Direct Segment Net Sales of $139 Million Up
16% versus Pre-pandemic Fiscal 2020
Reaches 508K JRNY® Members During Q4 Fiscal
2023, Up 56% versus Q4 Fiscal 2022
Adjusted EBITDA Loss Reduced by 26% versus
Q4 Fiscal 2022
Provides Fiscal Year 2024 Guidance; Expects
to Achieve Significant Year-over-Year Improvement in Adjusted
EBITDA Loss in Full Year Fiscal 2024
Bowflex Parent, Nautilus, Inc. (NYSE: NLS) today reported its
unaudited operating results for the fiscal 2023 fourth quarter and
year ended March 31, 2023.
Management Comments
“We’re pleased to deliver fourth quarter and full year results
that exceeded our expectations, reflecting the strength of our
Direct segment and continued momentum on JRNY® as we execute on our
long-term transformation under our North Star strategy,” said Jim
Barr, Nautilus, Inc. Chief Executive Officer. “We took deliberate
steps throughout fiscal 2023 that enabled us to exit the year with
a significantly improved inventory position and streamlined cost
structure. Subsequent to quarter end, we further strengthened our
balance sheet and monetized the value of certain non-core assets,
enhancing our ability to manage through the current environment.
These actions, coupled with our asset-light, semi-variable
operating model, position us well to drive future profitable
growth.”
Mr. Barr continued, “The continued demand we see for our
equipment in our Direct business gives us conviction in the
sustainability of the shift to at-home fitness. Furthermore, we are
capitalizing on consumer preferences for connected fitness thanks
to our investments in our differentiated digital offering. We will
continue to take the necessary actions that best position us to
operate more efficiently, drive free cash flow, and return to
profitability.”
Total Company Results
To gauge sales growth against more "normalized" or pre-pandemic
results, in addition to showing results for periods ending March
31, 2022 and 2023, we think it is helpful to investors to provide
sales results for the fourth fiscal quarter and full fiscal year
ended March 31, 2023 as compared to the pre-pandemic three-month
and twelve-month periods ended March 31, 2020.
Fiscal Fourth Quarter Ended March 31, 2023 Compared to Fiscal
Fourth Quarter Ended March 31, 2022
- Net sales were $68.4 million, compared to $119.7 million, a
decline of 42.9% versus last year. Net sales are down 19.2%, when
compared to the same period in fiscal 2020, excluding sales related
to the Octane brand, which was sold in October 2020. The sales
decline versus last year was driven primarily by the return to
pre-pandemic demand. The net sales decrease compared to fiscal 2020
was due to decreased demand.
- Gross profit was $10.7 million, compared to $21.0 million last
year. Gross profit margins were 15.6% compared to 17.5% last year.
The 1.9 ppt decrease in gross margins was primarily due to
increased discounting driven by the decision to exit Nautilus
branded products (-3 ppts), higher outbound freight (-2 ppts),
unfavorable logistics overhead (-2 ppts), and reduced investment in
JRNY® (-1 ppt), offset by lower landed product costs (+5 ppts)
driven by lower inbound freight and lower factory costs. Excluding
Nautilus branded products, gross profit margin would have been
20.3%.
- Operating expenses were $28.2 million compared to $42.9 million
last year. The decrease of $14.7 million, or 34.3%, was primarily
due to a $10.3 million decrease in media spending, a $3.9 million
decrease in personnel expenses, a $1.8 million decrease in
contracted services, a $0.8 million decrease in other variable
selling and marketing expenses due to decreased sales and a $0.4
decrease in other costs, offset by $2.5 million in restructuring
related charges. Total advertising expenses were $4.9 million this
year versus $15.2 million last year.
- Operating loss was $17.5 million compared to an operating loss
of $21.9 million last year, primarily driven by lower operating
expenses.
- Income tax expense from continuing operations was $0.8 million
this year compared to a $4.7 million tax benefit last year. The
income tax expense in the current year was primarily a result of
activities in foreign jurisdictions and the recording of a $4.8
million valuation allowance. The effective tax rate was (3.9)% this
year compared to 20.5% last year.
- Loss from continuing operations was $20.9 million, or $0.66 per
diluted share, compared to a loss of $18.2 million, or $0.58 per
diluted share, last year, driven by higher income tax expense.
- Net loss was $20.9 million, or $0.66 per diluted share,
compared to net loss of $18.2 million or $0.58 per diluted share,
last year.
- The following non-GAAP measures exclude the impact of
acquisition and other related costs1 and restructuring and exit
charges1 for the three months ended March 31, 2023.
- Adjusted operating expenses were $25.4 million compared to
$42.1 million last year. The $16.7 million, or 39.7%, decrease was
primarily due to a $10.3 million decrease in media spending, a $3.9
million decrease in personnel expenses, a $1.8 million decrease in
contracted services, and a $0.8 million decrease in other variable
selling and marketing expenses due to decreased sales.
- Adjusted operating loss was $14.7 million compared to $21.1
million last year, primarily driven by lower operating
expenses.
- Adjusted EBITDA loss from continuing operations was $12.6
million compared to $16.9 million last year. Excluding Nautilus
branded products, Adjusted EBITDA loss would have been $10.6
million.
1 See “Reconciliation of Non-GAAP Financial Measures” for more
information
Fiscal Year Ended March 31, 2023 Compared to Fiscal Year
Ended March 31, 2022
- Net sales were $286.8 million, compared to $589.5 million, a
decline of 51.3% versus last year. Net sales are up 3.3% when
compared to the same period in fiscal 2020, excluding sales related
to the Octane brand, which was sold in October 2020. The sales
decline versus last year was driven primarily by the return to
pre-pandemic demand and pre-pandemic sales discounting practices,
as our typical sales discounts were largely unnecessary during the
pandemic period.
- Gross profit was $52.0 million, compared to $148.5 million last
year. Gross profit margins were 18.1% compared to 25.2% last year.
The 7.1 ppt decrease in gross profit margins was primarily due to
increased discounting given our heavy inventory position and the
decision to exit Nautilus branded products (-5 ppts), unfavorable
logistics overhead absorption (-3 ppts), deleverage of JRNY® COGs
(-2 ppts), and increased outbound freight (-1 ppt), offset by lower
landed product costs, driven by lower inbound freight and lower
factory costs (+4 ppts). Excluding Nautilus branded products, gross
profit margin would have been 20.1%.
- Operating expenses were $145.3 million compared to $173.8
million last year. The decrease of $28.5 million, or 16.4%, was
primarily due to a $38.3 million decrease in media spending, a $9.9
million decrease due to savings in other operating expenses, a $7.4
million decrease in other variable selling and marketing expenses
due to decreased sales, and a $4.7 million prior year loss
contingency for a legal settlement, offset by a goodwill and
intangible impairment charge of $27.0 million, $2.5 million in
restructuring related charges and a $2.3 million increase in JRNY®
investments. Total advertising expenses were $23.2 million versus
$61.5 million last year.
- Operating loss was $93.4 million, or a negative 32.6% operating
margin, compared to an operating loss of $25.3 million, or a
negative 4.3% operating margin last year, primarily due to lower
gross profit and higher operating expenses, including a goodwill
and intangible impairment charge of $27.0 million and a $2.5
million restructuring charge.
- Income tax expense from continuing operations was $9.4 million
this year compared to a $6.0 million tax benefit last year. The
income tax expense in the current year was primarily the result of
the $25.4 million deferred tax asset valuation allowance recorded
in fiscal 2023. The effective tax rate was (9.5)% this year
compared to 21.3% last year.
- Loss from continuing operations was $107.5 million, or $3.40
per diluted share, compared to a loss of $22.2 million, or $0.72
per diluted share, last year. The decrease in loss from continuing
operations was primarily due to lower gross profit and higher
operating expenses as discussed in more detail above.
- Net loss was $105.4 million, compared to a net loss of $22.4
million last year. Net loss per diluted share was $3.34, compared
to net loss per diluted share of $0.72 last year. The decrease in
net loss was primarily due to lower gross profit and higher
operating expenses as discussed in more detail above.
- The following non-GAAP measures exclude the impact of non-cash
impairment charges1 related to the carrying value of our goodwill
and intangible assets and restructuring and exit charges1 for the
twelve months ended March 31, 2023 and the impact of legal
settlement1 and acquisition and other related costs1 for the twelve
months ended March 31, 2022.
- Adjusted operating expenses were $113.6 million compared to
$166.7 million last year. The $53.2 million, or 31.9%, decrease was
primarily due to a $38.3 million decrease in media spending, a $9.9
million decrease in other operating expenses, a $7.4 million
decrease in other variable selling and marketing expenses due to
decreased sales, and a $4.7 million prior year loss contingency for
a legal settlement, offset by a $2.3 million increase in JRNY®
investments.
- Adjusted operating loss was $61.6 million compared to a loss of
$18.2 million last year, driven by lower gross profit.
- Adjusted EBITDA1 loss from continuing operations was $46.6
million (versus guidance of Adjusted EBITDA2 loss of about $50.0
million) compared to Adjusted EBITDA1 loss of $3.3 million last
year. Excluding Nautilus branded products, Adjusted EBITDA loss
would have been $43.5 million.
1 See “Reconciliation of Non-GAAP Financial Measures” for more
information
2 We provided Adjusted EBITDA guidance, rather than net income
guidance, due to the inherent unpredictability of forecasting
certain types of expenses such as stock-based compensation and
income tax expenses, which affect net income but not Adjusted
EBITDA. We were unable to reasonably estimate the impact of such
expenses, if any, on net income. The inability to project certain
components of the calculation would significantly affect the
accuracy of a reconciliation. Accordingly, we did not provide a
reconciliation of projected net income to projected Adjusted
EBITDA
JRNY® Update
- As of March 31, 2023, Members of JRNY®, the Company’s
personalized connected fitness platform, reached 508,000,
representing approximately 56% growth versus the same quarter last
year. Of these Members, 156,000 were Subscribers, representing
approximately 41% growth over the same period last year. The
Company defines JRNY® Members as all individuals who have a JRNY®
account and/or subscription, which includes Subscribers, their
respective associated users, and users who consume free content.
The Company defines Subscribers as a person or household who paid
for a subscription, are in a trial, or have requested a "pause"' to
their subscription for up to three months.
- Earlier this year, the Company introduced an innovative feature
set to its adaptive fitness platform with the launch of JRNY® with
Motion Tracking, which pairs repetition tracking, form guidance,
and adaptive weight targets, along with its extensive library of
personalized cardio, strength, and whole-body workouts. Members can
now access these features on their mobile device or tablet within
their existing membership and without the need for additional
equipment.
- The Company also recently introduced new pricing tiers: JRNY®
Mobile-Only, made just for mobile device or tablet users at a lower
price point, and JRNY® All-Access, which allows Members to take
advantage of JRNY®’s features across their mobile devices, tablets,
and Bowflex® products with built-in touchscreens.
- JRNY® learns with each use by assessing Members’ fitness levels
and recommends workouts based on their abilities and the workout
experiences they favor, creating an adaptive and personalized
fitness plan that Members can stick to for long-term success.
Leveraging proprietary technology and machine learning expertise
from the Company’s acquisition of VAY, these new features are
enhancing value within the JRNY® platform, which the Company
believes will continue to drive membership growth.
Segment Results
Fiscal Fourth Quarter Ended March 31, 2023 Compared to Fiscal
Fourth Quarter Ended March 31, 2022
Direct Segment
- Direct segment sales were $41.6 million, compared to $59.8
million, a decline of 30.4% versus last year, and down 11.7%,
compared to the same period in fiscal 2020. The net sales decrease
compared to last year was primarily driven by the return to
pre-pandemic seasonal demand and pre-pandemic sales discounting
practices. The net sales decrease compared to fiscal 2020 was due
to decreased demand.
- Cardio sales declined 28.8% versus last year and were down
22.3% compared to the same period in fiscal 2020. Lower cardio
sales this quarter versus last year were primarily driven by lower
bike demand. Strength product sales declined 33.3% versus last year
and increased 22.0% compared to the same period in fiscal 2020.
Lower strength sales this quarter versus last year were primarily
driven by lower demand for SelectTech® weights.
- As of March 31, 2023, the Direct segment's backlog totaled $0.5
million. This amount represents unfulfilled consumer orders net of
current promotional programs and sales discounts.
- Gross profit margin was 21.0% versus 19.3% last year. The 1.7
ppt increase in gross margin was primarily driven by: lower product
costs (+3 ppts) and decreased other costs (+1 ppt), offset by
increased discounting (-2 ppts) and higher outbound freight (-1
ppt). Gross profit was $8.7 million, a decrease of 24.2% versus
last year.
- Segment contribution loss was $5.4 million, or 12.9% of sales,
compared to segment contribution loss of $11.7 million, or 19.5% of
sales last year. The improvement was primarily driven by decreased
media spend and lower operating expenses, as explained above.
Advertising expenses were $4.9 million compared to $15.2 million
for the same period last year.
Retail Segment
- Retail segment sales were $26.2 million, compared to $58.7
million, a decline of 55.4% versus last year, and down 28.5%
compared to the same period in fiscal 2020 excluding sales related
to the Octane brand. Retail segment sales outside the United States
and Canada were up 3.6% versus last year. The net sales decrease
compared to last year was primarily driven by the return to
pre-pandemic seasonal demand. The net sales decrease compared to
fiscal 2020 was due to decreased demand.
- Cardio sales declined 35.4% versus last year and were down
45.2% compared to the same period in fiscal 2020, excluding sales
related to the Octane brand. Lower cardio sales this quarter were
primarily driven by lower bike demand. Strength product sales
declined 68.4% versus last year and increased 19.2% compared to the
same period in fiscal 2020. Lower strength sales this quarter were
primarily driven by lower demand for SelectTech® weights.
- As of March 31, 2023, the Retail segment's backlog totaled
$11.5 million. This amount represents customer orders for future
shipments and are net of contractual rebates and consideration
payable to applicable Retail customers.
- Gross profit margin was 5.0% versus 14.0% last year. The 9.0
ppt decrease in gross margin was primarily due to unfavorable
logistics overhead absorption (-5 ppts), a prior year release of a
special warranty (-3 ppts), increase in inventory adjustments (-1
ppt) and increased other costs (-1 ppt), partially offset by lower
product costs (+1 ppt). Gross profit was $1.3 million, a decrease
of 84.3% versus last year.
- Segment contribution loss was $4.7 million, or 18.1% of sales,
compared to segment contribution income of $0.7 million, or 1.2% of
sales, last year. The decrease was primarily driven by lower gross
profit due to lower sales as explained above.
Comparison of Segment Results for the Fiscal Year Ended March
31, 2023 to the Fiscal Year Ended March 31, 2022
Direct Segment
- Direct segment sales were $139.3 million, compared to $221.7
million, a decline of 37.2%, versus 2022 and $120.1 million, an
increase of 16.0% compared to fiscal 2020. The net sales decrease
compared to last year was primarily driven by the return to
pre-pandemic seasonal demand and higher sales discounting
practices. The net sales increase compared to fiscal 2020 was due
to increased demand.
- Cardio sales declined 27.0% versus last year and were flat
compared to fiscal 2020. Lower cardio sales were primarily driven
by lower bike demand. Strength product sales declined 51.3% versus
last year and increased 74.7% compared to fiscal 2020. Lower
strength sales this year were primarily driven by lower demand for
SelectTech® weights.
- Gross profit margin was 20.6% versus 30.7% last year. The 10.1
ppt decrease in gross margin was primarily due to increased
discounting given the heavy inventory position and the decision to
exit Nautilus branded products (-6 ppts), deleverage of JRNY® COGs
(-2 ppts), unfavorable logistics overhead absorption (-2 ppts) and
increased other costs (-1 ppt), partially offset by lower outbound
freight (+1 ppt). Gross profit was $28.7 million, a decrease of
57.9% versus last year.
- Segment contribution loss was $29.6 million, or 21.3% of sales,
compared to segment contribution loss of $15.7 million, or 7.1% of
sales last year. The decline was primarily driven by lower gross
profit as explained above, offset by decreased media spend.
Advertising expenses were $23.2 million compared to $61.5 million
last year.
Retail Segment
- Retail segment sales were $144.1 million, compared to $364.1
million, a decline of 60.4% versus last year and $154.3 million, a
decrease of 6.6%, compared to fiscal 2020, excluding sales related
to the Octane brand. Retail segment sales outside the United States
and Canada were down 69.7% versus last year. The net sales decrease
compared to last year was primarily driven by the return to
pre-pandemic seasonal demand, lower cardio sales and higher sales
discounting. The net sales decrease compared to fiscal 2020 was due
to decreased demand.
- Cardio sales declined 70.2% versus last year and were down
41.1% compared to fiscal 2020, excluding sales related to the
Octane brand. Lower cardio sales this year were primarily driven by
lower bike demand. Strength product sales declined by 47.2% versus
last year and increased 68.5% compared to fiscal 2020. Lower
strength sales this year were primarily driven by lower demand for
SelectTech® weights.
- Gross profit margin was 13.8% versus 21.0% last year. The 7.2
ppt decrease in gross profit margin was primarily driven by
unfavorable logistics overhead absorption (-4 ppts), increased
discounting given our heavy inventory position and the decision to
exit Nautilus branded products (-3 ppts) and increased other costs
(-1 ppt), partially offset by lower product costs (+1 ppt) driven
by lower inbound freight and lower factory costs. Gross profit was
$19.9 million, a decrease of 74.0% versus last year.
- Segment contribution loss was $5.7 million, or 4.0% of sales,
compared to segment contribution income of $44.8 million, or 12.3%
of sales, last year. The decline was primarily driven by lower
gross profit as explained above.
Balance Sheet and Other Key Highlights as of March 31,
2023:
- Cash and Liquidity:
- Cash and restricted cash were $18.3 million compared to cash
and restricted cash of $14.2 million as of March 31, 2022. The
increase was primarily driven by faster inventory turns and
extended vendor payment terms.
- Debt and other borrowings were $27.9 million compared to $29.4
million as of March 31, 2022.
- $14.9 million was available for borrowing under the Wells Fargo
Asset Based Lending Revolving Facility (“Facility”) compared to
$65.8 million as of March 31, 2022.
- Free Cash Flow1, defined as net cash provided by (used in)
operating activities minus capital expenditures, was $6.2 million
for the fiscal year ended March 31, 2023 compared to negative $79.6
million for the fiscal year ended March 31, 2022.
- Inventory was $46.6 million, down 58% compared to $111.2
million as of March 31, 2022. The year-over-year decrease in
inventory was driven by faster turns of inventory on-hand and lower
inventory in-transit. About 6% of inventory as of March 31, 2023
was in-transit.
- Trade receivables were $21.5 million, compared to $61.5 million
as of March 31, 2022. The decrease in trade receivables was
primarily driven by lower sales in the fourth quarter of fiscal
2023.
- Trade payables were $29.4 million, compared to $53.2 million as
of March 31, 2022. The decrease in trade payables of $23.8 million
was driven by strong inventory management as the Company sold
through existing inventory and minimized purchases to end the year
with inventory more in line with projected revenue.
- Capital expenditures totaled $12.6 million for the twelve
months ended March 31, 2023.
- As noted in the pre-announcement of results for the fourth
quarter of fiscal 2023, as of May 2, 2023, cash and restricted cash
was $19 million while total borrowings were $18 million.
1 See “Reconciliation of Non-GAAP Financial Measures” for more
information
Forward Looking Guidance
The following forward-looking statements reflect the Company's
full fiscal year 2024 expectations as of May 23, 2023 and are
subject to risks and uncertainties.
Full Year Fiscal 2024
- The Company expects full year net revenue to be in the range of
$270 million to $300 million, with the second half of the year
representing 60% to 65% of full year net revenue. The Company
expects Q1 to be the lowest revenue quarter of the year, and as a %
of full year sales, to be lower than last year. Finally, given the
sale of the Nautilus Brand, the Company expects royalty revenue to
be $1.8 million.
- The Company expects full year Adjusted EBITDA1 of between $15
million loss to break-even.
- The Company is targeting JRNY® Members to be approximately
625,000 at March 31, 2024.
1The Company provides Adjusted EBITDA guidance, rather than net
income guidance, due to the inherent unpredictability of
forecasting certain types of expenses such as stock-based
compensation and income tax expenses, which affect net income but
not Adjusted EBITDA. The Company is unable to reasonably estimate
the impact of such expenses, if any, on net income. The inability
to project certain components of the calculation would
significantly affect the accuracy of a reconciliation. Accordingly,
the Company does not provide a reconciliation of projected net
income to projected Adjusted EBITDA
Conference Call
Nautilus will discuss our fiscal 2023 fourth quarter ended March
31, 2023 operating results during a live conference call and
webcast on Tuesday, May 23, 2023 at 1:30 p.m. Pacific Time. The
conference call can be accessed by calling (877) 425-9470 in North
America. International callers may dial (201) 389-0878. Please note
that there will be presentation slides accompanying the earnings
call. The slides will be displayed live on the webcast and will be
available to download via the webcast player or at
http://www.nautilusinc.com/events. The webcast will be archived
online within two hours after completion of the call and will be
available for six months. Participants from the Company will
include Jim Barr, Chief Executive Officer and Aina Konold, Chief
Financial Officer.
A telephonic playback will be available from 4:30 p.m. PT, May
23, 2023 through 8:59 p.m. PT, June 6, 2023. Participants can dial
(844) 512-2921 in North America and international participants can
dial (412) 317-6671 to hear the playback. The passcode for the
playback is 13737579.
About Nautilus, Inc.
Nautilus, Inc. (NYSE:NLS) is a global leader in digitally
connected home fitness solutions. The Company’s brand family
includes Bowflex®, Nautilus®, Schwinn®, and JRNY®, its digital
fitness platform. With a broad selection of exercise bikes, cardio
equipment, and strength training products, Nautilus, Inc. empowers
healthier living through individualized connected fitness
experiences and in doing so, envisions building a healthier world,
one person at a time.
Headquartered in Vancouver, Washington, the Company’s products
are sold direct to consumer on brand websites and through retail
partners and are available throughout the U.S. and internationally.
Nautilus, Inc. uses the investor relations page of its website
(www.nautilusinc.com/investors) to make information available to
its investors and the market.
Forward-Looking Statements
This press release includes forward-looking statements
(statements which are not historical facts) within the meaning of
the Private Securities Litigation Reform Act of 1995, including:
projected, targeted or forecasted financial, operating results and
capital expenditures, including but not limited to net sales growth
rates, gross margins, operating expenses, operating margins,
anticipated demand for the Company's new and existing products,
statements regarding the Company's prospects, resources or
capabilities; planned investments, strategic initiatives and the
anticipated or targeted results of such initiatives; the effects of
the COVID-19 pandemic on the Company’s business; and planned
operational initiatives and the anticipated cost-saving results of
such initiatives. All of these forward-looking statements are
subject to risks and uncertainties that may change at any time.
Factors that could cause Nautilus, Inc.’s actual expectations to
differ materially from these forward-looking statements also
include: weaker than expected demand for new or existing products;
our ability to timely acquire inventory that meets our quality
control standards from sole source foreign manufacturers at
acceptable costs; risks associated with current and potential
delays, work stoppages, or supply chain disruptions, including
shipping delays due to the severe shortage of shipping containers;
an inability to pass along or otherwise mitigate the impact of raw
material price increases and other cost pressures, including
unfavorable currency exchange rates and increased shipping costs;
experiencing delays and/or greater than anticipated costs in
connection with launch of new products, entry into new markets, or
strategic initiatives; our ability to hire and retain key
management personnel; changes in consumer fitness trends; changes
in the media consumption habits of our target consumers or the
effectiveness of our media advertising; a decline in consumer
spending due to unfavorable economic conditions; risks related to
the impact on our business of the COVID-19 pandemic or similar
public health crises; softness in the retail marketplace;
availability and timing of capital for financing our strategic
initiatives, including being able to raise capital on favorable
terms or at all; changes in the financial markets, including
changes in credit markets and interest rates that affect our
ability to access those markets on favorable terms and the impact
of any future impairment. Additional assumptions, risks and
uncertainties are described in detail in our registration
statements, reports and other filings with the Securities and
Exchange Commission, including the “Risk Factors” set forth in our
Annual Report on Form 10-K, as supplemented by our quarterly
reports on Form 10-Q. Such filings are available on our website or
at www.sec.gov. You are cautioned that such statements are not
guarantees of future performance and that our actual results may
differ materially from those set forth in the forward-looking
statements. We undertake no obligation to publicly update or revise
forward-looking statements to reflect subsequent developments,
events, or circumstances.
RESULTS OF OPERATIONS INFORMATION
The following summary contains information from our consolidated
statements of operations for the three and twelve month periods
ended March 31, 2023 and 2022 (unaudited and in thousands, except
per share amounts):
Three Months Ended March
31,
Twelve Months Ended March
31,
2023
2022
2023
2022
Net sales
$
68,419
$
119,724
$
286,773
$
589,534
Cost of sales
57,740
98,741
234,819
441,077
Gross profit
10,679
20,983
51,954
148,457
Operating expenses:
Selling and marketing
12,012
23,570
51,505
99,204
General and administrative
8,157
12,428
42,474
51,783
Research and development
5,507
6,904
21,822
22,786
Goodwill and intangible impairment
charge
—
—
26,965
—
Restructuring and exit charges
2,549
—
2,549
—
Total operating expenses
28,225
42,902
145,315
173,773
Operating loss
(17,546
)
(21,919
)
(93,361
)
(25,316
)
Other expense, net
(2,593
)
(984
)
(4,768
)
(2,914
)
Loss from continuing operations before
income taxes
(20,139
)
(22,903
)
(98,129
)
(28,230
)
Income tax expense (benefit)
786
(4,705
)
9,359
(6,026
)
Loss from continuing operations
(20,925
)
(18,198
)
(107,488
)
(22,204
)
(Loss) income from discontinued
operations, net of income taxes
(12
)
(16
)
2,089
(227
)
Net loss
$
(20,937
)
$
(18,214
)
$
(105,399
)
$
(22,431
)
Basic loss per share from continuing
operations
$
(0.66
)
$
(0.58
)
$
(3.40
)
$
(0.72
)
Basic income per share from discontinued
operations
—
—
0.06
—
Basic net loss per share
$
(0.66
)
$
(0.58
)
$
(3.34
)
$
(0.72
)
Diluted loss per share from continuing
operations
$
(0.66
)
$
(0.58
)
$
(3.40
)
$
(0.72
)
Diluted income per share from discontinued
operations
—
—
0.06
—
Diluted net loss per share
$
(0.66
)
$
(0.58
)
$
(3.34
)
$
(0.72
)
Shares used in per share calculations:
Basic
31,836
31,256
31,585
31,029
Diluted
31,836
31,256
31,585
31,029
Select Metrics:
Gross margin
15.6
%
17.5
%
18.1
%
25.2
%
Selling and marketing % of net sales
17.6
%
19.7
%
18.0
%
16.8
%
General and administrative % of net
sales
11.9
%
10.4
%
14.8
%
8.8
%
Research and development % of net
sales
8.0
%
5.8
%
7.6
%
3.9
%
Operating loss % of net sales
(25.6
) %
(18.3
) %
(32.6
) %
(4.3
) %
SEGMENT INFORMATION
The following table presents certain comparative information by
segment and major product lines within each business segment for
the three and twelve months ended March 31, 2023 and 2022
(unaudited and in thousands):
Three Months Ended March
31,
Change
2023
2022
$
%
Net sales:
Direct net sales:
Cardio products(1)
$
27,860
$
39,156
$
(11,296
)
(28.8
)%
Strength products(2)
13,743
20,616
(6,873
)
(33.3
)%
Direct
41,603
59,772
(18,169
)
(30.4
)%
Retail net sales:
Cardio products(1)
14,880
23,020
(8,140
)
(35.4
)%
Strength products(2)
11,284
35,711
(24,427
)
(68.4
)%
Retail
26,164
58,731
(32,567
)
(55.5
)%
Royalty
652
1,221
(569
)
(46.6
)%
Consolidated net sales
$
68,419
$
119,724
$
(51,305
)
(42.9
)%
Gross profit:
Direct
$
8,730
$
11,519
$
(2,789
)
(24.2
)%
Retail
1,297
8,243
(6,946
)
(84.3
)%
Royalty
652
1,221
(569
)
(46.6
)%
Consolidated gross profit
$
10,679
$
20,983
$
(10,304
)
(49.1
)%
Gross margin:
Direct
21.0
%
19.3
%
170
basis points
Retail
5.0
%
14.0
%
(900
)
basis points
Contribution:
Direct
$
(5,382
)
$
(11,655
)
$
6,273
53.8
%
Retail
(4,726
)
730
(5,456
)
(747.4
)%
Royalty
652
1,221
(569
)
(46.6
)%
Consolidated contribution
$
(9,456
)
$
(9,704
)
$
248
2.6
%
Reconciliation of consolidated
contribution to loss from continuing operations:
Consolidated contribution
$
(9,456
)
$
(9,704
)
$
248
2.6
%
Amounts not directly related to
segments:
Operating expenses
(8,090
)
(12,215
)
4,125
33.8
%
Other expense, net
(2,593
)
(984
)
(1,609
)
(163.5
)%
Income tax expense
(786
)
4,705
(5,491
)
(116.7
)%
Loss from continuing operations
$
(20,925
)
$
(18,198
)
$
(2,727
)
(15.0
)%
(1) Cardio products include:
connected-fitness bikes, the Bowflex® C6, Bowflex® VeloCore®,
Schwinn® IC4, Max Trainer®, connected-fitness treadmills, other
exercise bikes, ellipticals and subscription services.
(2) Strength products include: Bowflex®
Home Gyms, Bowflex® SelectTech® dumbbells, kettlebell and barbell
weights, and accessories.
Twelve Months Ended March
31,
Change
2023
2022
$
%
Net sales:
Direct net sales:
Cardio products(1)
$
93,889
$
128,550
$
(34,661
)
(27.0
)%
Strength products(2)
45,400
93,176
(47,776
)
(51.3
)%
Direct
139,289
221,726
(82,437
)
(37.2
)%
Retail net sales:
Cardio products(1)
62,225
208,991
(146,766
)
(70.2
)%
Strength products(2)
81,888
155,078
(73,190
)
(47.2
)%
Retail
144,113
364,069
(219,956
)
(60.4
)%
Royalty
3,371
3,739
(368
)
(9.8
)%
Consolidated net sales
$
286,773
$
589,534
$
(302,761
)
(51.4
)%
Gross profit:
Direct
$
28,664
$
68,117
$
(39,453
)
(57.9
)%
Retail
19,919
76,601
(56,682
)
(74.0
)%
Royalty
3,371
3,739
(368
)
(9.8
)%
Consolidated gross profit
$
51,954
$
148,457
$
(96,503
)
(65.0
)%
Gross margin:
Direct
20.6
%
30.7
%
(1,010
)
basis points
Retail
13.8
%
21.0
%
(720
)
basis points
Contribution:
Direct
$
(29,626
)
$
(15,711
)
$
(13,915
)
(88.6
) %
Retail
(5,720
)
44,831
(50,551
)
(112.8
) %
Royalty
3,371
3,739
(368
)
(9.8
) %
Consolidated contribution
$
(31,975
)
$
32,859
$
(64,834
)
(197.3
) %
Reconciliation of consolidated
contribution to loss from continuing operations:
Consolidated contribution
$
(31,975
)
$
32,859
$
(64,834
)
(197.3
)%
Amounts not directly related to
segments:
Operating expenses
(61,386
)
(58,175
)
(3,211
)
(5.5
)%
Other expense, net
(4,768
)
(2,914
)
(1,854
)
(63.6
)%
Income tax expense
(9,359
)
6,026
(15,385
)
(255.3
)%
Loss from continuing operations
$
(107,488
)
$
(22,204
)
$
(85,284
)
(384.1
)%
(1) Cardio products include:
connected-fitness bikes, the Bowflex® C6, Bowflex® VeloCore®,
Schwinn® IC4, Max Trainer®, connected-fitness treadmills, other
exercise bikes, ellipticals and subscription services.
(2) Strength products include: Bowflex®
Home Gyms, Bowflex® SelectTech® dumbbells, kettlebell and barbell
weights, and accessories.
BALANCE SHEET INFORMATION
The following summary contains information from our consolidated
balance sheets as of March 31, 2023 and March 31, 2022 (unaudited
and in thousands):
As of
March 31, 2023
March 31, 2022
Assets
Cash
$
17,362
$
12,872
Restricted cash
950
1,339
Trade receivables, net of allowances
21,489
61,454
Inventories
46,599
111,190
Prepaids and other current assets
8,033
14,546
Other current assets - restricted
—
3,887
Income taxes receivable
1,789
1,998
Total current assets
96,222
207,286
Property, plant and equipment, net
32,789
32,129
Operating lease right-of-use assets
19,078
23,620
Goodwill
—
24,510
Other intangible assets, net
6,787
9,304
Deferred income tax assets,
non-current
554
8,760
Income taxes receivable, non-current
5,673
5,673
Other assets
2,429
2,763
Total assets
$
163,532
$
314,045
Liabilities and Shareholders'
Equity
Trade payables
$
29,378
$
53,165
Accrued liabilities
15,575
29,386
Operating lease liabilities, current
portion
4,427
4,494
Finance lease liabilities, current
portion
122
119
Warranty obligations, current portion
2,564
4,968
Income taxes payable, current portion
328
839
Debt payable, current portion, net of
unamortized debt issuance costs
1,642
2,243
Total current liabilities
54,036
95,214
Operating lease liabilities,
non-current
16,380
20,926
Finance lease liabilities, non-current
282
395
Warranty obligations, non-current
703
1,248
Income taxes payable, non-current
2,316
4,029
Deferred income tax liabilities,
non-current
253
—
Other non-current liabilities
1,978
1,071
Debt payable, non-current, net of
unamortized debt issuance costs
26,284
27,113
Shareholders' equity
61,300
164,049
Total liabilities and shareholders'
equity
$
163,532
$
314,045
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Non-GAAP Presentation
Nautilus presents non-GAAP financial measures as a complement to
results provided in accordance with GAAP, and the non-GAAP
financial measures should not be regarded as a substitute for
GAAP.
In addition to disclosing its financial results determined in
accordance with GAAP, Nautilus has presented in this release
certain non-GAAP financial measures, which exclude the impact of
certain items (as further described below). Management believes
these measures are also useful to investors as these are the same
metrics that management uses to evaluate past performance and
prospects for future performance. Nautilus strongly encourages
investors to review all its financial statements and publicly filed
reports in their entirety and to not rely on any single financial
measure to evaluate the Company’s performance.
Free Cash Flow
Free cash flow is a non-GAAP financial measure. We define free
cash flow as net cash provided by (used in) operating activities
minus capital expenditures. We believe that, when viewed with our
GAAP results, free cash flow provides management, investors and
other users of our financial information with a more complete
understanding of factors and trends affecting our cash flows. We
believe free cash flow provides useful additional information to
users of our financial information and is an important metric
because it represents a measure of how much cash we have available
for discretionary and non-discretionary items after the deduction
of capital expenditures. We use this metric internally, as we
believe our sustained ability to generate free cash flow is an
important driver of value creation. However, this non-GAAP
financial measure is not intended to supersede or replace our GAAP
results.
Adjusted Results
In addition to disclosing the comparable GAAP results, Nautilus
has presented its operating expenses and operating (loss) income on
an adjusted basis to exclude certain non-recurring items, including
the non-cash charge related to goodwill and intangible asset
impairment(1), the legal settlement(2), acquisition and other
related costs(3) and restructuring and exit charges(4). The Company
believes that excluding these items, which are inconsistent in
amount and frequency, supplements the GAAP information with a
measure that can be used to assess the sustainability of the
Company’s operating performance. Nautilus has also presented EBITDA
from continuing operations on an adjusted basis, excluding the
aforementioned items for similar reasons.
Adjusted EBITDA from Continuing Operations
Nautilus has also presented EBITDA from continuing operations on
an adjusted basis, to exclude the non-cash charge related to
goodwill and intangible asset impairment(1), the legal
settlement(2), acquisition and other related costs(3),
restructuring and exit charges(4), depreciation and amortization,
stock-based compensation and certain other net expenses. The
Company believes that EBITDA is an important measure as it allows
the company to evaluate past performance and prospects for future
performance. The Company believes the exclusion of stock-based
compensation expense provides for a better comparison of operating
results to prior periods and to peer companies as the calculations
of stock-based compensation vary from period to period and company
to company due to different valuation methodologies, subjective
assumptions, and the variety of award types. The Company excludes
other expenses, net that are the result of factors and can vary
significantly from one period to the next. We believe that
exclusion of such other expenses are useful to management and
investors in evaluating the performance of our ongoing operations
on a period-to-period basis.
We do not reconcile non-GAAP financial measures on a
forward-looking basis as it is impractical to do so without
unreasonable effort.
The following table reconciles free cash flow, a non-GAAP
financial measure, from a GAAP financial measure for the three and
twelve month periods ended March 31, 2023 and 2022 (unaudited and
in thousands):
Three Months Ended March
31,
Twelve Months Ended March
31,
2023
2022
2023
2022
Net cash provided by (used in) operating
activities
$
30,626
$
25,017
$
18,846
$
(66,566
)
Purchase of property, plant and
equipment
(1,921
)
(3,914
)
(12,618
)
(13,050
)
Free cash flow
$
28,705
$
21,103
$
6,228
$
(79,616
)
Net loss
$
(20,937
)
$
(18,214
)
$
(105,399
)
$
(22,431
)
Free cash flow as percentage of net
loss
137.1
%
115.9
%
5.9
%
(354.9
)%
The following table presents a reconciliation of operating
expenses, the most directly comparable GAAP measure, to Adjusted
operating expenses for the three and twelve month periods ended
March 31, 2023 and 2022 (unaudited and in thousands):
Three Months Ended March
31,
Twelve Months Ended March
31,
2023
2022
2023
2022
Operating expenses
$
28,225
$
42,902
$
145,315
$
173,773
Goodwill and intangible impairment
charge(1)
—
—
(26,965
)
—
Legal settlement(2)
276
—
276
(4,665
)
Acquisition and other related costs(3)
(540
)
(770
)
(2,483
)
(2,448
)
Restructuring and exit charges(4)
(2,549
)
—
(2,549
)
—
Adjusted operating expenses
$
25,412
$
42,132
$
113,594
$
166,660
The following table presents a reconciliation of operating loss,
the most directly comparable GAAP measure, to Adjusted operating
loss for the three and twelve month periods ended March 31, 2023
and 2022 (unaudited and in thousands):
Three Months Ended March
31,
Twelve Months Ended March
31,
2023
2022
2023
2022
Operating loss
$
(17,546
)
$
(21,919
)
$
(93,361
)
$
(25,316
)
Goodwill and intangible impairment
charge(1)
—
—
26,965
—
Legal settlement(2)
(276
)
—
(276
)
4,665
Acquisition and other related costs(3)
540
770
2,483
2,448
Restructuring and exit charges(4)
2,549
—
2,549
—
Adjusted operating loss
$
(14,733
)
$
(21,149
)
$
(61,640
)
$
(18,203
)
The following table presents a reconciliation of loss from
continuing operations, the most directly comparable GAAP measure,
to Adjusted EBITDA from continuing operations for the three and
twelve month periods ended March 31, 2023 and 2022 (unaudited and
in thousands):
Three Months Ended March
31,
Twelve Months Ended March
31,
2023
2022
2023
2022
Loss from continuing operations
$
(20,925
)
$
(18,198
)
$
(107,488
)
$
(22,204
)
Other expense, net
2,593
984
4,768
2,914
Income tax expense (benefit) from
continuing operations
786
(4,705
)
9,359
(6,026
)
Depreciation and amortization
3,147
2,628
11,103
8,615
Stock-based compensation expense
(964
)
1,651
3,909
6,262
Goodwill and intangible impairment
charge(1)
—
—
26,965
—
Legal settlement(2)
(276
)
—
(276
)
4,665
Acquisition and other related costs(3)
540
770
2,483
2,448
Restructuring and exit charges(4)
2,549
—
2,549
—
Adjusted loss before interest, taxes,
depreciation, and amortization (Adjusted EBITDA) from continuing
operations
$
(12,550
)
$
(16,870
)
$
(46,628
)
$
(3,326
)
(1) Goodwill and intangible impairment charge In
accordance with ASC 350 — Intangibles — Goodwill and Other, an
entity is required to perform goodwill and indefinite-lived trade
names impairment valuations annually, or sooner if triggering
events are identified. We observed continued market volatility
including significant declines in our market capitalization during
the three month period ended June 30, 2022, which we identified as
a triggering event. In response to the triggering event, we
performed an interim evaluation and a market capitalization
reconciliation during the first quarter of fiscal 2023, which
resulted in non-cash goodwill and indefinite-lived intangible
assets impairment charges.
(2) Legal Settlement Legal settlement is a
loss contingency accrual related to a legal settlement for a class
action lawsuit related to advertisement of our treadmills.
(3) Acquisition and other related costs On September 17,
2021, we acquired VAY AG ("VAY") for aggregate purchase
consideration of approximately $27.0 million. We accounted for the
transaction as a business combination. Acquisition and other costs
are reflected in general and administrative costs and consist of
acquisition related closing costs and a contingent consideration
arrangement. The contingent consideration arrangement requires the
Company to recognize $3.9 million compensatory expense over an 18
month service period.
(4) Restructuring and exit charges In February 2023, we
restructured our cost structure to align with lower revenue. In
addition to ending relationships with outsourced contractors, we
executed a reduction in our workforce of approximately 15%.
Restructuring and exit charges include involuntary employee
termination benefits and other exit costs.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230523006033/en/
Investor Relations: John Mills ICR, LLC 646-277-1254
John.mills@icrinc.com Media: John Fread Nautilus, Inc
360-859-5815 jfread@nautilus.com Robin Rootenberg Action Mary
925-464-8030 robin.rootenberg@actionmary.com
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