much.

James Park: Thank you.

Operator: Thanks. We’ll go next to Scott Searle with ROTH Capital.

Scott Searle: Hey, good afternoon. Thanks for taking my question. Hey, maybe to just follow-up in terms of the manufacturing strategy and bringing partners in. What is the impact in terms of how quickly now you think you can turn products around and what we should be expecting from gross margins as we get beyond the September quarter? Does it start to come back with some seasonality in the fourth quarter and how do we think about going into 2020? And then follow on to that, it sounds like the lower end of the marketplace, particularly for the smartwatch has not been as effective as you'd hope for. Should we be expecting as part of the fall line up more higher end solutions as part of that portfolio?

James Park: Yes. So, on the hardware development strategy, so as I mentioned in my remarks, we are accelerating a hardware product development cadence and moving most of our products that comprise the bulk of our revenue to an annual cycle. And we do feel that one, that's going to give us more shots on goal and mitigate the impact of a single product mix. It's going to allow us to adapt faster to a changing market conditions and the competitive landscape. And it's also going to allow us to participate more fully in a fast growing wearable market, especially because new product introductions are such a large part of our revenue. And it also had the benefit of making our revenue more predictable on a year over year basis. We've actually been undergoing this change already. There's already several launch products and one underway, using this new methodology. And again, we expected to have positive improvements in our product cadence. And another big change there is it shifts a lot of the development and costs onto our manufacturing partners where we can leverage their scale and their resources to bring products to market.

Scott Searle: James, does it benefit your gross margins in the near-term?

James Park: So in the near-term, um, what I would say is, in Q2 is a starting point, we saw gross margins decline on a year-over-year basis that they were up sequentially. And that year over year decline was really driven by lower warranty benefit. I think we spoke about, previous calls increased discounting and this was partially offset by improving yield losses in efficiencies. The sequential improvement was a little bit less than we expected due to some excess inventory reserves resulting from the changes in the Versa Lite forecast. When you look to the second half, Q3 gross margins will trend lower on a higher mix of smartwatches, and increased promotions. But overall, the second half gross margin should be very similar to what we saw in the first half. I think when you look to 2020, what I would point to is our two fastest growing businesses, which are Fitbit Health Services and our Premium Services each have higher than our average gross margins and are expected to have a meaningful contribution to our revenues in 2020. And as you can imagine on the services side or a service that has gross margins say north of 70%, you don't have to be a significant percentage of revenue if you have a meaningful contribution to gross margin accretion.

Scott Searle: Hey, maybe just follow-up on that point, Ron and James had referenced it earlier in his initial commentary, but the lifetime value of a user or subscriber or device. Could you guys expand on that a little bit in terms of how you're thinking about it? And maybe couple that with your comments around bundling. It sounds like maybe some of the new products are going to be bundled. Are you thinking free then for premium services with certain products as a rollout in launch in the fall? Thank you.

James Park: Yes. So, right now our relationship with our customers is very episodic. We sell them a device and while there's continued usage of the software afterwards from a financial perspective, it's pretty much over at that point with the launch of Premium Services, currently in a couple of key test markets and a full launch in the fall. We feel that that's a critical part of changing our model from again, one that's episodic to one that's long-term and one of the ways that we're going to accelerate that in the fall is as you mentioned, through bundling. So there'll be a different types of bundling strategies, but one that's definitely on the table is the ability to give away certain hardware devices for free and then a recurring revenue stream on the services side with that user for a longer period of time.

Scott Searle: Thank you.

Operator: We'll hear next from Charlie Anderson with Dougherty & Company.

Charlie Anderson: Yes. Thanks for taking my questions. I guess I'm just curious if I look at the Q3 guidance and sort of the implied OpEx here. And I look at sort of implied Q4 OpEx, it seems like there's a little bit lower ramp than there would be traditionally from Q3 to Q4 OpEx. I wonder maybe just what's feeding into that and then just longer-term how we should think about how you're planning OpEx relative to topline? Thanks.

Ronald Kisling: Yes. So I think as you point out, we’re reducing our OpEx for the full-year to $640 down from our $660, $690 range. We did see a decline in Q2. I think the biggest variable that you see is really the timing of really our marketing and product launches. So we’ll see in Q3 pull forward of some media to support the fall product launches that affects the spending and Q3. I think as you look at more broadly we're continually committed to driving efficiency in the business. A number of things which James spoke about on the joint development of that does enable us to bring products to the market in the less capital intensive manner which will allow us to drive greater efficiency and operating expenses combined with growing two businesses, our services business and our health services businesses, which higher gross margins, which will contribute to accretion and margins.

Charles Anderson: Great. And then on gross margin, you mentioned a couple of factors that impacted the revision downward. I think returns were mentioned, promotional activity was mentioned. I wonder if maybe you could just elaborate on to what degree each of those individual aspects mattered mix as well I suppose. Thanks.

Ronald Kisling: Yes. I mean, I think without breaking it out explicitly. What we did see with as we saw lower than expected demand or Versa Lite, particularly through some promo periods that had an adverse impact on our product returns and increased that over what our earlier expectations were. And then similarly, there was some excess inventory reserves taken due to changes and our expected volumes, again, associated with Versa Lite. Both of those played out in Q2. And certainly the returns piece is a component through the second half. So the biggest driver overall when you look at sort of gross margins and ASPs is increased promotions, associated with the products particularly Versa Lite.

Charles Anderson: Gotcha. Thanks so much.

Operator: And from Morgan Stanley, we’ll heare from Katy Huberty.

Katy Huberty: Yes. Thank you. Good afternoon. The $150 million revenue reduction in the full-year guidance for Versa Lite. How does that compare? What percentage is that of the original revenue contribution from Versa Lite that you would have had in the model three months ago?

Ronald Kisling: Yes. So we haven't sort of practice of disclosing specific revenue by a product basis. What I would say is clarify that it was more than $115 million. However, we still sell a significant amount of Versa Lite in the course of the year. And it’s offset some of that with higher sales than we expected a Versa versus smartwatch. As well as continuing strong demand of our trackers, specifically Charge 3.

Katy Huberty: Okay. And then can you comment on where you exited the quarter as it relates to channel inventory? Maybe bucketing it into trackers versus smartwatches?

Ronald Kisling: Yes. So we don't really provide a breakdown of channel inventory between our product segments, but what I would say is channel inventory levels did grow year-over-year, primarily resulting from more normalized Versa inventory. Because last year we were supply constrained on an early launch of Versa. And so those are at what we would characterize as appropriate and normalized levels, as well as some growth in channel inventories to support expected summer promotional activities. Part of the reduction in our guidance, is to ensure that we continue to exit the year, with relatively clean channel inventory in line with what we believe is a normalized inventory levels. Particularly around addressing Versa Lite, which based on our expectations did not necessarily sell through in the quarter at the levels we initially expected.

Katy Huberty: Is it fair to say that you would expect to work those channel inventories down in the September quarter and you wouldn't expect to have more of that work down in the December quarter?

Ronald Kisling: What I would say is that, we would work that inventory down over the remainder of the year to ensure that we – in the year, we clean inventory levels. I mean particularly Q4 is our biggest sales period. It is also the largest promotional period which represents an opportunity to driving the middle volume of product.

Katy Huberty: Great. Thank you so much.

Operator: We’ll go next to Jeffrey Garro with William Blair & Co.

Jeffrey Garro: Yes. Good afternoon, guys, and thanks for taking the questions. Maybe a couple for me on Fitbit Health Solutions. So first want to ask if there's any update on adding or increasing value around specific medical conditions or disease states and maybe even more specific, any update on any dialogue with the FDA approval around sleep apnea or a trial fibrillation algorithms?

James Park: Yes. So one of the factors in our growth and the increased performance of FHS is our Fitbit Care business and the pipeline, and Fitbit Care again is our health coaching offering that allows health plans and employers and their employees and members to manage chronic disease conditions like diabetes. So that pipeline is continuing to grow and we've already started the rollout of bundled offerings where our devices are actually coupled with Fitbit Care and its associated digital interventions along with a coach. And we've seen promising initial stats with that offering. So that's been a bright spot in the healthcare business along with a strong growth internationally as well. In terms of the FDA, we're continuing to work with the FDA on a variety of initiatives, including around sleep apnea. I just can't give you a timeframe right now.

Jeffrey Garro: Fair enough. And then a follow-up on the revenue growth for Fitbit Health Solutions, I think I back into roughly flat year-over-year growth in the second half and recognize that you all had called out a frontloaded contribution from Fitbit Health Solutions, but wanted to check if there's anything in particular about the second half of 2018 that represents particularly tough comparable or if you guys are just viewing that target of $100 million in Fitbit Health Solutions revenue as conservative at this point?

Ronald Kisling: We're on track for the $100 million. What I would say is revenues are consistently tend to be front-end loaded based just on the seasonality of that business. And so we would expect to see a higher growth rate in the first half than the second half. But I would reiterate that we are comfortable and on track to the $100 million number.

Jeffrey Garro: Fair enough. Thanks for taking the questions.

Operator: And from Citi, we’ll move next to Jim Suva.

James Suva: Thank you very much and you've been very clear and appreciative of the full-year guidance of all the metrics. So thanks you for that clarity. James, it's really never been a year in Fitbit's history of steps to gear negative cash flow generation and lease. So can you help us understand, are there any concerns or a going concern? I know you don't have a debt other than a little bit of leasebacks. I mean that's a very large chunk out of your cash reserve, which has been very much a buffer for investors and it looks like it’s a bit of nick out of it. And so I know you don't want to guide the following year to cash flow at this point, I think that there will be some going concern questions after that cash flow adjustments?

Ron Kisling: Yes. This is Ron. I'll take the question. I think first and foremost, it's not a business liability issue. What I will say is, the reduction in revenue coupled with declining gross margin obviously negatively impacted our free cash flow for the year. The impact is partially offset, but not fully offset by our lower operating expense expectations. As we discussed on the Q1 call, on a year-over-year basis, our free cash flow in 2019 is further impacted by negative change in working capital. We entered 2019 with $100 million less accounts receivable than the prior year. And so if you take a look at the change in revenue and gross margin as well as, the significant change in working capital, we expect to consume approximately $130 million in cash and that's an increase over our earlier estimates of between $40 million and $70 million. A couple things, I want to remind you that as in prior years, we have a very seasonal business. We expect – where our cash flow is backend loaded. We would expect cash to cross at the end of Q3 before growing in Q4, which is our typical seasonal patterns. We do back to the viability question expect it in the year, somewhere between $570 million and $600 million of cash. So we will exit the year with a very robust balance sheet. I think as you look forward to 2020, we'll not providing necessarily forecast, what I would say is we would not expect to enter the year with the working capital headwinds that we entered the year this year. And so that should provide you an opportunity to see improvement in that free cash flow as you look forward to 2020.

James Suva: Okay. That was actually very, very useful and detailed and much more than what I was expecting. So thank you. And then maybe a strategy question for James, the OpEx changes are painful and not going to see as the CEO of a company, and you've really got some great initiatives with healthcare and things like that. But some of these things take a lot of time to further feed and maturate going. So when you think about the OpEx changes you're doing, can you help us understand about kind of where the defocus is and where the super focus is because it seems like you really can't do it all given the changing dynamic of the market changing so fast. Thank you.

James Park: Yes. So overall we’re very cognizant of the need to be very disciplined on OpEx, while still in acting the business transformation. So we realized that it's not business as usual and there are very specific things doing to change the way that we work to ensure that we can continue to execute on our strategy within a very disciplined OpEx profile. So one of the key things that I mentioned before, there JDM strategy which allows us to leverage our manufacturing partners and have them share more of the costs while allowing us to access their scale and their resources with develop products much more efficiently. So that's a big one. And there are also several initiatives underway within the company to focus on the things that matter and to offload the things that don't. So what I will say is yes, OpEx discipline is definitely top of mind.

James Suva: Thank you so much for the clarification. It’s truly a great responses and good to hear the details. Thank you, guys.

Operator: We'll take our last question today from Thomas Forte with D.A. Davidson.

Thomas Forte: Great, thanks. So given your guys cash position, how should we think about kind of the potential for an accelerated repurchase program? And secondly, you touched on this earlier about you're on track for the $100 million of revenue for your healthcare specific efforts. How should we think about your healthcare related initiatives that are not directly tied to hardware sales? Thanks.

Ronald Kisling: I'll go with the first one. I think with respect to a stock buyback, we continue to evaluate it and obviously that evaluation takes into account your work or evaluation looks our cash balances. I think to reiterate kind of the messages in the past, obviously our priorities to preserve, the opportunity to invest in growth. We're looking to do that more cost effectively, as James spoke about, and we'll continue to take a good hard look at whether and or win, every purchase program would make sense.

James Park: And on the healthcare software story. So today revenue does remain skew towards hardware, but we are looking for ways to accelerate the mix of that revenue towards software and services. And I mentioned previously that we're already beginning to rollout of bundled offerings or devices are coupled with Fitbit care and a Health Coach. And the other area of opportunity there is as we launch our consumer premium offering, there is an opportunity to sell that into our enterprise customers as well as a lower price Tier for digital interventions.

Thomas Forte: Great. Thank you.

Operator: And thank you everyone for joining us today. That will conclude today's conference. Good bye.