Commission file number: 001-36514

(Exact name of registrant as specified in its charter)

(650) 332-7600

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☑ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes ☑ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ☑

As of June 30, 2016 , 102,936,387 and 36,503,793 shares of Class A and Class B common stock were outstanding, respectively.

(unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

(unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

(unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

GoPro, Inc. (GoPro or the Company) makes mountable and wearable cameras and accessories. GoPro's products are sold globally through retailers, wholesale distributors and on the Company's website. The Company's global corporate headquarters are located in San Mateo, California.

Basis of presentation . The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The Company's fiscal year ends on December 31, and its fiscal quarters end on March 31, June 30, and September 30. The condensed consolidated financial statements reflect all adjustments (which are normal and recurring in nature) that management believes are necessary for the fair statement of the Company's financial statements, but are not necessarily indicative of the results expected for the full fiscal year or any other future period. The condensed consolidated balance sheet at December 31, 2015 has been derived from the audited financial statements at that date, but does not include all of the disclosures required by GAAP. This Quarterly Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K (Annual Report) for the year ended December 31, 2015 . There have been no significant changes in the Company's accounting policies from those disclosed in its Annual Report.

Principles of consolidation. These condensed consolidated financial statements include all the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of estimates. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the Company's condensed consolidated financial statements and accompanying notes. Significant estimates and assumptions made by management include those related to revenue recognition (including sales returns, implied post contract support and marketing allowances), stock-based compensation, inventory valuation, product warranty liabilities, the valuation and useful lives of long-lived assets (property and equipment, intangible assets and goodwill) and income taxes. The Company bases its estimates and assumptions on historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from management's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations could be affected.

Comprehensive income (loss). For all periods presented, comprehensive income (loss) approximated net income (loss). Therefore, the condensed consolidated statements of comprehensive income (loss) have been omitted.

Prior period reclassifications. Reclassifications of certain prior period amounts in the condensed consolidated financial statements have been made to conform to the current period presentation.

Recent accounting pronouncements

During the six months ended June 30, 2016 , the Company completed acquisitions of two privately-held mobile editing application companies for cash consideration of approximately $104 million . The aggregate allocation of the purchase prices primarily included $17.4 million of identifiable intangible assets, $3.4 million of net deferred tax liabilities and approximately $89 million of residual goodwill. Net tangible assets acquired were not material. Goodwill is primarily attributable to expected synergies in the technologies that can be leveraged by the Company in future software related offerings. Goodwill is not expected to be deductible for U.S. income tax purposes. The operating results of the acquired companies have been included in the Company's condensed consolidated financial statements for the six months ended June 30, 2016 from the date of acquisition.

The acquired companies are headquartered in Austin, Texas and Paris, France. In addition to the amounts above, aggregate deferred cash and stock compensation of up to approximately $37 million is payable to certain continuing employees subject to meeting specified future employment conditions. This amount is being recognized as compensation expense over the requisite service periods of up to four years from the respective acquisition dates.

Actual and pro forma results of operations for these acquisitions have not been presented because they do not have a material impact to the Company's consolidated results of operations, either individually or in aggregate.

The Company's assets that are measured at fair value on a recurring basis within the fair value hierarchy are summarized as follows:

(1) Included in "cash and cash equivalents" in the accompanying condensed consolidated balance sheets. Cash balances were  $126.8 million and $228.6 million as of June 30, 2016 and December 31, 2015 , respectively.

Cash equivalents and marketable securities are classified as Level 1 or Level 2 because the Company uses quoted market prices or alternative pricing sources and models utilizing market observable inputs to determine their fair value. At  June 30, 2016  and  December 31, 2015 , the Company had no financial assets or liabilities that were classified as Level 3, which are valued based on inputs supported by little or no market activity. There were no transfers of financial assets between levels during the  six months ended  June 30, 2016 .

The remaining contractual maturities of available-for-sale marketable securities are as follows:

At June 30, 2016 and  December 31, 2015 , the amortized cost of the Company's cash equivalents and marketable securities approximated their fair value and there were no material unrealized gains or losses, either individually or in the aggregate.

For certain other financial assets and liabilities, including accounts receivable, accounts payable and other current liabilities, the carrying amounts approximate their fair value due to the relatively short maturity of these balances.

The following sections and tables provide details of selected balance sheet items.

Inventory

Property and equipment, net

In June 2016, the Company committed to a plan to vacate and sublet certain leased office facilities that are auxiliary to our main headquarters. Changes in estimated useful life of associated leasehold improvements and office equipment are expected to result in accelerated depreciation expense of approximately $7 million over the next 13 months, including approximately $4 million in the third quarter of 2016 and approximately $3 million ratably over the remaining period.

Intangible assets and goodwill

Purchased technology acquired in 2016 has an estimated useful life of four years. As of  June 30, 2016 , technological feasibility has not been established for IPR&D assets, which have no alternative future use and, as such, continue to be accounted for as indefinite-lived intangible assets.

Amortization expense was $3.9 million and $1.2 million in the six months ended June 30, 2016 and 2015 , respectively. At June 30, 2016 , the expected amortization expense of amortizable intangible assets for future periods is as follows:

The carrying amount of goodwill was $146.5 million and $57.1 million as of June 30, 2016 and December 31, 2015 , respectively. The increase in 2016 was entirely attributable to the acquisitions described above in Note 2.

Accrued liabilities

In March 2016, the Company entered into a Credit Agreement (Credit Agreement) with JPMorgan Chase Bank, N.A., as administrative agent, Wells Fargo Bank, National Association, as co-agent, and the lender parties thereto. The Credit Agreement provides for a secured revolving credit facility (Credit Facility) under which the Company may borrow up to an aggregate of $250 million and the Company and lenders may increase the total commitments under the Credit Facility to up to $300 million , subject to certain conditions. The Credit Facility will terminate, and all outstanding borrowings become due and payable, in March 2021.

The amount that may be borrowed under the Credit Facility is based upon a borrowing base formula with respect to the Company's inventory and accounts receivable balances. Borrowed funds accrue interest, at the Company's election, based on an annual rate of (a) London Interbank Offered Rate (LIBOR) or (b) the administrative agent's base rate, plus an applicable margin of between 1.50% and 2.00% for LIBOR rate loans, and between 0.50% and 1.00% for base rate loans, depending on the level of utilization of the Credit Facility. The Company is required to pay a commitment fee on the unused portion of the Credit Facility of 0.25% or 0.375% per annum, based on the level of utilization of the Credit Facility. Amounts owing under the Credit Agreement and related credit documents are guaranteed by the Company and its material subsidiaries. The Company and its U.S., Cayman and Netherlands subsidiaries have also granted security interests in substantially all of their assets to collateralize these obligations.

The Credit Agreement contains customary affirmative covenants, such as financial statement reporting requirements and delivery of borrowing base certificates, as well as customary covenants that limit the ability of the Company and its subsidiaries to, among other things, pay dividends, incur debt, create liens and encumbrances, make investments and redeem or repurchase stock. The Company is required to maintain a minimum fixed charge coverage ratio if and when the unborrowed availability under the Credit Facility is less than the greater of $25.0 million or 10.0% of the borrowing base at such time. The Credit Agreement contains customary events of default, such as the failure to pay obligations when due, initiation of bankruptcy or insolvency proceedings, defaults on certain other indebtedness, change of control or breach of representations and warranties or covenants. Upon an event of default, the lenders may, subject to customary cure rights, require the immediate payment of all amounts outstanding and foreclose on collateral.

As of June 30, 2016, the Company may borrow up to approximately $82 million under the Credit Facility. No borrowings have been made from the Credit Facility to date. As of June 30, 2016 , the Company was in compliance with all financial covenants contained in the Credit Agreement.

Stock repurchase program . On September 30, 2015, the Company's board of directors authorized a program to repurchase up to $300 million of the Company's Class A common stock. The repurchase program, which expires in September 2016, does not obligate the Company to acquire any specific number of shares and may be discontinued or extended at any time by the board of directors. Share repurchases under the program may be made from time-to-time through open market transactions, block trades, privately negotiated transactions or otherwise, including under plans complying with both Rule 10b-18 and Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. At June 30, 2016 and December 31, 2015 , the Company had a remaining share repurchase authorization of  $264.4 million . The Company has recorded its repurchased shares as treasury stock.

CEO stock contributions. In the first six months of 2015, the CEO contributed an aggregate 5.2 million shares of Class B common stock to the Company without consideration per the terms of a Contribution Agreement dated December 28, 2011, and amended on May 11, 2015, representing all of the then remaining shares subject to the contribution obligations. These shares contributed by the CEO were retired during 2015. Refer to the audited financial statements contained in the Company's 2015 Annual Report.

Equity incentive plans . The Company has outstanding equity grants from its  three stock-based employee compensation plans: the 2014 Equity Incentive Plan (2014 Plan), the 2010 Equity Incentive Plan (2010 Plan) and the 2014 Employee Stock Purchase Plan (ESPP). No new options or awards have been granted under the 2010 Plan since June 2014. Outstanding options and awards under the 2010 Plan continue to be subject to the terms and conditions of the 2010 Plan. Options granted under the 2014 Plan generally expire within  10 years  from the date of grant and generally vest over  four years . Restricted stock units (RSUs) granted under the 2014 Plan generally vest annually over a  four year period based upon continued service and are settled at vesting in shares of the Company's Class A common stock. The ESPP allows eligible employees to purchase shares of the Company's Class A common stock through payroll deductions at a price equal to  85%  of the lesser of the fair market value of the stock as of the first date or the ending date of each six month offering period. For additional information regarding the Company's equity incentive plans, please refer to the audited financial statements contained in its 2015 Annual Report.

S tock options

A summary of the Company's stock option activity for the six months ended June 30, 2016 and related information is as follows:

The aggregate intrinsic value of the stock options outstanding as of  June 30, 2016  represents the value of the Company's closing stock price on June 30, 2016 in excess of the exercise price multiplied by the number of options outstanding.

Restricted stock units

A summary of the Company's RSU activity for the six months ended June 30, 2016 is as follows:

In June 2014, the Company granted an award of 4.5 million RSUs covering shares of the Company's Class B common stock to the Company's CEO (CEO RSUs), which included 1.5 million RSUs that vested immediately upon grant and 3.0 million RSUs that were subject to both a market-based vesting condition and a service-based vesting condition. The market-based condition was achieved in January 2015. Stock-based compensation expense related to the CEO RSUs was $4.2 million and $21.8 million for the six months ended June 30, 2016 and 2015 , respectively.

Employee stock purchase plan (ESPP)

In the six months ended June 30, 2016 and 2015 , the Company issued 431,673 and 313,233 shares under its ESPP at weighted average prices of $8.76 and $20.40 , respectively. The weighted-average fair value of each right to purchase shares of the Company's Class A common stock granted under the ESPP for these periods was $3.49 and $16.56 , respectively.

Stock-based compensation expense

The Company measures compensation expense for all stock-based payment awards based on the estimated fair values on the date of the grant. The fair value of stock options granted and ESPP issuances is estimated using the Black-Scholes option pricing model. The fair value of RSUs is determined using the Company's closing stock price on the date of grant. There have been no significant changes in the Company's valuation assumptions from those disclosed in its 2015 Annual Report. The following table summarizes stock-based compensation included in the condensed consolidated statements of operations:

At June 30, 2016 , there was total unearned stock-based compensation of $169.4 million related to stock options, RSUs and ESPP, which is expected to be recognized over a weighted average period of 2.9 years.

Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding, including all potentially dilutive common shares.

The rights of the holders of Class A and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to  one  vote per share and each share of Class B common stock is entitled to  ten  votes per share. Each share of Class B common stock is convertible at any time at the option of the stockholder into one share of Class A common stock and has no expiration date. Each share of Class B common stock will convert automatically into  one share of Class A common stock upon the date when the outstanding shares of Class B common stock represent less than  10%  of the aggregate number of shares of common stock then outstanding. Class A common stock is not convertible into Class B common stock.

Undistributed earnings are allocated based on the contractual participation rights of Class A and Class B common stock as if the earnings for the year have been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. The computation of the diluted net income (loss) per share of Class A common stock assumes the conversion of Class B common stock.

The following table presents the calculations of basic and diluted net income (loss) per share:

The following potentially dilutive shares were not included in the calculation of diluted shares outstanding as the effect would have been anti-dilutive:

The Company's tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items arising in that quarter. In each quarter, the Company updates its estimate of the annual effective tax rate, and if the estimated annual tax rate changes, a cumulative adjustment is made in that quarter.

The Company recorded an income tax benefit of $17.0 million for the three months ended June 30, 2016 due to a pre-tax net loss, which resulted in an effective tax rate of 15.6% . The lower effective tax rates for the three and six months ended June 30, 2016 compared to 2015 resulted from the Company providing a net tax benefit on pre-tax losses in the United States, which was offset by income taxes paid at lower rates in profitable foreign jurisdictions (primarily Europe). The Company's provision for income taxes in each period has differed from the tax computed at U.S. federal statutory tax rates due to state taxes, the effect of non-U.S. operations, deductible and non-deductible

stock-based compensation expense, federal research and development tax credits, and adjustments to unrecognized tax benefits.

The Company is currently under examination by the Internal Revenue Service for the 2012 through 2014 tax years. The Company is not able to estimate the potential impact that the examination may have on income tax expense. If the examination is resolved unfavorably, there is a possibility it may have a material negative impact on the Company's results of operations. The California Franchise Tax Board has completed an examination for the 2011 and 2012 tax years and the effect on income tax expense was immaterial.

At June 30, 2016 and December 31, 2015 , the Company's gross unrecognized tax benefits was $51.4 million and $36.3 million , respectively. If recognized, $31.2 million of these unrecognized tax benefits (net of U.S. federal benefit) at June 30, 2016 would be recorded as a reduction of future income tax provision. These unrecognized tax benefits relate primarily to unresolved matters with taxing authorities regarding the Company's transfer pricing positions and tax positions based on the Company's interpretation of certain U.S. trial and appellate court decisions, which remain subject to appeal and therefore could be overturned in future periods. The Company's existing tax positions will continue to generate an increase in unrecognized tax benefits in subsequent periods. Management believes events that could occur in the next 12 months and cause a material change in unrecognized tax benefits include, but are not limited to, the completion of examinations by the U.S. or foreign taxing authorities and the expiration of statute of limitations on the Company's tax returns. Although the completion, settlement and closure of any audits is uncertain, it is reasonably possible that the total amount of unrecognized tax benefits will materially increase within the next 12 months. However, given the number of years remaining that are subject to examination, the range of the reasonably possible change cannot be estimated reliably.

The Company has agreements for certain contract manufacturing and engineering services with a vendor affiliated with one of the Company's investors. The Company recorded no expense and $0.2 million in the six months ended June 30, 2016 and 2015 , respectively, for services rendered. As of June 30, 2016 and December 31, 2015 , the Company had no accounts payable associated with this vendor.

The Company incurs costs for Company-related chartered aircraft fees for the use of the CEO's private plane. The Company recorded expense of $0.6 million and $0.7 million in the six months ended June 30, 2016 and 2015 , respectively. As of June 30, 2016 and December 31, 2015 , the Company had accounts payable associated with this vendor of zero and $0.1 million , respectively.

In 2013, the Company entered into a three -year agreement, which was amended in July 2016 to continue through the end of 2016, with a company affiliated with the son of one of the members of the Company's board of directors to acquire certain naming rights to a kart racing facility. As consideration for these naming rights, the Company would pay a total of  $0.5 million  over the three year period. As of June 30, 2016 , the Company has recorded cumulative expense of $0.5 million , and has also provided  100  GoPro cameras at no cost each year.

See Notes 6 and 7 above for information regarding CEO RSUs and Class B common stock contributed by the CEO back to the Company.

Facility Leases. The Company leases its facilities under long-term operating leases, which expire at various dates through 2027. As of December 31, 2015, the Company's total future minimum lease payments under noncancelable operating leases were $152.2 million . In June 2016, the Company entered into a sub-lease agreement for one of its office facilities that decreased the Company's total future minimum lease payments by sub-lease rentals of approximately $5 million , which approximates the corresponding remaining lease rentals. The Company has not entered into any new material lease commitments during the six months ended June 30, 2016 . Rent expense was  $9.8 million and  $4.9 million  for the six months ended June 30, 2016 and  2015 , respectively.

Other Commitments. In the ordinary course of business, the Company also enters into multi-year agreements to purchase sponsorships with event organizers, resorts and athletes as part of its marketing efforts; software licenses

related to its financial and IT systems; manufacturing equipment for tooling and molds; and various other contractual commitments. In May 2016, the Company entered into a 3.5 year agreement with Red Bull GmbH (Red Bull) that includes content production, distribution and cross-promotion. As part of the agreement, Red Bull will receive equity and cash consideration over the term of the agreement. During the second quarter of 2016, the Company issued unregistered restricted shares of its Class A common stock to Red Bull with a fair value of approximately $7 million .

As of June 30, 2016 and December 31, 2015 , the Company's total undiscounted future expected obligations under these multi-year agreements described above were approximately $67 million and $28.8 million , respectively. The increase in 2016 was primarily attributable to the Red Bull agreement described above and new software licenses unrelated to the Red Bull agreement.

Legal proceedings. From time to time, the Company is involved in legal proceedings in the ordinary course of business, including the litigation matters described in Part II, Item 1 of this Quarterly Report on Form 10-Q. Due to inherent uncertainties of litigation, the Company cannot accurately predict the ultimate outcome of these matters. The Company is unable at this time to determine whether the outcome of the litigation would have a material impact on the results of operations, financial condition or cash flows of the Company.

Indemnifications. In the normal course of business, the Company enters into agreements that contain a variety of representations and warranties and provide for general indemnification. The Company's exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. It is not possible to determine the maximum potential amount under these indemnification agreements due to the Company's limited history with indemnification claims and the unique facts and circumstances involved in each particular agreement. As of June 30, 2016 , the Company has not paid any claims or been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations.

Product warranty

The following table summarizes the warranty liability activity:

At June 30, 2016 , $8.6 million of the warranty liability was recorded as an element of accrued liabilities and $0.3 million was recorded as an element of other long-term liabilities.

Customer concentration . Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade receivables. The Company's management believes that credit risk for accounts receivable is mitigated by the Company's credit evaluation process, relatively short collection terms and dispersion of its customer base. The Company generally does not require collateral and losses on trade receivables have historically been within management's expectations.

Customers who represented 10% or more of the Company's net accounts receivable balance were as follows:

* Less than 10% of total accounts receivable for the period indicated

The following table summarizes the Company's accounts receivables sold, without recourse, and factoring fees paid:

Customers who represented 10% or more of the Company's total revenue were as follows:

* Less than 10% of total revenue for the period indicated

Supplier concentration. The Company relies on third parties for the supply and manufacture of its cameras and accessories, some of which are sole-source suppliers. The Company's management believes that outsourcing manufacturing enables greater scale and flexibility. As demand and product lines change, the Company periodically evaluates the need and advisability of adding manufacturers to support its operations. In instances where a supply and manufacture agreement does not exist or suppliers fail to perform their obligations, the Company may be unable to find alternative suppliers or satisfactorily deliver its products to its customers on time, if at all. The Company also relies on third parties with whom it outsources supply chain activities related to inventory warehousing, order fulfillment, distribution and other direct sales logistics .

Geographic information

Revenue by geographic region, based on ship-to destinations, was as follows:

Revenue in the United States, which is included in the Americas geographic region, was $188.2 million and $344.4 million for the six months ended June 30, 2016 and 2015 , respectively. The Company does not disclose revenue by product category as it does not track sales incentives and other revenue adjustments by product category to report such data.

As of June 30, 2016 and December 31, 2015 , long-lived assets, which represent gross property and equipment, located outside the United States, primarily in Hong Kong and China, were $54.1 million and $47.6 million , respectively.

On January 12, 2016, the Company adopted a restructuring plan that provided for a reduction in the Company's global workforce of approximately 7% . The Company incurred aggregate restructuring expenses of $6.5 million in the first quarter of 2016, which primarily included cash-based severance costs. The restructuring plan was substantially completed in the first quarter 2016. As of June 30, 2016 , the remaining accrued liability was not material.

Our MD&A is provided in addition to the accompanying consolidated condensed financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flows. This MD&A is organized as follows:

The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the U.S. Securities and Exchange Commission (SEC) and the condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Our MD&A contains a number of forward-looking statements that involve a number of risks and uncertainties. Words such as "expect," "anticipate," "believe," "may," "will," "estimate," "continue," "intend," "target," "goal," "plan," or variations of such words and similar expressions are intended to identify such forward-looking statements. Forward looking statements include plans to include new product offerings, projections of results of operations, and any discussion of the trends and other factors that drive our business and future results. If any of management's assumptions prove incorrect or should unanticipated circumstances arise, our actual results could materially differ from those anticipated by such forward-looking statements. The differences could be caused by a number of factors or combination of factors including, but not limited to, those factors referenced in "Risk Factors" in Part II, Item 1A, and elsewhere in this report. Our business, financial condition or results of operations could be materially harmed by any of these or other factors. References in this Quarterly Report on Form 10-Q to "GoPro," "we," "us," "our" and the "Company" refer to GoPro, Inc., a Delaware corporation, and its subsidiaries.

GoPro is transforming the way people visually capture and share their lives. We do this by enabling people to capture compelling, immersive photo and video content of themselves participating in their day to day life as well as their favorite activities. Our consumers and community include some of the world's most active and passionate people. To date, our cameras and mountable and wearable accessories have generated substantially all of our revenue. We sell our products globally through retailers, wholesale distributors, and on our website. As of June 30, 2016 , our products were sold to customers in more than 100 countries and through more than 45,000 retail outlets.

The following is a summary of measures presented in our condensed consolidated financial statements and key metrics used to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions.

(1) One basis point (bps) is equal to 1/100th of 1%

(2) Represents the number of individually packaged camera units that are shipped during a reporting period, net of any returns.

(3) We define adjusted EBITDA as net income (loss) adjusted to exclude the impact of: provision for income taxes, interest income, interest expense, depreciation and amortization, POP display amortization, stock-based compensation and restructuring costs.

(4) We define non-GAAP net income (loss) as net income (loss) adjusted to exclude stock-based compensation, restructuring costs, acquisition-related costs and taxes related to the income tax effect of these adjustments. Acquisition-related costs include the amortization of acquired intangible assets, as well as third-party transaction costs for legal and other professional services.

Reconciliations of non-GAAP adjusted measures to the most directly comparable measures are presented under "Non-GAAP Financial Measures" below.

Second quarter 2016 and recent highlights

Second quarter 2016 revenue of $220.8 million increased 20% from the preceding quarter due to increased unit volumes for cameras and accessories as well as an 11% increase in average selling price of units shipped, reflecting a shift to a good-better-best offering of HERO Session, HERO4 Silver and HERO4 Black cameras. We estimate global channel unit sell-thru in the second quarter of 2016 was approximately 50% higher than global unit sell-in, which enabled a sequential reduction in our inventory balance of 36% as well as an estimated sequential reduction in global channel unit inventory of slightly below 35%, ahead of anticipated new product launches in the second half of 2016. See "Results of Operations" below for year-over-year discussion.

Second quarter 2016 gross margin of 42.1% increased from 32.5% in the preceding quarter, reflecting an improvement in both product mix of higher price point cameras and a higher proportion of sales through our direct channel. In addition, we recorded no further inventory write-downs in the second quarter.

Second quarter 2016 operating loss of $109.4 million decreased sequentially by $12.1 million, or 10%, resulting from improved gross margin performance as described above, the absence of restructuring costs of $6.5 million incurred in the first quarter associated with our January 2016 global workforce reduction, and partially offset by acquisition-related costs and higher research and development and marketing expenses.

We ended the second quarter of 2016 with total cash and investments of $279.2 million , down $109.5 million or 28% sequentially from March 31, 2016. Cash used in operations of $45.5 million primarily reflected cash outflows from increased operating expenses that were partially offset by net cash inflows related to operating assets and liabilities, including an approximate $50 million decrease in inventory. We made total acquisition related payments of over $70 million in the second quarter of 2016, which primarily consisted of payments related to the acquisition of a mobile editing application company in April 2016 for purchase consideration of approximately $59 million, as well as deferred cash compensation payments of approximately $11 million related to acquisitions in the current year and prior periods.

In May 2016, we launched the new mobile creative suite of Quik™ and Splice, two creative apps to help manage, edit, and share content from both GoPro cameras and mobile devices. Combined, the monthly active users have doubled to approximately 3.7 million in the second quarter of 2016 since we rebranded the apps as GoPro, and the cumulative downloads as of July 27, 2016 was approximately 37 million .

In June 2016, we launched GoPro Care to U.S. consumers, a fee-based service offering a range of support options, including extended warranty and accidental damage coverage. Revenue earned to date from GoPro Care was not material.

Looking Ahead

This fall, we plan to launch our next-generation HERO5 cameras and our first drone product for the consumer market, named Karma. We expect revenue to grow consecutively in each of the third and fourth quarters, as compared to the second quarter of 2016, based on our current expectations for these product launches. Furthermore, we expect sell-in to exceed sell-thru for the third quarter of 2016 due to our new product launches. Gross margin will fluctuate in future periods based on product, distributor and geographical mix and volume. We expect total operating expenses to grow sequentially for the third and fourth quarters, with a majority of this growth occurring in sales and marketing. We expect to increase our sales and marketing expenditures in the second half of 2016 to improve worldwide brand awareness, support the launch of our next generation cameras and drone-related products, software products and services and stimulate consumer demand during the holiday season.

Factors affecting performance

We believe that our future success will be dependent on many factors, including those further discussed below.  While these areas represent opportunities for us, they also represent challenges and risks that we must successfully address in order to continue the growth of our business and improve our results of operations.

Investing in research and development. We believe that our performance is significantly dependent on the investments we make in research and development and that we must continually develop and introduce innovative new products, enhance existing products and effectively stimulate customer demand for existing and future products. If we fail to innovate and enhance our product offerings, our brand, market position and revenue will be adversely affected. Further, if our research and development efforts are not successful, we will not recover the investments that we make in this aspect of our business. In the fall of this year, we plan to launch our next-generation HERO5 cameras and our first drone product for the consumer market, named Karma. We expect these hardware launches will be accompanied by ongoing software improvements and developments of our robust editing tools in both mobile and desktop. In future periods, we plan to further expand our software and services offerings and maintain our investment in our entertainment business.

Expanding our total addressable market and growing internationally. Our long-term growth will depend in part on our ability to expand our consumer base and our presence in international markets. We intend to broaden our user base to include a more diverse group of consumers by providing both innovative and easy-to-use cameras as well as offering intuitive and simple software tools that enable the seamless and easy sharing of content. We recently acquired two mobile video editing application companies that complement our strategy of enabling content management, editing and sharing across platforms. We plan to increase our presence globally through the active promotion of our brand, the formation of strategic partnerships, the introduction of new products and the growth of our international sales channel. We expect to begin offering localized customer experiences in multiple languages later this year including Chinese, French, German, Italian, Japanese, Korean, Portuguese, Spanish , and three versions of English. 

Investing in sales and marketing.  We intend to continue investing significant resources in our marketing, advertising and brand management efforts. We believe consumers in many emerging markets are not familiar with our brand and products and believe there is a significant opportunity for GoPro to expand awareness through increased marketing efforts. Sales and marketing investments will often occur in advance of any sales benefits from these activities, and it may be difficult for us to determine if we are efficiently allocating our resources in this area.

Leveraging software, services, and entertainment content. We intend to continue to increase our investment in the development of software and services, as well as entertainment-related initiatives. We believe we have significant opportunities to establish new revenue streams from these software, services and entertainment investments. However, we do not have significant experience deriving revenue from the distribution of GoPro content or software,

and we cannot be assured that these ongoing investments, which will occur before any material revenue contribution is received, will result in increased revenue or profitability.

Seasonality. Historically, we have experienced the highest levels of revenue in the fourth quarter of the year, coinciding with the holiday shopping season in the United States and Europe. Timely and effective product introductions and forecasting, whether just prior to the holiday season or otherwise, are critical to our operations and financial performance.

The following table sets forth the components of our condensed consolidated statements of operations for each of the periods presented:

Revenue